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In quiet title actions a common defense is the statute of limitations – has the plaintiff waited too long to file suit? Generally, the clock does not run while the defendant is in “undisturbed possession.” But what that means is often disputed in these cases, and there are no bright line rules. In a recent decision from El Dorado County, a South Lake Tahoe landowner was disappointed to learn that recorded documents are not sufficient to ‘disturb possession’, and the claim was not barred by the statute of limitations.

Sacramento-quiet-title-attorneyIn Kumar v.Ramsey (71 Cal.App. 5th 1110) Walker sold property on Dundee Circle in the City of South Lake Tahoe, California, to Kohs, reserving for themselves 23,188 square feet of land coverage. Land coverage rights consist of the right to place manmade structures on a certain parcel of land. These rights may be transferred in whole or in part to other parcels, granting purchasers the ability to build structures on their properties. Applications to transfer coverage rights are reviewed by the Tahoe Regional Planning Agency (TRPA).

The property was lost to foreclosure and then bought by Plaintiff Kumar. Prior to purchasing the property, Kumar conducted a title search which revealed multiple transfers of portions of the reserved coverage from Walker and Kohs to third parties between 2006 and 2007. As a result of those transfers, a TRPA tracking sheet indicated that the reserved coverage had been reduced to 6,959 square feet before Kumar purchased the property. Kumar understood that when he purchased the property, his purchase included the remaining 6,959 square feet of reserved coverage.

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Outside reverse veil piercing differs from traditional veil piercing, which is permitted due to the “‘The alter ego doctrine prevents individuals or other corporations from misusing the corporate laws by the device of a sham corporate entity. Traditional veil-piercing permits a party to pierce the corporate or limited liability company (LLC) veil so that an individual shareholder [or LLC member] may be held personally liable for claims against the corporation [or LLC However reverse veil piercing, rather than seeking to hold an individual responsible for the acts of an entity, seeks to satisfy the debt of an individual through the assets of an entity of which the individual is an insider. Outside reverse veil piercing arises when the request for piercing comes from a third party outside the targeted business entity. In a recent decision out of SLO County, where the wrongdoer was the owner of an LLC that owned land in Cambria. The trial court amended a judgment against the wrongdoer to reverse veil pierce and add the LLC. Sacramento-reverse-veil-piercing-attorney

The trial court’s adding the nonparty alter ego to the judgment was an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant.

The wrongdoer appealed, arguing that a charging order under Corporations Code section 17705.03 provides the sole remedy available, but the courts state otherwise. [T]he key is whether the ends of justice require disregarding the separate nature of the LLC under the circumstances. In making that determination, the trial court should, at minimum, evaluate the same factors as are employed in a traditional veil piercing case, as well as whether the plaintiff has any plain, speedy, and adequate remedy at law. Outside reverse piercing is permissible in the context of a limited liability company because, unlike a corporation, a limited liability company does not issue shares on which a creditor may levy and creditors do not have sufficient alternative remedies at law.

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A real property title defect will prevent you from selling your property or eventually cause future problems. When there is an issue regarding title to real property, a quiet title action is pursued which results in a court order clarifying the parties’ rights and interests. Such issues include ownership, and rights to ownership, removal of liens, boundaries, easements, licenses, and options. If a defendant who has a potential claim cannot be located or served, the court may order that they be served by publication of summons. The legal requirement is that the publication must “particularly describe the property,” plus provide its “common designation.” In a recent decision out of Riverside, the plaintiff was disappointed to learn that publishing just the Assessor’s Parcel Number did not qualify.

Sacramento-publish-summonsIn Douglas HUMPHREY v. Peter D. BEWLEY, the trial court ordered service of the summons and first amended complaint by publication. Humphrey filed proof of service by publication. In September, 2014, at Humphrey’s request, the trial court entered the default of all named parties.

In a quiet title action, “Whenever the court orders service by publication, the order is subject to the following conditions: “….The publication shall describe the property that is the subject of the action. In addition to particularly describing the property, the publication shall describe the property by giving its street address, if any, or other common designation, if any; but, if a legal description of the property is given, the validity of the publication shall not be affected by the fact that the street address or other common designation recited is erroneous or that the street address or other common designation is omitted.” (Code Civ. Proc., § 763.020.)

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Electronic signatures are commonly used in California, especially with real estate contract documents, and are accepted by real estate brokers and escrow officers. But what happens when there is a dispute and the person who supposedly e-signed denies doing so, claiming that the signature was forged? That was the case in a recent decision out of San Diego where a homeowner claimed that they did not sign a financing contract for solar panels. The solar company never proved that the “docusigned” electronic signature was the plaintiff’s by explaining the process used to verify the signature.

Sacramento-e-signature-real-estate-contract-attorneyIn Rosa Fabian v. Renovate America, Inc., Renovate made an unsolicited phone call to Fabian about solar panel financing. Fabian was never presented with any documents to sign, claiming that all communications were over the phone.

