By: Roger J. Buffington
In last week’s Blog article, we discussed our take with respect to California law as it handles expungement of a lis pendens, and why the current trend in the law is troublesome. Essentially, we observed that key holdings by California Courts of Appeal have greatly eroded one of the requirements to withstand a motion to expunge a lis pendens, to wit: that the party seeking to maintain the lis pendens need show that the claim in question state a claim that affects title to real property. Pacific Lumber v. Superior Court [(1990) 226 Cal. App. 3d 371, 375] clarifies that a lis pendens does not require that the party filing it him or herself have a real property claim; it only requires that the lawsuit in question “affect title” to real property. Newell v. Superior Court [(2024) 107 Cal. App. 5th 728, 734], a 2024 case, holds that in a trust dispute where the dispute involves a possible change in the identity of the trustee, such a dispute constitutes a claim that “affects title to real property. ” The rather tortured rationale is that the trustee is the person that holds title to trust property and that accordingly a dispute over the identity of the trustee in turn affects the title of trust real property. Taken together, Pacific Lumber and Newell essentially mean that any interested person in a trust dispute (i.e. a person who has standing to appear in the action) can appear and file a Notice of Pendency of Action against any real estate parcel that the trust owns, so long as the dispute involves a possible change in the identity of the trustee. The party filing the lis pendens need not have any interest in the real property parcel. The party filing the lis pendens need not be a claimant to be trustee. Since typical trust disputes often or usually involve numerous interested persons, it would logically appear that the element of maintaining a lis pendens that the claim “affect title” to real property has been greatly eroded and expanded to include far more potential claimants than earlier. Newell, supra in particular, appears to radically erode the “real property claim” element of maintaining a lis pendens. It essentially means that anyone who chooses to appear in the action can file a lis pendens in a trust dispute in which the trust owns real property and someone is disputing the identity of the trustee, i.e. seeking to remove the current trustee.
Our position is that this trend is not desirable. These holdings essentially mean that any disgruntled trust beneficiary can file a lis pendens against any trust real property if the dispute, in any way, involves a potential change in the trustee. Courts have justified the holdings in Pacific Lumber and Newell by the notion that it is to the public’s benefit to be aware of a pending lawsuit that might affect real property. The Court in Newell, supra, stated that the purpose of a lis pendens is to notify potential buyers of real property that there is a legal action pending regarding that property and to bind any buyers to the resulting judgment. [Newell v. Superior Court of Los Angeles County (2024) 107 Cal.App.5th 728, 734]. We believe that this logic is incorrect because it mischaracterizes both the usual intent and the actual effect of a lis pendens. Contrary to the Court’s reasoning in Newell, supra, a lis pendens does not merely inform. It is well understood that when a lis pendens is filed on a property title, that the effect is to cloud title to the point where the property is instantly unsalable. Make no mistake: filing a lis pendens is a hostile acts that freezes the property in place until the lawsuit ends or the lis pendens is expunged. Many, perhaps even most, lis pendens filings are strategic insofar as the filing party is acting to assert leverage over the opposing party by preventing the sale of real property. The effect is a restraint on alienation that in many cases may not really relate to the disposition of the real property itself or the real nature of the lawsuit, such as in a circumstance where only the identity of the trustee of a trust is at dispute. Such a dispute often does not reasonably justify a lis pendens and instead conflicts with the ancient public policy that strongly disfavors restraints on alienation. We respectfully submit that it is clearly wrong to justify a lis pendens with its potential far-reaching effects merely because the identity of a trustee of a trust is in dispute. This has nothing to do with the validity of the sale of real property. We believe that the Court of Appeal’s reasoning in Newell is erroneous in this context.
Because of the erosion in the “affects real property” element of maintaining a lis pendens, most motions to expunge lis pendens will turn on the second prong, i.e. probability of success. In the past it was common for courts to sustain motions to expunge for failure to find that the claim “affects real property.” This first prong did not turn on a subjective evaluation of facts — it is solely determined by the pleadings of the party filing the lis pendens and whether they state, as a matter of law, a qualifying claim concerning title to real property, more or less akin to the way courts evaluate a demurrer. Thus, in the past, trial courts often expunged lis pendens filings that plainly did not justify a lis pendens cloud upon title. Under Pacific Lumber and Newell, trial courts will much more rarely grant motions to expunge based on failure to state a real property claim. The moving party will usually have to depend upon convincing the trial court that the party that filed the lis pendens cannot sustain their burden of showing likelihood of prevailing in the action by a preponderance of the evidence. Most Motions to Expunge will accordingly function in much the same way as a summary judgment motion. Such motions are expensive to bring since they require a strong marshaling of facts rather than a careful analysis of law akin to a demur. The cumulative effect of Newell and Pacific Lumber will be to make expungement of lis pendens much more problematic. Expect lis pendens filings to proliferate as a tool for leverage, especially in trust litigation cases.
The effect of Pacific Lumber, Newell, and their progeny will be to strengthen the hand of trust beneficiaries by amplifying their ability to exert leverage over the trustee. As we argued last week, particularly in the context of California trust litigation, this is inappropriate because the Probate Court itself is charged with ensuring the efficient administration of trusts. This should include whether it is proper for a trustee to sell real property during the pendency of a trust dispute. If there is a dispute about whether trust property should be sold during the pendency of a trust petition, the Probate Judge should be the decider as to whether to allow the trustee to sell trust property. The Probate Court should not be bound by the relatively inflexible criteria under the Code to wit: California Code of Civil Procedure Section 405.30 et seq. that governs the expungement of lis pendens.