Suing and Serving Phantoms and Ghosts in Real Estate Quiet Title Cases
By Nate Bernstein, Esq., Managing Counsel, LA Real Estate Law Group
What is a Quiet Title Lawsuit
A “quiet title” lawsuit is filed by an owner of real property in court to resolve a problem with real estate title.
Every owner wants to have a “clean title” without gaps or other problems, and every lender wants to have their deed of trust in the position on title that they expected and bargained for in the prior escrow.
The overall objectives of pursuing a quiet title action are to bring in all interested parties that have an interest in the property before the court, to resolve the title problem, and to obtain a title for the plaintiff that is marketable and insurable by a title insurance company for a sale or refinance.
Both the legal and financial stakes can be high in quiet title litigation because without a clear title the owner cannot sell or refinance, and a lender cannot protect its priority title position. Issues litigated in quiet title actions are numerous and complex and can involve multiple parties with an interest in the property.
Hallmark examples include:
- A fraudulent transfer of a forged title deed by an unknown third party.
- An unauthorized deed transfer or encumbrance by a co-owner or business partner.
- A transfer prior to the filing of a bank foreclosure or bankruptcy that causes a gap or cloud in the chain of title.
- A lost and unrecorded deed that caused a cloud on title.
- The recordation of a fraudulent deed or deed of trust that the owner did not authorize.
- A related partnership dispute.
- A dispute about the percentage of equitable ownership.
Quiet title claims can be brought with other claims, such as fraud or breach of contract. The local superior court is equipped to adjudicate all of these types of title disputes and can enter a judgment after trial to provide relief to solve the problem.
Suing the Living and the Dead in Quiet Title Actions
Generally, it is relatively easy to determine who to name as a defendant in a quiet title action. The commonsense formula is to name any person or entity on the planet that has an actual or potential legal or equitable right, title, estate, lien, and interest in the subject property that is “adverse” to the right, title, and interest of the plaintiff.
Pursuant to Cal. CCP Section 762.010, the plaintiff shall name as defendants in the action the persons having adverse claims to the title of the plaintiff against which a determination is sought. The plaintiff should also sue any party that the plaintiff, a title insurance company, or the court wants to be bound by the quiet title judgment determination, including a co-owner or holder of a recorded deed of trust.
The adverse party defendant has the right to defend the action, and to present the defendant’s case and any defenses. In short, all sued parties get their day in court.
It is generally not necessary or advisable to automatically sue the plaintiff’s mortgage bank if the bank’s deed of trust lien interest is not adverse to the interest of the plaintiff. For example, the plaintiff obtained a mortgage loan on favorable terms, and was intended to be in first title position, there is no title dispute with the lender, and the plaintiff does not dispute that fact. A plaintiff can give a mortgage holder party or deed of trust holder notice of the action by serving the party or deed of trust holder and its loan servicer with a recorded lis pendens notice. If that mortgage party wants to intervene in the litigation, that party can be named as a defendant or can apply to the court to intervene in the action to have its claim heard.
Sometimes because of a time lapse or in other situations, a party that must be named in the quiet title action has died. However, technically speaking you cannot sue and serve a dead person- you can’t show up at the cemetery and drop the complaint and summons at the grave site.
If a defendant to be named is dead or believed to be dead, the legislature envisioned this “Tales of the Crypt” type of situation and you can sue pursuant to Cal. CCP Section 762.030. You can sue in the local superior court of general jurisdiction, and there may be no need to file an action or proceeding in probate court. A probate case may or may not be pending. If the person who died has an executor or administrator, you sue the personal representative of the deceased or of his estate.
If the person who died does not have a personal representative and no estate or probate, then you sue the “testate and intestate successors.” This code section provides,
“(a) If a person required to be named as a defendant is dead and the plaintiff knows of a personal representative, the plaintiff shall join the personal representative as a defendant.
(b) If a person required to be named as a defendant is dead, or is believed by the plaintiff to be dead, and the plaintiff knows of no personal representative:
(1) The plaintiff shall state these facts in an affidavit filed with the complaint.
