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Original content by Richard Zaretsky


The issue of Quiet Title lawsuits brought by borrowers to invalidate their mortgages is gaining interest based upon flimsy default judgment success in a few isolated instances. Borrowers that are thinking of pursuing this avenue of “resolution” can’t point to a definitive “win” in court using this procedure, and the long term “resolution” desired of invalidating the mortgage still leaves the promissory note unpaid for which the borrower remains liable.

A Foreclosure “Offense”?

Is this “offense” to attack the lender really the Holy Grail that eliminates the home or commercial mortgage – regardless of it being upside down in value or the homeowner even being in financial distress? A multitude of promoters (for substantial fees) are saying so and even some attorneys. Some firms are selling “information packages” – essentially “how to” guides to mortgage borrowers, while other firms say they will represent you in the “process” of the elimination of the mortgage.

The Concept

The concept sounds simple: A homeowner mortgage borrower or even a commercial mortgage borrower want to invalidate their mortgage or at least modify it. After weeks, months, years of unsuccessfully getting the “attention” of the lender, they decide that suing the lender with a Quiet Title lawsuit is a solution. Like I said, even an aggressive borrower can sue regardless of being current or late on the mortgage and regardless of the financial ability of the borrower. The borrower does not need to be in a Foreclosure lawsuit (see the article “WHAT DOES BEING “IN FORECLOSURE” MEAN?) to bring a Quiet Title action.

What is a Quiet Title Action?

In a Quiet Title lawsuit, the plaintiff (usually the one saying they have the best ownership title to the property, which would be the homeowner) files a court action asking the judge to declare that the homeowner / commercial property owner has the best title to the real estate and that all other persons have (a specified) inferior interest. Quite title actions can be needed for a variety of reasons, such as illegal or fraudulent property conveyances, unrecorded easements, boundary disputes or survey errors are typical reasons.

The Florida Statute on the Quiet Titles is at Chapter 65, but the key part of the chapter is at section 65.081. Understand that a Quiet Title lawsuit does not have to determine that the lender has no title interest in the property – most lenders do have a title interest in the property but it inferior to the fee simple title interest of the owner. The reason those lenders can sue and foreclose on the property is that the owner has given written permission to the inferior lender to take the property if the debt for which the property was mortgaged is not paid. In essence the borrower has given the lender the contingent right to sell the property to take precedent over the title held by the borrower. This describes 99% of all mortgages and borrowers.

Using the Quiet Title Action to Defeat the Mortgage

When can a Quiet Title lawsuit declare that the lender does not have a mortgage on the property when in fact the borrower did pledge the property as collateral for a promissory note? In other words, the mortgage was legitimate at the inception? So far, after hours of my own research, the only reports I could find were very isolated instances where the mortgage lender, having been served with the lawsuit to Quiet Title, has not TIMELY (usually 20 days) come forward to write to the court and say that the mortgage they hold is entitled to an interest in the property. When the lender does not TIMELY come forward and file their pleading with the court stating their position on title of the property, the court upon request of the property owner will enter a “DEFAULT” against the lender. A default is essentially both a failure to respond to the lawsuit allegations and an admission that the request of the property owner should be granted. The key here is that this is a procedural outcome to the case and not a full judicial adjudication on the merits of whether or not the lender factually has the contingent right to sell the property that I described above. In addition there can be a myriad of reasons why the default occurred in the first place – and the borrower (or the borrower’s attorney) can be very much to blame for setting up the lender for a probable default through service of the summons and complaint on the lender at some remote location.

The Final Judgment Quieting Title Upon Default

The default in responding to the suit in a timely manner then allows the property owner to pursue a Final Judgment Quieting Title. If there is a default against the lender, the final judgment is usually called a Default Final Judgment Quieting Title. It is exactly this scenario that has occurred in each of the “successful” cases mentioned by those that promote the Quiet Title solution.


You may hear arguments that the prior court decision(s) is “precedent” that all other courts must follow. The legal rule of “precedent” is complicated. Suffice it to say for this discussion that a final judgment obtained by default is never precedent anywhere. That is because there was no adjudication on the merits of the claim. Further, the decision of one judge at the trial level is not precedent on other judges in other counties in Florida, and actually not even the judge that may be in the courtroom next door to the deciding judge. Further, a decision by a judge in one state is not precedent on a judge in another state.

