Bulletin: CO000046

Dear Associates:

This Bulletin will address theColorado Court of Appeals decision in Kerns v. Ray Paul, Inc., 53 P.3d. 1157 as it relates to a Foreign Lis Pendens recorded in the public record in any county where the land to be insured is located in the State of Colorado.  

A lis pendens is a recorded legal instrument which serves as constructive notice by statute that an action or suit affecting a specified piece of real estate has been commenced in a federal or state court and is pending.  Although a lis pendens is not a lien, it is a notice of a possible interest in the property and establishes a priority for the later interest in the property which dates back to the date in which the lis pendens was recorded.

BACKGROUND FACTS

Plaintiff's in a pending federal court action in Minnesota recorded a lis pendens on property located in Colorado .  The landowner commenced a quiet title action to discharge the lis pendens filed on the Colorado property claiming that the original action was brought in an out-of-state court without jurisdiction over the property. 

THE DECISION

The Colorado Court of Appeals held that the Colorado Lis Pendens statute permits a party in any action, including an out-of-state action, where relief is sought which affects title to real property, to file a notice of lis pendens in the county where the Colorado real estate is located.  Where a notice of lis pendens is recorded in the county where the property is located, anyone acquiring an interest in the property is on notice that pending litigation may affect title to the property and will be bound by the outcome of the litigation.   The Court noted that jurisdiction in which the action was brought is not relevant under the Lis Pendens statute and the only prerequisite imposed on the action is that it be one "affecting title to real property."

COMPANY POLICY:  Where a recorded notice of Lis Pendens indicates that the original action is filed outside of the State of Colorado , an examiner should assume that the Lis Pendens is notice of a possible interest in the property to be insured.  The title examiner should not assume that the Lis Pendens does not affect the property simply because the action is filed out-of-state.   The examiner should either show the Lis Pendens as an exception on the title commitment and policy or require the release of the lis pendens.  Since a lis pendens charges the person examining the record with knowledge of the contents of the Court file, the Company expects title examiners to review the contents of the court file and make requirements appropriate to the situation.  In Colorado , a Lis Pendens may be released as follows: (1) Dismissal by the court after the appeal period has expired (2) 6 year lapses of time (3) Dismissal of the action with prejudice and expiration of the appeal period (4) stipulation by all the parties which is approved by the Court and a release of lis pendens is recorded. C.R.S.A. 38-35-110.  Additionally, recording a final judgment in any action removes the effect of the lis pendens.

IF YOU HAVE ANY QUESTIONS REGARDING THE ISSUES RAISED. BY THIS BULLETIN, PLEASE CONTACT YOUR LOCAL UNDERWRITING PERSONNEL.