Holiday Hospitality Franchising, Inc., f/k/a Holiday Inns Franchising v. States Resources, Inc., et al.

The issue presented in this priority dispute between a first deed of trust holder and a judgment lien creditor involves the legal effect of the inadvertent and erroneous release of the deed of trust. States Resources Corporation (SRC), Defendant/Appellant, holds two liens on the same real property: one as successor-in-interest to a judgment creditor and the other as assignee of a promissory note for a construction loan, secured by a deed of trust originally held by Trust One Bank. Plaintiff/Appellee Holiday Hospitality Franchising (Holiday) also holds a judgment lien that, in relation to SRC’s filings, was filed last in time. SRC appeals summary judgment entered in favor of Holiday and contends that as assignee of Trust One’s note and first-filed deed of trust, it occupies the most senior lien position, notwithstanding the mistaken release of the deed prior to the assignment. Because Trust One’s release was inadvertent and unintended, and because restoring the deed of trust to its original priority position would not prejudice the rights of Holiday, an intervening judgment lien creditor, we hold that, as a matter of law, the mistaken release should be cancelled in part and the deed as to Lot 30 should be restored to its position as first deed of trust. Accordingly, we reverse and remand.