Legal Question in Real Estate Law in California

There are definitely several legal theories under which your friend could bring a legal action against the mother-in-law to get back the house. It would appear that there was an express trust in this case, though there may be issues of proof and statute of limitations due to it being verbal. There are also equitable trust theories that could be asserted. Whether or not your friend would win a case is impossible to predict on such limited information as can be made available in this format, but it is definitely worth pursuing. If the house is up for sale, however, your friend needs to move immediately with some legal action. If the house is sold to a buyer who takes title without your friend asserting her claims first, the buyer will be a good faith purchaser for value and the house will be lost. If your friend get's a lawsuit on file and records a notice of the lawsuit in the chain of title to the property, the house will not be ablt to be sold until the lawsuit is resolved. I have spent over two decades handling this kind of case. So if your client would like a free telephone consultation she should feel free to email me or call me. If she then wants to use my services, we can proceed, and if she would rather find an attorney in the Turlock area, I can refer her.

The facts given seem to describe a classic example of a purchase-money resulting trust. The mother probably holds "bare legal title" as involuntary trustee of a presumed-in-law trust for the person who put up the down payment, or part of it. If there are decent records of whose money was used to buy the property, or what the parties' game plan was at the time the house was bought, your friend can and should file suit promptly to quiet title in herself on the basis that she is the beneficiary of a resulting trust and that the mother must convey legal title to her.

Suit should be filed and a "lis pendens" (notice of pendency of action) recorded before the house is sold to reduce the risk of a sale to a third party who might be considered a "bona fide purchaser for value and without notice" (of your friend's claim) which could jeopardize her right to assert her ownership.

There is, however, a possible way around a prior sale to a bona-fide purchaser.....it may be possible to show that the supposed BFP had constructive notice or was placed on inquiry notice because the house was in the possession of someone, and maybe even assessed to someone, who was not the owner "of record." Nevertheless, it would be cleaner, safer and simpler to get the suit on file and the lis pendens recorded before a sale can occur!

I have filed and won several resulting trust actions, one which was decided at the Court of Appeal (citation on request) and could handle your friend's case economically, so have her contact me directly if interested in a no-obligation discussion of the specifics.

Sounds like a claim for 'equitable interest', meaning that they claim a title interest based on the 'deal' and the payments they have made. Talk to local counsel asap to see what legal action needs to be done.