Supreme Court
425 Soledad, Ltd. v. CRVI Riverwalk Hosp., LLC
- Case number: 23-0344
- Legal category: Real Property
- Subtype: Bona Fide Purchaser
- Set for oral argument: October 3, 2024
Case Summary
A main issue is whether a creditor’s bona fide protections pass to a subsequent purchaser if the property is purchased through a receivership sale rather than through foreclosure.
A parking garage, hotel, and office building initially were under common ownership. The owner retained the garage and hotel but sold the office building, which was eventually acquired by 425 Soledad. The original owner and purchaser executed an agreement making a certain number of parking spots in the garage available to the office building and its tenants. The agreement stated that it would run with the land and be binding on the parties’ successors and assigns, but it was never recorded.
The garage and hotel were later sold to a purchaser who financed the transaction with two promissory notes. CRVI Crowne acquired the B note. When the new owner of the garage and hotel defaulted, Crowne chose to place the properties into receivership rather than foreclose on them. A related entity, CRVI Riverwalk, purchased the garage and hotel through the receiver. After Riverwalk became the owner of the garage and hotel, 425 Soledad requested parking spaces pursuant to the agreement made by the garage and hotel’s original owner. Riverwalk refused to provide the spaces, and 425 Soledad sued.
Riverwalk argues that the parking agreement is unenforceable because Crowne was a bona fide creditor when it purchased the note without notice of the unrecorded agreement; then, when Riverwalk purchased the garage and hotel from the receiver, Crowne’s bona fide protections passed through to it. The trial court rejected these arguments and entered judgment for 425 Soledad after a bench trial.
The court of appeals reversed. The court agreed with the trial court that the parking agreement is an easement, but it concluded that Crowne was a bona fide creditor and that Crowne’s status “sheltered” and passed through to Riverwalk when Riverwalk purchased the garage and hotel through the receivership sale.
425 Soledad petitioned the Supreme Court for review. It argues that because Riverwalk purchased the properties from the debtor’s receiver, and not from creditor Crowne in a foreclosure sale, that Crowne’s bona fide protections, if any, cannot shelter or pass through to Riverwalk. The Court granted the petition.
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