The Promissory Note is Still an Obligation

IF the Quiet Title action results in a Default Final Judgment Quieting Title, this only affects the title to the real estate. A quiet title win does not affect the debt – the promissory note – that evidences the payment obligation to the note holder (whoever that may be). Inevitably some person or entity is going to have the promissory note and seek to enforce it against the borrower. The only thing that can stop the enforcement of the promissory note is the statute of limitations in the jurisdiction in which it can be enforced, or the discharge in bankruptcy of the borrower. So the Quiet Title lawsuit only affects the title to the property. It does not protect the property from sale however.

The Property May Still be at Risk of Forced Sale and

The Necessity of Bankruptcy

Once the promissory note is enforced, the court will enter a money judgment against the borrower for the unpaid promissory note. The only way to avoid the money judgment is to declare bankruptcy. A money final judgment can in almost every jurisdiction in the country, be enforced by having a forced sheriff’s sale of the borrower’s real and personal property. Real estate is in certain instances and in certain jurisdictions, exempted from forced sale by the sheriff. If the real estate and enforcement laws allow forced sale of the particular property (real or personal), the money realized from the sale will be used to reduce or pay off the money judgment. If there is excess money left over after the lender is paid its money judgment, the excess or surplus sale proceeds are available to other creditors, and then after they are paid, the property owner who lost the property.

Quiet Title as a Viable Solution?

So I am still not convinced that there is a viable reason for wholesale quiet title actions being promoted as a solution for or as a foreclosure defense or offense. I don’t see the long term solution. Several persons I have spoken with stated that by putting their bank “on the defense” they will have a better chance of modifying their mortgage. I can’t say that works or not. I have plenty of foreclosure cases where we go to the lender through their counsel or directly with the lender and end up with modifications – without having filed a Quiet Title action. It seems to me that the Quiet Title action is just another way to get to speak to the lender’s attorneys, with the bonus of being at risk of foreclosure.

Who Has the Note?

Still another route many take is determining if the lender (not the servicer) truly has the promissory note or even the right to claim ownership of the mortgage. There are developing fact patterns being established by institutional investors suing the lenders that “packaged” these loans, it appears that the “trusts” or sub-entities that are supposed to own the note and mortgage in fact have themselves determined that they don’t own the documents – at least not in a legal and enforceable fashion. An excellent explanation, albeit one slightly tainted by reason it of being allegations in a complaint rather than findings by a judge, can be found in the New York State case currently pending HSH Nordbank vs. Barclays Bank, which tells of the failures of one particular lender that packaged and resold as securities blocks of thousands of mortgage loans, and through such failures and errors, made the mortgages unenforceable (or so they allege).

Can a Quiet Title Offense be Economical?

The problem with a typical residential borrower bringing up such defenses is the cost of investigation to get the proofs to establish such title problems is too much for law firms to undertake and too much for distressed homeowners to fund. This is not a $3,000 type case – tens of thousands of dollars would be necessary to prove up such a case. As stated before, the only basis for an economical (aka how much attorney time is involved) solution to the Quiet Title action is if the lender defaults by not responding to the Quiet Title Summons and Complaint. Assuming no default occurs, the lender will attempt to prove its line in the title of the property while the borrower must then be prepared to prove up why the lender’s title is actually inferior and the claims of the lender regarding its mortgage are false. This part of the proceeding will require advanced “discovery” through production of document and review of those likely thousands of pages and the taking of depositions – and this all take time, incurs expenses and results in usually a huge expense. Almost no attorney will take such a case on a contingency since the likelihood of borrower success where the lender answers the Quiet Title action is very slim.

Who Is Promoting Quiet Title Actions as Mortgage Elimination Solutions?

This leads me to the real issue that was the impetus to writing this article. Kimberly Miller, a writer at The Palm Beach Post in Palm Beach County, Florida has written several well researched articles regarding firms that promote the Quiet Title “defense” and Trusts as gimmicks to defeat mortgages. These firms typically require that the property owner pay significant fees, and transfer title to the property either to the company or to a “Trust” that has as the Trustee the company, but has as the Beneficiary the property owner. Almost always this is set up as a “Land Trust”, which exists in various states under statute, usually derived from the first state to codify the concept, being Illinois. Florida has had the Land Trust codified by Florida Statute section 689.071 and called the Florida Land Trust Act since the early 1980’s.

