Two deeds of trust secured by the same piece of real property that were simultaneously time stamped for recording but indexed at different times had equal priority. (First Bank v. East West Bank (— Cal.Rptr.3d —-, Cal.App. 2 Dist., October 17, 2011).)
First Bank and East West Bank granted loans to Kyaung Ha Chung secured by the same real property. Chung signed each trust deed on the same day before a different notary. Each bank delivered its trust deed to the county recorder’s office before business hours on September 4, 2008. This office and many others in the state allow for trust deeds to be delivered before 8:00 a.m. Each instrument is then given an 8:00 a.m. time stamp. The banks’ instruments were indexed later that day, one at 11:26 a.m. and the other at 3:08 p.m.
First Bank asked the trial court to determine the priority of the banks’ liens. The trial court held the liens had equal priority.
The Court of Appeal affirmed the decision of the trial court. Because both trust deeds were recorded simultaneously, neither was recorded first and therefore neither bank was a subsequent purchaser. The time the trust deeds were indexed is irrelevant. Recording and indexing are separate and distinct functions and an instrument can be classified as recorded before it is indexed.
Indexing of instruments is essential for imparting constructive notice. However, when title companies take advantage of the opportunity to deposit trust deeds before business hours, there is a risk they will not have notice of other instruments that were deposited on the same day.
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