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Elizabeth Erhardt

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Commitment to EducationThroughout her career, Erhardt has con-ducted real estate continuing education seminars for attorneys. Additionally, she has given numerous talks to real estate agents and to members of various real property associations. She authored arti-cles on an array of topics, including land-lord-tenant matters, ADA compliance, tax-deferred exchanges, and recourse and nonrecourse loans. She has made multiple radio appearances as an authority on real property disputes and has been mentioned as a top landlord-tenant attorney in Robert Kiyosaki’s “� e Real Book of Real Estate.” Erhardt authored the introductory chapter of the CEB® legal treatise California Domestic Partnerships, which received the ACLEA award for professional excellence in a legal publication, and she has been recognized multiple times by her peers as a Northern California Super Lawyer.®

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standing of their legal position and the support of Erhardt’s principled guidance, clients of Erhardt Litigation are well situated to achieve their legal objectives.

SAN FRANCISCO/NORTHERN CALIFORNIA

UPDATE as of 1/17/18

ELIZABETH T. ERHARDT ERHARDT LITIGATION 100 Pine St. Suite 1250 San Francisco, CA 94111 415-366-6698 | fax: 888-202-0519 Liz@ErhardtLit.com

Elizabeth Erhardt concentrates her practice on real estate litigation, including co-owner, commercial and residential disputes, real property torts and Business & Professions Code claims. Ms. Erhardt conducts real estate training seminars, makes presentations to real estate brokers and their agents, publishes articles and has been a guest panelist on local and statewide radio programs as an authority on real estate matters. She has served on the panel of several real estate related continuing legal education seminars and frequently co-counsels with family law and trust and estate attorneys seeking real estate related litigation support. Before launching her own business, Ms. Erhardt spent two years as a partner at Rutan & Tucker, LLP and seven years as a partner at Sideman & Bancroft, LLP. She is a past board member of both the Small Property Owners of San Francisco and Bay Area Lawyers for Individual Freedom as well as a former committee member of Commercial Real Estate Women of San Francisco. She is and has been repeatedly recognized as a Northern California Super Lawyer.

1

The Real Property Section of the Bar Association of San Francisco presents

A SURVEY OF SIGNIFICANT 2017 REAL ESTATE CASES

January 17, 2018

Speakers

ALEXANDER M. WEYAND, ESQ. (MODERATOR/SPEAKER)

WEYAND LAW FIRM,

A Professional Corporation

540 Pacific Avenue

San Francisco, CA 94133

Tel: (415) 536-2800; Fax: (415) 358-4461

www.wynlaw.com

Alex Weyand’s practice focuses on real property and business litigation matters, including non-

disclosure/fraud, breach of contract, adjacent neighbor, TIC and HOA/owner, small property

construction defect, inverse condemnation and commercial lease litigation. He successfully tried

and argued the appeal of Wong v. Stoler (2015) 237 Cal.App.4th 1375, a rescission case included

in the “Top Ten Real Property Case of 2015.” (California Real Property Journal, Vol. 34, No. 1.

2016). He has taught in the area (Instructor, Real Estate Law and Finance, University of

California at Berkeley, Extension), written (Co-Author of 2 Chapters of the California

Continuing Education of the Bar’s practice guide entitled “California Real Estate Brokers: Law

and Litigation”) and has been Outside General Counsel to the San Francisco Association of

REALTORS® since 2000. He is AV Peer Review Rated by Martindale-Hubbell®, and Peer

Review Rated a “Super Lawyer” by Thomson Reuters. He is a recipient of the Wiley W. Manuel

Award for Pro Bono Services from the State Bar of California for a real property matter.

KATHARINE VAN DUSEN

COBLENTZ PATCH DUFFY & BASS LLP

One Montgomery St. Suite 3000

San Francisco, CA 94104

Tel: (415) 677-5240; Office: (415) 391-4800

www.coblentzlaw.com

Katharine Van Dusen is a partner with the San Francisco law firm of Coblentz Patch Duffy &

Bass, and her litigation practice includes complex real estate and commercial lease disputes, as

well as construction disputes and white-collar cases involving real property. Katharine's clients

come from a variety of industries, and her practice takes into account the scope of the dispute

and the needs of the client to tailor an appropriate litigation strategy. She also regularly

volunteers for Justice and Diversity Center’s Housing Negotiation Project, where she represents

tenants in unlawful detainer proceedings during their pre-trial settlement conferences. Prior to

joining Coblentz, Katharine clerked for the Honorable Vaughn R. Walker of the United States

District Court for the Northern District of California.

2

ANDREW J. WIEGEL, Esq.

WIEGEL LAW GROUP, PLC

414 Gough Street, Suite 1

San Francisco, CA

(415) 552-8230

http://wiegellawgroup.com

Andrew Wiegel has specialized in real estate litigation and alternative dispute resolution since

1977. His experience includes decades of litigation, extensive involvement in client risk

management, and personal involvement in real estate development and construction work.

Andrew has been voted onto the “Superlawyers” list every year since the survey began in 2004.

He has been AV rated by Martindale Hubbell for decades. He is a coauthor of California Real

Property Remedies and Damages, second edition, and California Landlord-Tenant Practice,

second edition, both published by Continuing Education of the Bar (CEB) of the Regents of the

University of California.

Andrew is a member, co-founder and past chair of the Real Estate Law Section of the Bar

Association of San Francisco. He is also a member of the Real Estate Section of the State Bar of

California and many industry groups including the San Francisco Apartment Association, the

Coalition for Better Housing and the Professional Property Management Association of San

Francisco.

ELIZABETH T. ERHARDT

100 Pine St. Suite 1250

San Francisco, CA 94111

415-366-6698 | fax: 888-202-0519

www.erhardtlit.com

Elizabeth Erhardt concentrates her practice on real estate litigation, including co-owner,

commercial and residential disputes, real property torts and Business & Professions Code claims.

Ms. Erhardt conducts real estate training seminars, makes presentations to real estate brokers and

their agents, publishes articles and has been a guest panelist on local and statewide radio

programs as an authority on real estate matters. She has served on the panel of several real

estate related continuing legal education seminars and frequently co-counsels with family law

and trust and estate attorneys seeking real estate related litigation support. Before launching her

own business, Ms. Erhardt spent two years as a partner at Rutan & Tucker, LLP and seven years

as a partner at Sideman & Bancroft, LLP. She is a past board member of both the Small

Property Owners of San Francisco and Bay Area Lawyers for Individual Freedom as well as a

former committee member of Commercial Real Estate Women of San Francisco. She is and has

been repeatedly recognized as a Northern California Super Lawyer.

3

SURVEY OF SIGNIFCANT 2017 REAL ESTATE CASES

Re: BASF Presentation – January 17, 2018 ______________________________________________________________________________

Real Property Litigation Procedure & Remedies

1. Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744

In this contract interpretation decision involving an attorney fee clause, the Court

resolved a split of authority and held that an affirmative defense based upon a contract was not

an “action or proceeding brought” to enforce the contract.

The action arose from a complex commercial real estate transaction. Plaintiff (Mountain Air)

was the buyer by assignment from an individual member; Defendant (Sundowner Towers) the

seller. At the time of the purchase and sales agreement, the real property, located in Reno, NV,

was a single parcel of land improved with two towers and a casino building. No subdivision map

was recorded until several months after the parties contracted. The purchase was only of one of

the two towers, the “South Tower.”

The deal was structured as a purchase and sale, and a seller repurchase. The purchase price was

$7 million; the repurchase was for the same price plus an “inflation factor” of 12 percent. The

parties documented the transaction with two agreements. The repurchase obligations were

guaranteed by two of the members of the defendant entity.

Several months later after the parcel had been properly subdivided, Plaintiff and the two

members of the defendant entity who had guaranteed the repurchase agreement entered into a

new agreement. In that agreement, Plaintiff granted the two members the exclusive right, but not

the obligation, to purchase the South Tower during an option period. The option agreement

contained the following attorney fee clause:

“Litigation Costs. If any legal action or any other proceeding, including arbitration or an

action for declaratory relief[,] is brought for the enforcement of this Agreement or because

of an alleged dispute, breach, default, or misrepresentation in connection with any provision

of this Agreement, the prevailing party shall be entitled to recover reasonable attorney fees,

expert fees and other costs incurred in that action or proceeding, in addition to any other

relief to which the prevailing party may be entitled.” (Italics added.)

Thereafter, the defendant entity failed to repurchase the South Tower as agreed in the repurchase

agreement, and plaintiff filed suit for specific performance of the repurchase agreement, breach

of the guaranty of that agreement and breach of the repurchase agreement (damages). After a 13-

day bench trial, the trial court ruled in defendants’ favor. It found the repurchase agreement

“void, illegal and unenforceable” because the agreement did not require either party to prepare or

record a parcel map in accordance with the subdivision map laws of Nevada and California. The

trial court also concluded the option agreement was a novation and extinguished the repurchase

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agreement and any obligation defendants had under it. It entered judgment in favor of

defendants.

The defendants sought an award of nearly $775,000 in attorney fees as the prevailing party under

fee clauses in both the repurchase agreement and option agreement. The trial court denied the

motion finding the parties were in pari delecto with respect to the repurchase agreement. It also

denied any award under the option agreement as the defendants had not “brought” an action for

the enforcement of that agreement, and “none of provisions” in that agreement were actually “

‘in dispute.”

The Court of Appeal reversed. While it agreed with the ruling on the repurchase agreement, it

found the language of the option agreement’s attorney fee clause allowed for a recovery for

defendants. The Court of Appeal viewed defendants’ assertion of the option agreement and the

affirmative defense of novation to be within the definition of “proceeding” in the subject fee

clause. It found a “proceeding” may refer to a mere procedural step that is part of the larger

action. Following Windsor Pacific LLC v. Samwood Co., Inc. (2013) 213 Cal.App.4th 263, 274-

275, the Court of Appeal also found the affirmative defense to be a “legal action.”

The Supreme Court granted review to resolve a split of authority between Windsor and the

contrary holdings of Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698 and

Gil v. Mansano (2004) 121 Cal.App.4th 739.

The Supreme Court first unanimously declined to construe the term “proceeding” as including an

affirmative defense. In the context of the language of this particular fee clause, it found “other

proceeding” referred only to a form of legal action, and an “action” constituted the entire

proceeding of which an affirmative defense is a discrete event within the action. The Court thus

resolved the split in the circuits by disapproving Windsor to the extent it construed an affirmative

defense is a “proceeding.”

