It has been said that “a little knowledge is a dangerous thing.” A recent case from the Court of Appeals involved someone who defaulted on a loan secured by a residence, and after the trustee’s sale, attempted to register the land as his own under the Torrens Act. The Torrens Act was passed in 1907 to provide an independent method of recording title to land by registering the ownership of the land with the “registrar of titles” of the county, who by the same statute is the county auditor.
According to the court, the law provides that proper registration provides conclusive evidence that the owner who is registered is the actual owner. However the system has largely fallen into disuse with the prevalence of modern title recording systems including title companies and private electronic title registration systems such as the Mortgage Electronic Registration System (MERS).
People occasionally find parcels that were registered in the past under the Torrens system, which involves a description of lots and blocks similar to plat descriptions. The process of registering land that has not previously been registered involves going to the superior court of the county in which the land is located and petitioning to register the title.
In the recent case the property owner borrowed and signed a deed of trust on the property. After some time the borrower defaulted and the property was sold at a trustee’s sale. The borrower had not vacated the property eight months after the trustee’s sale, and claimed the right of homestead on the property.
At that eight month after the trustee’s sale time the owner filed a petition in superior court to register the land under the Torrens Act. The apparent reason was that as the court noted, the registration of land under the Torrens Act provides “conclusive evidence” that the registered owner is the actual owner of the land. One can speculate that the borrower believed that registration under the Torrens Act would have the effect of defeating the claim of the buyer at the trustee’s sale because of the statutorily conclusive presumption of ownership that comes with registration.
The buyer at the trustee’s sale was apparently an investor and that party objected to the petition to register the land under the Torrens Act. The superior court dismissed the petition and the borrower appealed. The borrower claimed that he was still the owner of the property and therefore entitled to register the property under the Torrens Act because he was still living in the property and had asserted homestead rights to the property.
The Court of Appeals upheld the dismissal, and declared that under the Torrens Act only the owner of the property can register the land. The Torrens Act does not define the term “owner.” The court determined that the buyer at the trustee’s sale was the owner for purposes of the Torrens act because the buyer had the legal or rightful title based on the trustee’s sale whether or not the buyer was then in possession.
The Court of Appeals determined that the borrower’s claim to ownership based on possession and the assertion of homestead rights was not sufficient to defeat the claim of the buyer at the trustee’s sale. The court held that homestead rights do not extend to debts secured by a deed of trust because the deed of trust’s non judicial foreclosure process is a trade off in which the borrower receives protection from deficiency judgments in exchange for giving up the homestead right.
So one cannot pull oneself up by one’s bootstraps after losing title in a nonjudicial foreclosure by registering land under the Torrens Act that only an owner of the land can legally register. The Torrens Act is a little used system but it cannot be used to “spin straw into gold” as this borrower found out. At least the court did not impose the buyer’s attorney’s fees on the borrower because even though the deed of trust would have granted attorney’s fees the borrower’s claim was under the Torrens Act and not the deed of trust.
The preceding is not intended as legal advice but should be considered educational.