People v. Schmidt

Facts: The owner of a company claiming to help homeowners avoid foreclosure induces distressed homeowners to quitclaim title to their properties to trusts created by the company. The owner falsely represents that homeowners may make monthly lease payments to the company in lieu of mortgage payments and regain clear title to their property after a period of five years. After numerous homeowners in the program tender payment to the company, the underlying mortgage holders foreclose on their properties. A trial court convicts the owner on multiple felony counts.

Claim: The State of California seeks imprisonment of the owner of the company, claiming among other accusations that the quitclaim deeds signed by the homeowners were false and therefore void since they were signed under false pretenses.

Counterclaim: The owner of the company claims the quitclaim deeds were valid since the deeds were not forged and accurately represented properties the homeowners intended to transfer.

Holding: A California appeals court holds the quitclaim deeds were not false since the deeds were not forged as they accurately represented properties the homeowners intended to transfer. [People v. Schmidt (November 8, 2019)­_CA6th_]

Read the case text.

Editor’s note — While the appeals court in this case held the quitclaim deeds did not qualify as “false” as defined by California statute, it upheld the owner’s conviction on multiple other counts related to the underlying fraud. No individual at this company, including its owner, was licensed by the California Department of Real Estate (DRE).

A quitclaim deed is considered false under California Penal Code §115 when it is not accurately representative of a property owned by the signee or when the deed is forged. Here, the homeowners indisputably owned the properties they quitclaimed to the trusts created by the company owner, and personally executed the quitclaim deeds. The deeds did not convey any interest in the properties the homeowners did not actually possess. Thus, the quitclaim deeds were neither “false” nor “forged.”

When considered false, a legal instrument like a quitclaim deed is instantly void. However, a quitclaim deed signed under false pretenses, while not void, may be considered voidable.

Void and voidable are similar concepts. Void deeds are unenforceable at all times and never convey an interest in real estate. A voidable deed, on the other hand, is a deed which is valid and enforceable after delivery, until it is challenged due to a defect and declared invalid by court order.

In the limited part of the holding discussed, the court did not rule on whether the quitclaim deeds were invalid, only whether they were false.

See the Quitclaim Deed published by RPI. [See RPI Form 405]