The Statute of Limitations in Quiet Title Actions When the Plaintiff Is In Undisturbed Possession of the Land

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Clifford R. Horner, Esq.

Quiet title actions establish claims for and against title and ownership to real property in California. The statute of limitations in quiet title actions, the maximum time after an event within which a lawsuit must be filed or face being time-barred, has its own rules in determining when the statute of limitations begins to run and whether certain exceptions exist. The statute of limitations in a quiet title action can vary based upon what the underlying legal theory or basis for relief is in the particular case. For example, if the underlying legal theory for relief is fraud then the statute of limitations in the quiet title action is based upon the statute of limitations for fraud. However, an exception exists to the statute of limitations in quiet title actions where the statute of limitations will not begin to run as to an owner ‘in exclusive and undisputed possession’ of the land, until the defendants’ adverse ‘claim is pressed against’ plaintiffs or when was defendants’ hostile claim ‘asserted in some manner to jeopardize the superior title’ held by plaintiffs.” In a recent California Court of Appeal case, the Court considered what and when an “adverse claim is pressed against” a plaintiff and what “jeopardizing superior title could mean” with respect to a notice of foreclosure sale being posted on the Plaintiff’s door about five years before the plaintiffs filed their quiet title lawsuit.


(See Huang v. Wells Fargo Bank, N.A. (2020) 48 Cal.App.5th 431)


Summary:


In this case, in 2009, the Huangs purchased a home in Lafayette, California from a foreclosing lender Bank of America and also purchased a title insurance policy from Fidelity National Title. The prior owners of the Property, the Fasslers had two home equity loans (HELOCS) with Wells Fargo that had been paid off in a refinance with a subsequent lender. However, Wells Fargo never issued or recorded any reconveyances of these two deeds of trust with respect to the HELOCS. The Fasslers nonetheless later defaulted with respect to the later loan that they used to refinance the at-issue Wells Fargo HELOCs, and that refinance lender, Bank of America successfully foreclosed in 2009.


A month after the Huangs purchased the home in 2009 from the foreclosing lender Bank of America, Wells Fargo recorded a notice of default and election to sell the Property under the power of sale – i.e., a notice to begin the foreclosure process - with respect to one of their HELOCs to the Fasslers (which was already repaid by way of the Bank of America refinance).


The Huangs admittedly received the foreclosure notice in 2009 as it was posted on the door of the Property and they contacted their title insurer Fidelity. In 2009, Fidelity notified the Huangs that it was going to conduct an investigation and that it contacted Wells Fargo to resolve the issue.


The Huangs heard nothing from Fidelity or Wells Fargo from about July 2010 and May 2014 and during that time, Wells Fargo didn’t take any further actions to foreclose. However, almost five years after, in 2014, Wells Fargo resurfaced and threatened to foreclose so at that time, the Huangs filed a quiet title lawsuit against Wells Fargo to quiet title to the Property – specifically with respect to the two deeds of trust for the HELOCs where a reconveyance should have issued and been recorded.


Wells Faro argued, and the trial court agreed, that more than three years past from when the Huangs received the recorded notice of trustee’s sale posted on the door of their property in 2009 and that because the Huang’s underlying legal theory for relief seeking to quiet title was fraud, that the three-year statute of limitations for fraud had expired in 2012 – three years from 2009 when the notice of sale was posted.


The Huangs appealed the trial court’s order ruling in favor of Wells Fargo with respect to the statute of limitations claim. On appeal, the Court of Appeal considered what constitutes an owner “in exclusive and undisputed possession” of the land”, when was defendants’ adverse ‘claim … pressed against ’plaintiffs’, and “when was defendants’ hostile claim ’asserted in some manner to jeopardize the superior title’ held by plaintiffs.


The Court ruled in favor of the Huangs who they held were in undisturbed possession of the land and that despite the notice of trustee’s sale being posted on their door in 2009, that the sale of the property at that point was not definite and the Huangs could take action to prevent it – i.e., cure the purported default.


Further, the Court of Appeal held that the notice of trustee’s sale (foreclosure sale) did not call into question the validity of the Huangs’ control or possession of the Property (i.e., ownership and title) but that their ownership would require them to pay the amount in default. As such, the Court reasoned that in 2009, Wells Fargo never pressed an adverse or hostile claim as to superior title. Further, the Court reasoned that once the Huangs transmitted the notice to Fidelity which led to the apparent postponement of the sale, no claim was being “pressed against” them that “put [them] to the expense and inconvenience of litigation.” As such, the statute of limitations had not run and disagreed with the trial court and Wells Fargo.


Take Away:


The statute of limitations has grave and case dispositive consequences and could bar a litigant from obtaining legal relief. The facts of any particular case will of course determine when the statute of limitations is triggered and begins to run. Here, the Court held that the notice of trustee’s sale did not disturb the owner’s possession of land and therefore, did not commence the running of the statute of limitations. However, it is critical that potential litigations be mindful and aware of the various statute of limitations and to avoid potentially being time-barred, seek legal counsel without delay to enforce their legal rights.


*The above does not constitute legal advice and should not be acted upon without seeking advice from a licensed lawyer.

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