Basic Questions and Answers about Quiet Title Actions
1. What is a quiet title action ?
A lawsuit filed in the local superior court to determine who owns right, title, and interest in real property, who is to be excluded, the nature of the interest, the legal description and address, and
the effective date that the interest was established.
2. Can quiet title actions be filed with other legal claims or causes of actions ?
Yes, examples include declaratory relief, reformation, fraud, and equitable subrogation.
3. What is the process for filing a quiet title action ?
The process is to determine the names of the parties, draft the lawsuit complaint, draft other required documents, and file the action in Superior Court.
4. What Courts have subject matter jurisdiction to hear Quiet Title Actions ?
Generally, Superior Courts where the subject property is located have jurisdiction to hear quiet title cases. Court venue is assigned by the zip code of the property. In certain limited circumstances,
Family law courts may take jurisdiction of quiet title actions if the claim relates to a dissolution action.
United States Bankruptcy Courts may hear quiet title actions if it relates to property and administration of the bankruptcy estate.
5. What laws govern quiet title actions in California ?
The main body of California statutory law is located in California statutes.
In County Superior Court in California, the California rules of Civil procedure and the California Rules of Court apply. Also The Local Rules of the Court and any specific rules of the judge’s courtroom also apply. Also, state case law in California will apply. The statutes and case law for lis pendens also apply. In sum, quiet title actions are generally governed by 6 sections of California law.
6. What is a “lis pendens” and how does it relate to a quiet title action ?
Lis pendens is a latin term for “action pending.” When you file a quiet title lawsuit or other claim involving ownership of an interest in real property, the plaintiff is required by law to file, serve and records a lis pendens- which is simply a written notice of the pending lawsuit. The Notice is filed in Court, served on parties in the action, and recorded in the county where the property is located. The filing of a lawsuit itself does not provide constructive notice to the world of the pending action. Recording a lis pendens in the public recording records against a piece of property alerts a potential purchaser or lender that the property’s title is in question, which makes the property less attractive to a buyer or lender. Once the notice is filed, anyone who nevertheless purchases the land or property described in the notice takes title that is subject to the ultimate decision of the lawsuit. The lis pendens provides notice that any grantee, transferee, or assignee take an interest that is subject to the plaintiff’s claim, and can be effected by plaintiff’s claim. The recording of a lis pendens also places a mini cloud on the title which may prevent a fee owner from taking out loans against the title to the subject property- if a lender knows about the lis pendens it is unlikely to provide a loan, unless the loan could settle or resolve the lawsuit and result in resolution. Once a lawsuit is settled or completed, a lis pendens may be released from the record title.
7. Is a quiet title action the same thing as an unlawful detainer action ?
No. The issue in a quiet title action is who has right, title, and interest in real property as of a certain date. The main issues in an unlawful detainer are the rights to possession of real property, past due rent, and daily damages.
8. What is a claim for equitable subrogation ?
Subrogation is a legal term that generally refers to the situation where the party pays a claim and then steps into the shoes of the payee to get indemnity or reimbursement from the bad actor. The term subrogation is common in the world of liability insurance, and the term and process of equitable subrogation is very common in the world of title insurance.
Equitable subrogation is frequently used by deed of trust lenders, and their title insurance companies
to establish priority as an equitable lien as a matter of equity when there is no protection for their deed of trust under the "first in time" recording rules. If the deed of trust lender prevails in the lawsuit, it can ask the Court to declare a priority equitable interest, and also foreclose the equitable lien to take title to the property if the borrower is in default on the loan.
In California, lien priority (and, therefore, right to payment) is determined by the maxim "first in time, first in right." Civil Code § 2897; Thaler v. Household Fin. Corp., 80 Cal. App. 4th 1093, 1099 (2000). Thus, liens that are recorded first have priority over later-recorded liens. Id. "The recording statutes were enacted for the purpose of establishing priorities among claims upon property and provide adequate means by which those with an interest in property may protect their rights." Gates Rubber Co. v. Ulman, 214 Cal. App. 3d 356, 370 (1989). Moreover, a properly recorded lien serves as constructive notice of its contents to all subsequent purchasers and encumbrances. Civ. Code § 1213; Thaler, 80 Cal. App. 4th at 1099.
There is, however, a doctrine in California called equitable subrogation that, in certain circumstances, provides an exception to the first in time lien priority rules. Equitable subrogation allows a party who stands behind one or more lienholders under California's first in time, first in right law to step in front and claim priority.