But the Court in a 4-3 decision did find a basis for a fee award for the defendants. It broke down

the fee clause into two elements (a) the “brought because of” element and (b) the “dispute…in

connection with” element. The Court found the second element existed as there was a dispute as

to the alternative and conflicting versions of the parties’ rights and obligations set forth in the

repurchase agreement and option agreement, and the two agreements were connected in that

sense. It found the first element was satisfied as the dispute was a “substantial factor” leading

plaintiff to bring its action to enforce the repurchase agreement.

The dissent’s primary concern appeared to be whether the fee clause “brought because of”

element meant that to trigger the fee clause one would need to find the necessary cause of the

plaintiff’s action was the dispute over the option agreement, which it was not.

This decision is a reminder that there is no “boilerplate.”

2. RSB Vineyards, LLC v. Orsi (2017) 15 Cal.App.5th 1089

Nondisclosure Claim/Imputation of Knowledge: When will the knowledge of a contractor

or architect be imputed to a real property seller?

5

This is a buyer/seller nondisclosure case.

Two families engaged in the business of viticulture and wine-making purchased a property in

Healdsburg. At the time, the main building on the property was a single-family home which the

families planned to convert into a commercial wine tasting room.

Following the purchase, the families hired an architect to design a remodel of the home and applied

for a commercial use permit for a winery and tasting room. Once the use permit issued, they

submitted the architect’s plans to the County of Sonoma, which approved the plans after requiring

some changes. None of them is a construction professional or possesses the skills of such a person,

each relied on their architect and county officials to insure the plans conformed to applicable

building codes, and none had any reason to believe the plans were non-conforming.

The construction work was performed by a licensed contractor, in consultation with a structural

engineering firm, and entailed, among other projects, tearing down an addition to the home, new

framing and exterior work, replacing windows, renovating bathrooms, reinforcing the floor above

the basement, installing new sewage disposal, plumbing, and electrical systems, repairing dry rot,

and creating a parking lot. The work was inspected and approved by county officials, and a final

certificate of occupancy for a “winery/tasting room” was eventually issued.

Soon after commencing business, the two families decided that operating a joint tasting room was

not to their liking. They decided to sell. During the sales process, they continued to conduct

business.

Their real estate broker prepared an offering memorandum and placed an ad in a local paper. The

offering memorandum stated that the property had a “vineyard-vested winery permit” and an

“active tasting room” and attached a table describing the various permits issued for the property.

The ad described the parcel as “[e]xceptional 19 acre vineyard parcel with operating tasting room,

vested 20,000 case winery permit and 12 acres planted to vineyard.”

Plaintiff RSB Vineyards, LLC submitted a proposed purchase agreement soon after, which

defendant sellers accepted subject to a counter-offer. Defendants provided to RSB a termite

addendum, buyer’s and seller’s advisories, and other disclosures and documents, and they gave

RSB the names of their architect, general contractor, and structural engineer. But sellers failed to

deliver a contractually required property statement questionnaire. RSB waived all contingencies

and inspection rights, and the sale closed the following month.

RSB later learned that the renovated residence was structurally unsound for commercial use and

was forced to demolish it.

In response to RSB’s lawsuit claiming misrepresentations and omissions in connection with the

sale of the residence, defendants moved for summary judgment, offering evidence they had no

knowledge of the various deficiencies in the building. While RSB provided no evidence to suggest

defendants had actual knowledge of the problems, it did demonstrate that the deficiencies were so

numerous that defendants’ construction professionals should have been aware of them and argued

that this knowledge was imputed to defendants. The trial court granted summary judgment,

reasoning that defendants could not be held liable for nondisclosure in the absence of evidence

they had actual knowledge of the facts to be disclosed.

6

Affirmed.

As this was mainly a concealment case, the central question was whether there was proof of actual

or constructive knowledge of a material fact that was undisclosed. The Court found Plaintiff failed

to produce any such proof. Instead, Plaintiff asserted the quantity of deficiencies discovered after

the close of escrow suggested that the defendants’ construction and design professionals “should

have known” of them, and such knowledge should be imputed to the sellers. While generally

“actual” knowledge can be inferred from the circumstances, those circumstances must lead to the

conclusion seller (or his agent) “must have known.” And, while knowledge of an agent may be

imputed to the principal/seller, Plaintiff failed to show sellers’ design and construction professional

learned in material facts while acting as “agents” of sellers. Instead, the evidence was that their

work was on a pre-sale project and nothing was presented showing they had interacted with third

parties as representatives of the sellers—the hallmark of agency. Imputation was thus improper.

The misrepresentation claim, predicated on the offering memo’s “vineyard-vested winery permit”

and an “active tasting room” representations also failed. Both were found to be “simple statements

of fact,” the one about an on-going activity at the property, the other the issuance of a regulatory

permit by the county. Neither was held to constitute a warranty about the propriety of the activities

on the site. The Court found the mere fact a property is being used for a particular activity does

not necessarily imply that the property satisfies all regulatory requirements for the activity. And,

of course, implied assertions will not support a misrepresentation claim; only affirmative

statements will. And the failure to deliver the property questionnaire was unavailing as it only

required disclosure of “known” facts and was waived in any event.

For a decision allowing for imputation where the knowledge was acquired before the

agency see Cooke v. Mesmer (1912) 164 Cal. 332, 338-339 (Imputation if shown or appears

knowledge was present in mind of agent when agency in effect).

3. Krechuniak v. Noorzoy (2017) 11 Cal.App.5th 713

Challenge to asserted penalty provision in settlement agreement held to be barred for failure to

raise it at trial court level

Background: After developer and property owner entered into agreement settling owner's cross-

complaint for breach of fiduciary duty, conversion, fraud, and intentional infliction of emotional

distress in suit filed by investors against developer for loss of their investments, stemming from

failed development of property, owner filed motion to compel enforcement of settlement

agreement.

The agreement called for payment of $600,000 on a timely basis and also provided for a stipulated

judgment for $850,000. It contained the following provision:

“The parties agree that the stipulated sum of said Judgment does not constitute a ‘penalty’ within

the meaning of Greentree Financial Group. Inc. v. Execute Sports. Inc. (2008) 163 [Cal.App.4th]

495, 78 Cal.Rptr.3d 24 [ (Greentree ) ] for several reasons, including but not limited to the

following: The stipulated sum represents less the value of the property [sic] located at 952 Sand

Dunes, Pebble Beach, CA, Assessor’s Parcel Number 007252015, at the time [Sister] entered into

7

her agreement with [Brother]. It does not include lost profits from the development of that

property, interest on the money lost, nor the value of the property lost at 2889 17 Mile Drive,

Pebble Beach, CA. Additionally, [Sister] further relinquished her right to trial during which she

reasonably expected to achieve a verdict in excess of the stipulated sum. [Sister] agrees to accept

substantially less in settlement as an act of kindness towards a family member in order

accommodate [Brother]’s attempt to maintain his business and home, as well as the sake of his

children. Said Stipulated Judgment is designed to encourage [Brother] to make his settlement

payments on time and to compensate [Sister] for the loss of use of the money, her relinquishment

of valuable rights and claims for which a substantial likelihood of success exists.”

The brother failed to make his payments and the Court granted a motion and subsequently entered

judgment against the brother developer for $850,000. Developer appealed, but apparently had

failed to argue that this was an unenforceable penalty provision to the trial court.

Holding: The Court of Appeal, observed that “the 1977 amendment shifted the evidentiary burden,

with section 1671, subdivision (b) now stating, “a provision in a contract liquidating the damages

for the breach of the contract is valid unless the party seeking to invalidate the provision establishes

that the provision was unreasonable under the circumstances existing at the time the contract was

made.”

The Court of Appeal then held that developer was precluded from arguing on appeal that settlement

agreement contained unlawful penalty provision, and affirmed the trial court.

Common Interest Developments

4. Retzloff v. Moulton Parkway Residents’ Association (2017) 14 Cal.App.5th 742

Civil Code Section 5235(c) costs award for frivolous action against HOA does not include award

of fees.

Plaintiffs Amber Retzloff, James Franklin, and Nancy Stewart sued defendant Moulton Parkway

Residents' Association, No. One (the association), twice for alleged violations of the Davis-Stirling

Common Interest Development Act (Civ. Code, § 4000 et seq.; the Act). The first suit was

dismissed without prejudice by plaintiffs; the trial court sustained the association's demurrer to the

second suit without leave to amend. The court further concluded that plaintiffs' second action was

frivolous and awarded the association costs and attorney fees under Civil Code section 5235 1,

subdivision (c) (section 5235(c)). Plaintiffs appealed.

Section 5235(c) states that a court may award a prevailing association “any costs.” The association

contends, and the trial court agreed, that “any costs” includes attorney fees. A plain reading of the

statute, however, does not support this interpretation. As such, the association was erroneously

awarded attorney fees and is entitled only to costs. We publish to clarify this point of statutory

interpretation, which appears to be a matter of first impression.

Adverse Possession

5. Vieira Enterprises, Inc. V. McCoy (2017) 8 Cal.App.5th 1057

8

Private Roadway Express Easement Not Terminated by Adverse Possession.

Neighbor dispute arising from properties in Capitola that appellate court found to be a “common

factual scenario” that presented opportunity to clarify and refine several points of law. The ruling

in this matter suggests that the burden of proof to establish adverse possession is preponderance

of the evidence, not clear and convincing evidence.

A question was raised whether a right-of-way easement over private road was extinguished by

locked gate and repaving, whether the use was sufficiently “hostile.” The locked gate benefitted

easement holder (reduced traffic) and he was not denied a gate key, and the improvement to the

road benefitted both owner and easement holder and did not unreasonably or substantially

impede use of the right of way. Easement holder would not have understood these acts to be

hostile to his use of the roadway. Structures that did not impede the right-of-way did not need to

be abated.

Appellate court summarizes various fundamental rules, including that (a) adverse possession of

an easement can originate with the possessor’s mistake; and (b) on related trespass/nuisance

claims, “annoyance or discomfort” damages are available only where the plaintiff is the occupant

or possessor of the affected land, even if plaintiff is not present at the moment of a tortious

invasion of the property.

6. People ex rel. Harris v. Aguayo (2017) 11 Cal.App.5th 1150

UCL Claims Not Barred by Adverse Possession.

