Lis Pendens Upheld in Claim Against Sham Trustee Who Transferred Trust Property
A lis pendens is a recorded document giving constructive notice that a lawsuit has been filed affecting title to or right of possession of the real property described in the notice. Any person later acquiring an interest in the property does so subject to the lis pendens, and is bound by any judgment entered in the lawsuit.
The property owner can remove (or “expunge”) an improper lis pendens by filing a motion under Code of Civil Procedure section 405.30 by showing either that the underlying claim does not affect title to or possession of real property, or that the claim is not supported by prima facie evidence.
In a case recently published by California’s Second Appellate District — Newell v. Superior Court — the court addressed a lis pendens recorded in a case alleging that an elderly man’s caretaker fraudulently made herself the trustee of his trust and then used trust funds to purchase property in Van Nuys, California.
Facts: elderly man suspiciously amends trust and makes his new caregiver the sole trustee and beneficiary; after his death the sham trustee uses trust assets to buy property
Arthur Mancini created his Family Trust with his wife Julia in 2002. After Julia died, Arthur amended the trust and named his daughter, Lucy Mancini Newell, as the successor trustee and sole beneficiary of the trust upon his death.
When Arthur was 89 years old, Neneth Rollins – a 56-year old woman – began providing caregiver services to Arthur. Just months later, Arthur executed changes to his trust making Rollins the trust’s trustee and sole beneficiary.
Arthur died the next year. Rollins used trust assets to purchase real property in Van Nuys, California, taking title to the property as “Neneth D. Rollins, Successor Trustee of the Mancinci Family Trust….”
Newell learned of the trust amendments when she received a Probate Code notice from Rollins’ attorney. Newell filed a petition in the probate court challenging the validity of the trust amendments and alleging financial elder abuse against Rollins. Newell’s claim cited to Probate Code section 21380, under which a donative transfer to a care custodian of a transferor who is a dependent adult is presumptively the product of fraud or undue influence.
Newell also recorded a lis pendens against the property in Van Nuys that Rollins had purchased with trust assets, and requested a constructive trust on the property.
Rollins filed a motion to expunge the lis pendens.
Probate court: motion to expunge granted; claim did not affect title to property
The probate court judge granted the motion to expunge, holding that Newell’s claim did not affect title to or possession of the Van Nuys property because the claim merely sought to change the identity of the trustee — from Rollins to Newell — and even if such change occurred the property would still be owned by the trustee of the Trust.
Newell filed a petition for writ of mandate to the Court of Appeal.
Court of Appeal: reversed; claim clearly affected title; trustee owns the property, not the trust
The Court of Appeal reversed and vacated the probate judge’s ruling, holding that Newell had clearly alleged a claim affecting title to the Van Nuys property.
The court first noted that the amendment to Arthur’s trust naming his caregiver Rollins as the sole beneficiary was presumptively the product of fraud or undue influence under Probate Code section 21380, so Newell’s claim had prima facie support.
As to the claim’s effect on title to the property, the court explained that unlike a corporation, a trust is not a legal entity and cannot hold title to real property. “Trusts do not own property; trustees do.” Trustees hold title as a fiduciary to the trust’s beneficiary. If Newell’s claim succeeded, the probate court would remove Rollins as trustee and designate a new trustee who “would then be entitled to hold title to the Van Nuys property in his or her name as successor trustee.”
The court continued: “In that event, Newell’s petition would change the name of the titleholder. True, as the probate court stated, title would still be in the name of the trustee, but the trustee would be a different person, and the name of the title owner on the deed would be different. That’s a pretty big effect on the title to the Van Nuys property.”
Takeaway
Under the Newell opinion, a claim seeking to invalidate a sham trust amendment naming a new trustee and to impose a constructive trust on property purchased with trust funds by the sham trustee affects title to property and can support the recordation of a lis pendens.