Question #1

Question:

My father died recently and I inherited the house he and my mother lived in for 25 years. I put it up for sale and found a buyer quickly. But I was surprised to find that the title report shows a deed of trust from a debt I'm sure my parents paid off years ago. My dad wasn't the type to let a debt go unpaid. How can I get rid of this lien so I can clear the title and complete the sale? I just want to put this behind me.

Answer:

First, get a copy of the deed of trust from the title company. It's possible that the effectiveness of the lien has expired if the debt is really old. With certain exceptions, a lien of this type can expire and become unenforceable 10 years after maturity - the date fixed for the last payment, if it can be determined from the deed of trust - or 60 years after the recording date, if maturity can't be determined. Unfortunately, many deeds of trust don't include a payment schedule so maturity may be impossible to determine.

If the deed of trust has not expired, or it can't be determined if it has expired, look at the upper left-hand corner of the deed of trust for the name and address of the beneficiary. If that party is still in business or their successor in interest can be located, you might convince them that the debt has been paid and get a reconveyance of the deed of trust. With an old debt, however, you may find that no representative of the beneficiary can be found.

In this case, your options are a little more expensive. The law allows you to post a corporate bond - typically for more than the amount of the debt - and record it to clear title to your property.  The bond must describe the deed of trust and be acceptable to the trustee named in the deed of trust.  If the trustee cannot be found, you may designate a title insurance company as the trustee in place of the beneficiary, if a title company will agree.  The actual bond amount is determined by a formula in Civil Code section 2941.7.

If you can't afford the bond or can't find a company to act as trustee, another option is to bring legal action to quiet title.  The court would require proof of your good-faith effort to locate the beneficiary - for instance, by hiring an investigator to try to locate him or her.  If you can prove you made your best effort, your attorney might be able to get the court's permission to publish a summons in the newspaper and eventually win a judgment clearing the title to your parents' home.

question date: 4-30-98

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Question #2

I am a real estate agent. I have a client who owns a house and is not working at this time. She has a mortgage of about $110,000. Her boyfriend has been making the monthly payments since she bought the house. Now she does not want the house anymore. She told her boyfriend that she will transfer the house to him if he gives her $25,000. Her boyfriend has very bad credit so he does not qualify to buy the house. Recently she had surgery and the county paid all her expenses at the hospital. If she gives a grant deed to her boyfriend and he records it, will the bank call the loan? Will the county record a lien on the house due to the fact that the hospital paid for the surgery?

Answer:

While it is always hard to guess just what someone else might do in a particular case, this is one where I would urge caution on the part of your client.

Typically, most promissory notes and deeds of trust prepared by banks and other institutional lenders contain a “due on sale” clause which allows them to call the loan due if the borrower transfers the property, or any interest in the property, to someone else without the lender’s consent. If that clause is in your client’s loan documents, it would give the bank the legal right to call the loan, but whether it would actually do so would be a business decision on their part. However, since the boyfriend is not terribly credit worthy, this might make them more ready to call the loan than if he had a stronger financial position.

I’m not familiar with the law involving payments of medical bills by the county, but if it allows them to put a lien on a patient’s property, they might try and set the transfer of the house aside as being a conveyance in fraud of creditors. A “fraudulent conveyance” is one by an owner of property for less than adequate consideration, which prevents a creditor from reaching the property in order to satisfy its claims. The question, then, is whether $25,000 is adequate consideration for the house. If there is only $25,000 in equity, and the boyfriend also agrees to assume liability under the loan, then it might suffice. Unfortunately, this would be a question of fact to be determined by the court if the transfer was ever attacked.

Please be advised that any transfer of real property can involve significant tax and legal consequences, particularly where creditors are involved. Accordingly, your client should not transfer any interest in her property without first speaking with her own attorney and tax advisor, who can give her specific advice tailored to her particular circumstances.

question date: 8-9-01

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