This case concerns a decades-long scheme to obtain possession of over 100 residential properties

in distress, evict the residents, and then rent properties to unsuspecting tenants. The Attorney

General brought a UCL claim.

The Noerr-Pennington doctrine did not immunize defendants from UCL liability, even though

they filed quiet title actions, because the actions were a sham. Noerr-Pennington precludes civil

liability for actions taken to influence a branch of government. Here, defendants’ actions—

among others, filing baseless quiet title actions in an effort to deceive courts into issuing

judgments that would allow them to take another’s property—shows defendants did not actual

intend their petitioning activity (the quiet title action) to influence a governmental entity.

Nor does the doctrine of adverse possession protect defendants from UCL liability for their

unlawful, unfair, or fraudulent acts. Even if defendants took legal title to some properties

through adverse possession, they remain liable for their acts taken in the years before they

acquired title. Adverse possession does not immunize defendants from liability for their

wrongful acts in taking possession.

Partition

7. Orien v. Lutz (2017) 16 Cal.App.5th 957

“Common Benefit” attorneys’ fees in partition can be awarded to both sides.

9

Partition action was permitted under settlement agreement pertaining to estate issues, but was not

an enforcement of the settlement. No fees could be awarded for enforcing settlement agreement

Both sides can be entitled to fees for the “common benefit”

Following earlier settlement of probate claim, plaintiff sibling brought action against defendant

siblings seeking partition by sale of two properties which had been gifted to the siblings by their

mother. The Superior Court, Los Angeles County, granted summary judgment to plaintiff sibling

and entered interlocutory judgment for partition by sale, and awarded attorney's fees to plaintiff

sibling. Defendant siblings appealed attorney's fee award.

In 2003, plaintiff and defendants had received a gift of two residences from their mother. Each

took an undivided one-third interest in the properties.

In 2006, the parties entered into a settlement agreement to resolve a probate claim regarding their

mother’s estate initiated by defendant Howells. Paragraph 11.1 of the settlement agreement,

entitled “Sale of properties,” stated, “Mista, Stara and Russell [ (i.e., plaintiff and defendants) ]

may sell the properties at any time they agree to do so. However, this provision shall not prevent

any one or more of the parties from filing a partition action with respect to either or both the

properties, in the event that Mista, Stara and Russell are unable to unanimously agree on whether

or not the properties should be sold.”

Paragraph 21.1 of the settlement agreement provided for attorney fees, stating, “Should any party

hereto retain counsel for the purpose of enforcing or preventing the breach of any provision herein,

including but not limited to instituting an action for a declaration of such party’s rights or

obligations hereunder, or for any other judicial remedy, then the prevailing party shall be entitled

in addition to such other relief as may be granted, to be reimbursed by the other party for all costs

and expenses incurred thereby, including but not limited to, reasonable attorney’s fees and costs.”

The Court of Appeal, Flier, J., held that:

1. A Prior settlement agreement did not allow plaintiff sibling to recover attorney's fees;

2. A partition action could be considered “for the common benefit” within meaning of statute

allowing attorney's fees in partition actions; and,

3. Fees incurred by a defendant to a partition action can be for the common benefit, and

therefore allocable in part to the plaintiff.

8. Cummings v. Dessel (2017) 13 Cal.App.5th 589

The procedure for partition must follow statutory guidelines. Court erred in mixing partition by

appraisal or party bidding and partition by public sale, but the error held to be harmless and not

grounds for reversal

Half-owner of investment property filed suit against co-owners of other half of property, seeking

partition of property. Following bench trial, the Superior Court, Humboldt County, No.

DR110625, W. Bruce Watson, J., ordered partition of property.

10

The Court of Appeal observed: “concluding partition was an appropriate remedy, the

interlocutory judgment specified a procedure by which the parties could bid against each other to

purchase the property, and set $125,000 as the minimum bid, “based upon the testimony of

[Cummings’s] expert witness Matthew Babich.”3 Finding that Cummings, by then, had invested

a total of $124,353.51 in the property, including her original down payment, while Dessel and

Seal had invested $39,588.36, the trial court ruled Cummings was entitled to a credit in the

bidding process equal to the amount of the difference ($84,765.15). The successful bidder was to

assume all existing obligations under the parties’ agreement and the *596 seller’s note. If no

party took title to the property, the interlocutory judgment directed, it was to be listed and sold to

the public at whatever value bidders offered.”

Cummings was the successful bidder and the Co-owners appealed.

Holding: The Court of Appeal, Rivera, J., held that partition procedure that effectively combined

partition by appraisal and partition by sale as successive alternatives did not meet requirements

for either partition procedure.

However, the judgment was nevertheless affirmed, being characterized as “not prejudicial” with

the explanation redacted from the published opinion.

The equitable nature of the remedy was expressly commented upon in the opinion, along with

the following quote:

“Although there is no case law interpreting the statutes authorizing partition by appraisal, the

Commission’s 1975 report explained they were intended to address situations “where physical

division [would be] inequitable or impossible, and sale [would] result in an unwanted tax

liability or in loss of property which one of the owners desire[d] to keep.” (Id. at p. 414.)

Partition by appraisal, the Commission advised, would “be an expeditious and effective means of

terminating the differences among the co-owners, while at the same time allowing one to retain

the property without the expenses of sale and without the imposition of undesired tax liability.”

As we have seen in a number of published decisions over the past years, It may well be that this

published decision serves to again underscore the deference which is accorded to the trial judge

when acting in equity.

Condemnation

9. Mercury Casualty Company v. City of Pasadena (2017) 14 Cal.App.5th 917

City not liable on inverse condemnation claim when city-owned tree fell on private house.

During a massive storm, a tree on public property fell on a house. The house was severely

damaged and the insurance paid the homeowner’s claim. Consequently, the insurance company

sought inverse condemnation against the city. Trial court entered judgment for insurer. Reversed.

Inverse condemnation allows a property owner to recover from a public entity for any injury to

real property caused by a public improvement as deliberately designed or construction. Here, the

Court of Appeal held that a tree constitutes a work of public improvement if the tree is

11

deliberately planted by the government entity as part of a planned project, such as to enhance the

appearance of a public road. Not all trees on public land are works of public improvement. In

this case, the Court of Appeal found no liability under the inverse condemnation claim, because

there was no evidence that the tree was planted as part of a planned project, and no evidence that

the city’s tree maintenance plan was deficient.

10. Dryden Oaks, LLC v. San Diego County Regional Airport, et al. (2017) 16 Cal.App.5th

383

County agency adopted an airport land use compatibility plan, depressing plaintiff’s property

values.

The land use plan is not a final land use determination, because the city retains authority to issue

permits. No inverse condemnation or takings claim.

Claim for regulatory taking inverse condemnation by owner of two lots adjacent to regional

airport alleging that the value of his property was depressed by county airport authority’s

adoption of land use compatibility plan. Summary judgment granted for airport authority and

county. Affirmed. The compatibility plan adopted by county airport authority was deemed to not

be a final land use determination. The city retained final authority to issue permits.

Easements

11. Hinrichs v. Melton (2017) 11 Cal.App.5th 516

How does a landowner whose parcel is landlocked gain access to the property?

The court grants equitable an easement, even though there is no historic use of the route chosen

Hinrichs, the owner of a landlocked parcel, brought an action against the owners of three

neighboring parcels seeking to establish easements for access to his parcel.

The trial court found that Hinrichs would suffer irreparable harm if some easement or easements

are not imposed. The court found that without such an easement or easements Hinrichs’s parcel

would be landlocked. The court chose a route that was the least disruptive for all the servient parcel

owners involved. It used an existing driveway over the Asquith parcel and a small portion of the

Melton parcel that was separated from the bulk of the parcel by a creek. The Meltons seldom

visited that portion of their parcel and it had little or no development potential.

The Superior Court, Ventura County, established access by finding an easement by necessity over

one parcel and a connecting equitable easement over another parcel. The owners of the parcels

over which the court found easements appealed, and the owner of the landlocked parcel also

appealed.

The Court of Appeal affirmed the trial court decision, found that the trial court properly balanced

the hardships, and held:

1. The trial court may grant an equitable easement for access to a landlocked parcel without

there being a preexisting use by the landowner seeking the easement;

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2. Landowner’s conduct in selling a parcel that left his remaining parcel landlocked did not

bar landowner from seeking an equitable easement;

3. The trial court acted within its discretion in finding that landowner would suffer irreparable

or greatly disproportionate harm if the trial court failed to grant an equitable easement; and

4. Placing large boulders and a barbed wire fence that blocked the entrance to a trail satisfied

the “hostility” element of adverse possession.

12. Scher v. Burke (2017) 3 Cal.5th 136

California Civil Code Section 1009 held to bar any implied dedication of public road.

Trial court determination of implied dedication reversed

Landowners filed complaint against adjacent landowners, seeking quiet title to alleged easements

for ingress and egress along roads running through parties’ properties, injunction, implied

easement, and declarations that landowners were beneficial owners of express, prescriptive, and

equitable easements, that adjacent landowners had acquiesced to dedication to public use of roads,

and that landowners were entitled to use roads as public streets. Following bench trial, the Superior

Court, Los Angeles County, entered judgment declaring that roads had been impliedly dedicated

as public streets, quieting title to easements in favor of landowners, and enjoining adjacent

landowners from obstructing roads, but declined to enter judgment in favor of landowners on

theories of express, prescriptive, and equitable easement.

Landowners and adjacent landowners appealed, and the Court of Appeal affirmed in part, reversed

in part, and remanded with directions to enter judgment in favor of adjacent landowners.

Landowners petitioned for review, and the Supreme Court granted review, to resolve the

disagreement among the Courts of Appeal about whether section 1009, subdivision (b) applies to

nonrecreational use of private noncoastal property.

The Supreme Court held that section 1009, subdivision (b) unambiguously “bars all public use,

not just recreational use, from developing into an implied public dedication.”

Nuisance/Trespass/Trees

13. Scholes v Lambirth Trucking Company (2017) 10 Cal.App.5th 590

Civil Code Section 3346, which contains a five year statute of limitations for wrongful

injury to timber, trees or underwood, and authorizes double damages, does not apply where the

trespass causing the injuries was casual or involuntary, resulting from fires negligently set.

Instead, the three year statute of limitations under CCP Section 338(b)applies to damage to trees

caused by fires negligently set.

