A lis pendens is a notice that a lawsuit has been filed against real property which could affect that property’s title. The lis pendens notifies any potential buyer that there is a lawsuit involving a real property claim. This is important because a potential buyer with knowledge of the lis pendens will be bound by the court’s eventual judgment on the lawsuit.
According to California law, a lis pendens is filed if the party has a real property claim. (Code of Civil Procedure § 405.20.) A real property claim is a cause of action that would affect the title or possession to real property, or easement use. (Code of Civil Procedure § 405.4.) Until recently, one could not file a lis pendens based on a constructive trust theory, since constructive trusts were not considered real property claims. A new California appellate court decision, however, allowed lis pendens to be filed based on a constructive trust theory.
What is the Constructive Trust Theory?
The constructive trust theory is a legal remedy that compels the transfer of property when someone obtains the property through fraud or misrepresentation. (American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1485.) A constructive trust allows the rightful owner to regain his property that was taken. (Id.) Constructive trusts can also be used to compel the transfer of money back to the rightful owner. (GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856, 879.)
For example, in Fowler v. Fowler (1964) 227 Cal.App.2d 741, the defendant bought a home with the plaintiff’s assistance. (Id., at 745.) The defendant promised to put the home in both their names after they were married. (Id.) Later, the defendant asked for money for improvements to the property, which the plaintiff gave him. (Id.)
Eventually, they got married but the plaintiff sued to annul the marriage. (Id., at 743.) The plaintiff also sued to establish a constructive trust on the real property. (Id.) The plaintiff argued that she relied on the defendant’s oral promise to transfer the property’s title. (Id., at 746.) The Court of Appeal held that there was substantial evidence to support the repudiation of the defendant’s oral promise, and so a constructive trust could be enforced in this situation. (Id.) The Court of Appeal remanded other aspects of the trial court’s judgment on other grounds. (Id., at749.)
Applying Lis Pendens to Constructive Trusts
A recent California appellate court decision, Shoker v. Superior Court of Alameda County (2022) 81 Cal.App.5th 271, finally settled the question of whether a lis pendens could be filed based on a constructive trust theory. Before this case, California case law had not been totally clear on whether a constructive trust claim was a real property claim. This left the question of whether a lis pendens applied to constructive trusts an open one.
In Shoker, Devinder Shoker and Rajwant Shoker owned several rental properties. (Id., at 275.) Sukhjinder Singh Ghuman befriended the Shokers and told them about an investment opportunity in a tech company that was time sensitive. (Id.) The Shokers relied on Ghuman’s advice, giving him millions of dollars and sold ten of their rental properties to Jabir Phangureh. (Id., at 276.)
Ghuman never intended to help the Shokers with the investment but was conspiring with Phangureh to obtain the Shokers’ properties. (Id.) The Shokers eventually found out, and they sued Ghuman and Phangureh. (Id.) One of the Shokers’ claims was for constructive trust. (Id.)
Two years after the Shokers filed their complaint, they recorded a lis pendens for the ten rental properties. (Id.) Phangureh moved to expunge the lis pendens, which the trial court granted. (Id., at 276-277.) The trial court held that the Shokers did not assert a real property claim against Phangureh. (Id., at 277.) The Shokers appealed, and the Court of Appeal reversed the trial court’s judgment. (Id.)
The Shokers argued that their constructive trust claim was a real property claim. (Id.) The Court of Appeal held that the Shokers’ constructive trust claim against the defendants fell within the statutory definition of a real property claim, since the claim would affect the real property’s title. (Id., at 282.)
Furthermore, the Court of Appeal ruled that the claim was still a real property claim even though the Shokers also sought money damages. (Id.) The Court of Appeal concluded that the trial court erred in expunging the lis pendens and reversed the trial court’s judgment. (Id.)
As seen in Shoker, a lis pendens can be filed for real property that is the subject of constructive trust claims. Parties should be aware of this tool that can be used in litigation. This is especially important for plaintiffs who are looking to assert their rights to the property. It is also important for parties to know that courts will consider a constructive trust claim as a real property claim.
“Shawn” is a businessman who owns several properties. He is looking for new ways to invest and make more money. Eventually, he meets “Julie,” a real property manager.
Julie tells Shawn that if he gives her some of his properties and some money, she can improve the properties and increase their value. Intrigued, Shawn agrees to Julie’s plan. He gives her five properties and thousands of dollars for her improvements.
Unfortunately for Shawn, Julie never intended to invest in and improve the properties. Julie takes the five properties and keeps all of the income from the properties for herself. She uses the thousands of dollars Shawn gave her for improvements to fund her lavish lifestyle.
Shawn finds out about Julie’s deception and sues her for fraud, breach of fiduciary duty, and constructive trust. Shawn also files a lis pendens on the five properties he gave to Julie. Under Shoker, Shawn is allowed to file a lis pendens under a constructive trust claim.
How Underwood Law Firm Can Help You
Under a recent California appellate court decision, parties can file a lis pendens under a constructive trust claim. This is because a lis pendens is filed for real property claims, and Shoker ruled that constructive trust claims are considered real property claims.
Here at Underwood Law Firm, our knowledgeable attorneys are here to help navigate the complex web of case law and statutes surrounding partitions. If you are trying to plan a partition order, or just have any questions, please do not hesitate to reach out to our office.