(2) Where it is stated in the affidavit that such person is dead, the plaintiff may join as defendants “the testate and intestate successors of __________ (naming the deceased person), deceased, and all persons claiming by, through, or under such decedent,” naming them in that manner.
(3) Where it is stated in the affidavit that such person is believed to be dead, the plaintiff may join the person as a defendant, and may also join “the testate and intestate successors of __________ (naming the person) believed to be deceased, and all persons claiming by, through, or under such person,” naming them in that manner.”
Suing the “testate and intestate successors of the deceased” is relatively straightforward. You just name this class in the complaint and summons by using the language required in the statute. The plaintiff also files an affidavit at the time of filing the complaint.
Serving this class with the lawsuit is more problematic because this class may not exist as a real person or entity and there is no residential or business address to use for attempted personal and direct service. The deceased may not have “testate or intestate successors” or heirs. The plaintiff or plaintiff’s attorney may not learn about a successor until after the filing.
If a successor exists who claims an interest in the subject property, that person or entity should be named in the lawsuit. The only way to complete service of the unknown testate and intestate successors is to serve this class of defendant by publication. Service by publication will require the requisite due diligence to obtain a court order to serve by publication. See Cal. CCP 763.010.
Suing the Ghost Defendant Category Known as “All Persons Unknown”
When prosecuting a quiet title action, you want to be sure that you sue any person in the chain of title who has an adverse interest in comparison to the rights of the plaintiff, and to sue anyone else on the planet who may have an “adverse” interest in the property as compared with the plaintiff.
You want to sue any potential party who may claim a direct or indirect interest in a property. A review of an up-to-date preliminary title report for the subject property will usually reveal any person in the chain of title with an interest that was recorded.
You may have an investor or stakeholder who claims an interest in the property, but who is not on a record title profile. Sometimes, the true owners may not qualify for a loan, and have a relative or friend with a strong credit profile to obtain the loan and be on title. The true owner will still put down a down payment for the purchase price. This seemingly covert equitable owner may be living at the subject property and paying the mortgage but is not on the record title.
It is recommended to also name as a defendant in the action “ pursuant to CCP S. 762.060 “all persons unknown.” The statute provides,
“(a) In addition to the persons required to be named as defendants in the action, the plaintiff may name as defendants “all persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to plaintiff’s title, or any cloud upon plaintiff’s title thereto,” naming them in that manner.”
The name of this phantom defendant should be stated in the caption in the complaint and summons.
The Method for Serving Phantom and Ghost Parties with the Lawsuit is Delineated in the Quiet Title Statute
When you sue “testate and intestate successors” or “all persons unknown,” you still need to serve these phantoms and ghosts with the summons and complaint. But how do you serve this fictitious class of defendant that technically do not really exist in the world?
These defendant categories are only creatures of the quiet title statute. Personal or substituted service is not possible. If it is not Halloween night these ghosts and phantoms don’t come out of the shadows to accept service. The answer to resolve this dilemma is set forth in Cal. CCP S. 763.010, which provides,
“763.010. (a) The form, content, and manner of the service of summons shall be the same as in civil actions generally.
(b) If upon affidavit it appears to the satisfaction of the court that the plaintiff has used reasonable diligence to ascertain the identity and residence of and to serve summons on the persons named as unknown defendants and persons joined as testate or intestate successors of a person known or believed to be dead, the court shall order service by publication pursuant to Section 415.50 and the provisions of this article. The court may, in its discretion, appoint a referee to investigate whether the plaintiff has used reasonable diligence to ascertain the identity and residence of persons sought to be served by publication, and the court may rely on the report of the referee instead of the affidavit of the plaintiff in making the order for service by publication.
Nothing in this section authorizes service by publication upon any person named as an unknown defendant who is in open and actual possession of the property.”
The mindset for this form of due diligence is to perform it with an approach that perhaps you will find a person who was previously “unknown,” or who is a potential successor interest. If they fit in the statutory category and have a connection with the subject property, then that person should be named in the lawsuit.
If anyone in these phantom classes of defendants emerges from out of the woodwork to claim an interest in the property, this person or entity can be added as a DOE defendant after the case was filed. Alternatively, this party may want to intervene in the action and file its own cross-complaint if the stakes are high enough.