Lambirth operated a soil amendment and enhancement company that grinds wood

products and stores wood chips, sawdust, and rice hulls, the remnants of which have blown into

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Scholes’ neighboring property. On May 12, 2007 a fire broke out on Lambirth’s property.

Scholes complained about the wood chips piling up on his property and Lambirth began

removing the chips from Scholes property. On May 21, 2007 another fire broke out on

Lambirth’s property and spread to Scholes’ property.

Scholes, in pro per, filed his original complaint on May 21, 2010, three years after the fire

stating that the complaint was for dispute compensation on insurance claim, that the defendants

conceded liability and dispute the amount of damages. Scholes alleged, without alleging any

specific facts, lost use of his property and general and property damages.

On November 10, 2011, Scholes filed his operative third amended complaint alleging

negligent trespass, intentional trespass, and strict liability (trespass through unnatural activity i.e.

storage of combustible materials in violation of Civil Code Section 1014.) Scholes sought treble

damages under CC section 3346 and CCP section 733 for alleged damages to his walnut orchard.

Lambrith filed a demurrer to the third amended complaint and the court sustained the

demurer without leave to amend. The court of appeal affirmed.

The appellate court ruled that the three-year statute of limitations under section 338(b)

applies as to Scholes’ causes of action for trespass not the five year statute of limitation for

wrongful injury to timber found under Civil Code section 3346 (c). The court followed the

reasoning of Gould v Madonna (1970) 5 Cal.App.3d 404, 406-407. The Gold court held that

Health and Safety Code sections 13007 and 13008, which cover liability in relation to fires,

provide for recovery of only actual damages, not damages of a penal nature as contemplated by

Civil Code Section 3346. Consequently, the three-year statute of limitations under CCP Section

338(b), rather than the five-year statute of limitations of Civil Code Section 3346(c) applies.

The Court further held that Scholes did not allege trespass until his second amended

complaint filed in August 2011, over three years after the fire.

The Appellate Court rejected Scholes’ argument that the Third Amended Complaint

relates back to the original May 21, 2010 complaint. “In determining whether the amended

complaint alleges facts that are sufficiently similar to those alleged in the original complaint, we

consider whether the defendant had adequate notice of the claim based on the original pleadings.

The policy behind statutes of limitations is to put a defendant on notice of the need to defend

against a claim in time to prepare an adequate defense. This requirement is met when recovery

under an amended complaint is sought on the same basic set of facts as the original pleading.”

Scholes’ original complaint failed to identify the property at issue, specify the damages

suffered, provide the date, origin, or scope of the fire, set forth the relationship between the

parties or state a cause of action. Consequently, the original complaint fell well short of placing

the defendant on notice of the claims alleged in the third amended complaint. Accordingly, the

third amended complaint was time barred.

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14. Clary v City of Crescent City (2017) 11 Cal.App.5th 274

John Diehl, while a resident of Washington State, owned eight vacant lots in Crescent

City, California. Diehl acquired his vacant lots in 1998 through foreclosure after the prior owner

defaulted on a loan Diehl made.

Commencing in May 2010, Crescent City, through its code enforcement officer,

commenced sending multiple notices that Diehl’s overgrown lots constituted a public nuisance in

violation of Crescent City Mun. Code, Section 8.08.020 (H). In September 2010 the City Fire

Chief sent a notice that the properties violated California Fire Code Section 304, creating a

significant fire hazard which needed to be cleaned up immediately. The Department of

Community Development, Engineering and Environmental Health for the County of Del Note

notified Diehl that the condition of the properties constituted a nuisance and that the accumulated

plants and refuse needed to be removed from the site prior to November 1, 2010. The City sent a

final notice to Diehl on November 11, 2010 and on January 21, 2011, sent him a notice of public

hearing.

A public hearing was held on February 7, 2011. Diehl sent a declaration and eight pages

of legal argument but did not appear at the hearing. On February 14, 2011, the City served a 30

day notice of abatement requiring Diehl to abate the nuisance. On the 30th day, March 14, 2011,

Diehl filed a verified petition for writ of mandate to superior court.

On August 2011, the City filed the administrative record and an answer to the petition.

For two and a half years Diehl made no effort to move his superior court writ proceeding

forward.

Meanwhile, in November 2011, the City received another complaint about Diehl’s lots.

On February 6, 2012, the City considered a resolution declaring Diehl’s properties a nuisance

under Government Code 39560 et seq. Such a resolution would enable the City after providing

proper notice to Diehl to enter onto the property and abate the nuisance at Diehl’s expense, and

enable the City to re-enter the property within the same calendar hear to conduct further

abatement without holding another public hearing. The City adopted the resolution and gave

notice of a public hearing set for February 21, 2012. Diehl did not appear at the hearing and the

City Council voted to find that there was a nuisance on the properties and to direct staff to obtain

estimates and proceed with the abatement. On March 6, 2012, Diehl was notified that the City

received abatement estimates ranging from $485 to $4,200 and that the cost of the abatement

would be placed as a lien against his properties unless Diehl abated the nuisance within one

week. Diehl failed to take corrective action, so the City abated the nuisance. and placed a lien

on his properties.

In December 2013, Diehl filed a motion to file a first amended petition for writ of

mandate. The Court granted the motion to amend the petition, granted Diehl permission to

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submit an oversized brief which was previously filed in 2011, directed the City to update the

administrative record, and accepted briefs by from the parties. Ion September 29, 2014, the

Court denied the petition in a written opinion and entered judgment on October 9, 2014.

Diehl through his personal representative James Raymond Clary, appealed the superior

court’s denial of his petition for a writ of mandate brought under Code of Civil Procedure section

1094.5. Diehl’s writ petition challenged the City’s determinations that the overgrown weeds and

rubbish on his lots constitute a public nuisance that required abatement and, when he refused to

abate the nuisance, that a lien be placed on his lots for the City’s abatement costs.

The appellate court in affirming the lower court decision, groups Diehl’s arguments on

appeal into three categories (1) legal challenges; (2) procedural irregularities and (3) other

contentions of superior court error.

Following is a list of some of the more germane legal rulings in the decision: 1) Neither

estoppel nor laches are available defenses if the defenses would nullify an important public

policy for the benefit of the public, which the nuisance ordinance is. 2) City police powers are

broad enough to encompass aesthetic concerns. 3) The term “unsightly appearance” in the

Crescent City nuisance ordinance was not unconstitutionally vague in violation of due process

where the ordinance addressed not all weeds or vegetation, but only that which was overgrown,

dead, decayed or hazardous.” 4) The City ordinance does not conflict with Civil Code section

3479, which among other things, defines as a nuisance “anything which is injurious to health…

or is indecent or offensive to the senses. Nor did Diehl provide any legal authority restricting

nuisance to Civil Code section 3479. Notably, Government Code section 38771 provides” “By

ordinance the city legislative body may declare what constitutes a nuisance.”

With respect to the alleged procedural irregularities, including 1) lack of oral argument;

2) failure to rule on a motion to supplement the record; 3) absence of a statement of decision; 4)

denial of a disqualification motion and 5) lack of due process for failure to receive a proposed

form of judgment, the appellate court concluded that the claims were meritless and/or appellant

failed to establish the existence of any prejudice as a result of the alleged procedural

irregularities.

Diehl’s catch all argument that the City deprived him of due process was meritless and

Diehl had waived the right to argue lack of due process because he failed to cite or discuss any

law addressing due process I administrative proceedings.

15. Hensley v. San Diego Gas & Electric Company (2017) 7 Cal.App.5th 1337

Plaintiffs entitled to put on evidence of emotional distress as part of damages for trespass and

nuisance

Following a wildfire, homeowners Hensley brought action against the electrical utility for

inverse condemnation, negligence, trespass, nuisance, negligence per se, statutory violations, and

intentional and negligent infliction of emotional distress. Following bifurcation of liability and

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damages, and grant of utility’s motion to exclude evidence of emotional distress damages, the

parties entered into a stipulated judgment.

The Homeowners appealed, and the Court of Appeal, 2016 WL 280093, dismissed the appeal.

Following second stipulated judgment, the Superior Court, San Diego County, entered a take

nothing judgment, and homeowners appealed.

The central issue was whether the Hensleys should be allowed present evidence of emotional

distress as part of the damages claim. After a tortured procedural history, the Court of Appeal

held:

“On the merits, we hold the Hensleys were legally entitled to present evidence of William’s

emotional distress on their claims for trespass and nuisance as annoyance and discomfort damages

recoverable for such torts. Because the trial court excluded evidence of emotional distress damages

in their entirety, we reverse.”

16. Fulle v. Kanani (2017) 7 Cal.App.5th 1305

Noneconomic damages, such as annoyance and discomfort may be subject to multiplier und CC

3346 and 733 for damages to trees

Owner of property Fulle brought action against neighbor for trespass and negligence after neighbor

hired workers to cut tree limbs and branches on owner’s property, seeking damages for injury to

the trees, restoration costs, and damages for annoyance and discomfort, as well as enhanced

damages.

Fulle sued for trespass and negligence, seeking damages for injury to the trees, restoration costs,

and damages for annoyance and discomfort. She sought enhanced damages under Civil Code

section 3346, subdivision (a)1 which provides trial courts with discretion to treble damages to

“compensate for the actual detriment” “[f]or wrongful injuries to timber, trees, or underwood upon

the land of another.”

Following a jury trial, the Superior Court, Los Angeles County, entered judgment for Fulle, and

trebled economic damages. But the court declined to treble noneconomic damages. Fulle

appealed.

The court of appeal reversed, rejecting Kanani’s argument that it should narrowly interpret

sections 733 and 3346, under the courts’ long-standing view that the timber trespass statutes are

punitive in nature and therefore should be strictly construed. Because neither section mentions

any type of personal harm or detriment, Kanani asserts the statutes should not be interpreted to

extend to noneconomic damages such as those for annoyance and discomfort.

The court reasoned: “No matter how strictly we construe section 733, the plain language of that

statute explicitly authorizes trebling the “amount of damages which may be assessed” for cutting

down or injuring trees on another person’s land. Our cases are similarly clear that annoyance and

discomfort damages may be assessed for this type of tortious injury to trees.”

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Concluding that the two sections must be harmonized, the Court held: we conclude that annoyance

and discomfort damages resulting from tortious injuries to timber or trees are subject to the damage

multiplier under sections 733 and 3346. Where, as here, the jury finds willful and malicious

conduct by the defendant, the trial court must award double damages and has discretion to award

treble damages for annoyance and discomfort.

