An “instrument” is “a written paper signed by a person or persons transferring the title to, or giving a lien on real property, or giving a right to a debt or duty.” (Gov. Code, § 27279.) Recordings not affecting title are not instruments. (Sisemore v. Master Financial, Inc. (2007) 151 Cal.App.4th 1388, 1399-1400; Ward v. Super. Ct. (1997) 55 Cal.App.4th 60, 64-65.)

Section 3412 of the Code of Civil Procedure provides for the cancellation of an instrument. (Code of Civ. Proc., § 3412.) It states that a “written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” (Code of Civ. Proc., § 3412; Robertson v. Super. Ct. (2001) 90 Cal.App.4th 1319, 1324.)

Cancellation of an instrument is essentially a request for rescission of the instrument. (Bank of America v. Greenbach (1950) 98 Cal.App.2d 220, 228.) The effect of a decree cancelling an instrument is to place the parties where they were before the instrument was made, as if it had never been made. (Id. at 238.) A decree cancelling an instrument is equitable in nature and may be subject to equitable conditions, including reimbursement for the reasonable value of benefits conferred. (Ebbert v. Mercantile Trust Co. (1931) 213 Cal. 496, 501.)

Legal Standard

To plead a right to cancellation of an instrument, a plaintiff must allege the instrument is “void or voidable” and would cause “serious injury” if not canceled. (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 818-19; U.S. Bank N.A. v. Naifeh (2016) 1 Cal.App.5th 767, 774; Thompson v. Ioane (2017) 11 Cal.App.5th 1180, 1193-1194.) “The injury referred to in section 3412 is not limited to pecuniary loss; it may be the alteration of one’s position to his prejudice.” (Turner v. Turner (1959) 167 Cal.App.2d 636, 641.)

The plaintiff must allege specific facts, “not mere conclusions, showing the apparent validity of the instrument designated, and point out the reason for asserting that it is actually invalid.” (Ephraim v. Metropolitan Trust Co. (1946) 28 Cal.2d 824, 833-34; Wolfe v. Lipsy (1985) 163 Cal.App.3d 633, 638.)

Promissory fraud is a basis for demonstrating the invalidity of an instrument in an action to cancel an instrument. (Lawrence v. Gayetty (1889) 78 Cal. 126, 131-132.) Notwithstanding the strict common law pleading requirements for causes of actions for damages for fraud (and somewhat surprisingly), general allegations of fraud are sufficient to allege the invalidity of an instrument in the absence of a special demurrer for uncertainty. (Larkin v. Mullen (1900) 128 Cal. 449, 453-454 [general demurrer properly overruled even though fraud alleged in general terms]; see also Campbell v. Genshlea (1919) 180 Cal. 213, 218.)

Statute of Limitations

The statute of limitations for a cause of action for cancellation of instruments is three years if based on fraud, otherwise, the statute is four years. (Zakaessian v. Zakaessian (1945) 70 Cal.App.2d 721, 725.)