Problem.Lawyer's standard of care

     Dale Debtor wanted to purchase a house with a value of $300,000 but did not have the necessary down payment. She asked her friend Sylvan to loan her $40,000. Sylvan agreed, on the condition that Dale give him a deed of trust to secure the note, and that Dale use the money to improve the property. Dale convinced Sylvan to delay recording the deed of trust until a couple of weeks after the close of escrow. Dale deposited the proceeds of the $40,000 loan from Sylvan into her checking account, and, at the appropriate time, transferred $30,000 of it into escrow as her down payment. U-Save Bank funded a $270,000 loan to Dale to pay for the balance of the purchase price, secured by a deed of trust recorded by the escrow at the close of escrow. Two weeks after close of escrow, Dale's friend recorded his deed of trust.

     From Sylvan's perspective, what is the fundamental problem with this transaction? Is U-Save Bank's loan adequately secured at close of escrow (COE)? Is Sylvan's loan adequately secured? Does Dale have any incentive to make the payments on the notes? If Dale defaults and U-Save forecloses, what is the maximum a purchaser will bid at the foreclosure sale? If Dale defaults and Sylvan forecloses, what is the maximum a purchaser will bid at the foreclosure sale? Is there any way Sylvan could have protected himself prior to close of escrow? What does Starr v. Mooslin tell you about a lawyer's responsibility to understand and advise a client about the economic reality of a transaction?