Land Use

17. Lynch v. California Coastal Commission (2017) 3 Cal.5th 470

A landowner who accepts the benefits of a development permit forfeits objections to permit

conditions raised in a mandate petition

Coastal landowners applied for and obtained a permit to rebuild an eroded seawall on an

Encinitas bluff. The Coastal Commission permit authorized the seawall with mitigation

conditions: the permit expires in 20 years, and the lower stairway could not be rebuilt.

The landowners filed a petition for administrative mandate to challenge the conditions, but also

constructed the seawall. Because they built the seawall, and accepted the benefit of the permit,

they forfeited objections to the mitigation conditions.

18. Surfrider Foundation v. Martins Beach 1, LLC (2017) 14 Cal.App.5th 238

Closing a gate to prevent public beach access is “development” under the Coastal Act

This is one of many cases involving Martins Beach, the beach cove on the coast of San Mateo

County. The coastal property owner closed an access gate to Martins Beach that had previously

been used by the public. The owner had not sought a permit from the Coastal Commission to

close the gate. The Court of Appeal held that the gate closure constituted a "development" under

the Coastal Act, because it substantially decreased public access to the beach.

Trial court granted injunctive relief allowing access in favor of Surfrider Foundation, and the

Court of Appeal affirmed. An owner needs a coastal development permit to close a gate. A

question arose whether a denial of a permit would amount to a taking is not ripe, because the

owner had not yet sought permit. The trial court issued an injunction prohibiting the gate closure

not a per se taking, because the injunction isn't permanent.

19. Protect Telegraph Hill v. City and County of San Francisco (2017) 16 Cal.App.5th 261

CEQA exemption applied to three-unit condo development on Telegraph Hill. No unusual

circumstances overrode exemption.

In a three-unit condo development, there was no CEQA review required. The Court found that

categorical exemptions applied, because the new structure had less than four dwelling units.

This, despite conditions in the permit to account for pedestrian and vehicle traffic during

construction, and despite iconic hillside view. There is nothing about this project that presents a

particularly unusual circumstance in San Francisco.

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“Telegraph Hill is outstanding and unique in a city of outstanding and unique places….But the

City here has made a determination based upon the evidence that the proposed project conforms

with the general plan, the urban design element and the general nature of development on

Telegraph Hill in a way that does not change its character. On this record, we cannot disagree.”

Real Property Securities

20. Gillies v JP MorganChase Bank (2017) 7 Cal.App.5th 907

Res Judicata Doctrine Precludes Piecemeal Litigation by Splitting a Single Cause of

Action or Relitigating the Same Primary Right of Plaintiff to Be Free of Particular Injury

Attorney Plaintiff brought four successive unsuccessful wrongful foreclosure cases

commencing in 2009. Three of the suits were brought in CA state court, including the instant

fourth action and one suit was brought in federal court. Plaintiff took all cases up on appeal and

lost each case on appeal as well as losing his effort to obtain federal bankruptcy protection.

In the first suit, Plaintiff claimed that the August 13, 2009 notice of default was not

recorded, and not filed in compliance with CC Section 2923.5 and that the November 18, 2009

notice of sale was not properly recorded. The trial court sustained defendants’ demurrer without

leave to amend. The lower court ruling was affirmed on appeal.

In the second suit Plaintiff alleged the June 30, 2011 second notice of trustee’s sale, was

premature and violated CC Section 2923.52 because the notice of default upon which the notice

of sale was based was allegedly defective. The trial court granted defendants’ motion to strike

the complaint and the ruling was affirmed on appeal.

In the third suit, which Plaintiff filed in federal court, Plaintiff repeated the allegations he

made in Gillies I and Gillies II that the misspelling of his first name as “Dougles” as opposed to

the correct spelling “Douglas” rendered the notice of default fatally defective and raised a new

claim that the Chase, who succeeded to WaMu’s interest as beneficiary of the deed of trust, was

not entitled to conduct a nonjudicial foreclosure. The trial court grated defendants’ motion to

dismiss without leave to amend.

In the instant fourth suit, Plaintiff filed a complaint based on the new November 16, 2015

notice of trustee’s sale set for December 30, 2015. Plaintiff brought causes of action asserting

Violation of Homeowner’s Bill of Rights (“HBOR”), lack of standing to foreclose, unlawful

substitution of trustee, fraud, injunctive relief and damages. He obtained a temporary restraining

order and filed a motion for preliminary injunction.

The Court held that Plaintiff own pleadings belie his legal claims and/or Plaintiff

provides no evidence in support of his claims. Ultimately, the Court held that res judicata

precludes Plaintiff from bringing new theories of wrongful foreclosure because the primary right

protected, freedom from wrongful foreclosure, is the same claim brought by Plaintiff in all three

of his prior suits.

Res Judicata precludes piecemeal litigation by splitting a single cause of action or

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relitigation of the same cause of action on a different legal theory or for different relief. All

claims on the same cause of action must be decided in a single suit; if not brought initially, they

may not be raised at a later date.

After approximately eight years of remaining in possession without making any mortgage

payments, Plaintiff’s successive efforts to forestall the foreclosure sale appear to have come to an

end. As stated by the appellate court, “The game is over.” 7 Cal.App.5th 907 at 909.

21. Rincon EV Realty LLC v CP III Rincon Towers, Inc. (2017) 8 Cal.App.5th 1

California’s interest in preserving the state constitutional right to a civil jury trial trumps

contractual choice of law provisions from other states which authorize predispute jury waivers.

California’s interest in enforcing a litigant’s inviolate right to a jury trial in civil matters

brought within the state of California, absent waiver of that right as expressly and exclusively

authorized by the California State Legislature, compels the Court to abandon contractual parties’

choice of law provision when the chosen state, like the State of New York, authorizes contractual

waivers of the right to a civil jury trial which are not recognized by the California Legislature.

In order to decide whether to follow California’s law, as the forum state, or New York’s

law, as the chosen state under the contracting parties’ choice of law provision, the court must

follow section 187 of the Restatement Second of Conflict or Laws and apply the test set forth in

Nedlloyd Lines B.V. v Superior Court (1992) 3 Cal.4th 459.

THE NEDLLOYD TEST:

Step 1 Does the chosen state have a substantial relationship to the parties or the

transaction or Is there any other reasonable basis for the parties’ choice of law

provision? If no to both, apply California law as the forum state. If yes to either,

then go to Step 2.

(The trial court judge concluded that New York had a substantial relationship to

the parties and the transaction, the original contracting parties were all

headquartered in New York and the transaction was negotiated and contracts

signed in New York.)

Step 2 Is the chosen state’s law contrary to a fundamental California policy? If no,

follow the contracting parties choose of law. If yes, go to step 3.

(The trial court judge concluded that New York’s predispute contractual waiver of

the right to a civil jury trial was in fundamental conflict with California law which

only provides for jury waivers after a suit has been filed. See Grafton Partners v

Superior Court (2005) 36 Cal.4th 944. 950. CCP Section 631 waiver methods are

exclusive and the recognized grounds for waiver of the right to a jury trial set forth

in CCP Section 631 all occur post filing of a lawsuit.)

Step 3 Is there a fundamental conflict with California law, then the court must

determine whether California has a “materially greater interest than the chosen

state in the determination of the particular issue. If no, then follow parties’ choice

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of law. If yes, follow California’s law so as not to enforce a law that is contrary to

California’s fundamental policy.

(When applying Step 3, the trial judge concluded that California did not have a

greater interest in securing a jury trial than the chosen state had in waiving the jury

trial. Furthermore, since the California resident litigant sought to enforce the New

York choose of law provision and all other parties were New York domiciled and

since all parties were very sophisticated and had a reasonable expectation that the

choice of law provision in the contract would control, the trial court applied New

York law.)

In accordance with the judge’s analysis of the Neddllod factors, the judge waived the

right to a jury trial. The judge proceeded to adjudicate both the equitable and legal claims in a

bench trial. In the bench trial, the court ruled for the defendants on all causes of action, the

equitable causes of action for unfair competition, to set aside the foreclosure sale, and for

accounting as well as the legal causes of action for breach of contract, fraud, slander of title,

trade secret misappropriation.

On appeal, the appellate court, reviewing the matter de novo, determined that Court’s

denial of the right to a jury trial with respect to the legal causes of action was reversible error per

se and no showing of prejudice is required by the party who lost as trial. Valley Crest Landscape

Development, Inc. v Mission Pools of Escodido, Inc. (2015) 238 Cal.App.4th 468, 493. .

The appellate court concluded that the relevant California interest at issue under the

Nedlloyd analysis Step 3 was not solely California’s interest in resolving the dispute by a jury

trial, which as viewed by the trial court, would be no more material than New York’s

countervailing interest in preserving the parties’ right under New York law to contractually

waive the right to jury trial, but rather protecting California’s policy that only the Legislature can

determine the permissible methods for waiving the inviolate right to a civil jury trial. The Court

went on to state that California prioritizes access to civil justice on terms applicable to all

California litigants regardless of sophistication or wealth.

Although the court reversed the judgment and remanded the case to the lower court to try

the legal claims before a jury, the court affirmed the court’s ruling on the equitable claims, as

there is no right to a jury trial on equitable claims.

22. OC Interior Services, LLC v Nationstar Mortgage (2017) LLC (2017) 7 Cal.App.5th

1318

A void judgment in the chain of title has the effect of nullifying a subsequent transfer,

including a transfer to a purported bona fide purchaser.

OC Interior purchased real property days after a default judgment was recorded in the

chain of title which purported to vacate the lien rights and cancel the first deed of trust

encumbering the property. The party against whom the default was taken filed a successful

motion to set aside the default judgment pursuant to CCP 473(d). The court granted the motion

and ordered the default judgment void, vacated, and set aside.

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The trustee under the first deed of trust filed a notice of trustee sale. OC Interior

discovered the notice of sale posted to the door and filed the instant suit to establish that OC

Interior acquired title free and clear of the first deed of trust. The lower court held that OC

Interior was a good faith purchaser for value and as such to title to the property free and clear.

The appellate court reversed the lower court ruling and determined that even if OC

Interior was a Good Faith Purchaser for Value, an assertion that the appellant court believed

dubious, OC Interior still took title subject to the fist deed of trust. The court states: “We

conclude that a void judgment in the chain of title has the effect of nullifying a subsequent

transfer, including a transfer to a purported bona fide purchaser. Gray v Hawes (1857) 8 Cal.