Mind you, there is nothing wrong with the Land Trust – I use it in my practice very often instead of a limited liability company or a partnership agreement, when the situation is right for its use. The concept is that a “Trustee” is given all the power to deal with the real estate including selling or borrowing with it, and no person dealing with the Trust needs to ask questions about who the Beneficiaries are. The Beneficiaries are the real owners – but they don’t own the real estate – they own an interest in the Trust, like stock in a corporation. That “interest they own is “personal property” and not “real property”. So your Timex watch is personal property and so is your car and your sofa and your stock in Apple Computers. The deed to your house however is an interest in real property. In the Trust you give that deed to the Trustee, who then holds the equitable title, while the beneficiary holds the beneficial (the personal property interest) title.

The problem we see with these trusts when given to firms that promote foreclosure rescue is that if the property owner decides to not move forward, they have to get the deed back from the Trustee. Granted the Trustee is supposed to act according to the instruction of the Beneficiaries. But you would be surprised how disinterested the Trustee becomes when there is no more in fees or monies to be received by the Trustee regarding the property. Typically (not always – there are always Trustees that actually do what they are supposed to do when they are asked to do it) the Trustee becomes non-communicative or even the Trustee can’t be found or is out of business. Some firms just want the borrower to give them the deed to the home and then they will negotiate with (or sue) the lender. In either case, there is no legitimate reason to give a deed to a Land Trust or directly to one of these firms. Interestingly, one of the ways to cure the refusal of the Trustee to give back the deed is a Quiet Title action against the firm that got the deed! I have written about a pending matter is Florida at SHORT SALE RESCUE FRAUD ON DESPERATE HOMEOWNERS.

The typical cost to the borrower regarding these companies is anything from upfront payment for the “educational how-to course” or “guide” to monthly fees while the borrower is advised to no longer pay the mortgage, to the firm getting a percentage of the mortgage amount saved if the loan is re-negotiated. Sometimes the fee can include the firm getting 2nd mortgage on the home – or in the slim chance that the first mortgage is eliminated through the Quiet Title lawsuit, the firm will receive a first mortgage on the property usually in the amount of the value of the property or something slightly less, leaving the property owner with two debts – one being the unpaid promissory note to the original lender and the other the new mortgage to the firm that supposedly eliminated the actual first mortgage. The borrower is advised that the promissory note can be eliminated by a bankruptcy – but the new first mortgage is there for good until it is paid or the property sold.

The Title Insurance Underwriters Say No

This brings us to another issue, which is title insurance. Title insurance underwriters have issued advisories that they are not recognizing the default final judgments in these quiet title actions as having cleared the mortgages. Therefore the home cannot be sold unless the mortgage supposedly removed in the Quiet Title lawsuit is fully adjudicated in a court of law or the lender issues a satisfaction or release of mortgage. In simple terms, if the borrower was expecting to be able to sell the house without the mortgage that was “officially” canceled by the default judgment in the Quiet Title lawsuit – the homeowner is not going to be happy with the truth as that mortgage still must be dealt with to obtain clear and marketable title.

Real Estate Agents that are confronted with a borrower that wants to seek this route rather than face realistic resolutions of financial distress or sale of a property need to recognize these "concepts" and understand the background for them.  Understanding the process may help create a listing instead of an eventual REO.  But be advised - agents should not give legal advice regarding the borrower's situation or there could be a claim of Unauthorized Practice of Law (UPL).

In summary, many of these Holy Grail solutions are based on theory that has no practical application. Although the technical legal theory may have merit in various aspects of the argument for clearing title, the reality of that happening through an case “adjudicated on its merits” has yet to occur – that means that there has been no court decision on the validity of the concept being promoted to mortgage borrowers. Many mortgage borrowers that have started programs as mentioned here and in the Kimberly Miller articles end up with bigger problems than they started with. Sometimes their ability to save the home under current Making Home Affordable programs is thwarted by the fact that they no longer own the property, but it is owned by the firm they contracted with or by the Trust that they thought they controlled.



© 2012 Richard P Zaretsky, Esq.


Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.


Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.






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Lucas Taylor
Keller Williams Miami Beach - Miami Beach, FL
Thank you for the great education. I learned so much from your post.
Oct 03, 2012 12:39 PM #1
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Very detailed post, thank you for sharing it with all of us. If someone is in this kind of situation, you really need someone knowledgeable represnting you.

Oct 03, 2012 07:21 PM #2
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