Legal Question in Real Estate Law in California

Re: Lein

You omit an important fact: how is title held?

If you are co-owners of record, i.e, the deed shows that the house is owned by X and Y as tenants in common, or as joint tenants, a note and deed of trust executed by X alone is secured only by X's interest in the collateral. If the parents foreclose, they will be selling X's share; Y remains a co-owner with whoever is the buyer at the foreclosure sale. Parents may be the only bidder, since there is little or no market for half interests in single-family houses, so parent would end up co-owning with partner!

Your ex-partner's threats to "sue and force a sale" probably involve a partition action. In a partition suit, the plaintiff is asking the court to order the sale of a co-owned property and to have the net proceeds divided fairly between the former owners. Such sales are usually done in the ordinary way, using a real-estate agent, rather than as a courthouse-steps auction, but in this market, the results can be little or no net proceeds, and after legal costs, there is little hope of getting much back in many instances where the property was bought less than five years ago.

I know of another legal theory that might produce a better result for your parents. There is an equitable concept called a 'purchase-money resulting trust' which says that if X puts up the down-payment money to buy property, but Y (or Y and Z) get legal title to it for some reason, X may nevertheless be declared the beneficial owner of the property, and that Y (or Y and Z) hold legal title as mere trustee(s) for X, with a duty to convey legal title to X upon X's demand. The trust by which Y (or Y and Z) hold(s) title is a fictitious trust, implied by law, in order to prevent injustice.

There is a presumption that a resulting trust arises whenever X pays for, but Y gets, ownership. The presumption of a resulting trust can be rebutted upon a showing that X intended to make a gift to Y (or Y and Z).

If there is more evidence that your parents intended from the get-go that the $60,000 was a loan than there is that they were making a gift, your parents and you should cross-complain, when sued for partition, that the parents are the beneficial owners of 100% of the property due to a purchase-money resulting trust arising.

Please feel free to contact me directly if legal representation is needed. I have handled similar cases in severalcounties statewide.

Re: Lein

NO advice you get here is going to do you any good, other than to tell you and your parents to get an attorney when you end up in litigation when either of the 'partners' try to sell the property or force the other to do so without paying the parents. You're going to need a miracle or a court order. That's what happens when people don't have clear written agreements about 'deals' and money.