562, an almost 160 year-old California Supreme Court opinion support our conclusion. OC

Interior 7 Cal.App.5th 1318 , 1335.” The appellate court also relied upon Restatement First of

Judgments: “Where there has been a void judgment which purported to transfer a property

interest, a person who purchases the property is not protected and the person against whom the

judgment was rendered is entitled to equitable relief against him.: (Rest. 1st Judgments, Section

115, com.j,p.561).

23. Faulks v Wells Fargo & Company, 231 F.Supp.3d 387 (2017)

The general rule that a lender owes no duty of care to the borrower is subject to

exception under the Biankanja test. Lender activities related to negotiating potential loan

modifications may trigger a lender duty of care to protect the debtor.

The debtor brought suit against the lender for promissory estoppel, intentional

misrepresentation, negligent misrepresentation, intentional infliction of emotional distress and

conversion. The lender defendant brought a summary judgment motion. The court granted

summary judgment.

Of note in the Court’s decision was the discussion regarding duties of the lender to the

debtor.

As a general rule, under California law, a financial institution owes no duty of care to a

borrower when the institution’s involvement in a loan transaction does not exceed the scope of

its conventional role as a mere lender of money. However, the court applied Biankania factors,

and held that the lender did in fact owe a duty of care to the debtor in light of the loan

modification activities occurring between them.

The test for determining whether a financial institution owes a duty of care to a borrower-

client involves a balancing test weighing various factors (1) the extent the transaction was

intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff (3) the degree of

certainty the plaintiff suffered injury (4) the closeness of connection between defendant’s

conduct and the harm suffered, (5) the moral blamed attached to the defendant’s conduct, and (6)

the policy of preventing future harm. Nymark v Heart Fed. Savings & Loan Ass’n 231

Cal.App.3d 1089, 1098 (quoting Biankanja v Irving, 49 Cal.2d 647, 650 (1958)

The court rejected the lender’s argument that the Biankanja factors were not relevant

because the lender and debtor were in privity of contract. The Court identified cases in which

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the Biankanja factors have been applied to parties in privity of contract, particularly in

foreclosure cases. Alvarez v BAC Home Loans Servicing, L.P., 228 Cal.App.4th 941 (2014);

Romo v Wells Fargo Bank, N.A., 2016 WL 324286 (N.D. Cal. Jan. 27, 2016).

Although the court held that the lender had a duty of care, under the facts of the case, the

court held that no reasonable jury could conclude that the lender breached that duty of care.

24. Hardwick v Wilcox (2017) 11 Cal.App.5th 975

A general release contained in a loan modification agreement will not waive usury

claims if the loan modification itself is usurious. Furthermore, a general release in a loan

modification, in the absence of any knowledge by the parties of the existence of a potential usury

claim, cannot qualify as a knowing waiver.

Background

The lender and debtor entered into a series of nine usurious loans, all of which were

secured against the debtor’s property. The lender issued a notice of default on note #8 and

initiated judicial foreclosure proceedings. However, the parties entered into a forbearance

agreement which extended the timing on the loan payoff provided that the debtor made timely

monthly payments of principal and interest on notes 1 & 2.

The forbearance agreement contained a unilateral general release and a Civil Code

Section 1542 waiver. The forbearance agreement expressly stated: “Borrower acknowledges and

agrees as of the date of this Agreement, none of the obligations under the Notes or the payment

of the amount owing thereunder, are subject to any right of offset, defense or counterclaim of any

kind or nature whatsoever. Borrower… hereby fully and forever waives, releases, acquits, and

discharges Lender”

Despite the release contained in the forbearance agreement, the debtor filed the instant

suit to recover the usurious interest he paid on the loans and to protect his real property used to

secure the loans. The lender cross-complained for breach of contract under Notes 8 & 9, judicial

foreclosure, specific performance on both notes, elder abuse and declaratory relief related to the

validity of the release in the forbearance agreement.

The Court concluded that construing the forbearance agreement as a waiver of usury

would violate public policy. Civ. Code Section 1668; Tiedje v Aluminum Taper Milling Co.

(1956) 46 Cal.2d 450. The facts showed that the forbearance agreement was 1) a descendent

obligation of the original usury loans, 2) an extension of the original usurious transaction and 3)

was in and of itself usurious. Furthermore, the court concluded that the forbearance agreement

was not a knowing waiver of a usury claim. The parties were unaware that the loans were

usurious when they entered into the forbearance agreement.

23

Applying the rule that attempts to extract usurious interest renders the interest provision

void and all payments on the note must be applied to reduction of principle, the trial court held

that the debtor paid off Notes 8 & 9. Epstein v Frank (1981) 125 Cal.App.3d 111, 122-123.

The trial court further ruled that the lender’s statute of limitation argument was misplaced

because the debtor was not seeking interest on Notes 1 through 7 but rather seeking setoff of the

usurious interest as against the principal on Notes 8 & 9. Moreover, in an action to collect a

usurious debt, the usurious payments are not barred by the statute of limitations so long as the

usurious loan remains unpaid. Shirley v Britt (1957) 152 Cal.App.2d 666. The court found that

notes 8 & 9 were successor notes to notes 1 through 7 constituting renewals of the same debt.

The appellate court affirmed the judgment. The Court agreed that the forbearance

agreement was an extension of the underlying usurious loan transaction and that construing the

forbearance agreement as a waiver of usury, while itself being usurious, would violate public

policy. The appellate court cited Section 1668 of the civil code states: “All contracts which have

for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or

willful injury to the person or property of another, or violation of law, whether willful or

negligent, are against the policy of the law.”

A transaction is usurious if there is a loan at greater that the legal rate of interest or an

extraction at more than the legal rate for the forbearance of a debt or sum of money due. The

creditor of a usurious loan is entitled to recover only the principal and is allowed no interest

whatsoever.

25. PGA West Residential Association, Inc. v Hulven International, Inc. (2017) 14

Cal.App.5th 156

As an issue of first impression, the court held that the seven-year limitation period under

the Uniform Fraudulent Transfer Act (now renamed the Uniform Voidable Transaction Act) was

a statute of repose as opposed to a statute of limitation. Furthermore, finding no published

California decisions addressing whether a statute of repose is subject to forfeiture, the appellate

court adopted the majority view among other jurisdictions holding that a statute of repose

cannot be forfeited.

The case involves a fraudulent transfer by property owner Dempsey Mork to a sham

corporation, Hulven International, Inc. via a bogus deed of trust for $450,000 recorded against

the property on January 23, 2004, after the owner purchased the property free and clear on March

17, 2003. On June 7, 2011, PGA West, a judgment creditor of Dempsey Mork, the owner of the

property, filed a judgment lien against the property for $413,369.87.

On November 15, 2012 a substitution of trustee under the bogus deed of trust occurred

and the new trustee, replacing Hulven, recorded a notice of default in the amount of $209,934.25

as of January 1, 2005. On February 15, 2013, a notice of trustee sale was served establishing a

sale date of March 14, 2013.

24

PGA West filed a complaint to prevent the nonjudicial foreclosure sale. PGA West’s

complaint sought declaratory relief that the January 28, 2004 deed of trust was invalid and

therefore was not a superior interest to PGA West’s $413,369.87 judgment lien dated June 7,

2011, injunctive relief that the foreclosure proceedings were an attempt by Mork to “lauder title

to the Property” and free it of adverse claims; fraudulent conveyance that if allowed to transfer

via the foreclosure sale would constitute a fraudulent transfer depriving creditor’s of their ability

to collect, constructive trust of the sale proceeds in the event that the foreclosure sale is permitted

to proceed, and appointment of a receiver.

Hulven demurred to the complaint arguing that PGA’s lawsuit was barred because (1) the

January 2004 deed of trust constituted a transfer for purposes of the UFTA and (2) the UFTA’s

seven year limitation period under section 3439.09 (c) is absolute, extinguishes any claim to void

a fraudulent transfer, and applies to all claims related to a fraudulent transfer whether they are

brought under the UFTA or not. Since PGA West’s March 2013 complaint related to the

fraudulent transfer, and the complaint was filed more than seven years after the January 2004

deed of trust, the lawsuit was completely time barred.

The trial court overruled the demurrer stating “This is an action to determine priorities in

liens against the property for which the statute of limitations has not expired. Furthermore, a sale

of property under the deed of trust will trigger a fraudulent transfer action with a new statute of

limitations.”

Hulven answered the complaint and raised the defense that the suit was time barred by

various limitations periods including section 3439.09. At trial Hulven did not argue that the

claims were time barred and the trial court made no findings on the plead defense. The Court

concluded that the deed of trust was fraudulent, void and unenforceable, of no effect and shall be

cancelled.

On appeal, the appellate court reversed the judgment, remanded the case to superior court

to enter a new order sustaining the demurrer without leave to amend.

The Appellate Court held that the deed of trust was a transfer for purposes of the UFTA

and therefore PGA West’s common law causes of action were subject to the limitation period

under section 3439.09(c). Under the UFTA, a transfer is fraudulent, both as to present and future

creditors, if it is made ‘with actual intent to hinder, delay, or defraud any creditor of the debtor.”

(Civ. Code Section 3439.04, Subd. (a)(1). Even without actual fraudulent intent, a transfer may

be fraudulent as to present creditors if the debtor did not receive “a reasonably equivalent value

in exchange for the transfer and the debtor was insolvent at that time or the debtor became

insolvent as a result of the transfer or obligation.”

The UFTA applies to all transfers. Civil Code section 3439.01 (m) defines “transfer as

every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of

or parting with an asset or an interest in an asset.” Civ. Code Section 3439.08 (Mejia v Reed

25

(2003) 31 Cal.4th 657, 664). Transfers to bogus corporations that are wholly owned and

controlled by the debtor are “transfers” for purposes of the UFTA.

The appellate court held that PGA West’s claims are a common law attack on a

fraudulent deed of trust and therefore, are subject to section 3439.09(c)’s seven year

“overarching, all-embracing maximum time period to attach fraudulent transfer.”

In a case of first impression, the appellate court ruled that the seven-year limitation

contained in section 3439.09(c) is a statute of repose as opposed to a statute of limitations.

Section 3439.09(c) provides: “Notwithstanding any other provision of law, a cause of action

under this chapter with respect to a transfer or obligation is extinguished if no action is brought

or levy made within seven years after the transfer was made of the obligation was incurred.”