Finally, in 1978, the California Supreme Court ruled that a party must establish the following five prerequisites to establish the doctrine of equitable subrogation successfully: (1) the subrogee (the party seeking subrogation) must have made payment to protect his own interest; (2) the subrogee must not have acted as a volunteer; (3) the debt paid must be one for which the subrogee was not primarily liable; (4) the entire debt must have been paid; and (5) subrogation must not work any injustice to the rights of others. Caito v. United Cal. Bank, 20 Cal. 3d 694, 704 (1978).
A claim for equitable subrogation is somewhat similar to a quiet title claim because at the end of the case the plaintiff establishes a right and interest in real property in the form of prioritized equitable lien. This claim is filed by a secured lender generally after an assignment of a deed of trust. Secured lenders frequently sell their deeds of trust as pool or loans, or they may sell the loan along with an assignment. If there is a title defect in the way the original deed of trust was drafted, recorded or perfected, or the borrower did not have proper to title when the original deed of trust was signed, the holder of the loan makes a title claim using the equitable laws. On title to real property, there may be competing interests by holders of deeds of trust and holders of judgment liens.
The assignee lender is making a claim that it stepped into the shoes of the origina lender and therefore is entitled to priority as a matter of equity.
9. What is title insurance and who purchases it ?
Title insurance is a contract of indemnity that is purchased for an owner or a secured lenders at the time of the close of an escrow. The policy is issued at the time of the recording and close of escrow. The purpose of the policy of title insurance is to protect the owner from unknown title defects that may effect the owner’s title after the close of escrow. For example, the escrow company or title insurer misses a recorded deed of trust or judgement lien that was not disclosed by the seller of the property. Or the seller did not have good title to convey to the purchaser, and there is a gap in the chain of title. For lenders, the purpose is to insure title priority- which for most home lenders is first title position ahead of other creditors with liens. It is a unique type of insurance because it is generally purchased one time, and it is not structured as an
Automobile insurance policy or as a homeowner’s policy that would be paid for and renewed each year. The amound of insurance for an owner is generally based on the purchase price of the property, or for the lender’s policy is the amount of the loan.
Pursuant to the terms of the title insurance policy, and the exceptions, the title insurance company has the legal obligation to insure and indemnify the insured for a title defect and loss. The lender and owner will file a claim with the title insurance company. In reality, the title insurance company will investigate the claim, and may pursue litigation to try to fix the title defect.
10. What is the most common factual scenario that is the basis of a quiet title action ?
Probably the most common fact scenario is a mistake in the language of the legal description. The lender discovers the mistake at the time it wants to foreclose. The legal description may describe the lot or parcel number of a property that was not intended to be secured by the lender.
Another common scenario is a forged grant deed or deed of trust that is recorded on title without the owner’s consent. This type of unauthorized fraudulent deed causes a cloud on title, and filing a quiet
title action is one method to attack it.
11. How do title insurance companies get involved in quiet title actions ?
When owners and lenders make claims for title defects under their title insurance policies, the title insurance company will investigate the claim, refer the claim to an adjuster or claims attorney, and may refer the claim to a litigation attorney to file or defend the rights of the insured. The litigation attorney may be employed by the title insurance company or may be an outside law firm.
12. Do quiet title claims settle or go to the trial ?
Like most cases in Court, most title claims settle and do not go to trial. The factors that determine whether a settlement is possible is the attitude and positions of the parties, the cooperation of the parties, whether the parties can reach a global settlement, the cost and attorney’s fees to go to trial, the strength of expert witness’s opinions, whether a title insurance company can facilitate a settlement. If monetary losses is involved the issue is whether the opposing parties are apart in their financial positions or close to resolution. A knowledgeable mediator or settlement judge can help facilitate a settlement. If there are high financial stakes, and the parties cannot reach a written agreement, the case will go to trial, and will be decided by a Court or jury.
13. Can a court decision on a quiet title claim by a trial court be appealed to a higher Court ?
Yes if a notice of appeal and other required documents are timely filed and in proper form, a decision of the Superior Court on a quiet title claim can be appealed to the court of appeals or the California Supreme Court. The issue on appeal is whether the trial court made an error in the admission of evidence, on the law, awarding excessive damages, or in applying the facts to the law.
Most trial court decisions do not get reversed on appeal, but appeal court have a lot of power and can reverse a decision in part or totally, or not at all.
The California Supreme Court may hear a second level of appeal if it wants to – there is no automatic right to have the California Supreme Court hear the appeal.
14. Can the U.S. Supreme Curt decide a quiet title action ?
Yes. If federal land claims are involved or the competing claims of states are at issue, the United States Supreme Court may decide to hear a quiet title action. See for example.
Alaska v. United States, 545 U.S. 75 (2005)