Q: I need to sell my house with a short sale because I can no longer afford to pay the mortgage. But there is a cloud on the title in the form of a deed of trust that I paid off long ago to my brother, and he refuses to have the deed removed from the title. What can I do to get the title cleared of my brother’s deed so I can complete the short sale?
A: If the class action is a butcher’s cleaver, then the quiet title action is a scalpel. Whenever I hear about a real estate title issue or a cloud on the title, my first thought is whether a quiet title action is the appropriate proceeding to obtain a court judgment that clears title of the adverse claim, but does not affect any liens or title issues that are legitimate.
A quiet title action under California’s Code of Civil Procedure, section 760.010, et seq., is a very effective method of removing any adverse claim against the title. It is used to declare the rights of the parties and to finally settle and determine all conflicting claims to real property, and to decree such interest or estate as the contesting party may be entitled to.
One of the typical actions for quiet title is to attack a fraudulent or mistaken deed conveying an interest in the property, or a deed of trust that establishes an improper lien. The action names as defendants the persons having adverse claims to plaintiff’s title, including all persons unknown, claiming any legal or equitable right, title, estate, lien, easement, or interest in the property described in the complaint adverse to plaintiff’s title, claims or rights, or any cloud on plaintiff’s title, claims or rights thereto named as unknown doe defendants.
In general, only the holder of legal title to the property can file a quiet title action. However, a person who acquires legal title through fraud has only bare legal title, and is considered a constructive trustee of the property for the benefit of the defrauded equitable title holder. A quiet title action is allowed on the grounds that such title was acquired by fraud.
In a recent case, my client had purchased a building and allowed the title in the name of his brother as security for the $60,000 the brother lent toward the purchase. Unfortunately, the brother died while the property was still in his name and before the loan was repaid. Although the sons of the brother agreed to accept final payment of the loan and individually sign quit claim deeds to confirm their release of any interest in the property, title to the property remained in the deceased brother’s name. Many years later when I was contacted, I filed a quiet title action to change legal title to the property from the brother to my client. After I contacted the sons to reassure them that I was simply cleaning up the title to transfer it from their father’s name to my clients, I filed the quiet title action and served each of the sons as an adverse claimant. After the defaults of the four sons was entered, I obtained a judgment quieting the title in the name of my client at a default prove-up hearing in court.
On another occasion, I was contacted by a property owner who had been served with a notice of eviction. Upon investigation, I learned that a deed of trust with my client’s forged signature had been recorded against the title as security for a promissory note to repay a loan for $100,000. I determined that my client’s daughter and son-in-law had forged my client’s signature to borrow the money, and when they defaulted, the lender began foreclosure proceedings, all without my client’s knowledge. I filed a quiet title action on the grounds that the deed of trust was a forgery. After I confirmed that the signature was a forgery, and that my client had not received any of the funds from the loan and had been taken advantage of by her family, I filed a successful motion for summary judgment. As a result, the fraudulent deed of trust was voided ab initio (ie., from the inception), and clear tile in favor of my client was restored.
As in all cases, the statute of limitations applies based upon the nature of the plaintiff’s action, and where fraud or mistake is alleged, a three-year limitations period applies and begins to run upon plaintiff’s discovery of facts constituting the fraud or mistake. However, while the plaintiff is in possession of the property, the statute of limitations is tolled, even if the plaintiff is aware of the potential adverse claimant. Quiet title actions must be filed in the superior court of the county where the real property, or any part thereof, is located.
If the proper defendants making the adverse claims are served, the superior court has complete jurisdiction over the parties and the property for purposes of issuing a judgment resolving the adverse claim, or to grant such equitable relief as may be proper under the circumstances of the case.
The quiet title complaint must be verified by the plaintiff, and a notice of pendency of action (lis pendens) must be recorded with the recorder for the county where the property is located. This provides confirmation that the allegations are accurate and notice of the action to third parties. As a result, a quiet tile action can cloud title and discourage a sale or additional lien on the property until it is resolved.
The plaintiff must prove its title to prevail, and normally a judgment binds all persons from claiming an interest in the property adverse to the plaintiff. In effect, it clears the title of all claims contested by the plaintiff, without disturbing legitimate claims. If your brother continues to refuse to cooperate, take him to court with a quiet title action and prove you repaid the loan, and title should be quieted as to your brother’s deed, allowing your short sale to proceed.
The opinions expressed in this article are those of the author, and they do not create an attorney-client relationship, a broker-client relationship, or constitute legal or tax advice. Craig B. Forry, a California attorney since 1984, and a California real estate broker since 2004, is co-owner of CARES Realty, Inc. Individual circumstances may vary and professional advice is recommended before making any decisions concerning legal matters.
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