While a “statute of limitations” normally sets time within which proceedings must be

commenced once an action accrues, a “statute of repose” limits the time within which an action

may be brought and is not related to accrual, and indeed the injury need not have occurred, much

less have been discovered.

Halven’s failure to argue the seven year limitations period at trial did not waive the issue

on appeal because, although the defendant must plead a statute of limitations defense to avoid

forfeiture, it is the plaintiff who must plead facts showing their substantive right has not been

extinguished by a statute of repose. Williams v Pacific Mutual Life Ins. Co. (1986) 186

Cal.App.3d 941, 949-950.

“We have found no published California decisions addressing whether a statute of repose

is also subject to forfeiture. The majority view among the other jurisdictions, which we adopt,

holds that statutes of repose cannot be forfeited.” ((at 185))

“As one leading decision adopting the majority view explained: “’While the running of a

statute of limitations will nullify a party’s remedy, the running of a statute of repose will

extinguish both the remedy and the right. The statute of limitations is therefore a procedural

mechanism which may be waived [i.e., forfeited]. On the other hand, the statute of repose is a

substantive provision which may not be waived [i.e., forfeited] because the time limit expressly

qualifies the right which the statute creates.’”

While conceding that the result of application of the statute of repose to PGA West’s suit

was lamentable, the appellate court found that upon review of the legislative history, the result

was neither absurd nor unanticipated by the legislature.

The appellate court also ruled that by waiting until oral argument on appeal to seek leave

to file an amended complaint in the event that the appellate court remanded with instructions to

sustain the demurrer, PGA West forfeited its right to file an amended complaint. PGA West

failed to demonstrate how it could amend the complaint to change the legal effect of its original

pleading. PGA West failed to specifically set forth the applicable substantive law and legal basis

26

for amendment along with the factual allegations to state the required elements of a new cause of

action.

During oral argument on appeal, PGA West actually foreclosed on the property.

However, neither party on appeal argued that the foreclosure sale rendered the appeal moot. In a

footnote, the appellate court states “To the extent the appeal is moot, we have exercised our

discretion to retain jurisdiction to decide the important issues of public interest raised herein.”

26. Black Sky Capital, LLC v. Cobb (2017) 12 Cal.App.5th 887

Nonjudicial foreclosure of a senior lien does not preclude judicial action by junior lienholder to

recover amount due on its note.

A bank held both a senior and junior lien on a parcel of commercial property. After the owner

defaulted on both notes, the bank nonjudicially foreclosed on the senior lien and sold the

property at a trustee’s sale. Thereafter, the bank sued to collect the remaining balance on the

junior note. The property owner argued in defense that the action sought an impermissible

deficiency judgment under Code of Civil Procedure section 580(d). Alternatively, the property

owner claimed that the bank was required to bring all claims associated with its notes in a single

action under Code of Civil Procedure section 726.

The Court of Appeal rejected the property owner’s defenses and allowed the junior lienholder’s

collection action to proceed. It was of no consequence that the junior and senior lienholder were

the same entity. The junior lienholder’s action addressed a different obligation from the senior

lienholder’s, and nonjudicial foreclosure is not an “action” under Section 726.

27. Deustche Bank National Trust Company v. Pyle (2017) 13 Cal.App.5th 513

A buyer could not claim to be a bona fide purchaser where trustee’s deed remained in chain of

title, even where a default judgment purported to cancel the trustee’s deed.

A default judgment in a chain of title purported to cancel a trustee’s deed. This default judgment

was subsequently set aside, because the proof of service on banks had been falsified. Before

default judgment set aside, house sold to a third party. Third party did not take title, because the

underlying judgment was subsequently voided. The third party could not claim to be a bona fide

purchaser, because the trustee’s deed was reflected on the chain of title and the default judgment

did not quiet title. The third party’s remedy was through the title insurance.

Landlord-Tenant

28. Ayala v. Dawson (2017) 13 Cal.App.5th 1319

Unlawful detainer action has collateral estoppel effect on claim of right to equitable title

in related action

27

After living for more than a dozen years in a residential unit he claimed he owned, Alfonso Ayala

was evicted by the property owner, Randy Dawson, in an unlawful detainer action. Ayala defended

by attempting to quash service of summons on the ground he was not a tenant, but instead held

equitable title under an oral installment sale contract for the purchase of property. Dawson

countered that, in fact, Ayala was a tenant under a written lease, and had breached the lease in

various ways, thus justifying his eviction.

After holding a one and a half day evidentiary hearing in the unlawful detainer action, Judge D.

Scott Daniels denied the motion to quash, ruling that “[b]ased on Plaintiff's ... Residential Lease

with Option to Purchase and the conduct of the parties, [Dawson had] met his burden of proof to

establish the existence of a landlord-tenant relationship....” In denying the motion, Judge Daniels

found that Ayala had read and signed the lease, declined to find any basis to relieve Ayala of his

contractual obligations, and specifically rejected the theory that Dawson served as Ayala's real

estate broker or was Ayala's trusted real estate advisor. Dawson prevailed and ultimately took a

default judgment. Ayala then vacated the premises.

In this case, a separate, concurrent action by Ayala against Dawson for fraud and various other

claims, Ayala once again pursues the theory that he holds equitable title under an installment sale

contract. He seeks to argue, as he did in the unlawful detainer action, that Dawson, a real estate

broker, deceived him into signing the lease, while misrepresenting that the document was simply

the memorialization of a preexisting oral contract of sale. The court granted summary judgment

for Dawson, ruling that, under the doctrine of collateral estoppel, Ayala is barred from relitigating

his fraud-in-the-inducement theory.

This appeal is from the ensuing judgment and from an award of attorney fees in Dawson's favor

under the prevailing party fee clause in the lease. We affirm.

29. Geraghty v. Shalizi (2017) 8 Cal.App.5th 593

Vacating agreements are not barred by non-waiver provisions of rent control law

Per the court: “Plaintiff and former tenant Brian Geraghty seeks to undo the deal he made with

his former landlord, defendant Joseph Shalizi. Shalizi, as the new owner of a four-unit apartment

building in San Francisco, could have evicted Geraghty and moved into Geraghty’s unit under the

owner move-in provisions of San Francisco’s rent ordinance. Instead, the two reached an

agreement whereby Shalizi would pay $25,000 to Geraghty, and Geraghty, in turn, would vacate

the apartment and refrain from suing Shalizi for any claim related to the unit, including any claim

under the rent ordinance and any claim premised on a right to reoccupy. Shalizi moved in, but later

moved out, and Geraghty sued. Shalizi successfully moved for summary judgment. We reject

Geraghty’s principal assertion, that his waiver was invalid and unenforceable, and affirm the

judgment.”

San Francisco Superior Court judge Lillian K. Sing, J., had granted summary judgment for

landlord, upholding the effectiveness of the settlement agreement and stating there was no

evidence Shalizi “misrepresented his intent to remove [Geraghty] from the premises by way of

either buy-out agreement o[r] Owner Move–In Eviction. Owner Move–In eviction has never been

initiated due to [Geraghty’s] acceptance of the buy-out agreement. No evidence is provided to

show that [Geraghty] did not contemplate a possibility of the Owner Move–In Eviction at the time

28

the representation was made. Whether defendant would have followed through with the eviction

and whether plaintiff would have complied with the Rent Ordinance is speculative at best and

cannot create a triable issue of fact.”

Tenant appealed.

The court of appeal noted the importance of upholding settlements reached according to their terms

in the landlord / tenant context, citing the decision in Kaufman v. Goldman (2011) 195 Cal.App.4th

734. The tenant argued that he presented evidence raising a triable issue that Shalizi procured the

release by fraud and asserts the buyout agreement should be rescinded and claims that waiver of

his rights is precluded by the rent control law.

The court found no evidence in the record to support the claim and concluded that:

1 landlord did not make misrepresentation about his intent not to follow owner move-in procedure

under rent stabilization ordinance;

2 waiver provision of settlement agreement covered tenant's claim of a right to reoccupy the

apartment; and,

3 anti-waiver provision of rent stabilization ordinance did not apply to tenant's waiver of right to

reoccupy the apartment.

Affirmed.

30. Epps v. Lindsey (2017) 10 Cal.App.5th Supp. 1

The right of a successor in interest to evict for owner occupancy post foreclosure under

CCP 1161b is not limited to immediate successor

Transferees from post-foreclosure purchasers of residence brought unlawful detainer action

against the former boyfriend of the borrower under the deed of trust, who contended that his deed

to the property was invalid and that he was a tenant.

The Superior Court, San Bernardino County, granted summary judgment for the post-foreclosure

transferees. Borrower's former boyfriend appealed, claiming foreclosure purchasers were not

“successors in interest” entitled to terminate the alleged tenancy upon 90 days' written notice.

Code of Civil Procedure section 1161b, subdivision (b)(1), provides that “tenants or subtenants

holding possession of a rental housing unit under a fixed-term residential lease entered into before

transfer of title at the foreclosure sale shall have the right to possession until the end of the lease

term, and all rights and obligations under the lease shall survive foreclosure, except that the

tenancy may be terminated upon 90 days' written notice to quit” if, as relevant here, “[t]he

purchaser or successor in interest will occupy the housing unit as a primary residence.”

If the legislature intended to limit the exception outlined in 1161b to only the purchaser's

“immediate successor” it could have done so. For instance, the code section which immediately

follows section 1161b obligates the “immediate successor in interest” to provide the type of

advisory notice outlined by the statute. (Code Civ. Proc., § 1161c.) Although the term, as used in

29

section 1161c, is actually a reference to the purchaser, the use of the phrase “immediate” still

demonstrates that if the legislature wanted to specifically limit the exception under section 1161b

to one specific successor within the chain of title, it could have done so.

Finally, although the statute was enacted in-part to address the concern that unsuspecting tenants

were being evicted despite paying their rent, the statute's exception suggests that the legislature

intended to give the post-foreclosure owner, who doubles as a would-be resident, preference over

a non-defaulting tenant whose interest would have otherwise been extinguished by the foreclosure.

This is especially true given that the purpose of the statute is furthered based on the fact that the

Epps were required to provide the 90-day notice. Therefore, the trial court correctly applied the

undisputed facts to the law.

