Quieting a Cloud on Title: What It Means and How It Works

What are we really saying when we state: “A cloud is on my title”? First we must understand what a Colorable Claim to Title is and what Title is. Those are two distinctly different things.

Colorable Claim vs. Title

Colorable claim, as defined by the Legal Information Institute of Cornell Law School:

“A plausible legal claim. In other words, a claim strong enough to have a reasonable chance of being valid if the legal basis is generally correct and the facts can be proven in court. The claim need not actually result in a win.”

The banks are hoping that the hearsay claims to title recorded into public record will be enough to take the home from beneath the homeowner. But a colorable claim is not title. It is a claim that might be valid if the facts hold up. In my 12 years of forensic mortgage investigation, I have seen thousands of cases where the facts do not hold up.

As defined in Hocking v. Title Ins. & Trust Co., 37 Cal. 2d 644, 648 (1951), title is:

“A common meaning [of the word ‘title’] is complete ownership, in the sense of all the rights, privileges, powers and immunities an owner may have with respect to land.”

Documents Memorialize, They Do Not Cause Transactions

The documents filed into public record are there to memorialize transactions. They do not cause the transactions. When an “Assignment of Mortgage” or an “Assignment of a Deed of Trust” is filed into public record, the purpose is to memorialize the sale of a Tangible Negotiable Instrument and the acquisition of rights to title. The filing does not cause the sale.

The sale must be in accordance with your state’s equivalent of the Uniform Commercial Code Article 3. The filing of the document purporting to be an “Assignment of Mortgage” gives constructive notice to the world that a superior claim to title has taken place. But here is the question that is never asked: Is this document eligible to be recorded?

The Problem with Foreclosure Actions

In the majority of foreclosure actions I have investigated, the claimed holder in due course has not acquired complete and lawful ownership of title. Mortgage servicers can foreclose under local laws of jurisdiction, but that ability derives from a principal/agency relationship with the owner of the indebtedness and a perfected right to the real property.

Therein lies the problem. The claimed right has not been lawfully acquired. A third party attempts to exercise a right on the homeowner’s property without lawful authority to do so under statutory requirements of law.

Court of Equity vs. Court of Law

When a Quiet Title suit is filed, you are asking for equitable relief. You are going into a court of equity when you should be going into a court of law. Going into a court of law requires a few things to be done first.

Before any action is taken, there should be findings of facts and conclusions. In regards to the true sale pertaining to title of real property, these questions need to be addressed:

1. What did take place?
2. What did not take place?
3. When was this to take place?
4. What was supposed to take place in accordance with statutory requirements of law?

Only by applying the correct methodology to identify the party entitled to enforce the note can a determination be made as to whether a Party Entitled to Enforce exists. Once the facts are ascertained, the course of action becomes clear. A chain of title analysis documents the transfer history needed to support these determinations.

Quieting the Cloud on Title

Quieting a cloud on title means unraveling the facts and hearsay claims of colorable title from the statutory requirements of law required to achieve properly secured title with legal rights. A professional quiet title investigation is the process of uncovering those facts and identifying whether the claims are valid.

Where there is controversy pertaining to superior claims to title, it would make sense to this writer to have a court determine the legal position of the parties making a colorable claim.

The Role of Declaratory Judgment

One way to obtain the “status quo” of the parties would be through a declaratory judgment, which is the legal determination of a court that resolves legal uncertainty for the litigants. The declaratory judgment is generally considered a statutory remedy, not an equitable remedy, and is thus not subject to equitable requirements.

Declaratory judgments can provide legal certainty to each party when that certainty could resolve or assist in a disagreement. Often an early resolution of legal rights will resolve some or all of the remaining issues.

In looking at actions where a Declaratory Judgment may produce positive results:

• Enforceability of Security Instrument as to the current party claiming an interest
• Enforceability of Promissory Note as to the current party claiming an interest

The Foundation

Laying the proper foundation of findings of facts and conclusions gives teeth to a cause of action for Slander of Title and for a Declaratory Judgment.

There is no such thing as a free house. What is lost is an alternative means of collection. One cannot lose what one never properly acquired in accordance with statutory requirements of law.

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Joseph Esquivel, Mortgage Compliance Investigators. Copyrighted 2014.