The court found that Renovate met its initial burden to show an agreement to arbitrate by attaching a copy of the Contract to its petition, which purportedly bears Fabian’s electronic initials and signature. Because Fabian declared that she did not sign the Contract and the e-signature was forged, however, Renovate then had “the burden of proving by a preponderance of the evidence that the electronic signature was authentic.

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A quiet title action is brought to establish, or “quiet”, an interest in real estate between adverse parties. One can establish any interest in property or cloud upon title. (CCP §760.010) A common goal is to establish title by adverse possession. Adverse possession is a way of acquiring title to real property through continuous possession or use for a specified period of time. One of the elements required to prove adverse possession is that the possession or use must be “hostile to the owner’s title.” What happens if the adverse possession occurs on property with a deed of trust recorded, and the lender forecloses? In a recent California decision, the adverse possessor lost because the adverse possession did not count against the Lender until the lender acquired the property at the trustee’s sale.

Sacramento-Quiet-title-attorneyIn Charles Scott Bailey v. Citibank N.A. owners of property in Kern County had a deed of trust. They went into default and a Notice of Default was recorded, so the owners filed a series of bankruptcies. Apparently, the lender never completed the foreclosure, the bankruptcies concluded, and the owners walked away from the property. Plaintiffs, seeing it empty in 2013, saw that as a green light to take possession and pay property taxes. Citibank became the successor to the original deed of trust in 2017, and recorded a new notice of default, foreclosed, and became the new owner in 2018.

A few months later Plaintiffs filed their quiet title suit. There was much hubbub in the courts, a default & judgment for quiet title by adverse possession, the default judgment set aside, and appeals. For our purposes, an issue on appeal was whether, as a matter of law, plaintiffs’ possession was adverse to Citibank for the required five-year period.

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In California, a third party who acts in reliance on a quiet title judgment retains its property rights even if the judgment is later invalidated as void, as long as the third party qualifies as a bona fide purchaser for value. The third party must do so without knowledge of any defects in the judgment. But “knowledge” is a slippery term. Does it mean actual knowledge, or include “constructive” knowledge? is a legal concept that, in real estate, generally applies when the document must be recorded as prescribed by law. The buyer may not have seen it, but the law treats them as if they had. In a recent decision out of Inglewood, CA, the court decided that they must have neither actual notice or constructive notice. This decision is interesting because the buyer would have had to do some digging (and actually did obtain title insurance) to realize there was a defect.

Quiet-title-judgment-attorneyIn Tsasu LLC v. U.S. Bank Trust, N.A the court had a complicated series of facts.

– Celestine borrowed money from CIT, who assigned the deed of trust to US Bank. It was then assigned to DLJ.

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The alter ego doctrine is a procedure that creditors use when their judgment is against a corporation or LLC which is owned by, or controlled by, a sole shareholder. Usually, the corporation has no assets to collect from, and the goal of the creditor is to go after the shareholder’s personal assets, claiming that the corporation is a sham. In effect, the corporation is the shareholder’s alter ego and the shareholder should not hide behind the corporation. Reverse veil piercing is a newer concept in which a creditor with a judgment against an individual goes after the assets of the corporation which the debtor controls. In a recent decision from Southern California, two LLC members got slammed for a huge judgment – as aptly described by the Court: “There are numerous ways in which an LLC or corporation is undercapitalized. Here, wealthy principals of an LLC withdraw or add money at will. This enviable position does not allow the LLC to become undercapitalized when its shareholders intend to avoid liability.”

Sacramento-alter-ego-attorneyIn Triyar Hospitality Management, LLC v. WSI (III) – HWP, LLC (an unpublished decision), Triyar was under contract to buy a hotel from WSI; the hotel was subject to a Hyatt operating agreement. The Hyatt agreement terminated while Triyar was doing its due diligence, but Triyar did not know about the termination. (What is due diligence anyway?) Triyar passed on the purchase but then learned about the termination of the Hyatt agreement. In a costly case of chutzpah, Triyar then claimed that the Hyatt agreement was so burdensome, the termination increased the hotel value by $11 million, and sued ESI for fraud – I guess not telling them the agreement had terminated.

The trial court said haha; it’s your own fault for not doing your due diligence. The court awarded WSI over $2 million dollars in attorney fees. WSI could not collect the judgment, so moved the court to amend the judgment to add the Yari brothers, principals of Triyar, to the judgment on an alter ego theory. The court agreed, and this appeal followed.

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A Quiet Title action is a lawsuit that a person files to establish their title against adverse claims. For example, what if a signature is missing on the deed of trust, and the deed of trust is foreclosed? Was it a necessary signature, for example, the wife of the owner, when the wife was not on the deed? In a recent decision from Grenada Hills, the Note Holder started the process for a trustee’s sale, and the owner filed a quiet title action. He claimed that it was community property, and there is a legal presumption that it is community property, so the deed of trust could be voided by the wife who did not sign it. He was right!

Sacramento-Deed-of-trust-attorneyIn Trenk v. Soheili, as a result of a Settlement Agreement in an unrelated matter, Trenk agreed to pay $100,000 and executed a promissory note and a trust deed on the Residence to secure the obligation.

Trenk stopped regular payments on the note after 2003, and by 2018 he still owed about $75,000. Soheili began nonjudicial foreclosure proceedings in January 2018. The Trenks then filed this lawsuit to clear title to their house, alleging that the trust deed was no longer enforceable.

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California law provides enhanced damages when someone harms a tree on another person’s property. The tree is owned by the owner of the real estate. There is a provision for doubling the damages incurred for harm caused to timber, trees, and underwood, and trebling it if the harm is intentional. (Civil Code section 3346.) A statue can double the damages for harm to a tree. (Civil Procedure section 733). However, both statutes specify enhanced damages for “trespass.” In a recent decision, a party decided to build a house, but roots from the neighbor’s tree was in the way of the foundation. So they cut the roots killing the tree. The tree owner was disappointed that this did not qualify for treble damages.

sacramento-neighbor-tree-attorneyIn Raymond Russell et al., v. Cornel Dorin Man et al., a ‘massive” Jeffrey Pine (85 feet tall, 40 inch d.b.h.) was located on the property line between the two parties in Big Bear Lake. The defendants built a house on their property, though according to the city’s development code they should not have been allowed to. Almost any house on the property, no matter how configured, would be too close to the tree’s “critical root zone.” Under the Big Bear Development Code, it was forbidden to dig in a tree’s “critical root zone.” This was defined as a circle around the tree with a radius of one foot for every inch of the tree’s diameter at standard height (four and a half feet above the ground, which used to be called “breast height”). Here, the tree’s diameter at standard height was 40 inches, so it’s critical root zone had a radius of 40 feet.

Defendants had hired a draftsman who prepared the building plans and then submitted them to the city. Those plans misrepresented the tree as being behind the proposed house, rather than to the side. Even according to the plans, however, the house was within the tree’s critical root zone. In fact, there was no way to build on the property without killing the tree. Nevertheless, the city inspected the site and issued a building permit.

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The general rule is that a bona fide purchaser of California real estate for value who acquires their interest in the property without knowledge or notice of another’s rights or interest in the property takes the property free of such unknown interests. The usual way a purchaser receives notice is through recorded documents – mostly learned about in California by receiving a Preliminary Title Report, which the buyer receives if they are going to obtain title insurance. The way to research recorded documents is through the index – the recorder indexes documents by the names of the parties. The buyer’s title insurer searches for the names listed in the owner’s deed But sometimes the recorded documents do not all have the exact same names but some variation thereof. In a recent decision, when it came to names, the court said close, but no banana (some might say cigar). The buyer obtained the property free and clear of plaintiff’s liens because then names were not close enough and they did not have notice.

Sacramento-real-estate-attorneyIn Vasquez v. LBS Financial Credit Union, LBS had recorded Abstracts of Judgment against “Wilbert G. Guerrero.” Years later The Vasquezes bought property from “Guillermo Guerrero,” who was the same individual subject to the judgment. In the Guerrero – Vasquez purchase & sale documents were numerous versions of Guerrero’s name, including one handwritten reference in the 10-page purchase agreement to the name Wilbert Guillermo Guerrero. Guerrero’s cursive signature on page 10 appears to be either “Guillermo Guerrero” or “Guillermo Guerrero W.” The name “Wilbert Guillermo Guerrero” is handwritten below Guerrero’s signature, where the form specifies to “[p]rint name. In the counteroffer Guerrero signed the acknowledgment and acceptance twice. One signature appears to be “Guillermo Guerrero W.,” and the second appears to have the same signature, except it is not discernable whether the name is followed by a “W.” “Guillermo Guerrero. The Title report stated the Guerreros’ interest in the property was vested in “Guillermo Wilbert Guerrero and Laura Olivia Guerrero, husband and wife as joint tenants.” The report identified a deed of trust in the amount of $198,000 to secure a note for borrowers “Guillermo Wilbert Guerrero and Laura Olivia Guerrero, husband and wife as joint tenants.” The report also identified three tax liens against “Guerrero[,] Guillermo” and a 2008 abstract of judgment for $16,312.38 against “Guerrero Construction and Development, Inc. and Guillermo Guerrero.” The preliminary title report did not identify the LBS abstracts. LBS wanted their money, and this lawsuit ensued.

The Court first noted that the bona fide purchaser without notice may seek a legal determination through a quiet title action that the title it obtained remains free and clear of any adverse interest in the property. Constructive notice of a lien or other interest in property arises from the proper recording of that interest.