Cancellation of Instrument in California

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How do you get rid of a fraudulent deed of trust or other recorded document that clouds your title in California?

As a real estate litigation attorney in Los Angeles, I come across situations where properties have a bogus or fraudulent deed of trust or other documents recorded with the County of Los Angeles that are clouding my client’s title.

In one particular example of egregious fraud, a group of criminals, including a real estate agent and an escrow agent, set about defrauding homeowners in Los Angeles and Orange Counties. In the guise of helping out homeowners facing foreclosure, they would create “straw buyers” and take out loans purportedly to pay off the first mortgage. But they would then either take all of the money or pay off the first and take any remaining equity. They did this to the tune of over $13 million.

The schemers were arrested, convicted and later sent to prison.

But my client, who was a victim of the scam, was left with a fraudulent deed of trust on his home.

Civil Code 3412 Allows For The Cancellation Of Instruments

California Civil Code section 3412 states that “a written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.”

To prevail on a claim to cancel an instrument, a plaintiff must prove (1) the instrument is void or voidable due to, for example, fraud; and (2) there is a reasonable apprehension of serious injury including pecuniary loss or the prejudicial alteration of one’s position.

We, therefore, prepared a complaint alleging a cause of action for cancellation of instrument and argued that the fraud rendered the deed of trust void. Our client had been injured because he was unable to refinance or sell his property with this fraudulent deed of trust on title.

We expect that because the schemers, in this case, are in prison and their mortgage company is a suspended California corporation that this case will proceed through default judgment.

What Is The Difference Between An Action To Cancel An Instrument And A Quiet Title Action?

A Quiet Title action can also be used to get the same result in this case. Quiet title is a broader cause of action that can be used for other disputes regarding title. For example, boundary disputes are often brought under a quiet title cause of action. In the case above quiet title would not be inappropriate and undoubtedly many lawyers would approach this situation by alleging quiet title.  However, an experienced real estate trial attorney should be aware of Civil Code section 3412. Quiet title causes of action have more requirements and can make the case more difficult. In quiet title cases, the complaint must be verified and the court must hold a live hearing rather than ruling on a default judgment package without a hearing. We would also have to name and serve any other parties having an interest in the property, including the holder of the first deed of trust.

In this case, we are able to bring a complaint with a very specific demand for relief that does not implicate all of these other factors and parties. The judgment canceling the deed of trust can then be recorded, satisfying the requirements of the title companies and allowing the property to be sold or refinanced.

Laine T. Wagenseller is an experienced real estate litigation attorney in downtown Los Angeles.  He is the founder of Wagenseller Law Firm, which specializes in real estate lawsuits in Southern California.

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