Schwalm v. Deanhardt

The Schwalms (plaintiffs) sold a rental home to Eddins via a quitclaim deed subject to their mortgage; Eddins recorded only the deed, not the mortgage, then told Deanhardt (defendant) he owned the property free of any senior lien and offered Deanhardt a first mortgage position with a 20 percent return. Deanhardt invested without conducting a title search, without visiting the property to see who possessed it, and without otherwise investigating Eddins or the property, even paying by personal check despite the property being titled to a trust at Eddins's request; Eddins then recorded Deanhardt's mortgage mere seconds before recording the Schwalms' mortgage. After the Schwalms sued Eddins and won a conveyance of the property back, they brought this quiet-title action against Deanhardt; the trial court dismissed, finding a reasonable search wouldn't have uncovered the Schwalms' interest, and the Schwalms appealed.