For the court to obtain personal jurisdiction over these ghosts and phantoms, you need to serve these defendants by publication. This process involves making a separate application to the court, demonstrating specific due diligence, obtaining a court order to allow for service by publication. The service is completed by complying with the court order for service by publication which usually requires publishing notice in a local newspaper and posting on the subject property.
Defining “Due Diligence” in Searching for the Phantom and Ghost Defendants
As explained above, to serve “testate and intestate successors” or “unknown persons” with the summons and complaint, the law requires service by obtaining a court order of publication.
To obtain the court order for publication you need to demonstrate due diligence as a matter of law. See generally Friends of Del Mar Bluffs v. North County Transit (2022 West Law 1227285) regarding the requirements for serving an individual in a quiet title action by publication under Cal. CCP Section 415.50.
In that case, the Court denied the application for an order for publication without prejudice. The Court denied the application to serve defendants by publication, but opined that the Judicial Council comments to Section 415.50 as instructive in elaborating on the showing required for a trial court to find a party has exercised reasonable diligence in trying to locate the party to be served:
“The term “reasonable diligence” takes its meaning from the former law: it denotes a thorough, systematic investigation and inquiry conducted in good faith by the party or his agent or attorney. A number of honest attempts to learn defendant’s whereabouts or his address by inquiry of relatives, friends, and acquaintances, or of his employer, and investigation of appropriate city and telephone directories, the voters’ register, and the real and personal property index in the assessor’s office, near the defendant’s last known location, are generally sufficient. These are likely sources of information, and consequently must be searched before resorting to service by publication. See also Kott v. Superior Court , 45 Cal. App. 4th at 1137-38 (citing Cal. Judicial Council Com., West Ann. Code Civ. Proc. (1973 ed.) Section 415.50, pp. 561-563.
Given this standard, how do you perform due diligence on persons or entities that probably do not actually exist anywhere in the world when their identities are not stated on a preliminary title report? This is where you need to be very creative in your due diligence methodology and strategy since databases are largely online and on many different websites. You need to think outside of the box.
You can ask the following questions:
- Are there living spouses, partners, relatives, heirs, neighbors who may have an interest?
- Who is leasing the property and in possession?
- Has a probate case been filed that can be investigated?
- Has anyone filed another lawsuit concerning the subject property?
- Did the decedent have a trust or a retirement account that would disclose a potential successor?
This approach requires multiple inquiries and searches by professionals, and the presentation of affidavits and exhibits to demonstrate due diligence. There also needs to be compliance with Cal. CCP Section 415.50(a)(1). The plaintiff must provide independent evidentiary support, in the form of a sworn statement of facts, for the existence of a cause of action against each defendant whom service by publication is requested.
Focused Approach and Strategy in Quiet Title Cases
When you need to file a quiet title action in superior court, you might as well file the case against all potential parties to achieve the maximum amount of relief. That approach includes naming and serving “all persons unknown,” and if a party is deceased, to sue their known personal representative or “testate and intestate successors.”
Service of these phantoms and ghost defendants is completed after obtaining an order of publication. You can also name the actual real person/ entity discovered defendants by filing a doe amendment. If need be, the plaintiff can amend the complaint to allege additional specific facts about the new doe defendant and this defendant’s connection with the subject property.
At the end of the day, the mail goal is obtaining a recordable quiet title judgment and other vital papers, to achieve a marketable unclouded title such that a title insurance company will write a future title insurance policy for knowing the title defect has been cured.
In this process, you can work with a title company officer to see what the title officer wants to fix the title problem evident in the chain of title. The title company officer will not provide formal legal advice, but a competent title office will work with you and your counsel and inform you what they need to correct the title problem. It also helps to have a competent judge assigned to your case that understands the law and nuances of quiet title actions, and who can facilitate settlement of the action if that is possible.
About the Author
The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy matters. The contact number is (818) 383-5759, and email is [email protected]. Nate Bernstein is a 30-year veteran Los Angeles real estate and business attorney and trial lawyer. Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options. He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, and in house counsel at Denley Investment Management Company. Nate Bernstein created www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation. Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, bankruptcy law. Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases.