Articles Posted in real estate law

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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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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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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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Quiet title actions establish claims for and against title to California real property. Quiet title has its own rules regarding t when the statute of limitations begins to run – courts look to the underlying theory of relief to determine the applicable period of limitations. Once that is determined, whether a statute of limitations bars an action to quiet title may turn on “whether the plaintiff is in undisturbed possession of the land.” But what exactly disturbs possession of land? A recent decision out of Lafayette CA determined if the posting and recording of a Notice of Trustee’s Sale disturbed the owners’ possession. Wells Fargo was not pleased with the result.

Sacramento-quiet-title-attorney-1In Huang v Wells Fargo Bank, Wells Fargo held two letters of credit (home equity loans) that had been paid off in a refinance. Wells Fargo never issued or recorded any reconveyances of these two deeds of trust. The owner defaulted, and the refinance lender foreclosed. The Huangs purchased the Property from the successor to the foreclosing lender in February 2009. They were issued a policy of title insurance from Fidelity National Title Company (Fidelity). The following month, Wells Fargo recorded a notice of default and election to sell the Property under the power of sale in the First Wells DOT.

On August 24, 2009, Wells Fargo recorded its notice of trustee’s sale. The Huangs received the notice when it was posted on the door of the Property that month. The Huangs contacted their title insurer Fidelity, who informed them that it was going to conduct an investigation and contacted Wells Fargo to resolve the issue. The trustee’s sale did not proceed as scheduled. In the months following, Fidelity sent the Huangs periodic updates to identify new points of contact and to state the investigation was ongoing, but they never received any communication from Fidelity telling them there was a resolution of the dispute with Wells Fargo. Between July 2010 and May 2014, the Huangs heard nothing further and assumed the matter had been resolved. In May 2014, nearly five years after the Huangs gave Fidelity the notice of trustee’s sale, they were told that Wells Fargo claimed it had two deeds of trust secured by the Property and was again threatening to foreclose. The Huangs filed suit against Wells Fargo to quiet title to the Property.

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A junior lienor is a lender who is not in first place on the property – there is a senior lien in front of them. This often occurs when an owner has paid down the senior and takes out an equity loan, or may be the result of a purchase. If the senior forecloses, the junior can pay the senior lien, or buy the property at foreclosure. The junior then stands in the place of the senior. Alternatively, the junior can allow the foreclosure to take place, in which case it becomes a sold-out junior – it has no security for the debt. The junior must pursue the borrower personally to get paid. If the senior’s foreclosure results in a sale with excess proceeds, they may be paid by order of priority. But what happens if the junior lienor holds a lien on less than the entirety of the property? That was the case in a recent decision in which the junior was secured by only 75% of the property. The court found that the junior was only entitled to 75% of the proceeds. The owner of the 25% got the remainder.

Sacramento-junior-lien-AttorneyIn Zieve, Brodnax & Steele, LLP v Dhindsa, a father had 75% interest, and his son the remaining 25% in property in Turlock. The senior lender held a lien against 100% of the property, and the juniors lien was only against the father’s 75% – the son’s interest was not included. The senior foreclosed and got paid, leaving a surplus of $160,000 available. The dispute was whether the 25% owner got any.

The junior lender wanted all the proceeds, so it relied on Civ. Code, § 2924k, subd. (a)(1)–(4), set out in full at end of post.) This provides that First, the costs of foreclosure are paid. Second, the foreclosing creditor’s secured obligations are paid. Third, junior lienors are paid in their order of priority (this is what the trial court relied on). Lastly, any remaining funds are given to the vested owner of record at the time of the foreclosure sale. In this case the trial court awarded the entire surplus to the junior creditor, but it was reversed on appeal.

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In California real estate Partition actions, Courts are able to award reasonable attorney fees “incurred or paid by a party for the common benefit.” CCP §874.040. This applies even in contested partition suits. It is all in the court’s discretion – fees incurred by a defendant to a partition action could be for the common benefit, and therefore allocable in part to the plaintiff, despite the fact that the defendant had “resisted partition, with the claim that plaintiff had no interest in the subject property, that it belonged to defendant alone, and that plaintiff was a mere volunteer in paying the delinquent taxes. However, courts have found that fees incurred “advocat[ing] a position of limited merit” are not for the common benefit and should be borne by the party “pressing” such “spurious matters.” A court may achieve a similar result through an exercise of its equitable discretion under section 874.040 and require a party to bear its own fees. But what if there is a written agreement between the parties which contains an attorney fee provision? In a recent decision, the parties entered a settlement agreement regarding property that did not limit the right to partition. When one filed a partition action, claiming to be enforcing the settlement, the court disagreed that they could invoke the attorney fee provision.

Sacramento-partition-attorney-fee-attorneyIn Orien v. Lutz, three siblings were gifted two properties from their mother; they each obtained one-third undivided interest. Once mom died they fought over her probate estate, resulting in s a settlement agreement which included the 2 properties. The exact language is set out at the end of this post below; in summary, the Settlement said that if the parties agreed, they could sell the properties, but this did not prevent them from filing a partition action. Another provision provided for attorney fees to anyone who brought an action to enforce the agreement or prevent its breach.

Eventually the plaintiff filed this action seeking a partition. Partition was granted. The trial court awarded attorney fees to plaintiff pursuant to paragraph 21.1 of the settlement agreement and Civil Code section 1717, which governs awards of attorney fees for actions on contract. The trial court agreed that the action “concerned enforcement of one of the provisions of the settlement agreement—paragraph 11.1—that allowed for partition by sale of the properties at issue” and therefore fell within the attorney fees provision.

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Notes and Deeds of Trust are often assigned to different parties. The question posed is what happens if the Deed of Trust alone is assigned? A typical assignment of the Deed of Trust alone will purport to assign “all beneficial interest under that certain Deed of Trust dated xyz..” But the long-established law in California is clear: the beneficial interest under a Deed of Trust is held by the party who holds the Note (or is entitled to enforce it), without regard to the assignment of the Deed of Trust.

Sacramento-Deed-of-Trust-LawyerWe start with the U.S. Supreme Court decision in Carpenter v. Longan (83 US 271.) In that great 1872 style of legal writing, it states:

“The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity. That the debt is the principal thing and the mortgage an accessory. Equity puts the principal and accessory upon a footing of equality, and gives to the assignee of the evidence of the debt the same rights in regard to both.”

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