C F Investments, Inc. v. Option One Mortgage Corp.Annotate this Case
In 1989, Richard Cormier conveyed property to CF Realty Trust by warranty deed, and CF Realty Trust recorded the conveyance in the registry of deeds shortly thereafter. In 1993, CF Realty Trust and Plaintiff C F Investments both filed for Chapter 11 bankruptcy. Pursuant to a proposed plan of reorganization, CF Investments succeeded to all of CF Realty Trust's assets, including the property, and the bankruptcy court entered a final decree approving the proposed plan in 1995. However, C F Investments never recorded its interest in the Property in the registry of deeds. Notwithstanding the bankruptcy plan, CF Realty Trust continued to conduct real estate business after 1995. In 2002, Robert Fuller, acting as trustee of CF Realty Trust, conveyed the property to himself as an individual and duly recorded the transaction in the registry of deeds. He then borrowed $219,000, secured by a mortgage on the property, from First Eastern Mortgage Corporation, and First Eastern recorded its interest. First Eastern then assigned its interest to Defendant Option One Mortgage Corp, and Option One duly recorded. In 2008, counsel for CF Investments notified defendant Option One of its competing claim to the Property, alleging that Fuller had acquired title to it unlawfully and had no authority to borrow money against it. In June 2008, Defendant Wells Fargo notified CF Investments of its intent to conduct a foreclosure sale of the property because Fuller had defaulted on his promissory note. CF Investments brought this action in superior court to enjoin the foreclosure sale, arguing that CF Realty Trust did not own the property at the time of its purported conveyance, that such conveyance was therefore invalid, and that consequently Fuller could not lawfully have granted a mortgage to First Eastern. The trial court disagreed, concluding that First Eastern was protected as a bona fide purchaser without notice of CF Investments' claims. After a bench trial, the Superior Court ruled in favor of Option One and Wells Fargo, concluding that the claim of First Eastern had priority over CF Investments' claim. Upon review, the Supreme Court affirmed.