31. Fernandes v. Singh (2017) 16 Cal.App.5th 932

Award of punitive damages supported by declaration of plaintiff’s counsel where

defendants failed to respond to order to produce financial information

The Superior Court, Sacramento County trial court found “Singh rented uninhabitable premises to

Fernandes at an exorbitant rental rate and then retaliated against her when she complained about

the uninhabitable conditions. His conduct is utterly indefensible.” The total award for

compensatory damages was $87,894.

The trial court found four retaliatory acts: the three unlawful detainer actions, plus the repeated

demands for payment of rent despite the conditional judgment in favor of Fernandes. The statutory

penalty was $2,000 per act, or $8,000. (See Civ. Code, § 1942.5, subd. (f)(2).) By clear and

convincing evidence, the trial court found Singh acted with oppression, fraud or malice, both actual

and implied, based on his “despicable conduct ... with a willful and conscious disregard of the

rights or safety of Fernandes. Moreover, clear and convincing evidence establishes that defendant

Kiran Rawat, who is in default for non-appearance at trial, and the Sitaram Trust ratified and

approved the malicious, fraudulent and oppressive conduct of defendant Singh.”

Counsel for Fernandes filed a declaration in support of punitive damages, detailing his search of

property records, showing the Trust held property in the Sacramento area of a total sale value of

over $341,000, and Rawat held property of a total sale value of over $1,383,000, but that it was

impossible to ascertain Singh’s own holdings, due to his common name. This declaration was not

rebutted.

At the hearing, the trial court asked Singh if he would produce his financial information, and Singh

declined, claiming there were “lawsuits pending with IRS” and claiming not to own any property.

He claimed to be unemployed. He never explained what happened to the money he received from

Fernandes. The court awarded $350,000 in punitive damages.

Pointing to a general rule regarding punitive damages, that it is a plaintiff’s burden to prove a

defendant’s financial condition (see Adams v. Murakami (1991) 54 Cal.3d 105, 108-109, 284

Cal.Rptr. 318, 813 P.2d 1348), Rawat faults the evidence of her financial condition because

Fernandes’s declaration about the “sale value” of the real property—which was unrebutted—was

insufficient. This argument overlooks the trial court’s discovery order compelling Rawat, the

Trust, and Singh, to produce evidence of their financial condition—an order disregarded by each

30

defendant. A defendant is in the best position to know his or her financial condition, and cannot

avoid a punitive damage award by failing to cooperate with discovery orders.

A number of cases have held that noncompliance with a court order to disclose financial condition

precludes a defendant from challenging the sufficiency of the evidence of a punitive damages

award on appeal.

The Court held that:

1 evidence was sufficient to support award of punitive damages, and

2 punitive damages award did not violate due process.

32. Dr. Leevil, LLC v. Westlake Health Care Center (2017) 9 Cal.App.5th 450

An owner need not record title before serving a 3-day notice to quit

This matter concerns a lease with an automatic subordination clause. A trustee sale on a

subsequent deed of trust extinguished the lease. The question that arose was “Does title need to

be perfected before 3-day notice to quit can be served?” Here, the Second District Court of

Appeal held that title need only be perfected before an unlawful detainer action is filed. Serving a

three-day notice does not initial unlawful detainer proceedings; therefore, a notice served before

title is perfected is valid.

The decision that it did disagree with U.S. Financial, L.P. v. McLitus (2016) 6 Cal.App.5th Supp.

1, a decision of the Appellate Division of the San Diego County Superior Court. McLitus held

that title must be perfected before a notice to quit could be served.

The California Supreme Court has granted review and will presumably resolve the split.

33. BRE DDR BR Whittwood CA LLC v. Farmers & Merchants (2017) 14 Cal.App.5th 992

A new tenant after lease foreclosure did not expressly assume the lease and was not bound by its

obligations after it vacated.

A shopping center tenant defaulted on a lease secured by a mortgage. Consequently, the lender

took possession. Despite a provision in the lease stating that foreclosing lender would assume

tenant's obligation, there was no evidence on the record that lender actually assumed the lease.

The lease terminated when lender vacated. The lender never assumed the lease and had no

obligation to pay rent when not in possession.

Real Property Taxes

34. 926 North Ardmore Avenue, LLC v. County of Los Angeles (2017) 3 Cal.5th 319

Documentary transfer tax applied to written instrument that transferred beneficial ownership for

consideration, even though instrument was not recorded

31

In this matter, the court held that the County could impose documentary transfer tax on transfer

of real property from partnership to family trust under Revenue and Tax Code 11901. The key to

the decision is that beneficial ownership changed as a part of a sale, and included a document of

transfer.

The property tax value was reassessed as part of the transfer, and the owner did not challenge

that reassessment. Rather, the owner claimed that no documentary transfer tax could be

assessed, because no document was recorded. The Supreme Court, in a 6-1 decision (Justice

Kruger dissenting), held that the County could impose the transfer tax.

Brokers

35. Jacobs v. Locatelli (2017) 8 Cal.App.5th 317

Real Estate Commissions: Broker’s claim of a commission under a Listing Agreement

signed by ostensible agent of seller group survives demurrer on statute of frauds and parol

evidence challenge by other owners.

This action arose from the listing and marketing of sale of a parcel of real property in Marin

County.

Plaintiff Jacobs, a licensed CA real estate broker, and Defendant John B. Locatelli, a co-owner of

the property, signed a “vacant land” exclusive listing agreement, listing price $2,200,000, term 1

year and commission $200,000. The agreement exempted “Open Space Land Trust,” in the event

such entity made an offer.

Mr. Locatelli signed as trustee of his trust. The term “owner” in the agreement was defined as

“John b. Locatellis, Trustee…, et al. (emphasis added.)”

The listing agreement, however, had 5 additional party signature lines for the other co-owners of

the property each of which were left unsigned. Plaintiff alleged in her later complaint that (a)

Locatelli told her when he was signing the agreement that he was authorized to act on behalf of

the other owners; (b) a written “agency agreement” exists between him and the other owners; (c)

two of the other owners acknowledged her engagement and commended her performance; and (d)

Locatelli and the other owners were joint venturers.

After the agreement was signed as noted above, Plaintiff spent significant time marketing the

property and was able to develop a potential, qualified, interested buyer, “The Trust For Public

Land.” Locatelli upon learning of the prospective buyer, objected that he had been negotiating with

the prospect for years hence wanted to change to the exemption to apply to it. Plaintiff alleges she

asked the director of acquisitions of the prospect if that were true and he said he did not know

Locatelli, had never spoken with him and was unaware the property was for sale. When confronted

with that response, Locatelli called the prospect’s director, told him to only speak with him about

any sale, not with Jacobs, and so informed Jacobs. The owners of the property then entered into a

purchase and sales agreement for the property with the entity which was never consummated due

32

to later issues that arose between those parties.

About a year later, when Jacobs sued to recover her commission, the owners responded with two

successive demurrer on the grounds that they did not all sign the listing agreement hence it was

barred by the statute of frauds, the equal dignities rule (Civil Code section 2309) and any argument

that Locatelli signed on their behalf was precluded by the integration clause in the agreement (parol

evidence rule) and the fact they held title as tenants in common rather than as partners.

The trial court sustained the second demurrer by the owners without leave.

The Court of Appeal reversed.

The equal dignities rule was inapplicable—there was the necessary written authorization as the

listing concerned real property. The Court found the owners’ argument entirely ignored the fact

that Jacobs does specifically allege that a written agency agreement exists between Locatelli and

the owners. While it acknowledged the statute of frauds generally is strictly enforced against

brokers given their licensing and education, the Court was concerned that allegations in the

complaint, if true, would support a finding that the owners authorized Locatelli to sign as their

agent.

The statute of frauds was no bar here. Citing Sterling v. Taylor (2007) 40 Cal.4th 757, the Court

found that the trial court “should have allowed the case to proceed so that Jacobs could introduce

extrinsic evidence of the manner in which Locatelli signed the agreement and that its failure to do

so runs afoul of the Supreme Court’s pragmatic approach to the statute of frauds as set forth in

Sterling. While it is true that Locatelli did not explicitly indicate in the agreement that he was

signing as an agent for any other entity or individual, it is also true that the agreement specified

that there were multiple owners, which could be interpreted as referring to all of the members of

the joint venture which Jacobs claims exists. In Sterling itself, for example, the Supreme Court

allowed extrinsic evidence to show that a person who signed the agreement was in fact an agent

of the entity which owned the property, even though the entity’s name was entirely missing from

the agreement and the contract did not state that the signatory was signing as an agent for that

missing entity.” (Id., at 326.)

Nor was the parol evidence rule a bar under the agreement’s integration clause.“ “ ‘[T]he rule is

well settled that where a reading of a simple contract, however inartificially it may be drawn,

discloses that it is executed for or on behalf of a principal, or discloses an intent to bind such

principal, or even leaves the matter one of doubt, parol evidence may be employed to determine

whose contract it is, and this even in cases where the instrument is sufficiently clear in its terms to

bind the agent….” (Id., at 328.) Citing the “et al.” reference in the contract’s definition of “owner,”

the Court found an ambiguity sufficient to allow for proof of what was meant by that reference,

and that it was possible such proof would show the allegation of a joint venture was not necessarily

in conflict with the ownership provisions of the contract.

Proof of agency of a party signing any real estate agreement may be awkward to request

but is essential to avoiding future disputes as this decision illustrates.

33

36. Laymon v. J. Rockcliff, Inc. (2017) 12 Cal.App.5th 812

Arbitration compelled by brokers in response to class action by sellers for disgorgement

and failure to disclose alleged kickbacks from service providers.

Two sets of plaintiffs filed two materially identical class action lawsuits against several real estate

brokers and a group of title companies and other service providers. Each of the broker defendants

represented one or more of the plaintiffs in connection with the sale of his or her home. The

complaints alleged claims for breach of fiduciary duty, fraud, unfair competition, and unjust

enrichment. Plaintiffs sought declaratory relief, damages, punitive damages, and an accounting

and disgorgement of the compensation received by defendants from plaintiffs in connection with

the home sales.

Plaintiffs’ claims were premised on the broker defendants’ use of a software program known as

“TransactionPoint,” alleging TransactionPoint was used to facilitate improper payments from the

service provider defendants to the broker defendants in the course of the sales. As one of the

complaints explained the gravamen of the claims, the brokers used TransactionPoint to “prepare

transaction documents and order related real estate settlement services (such as title insurance,

escrow, natural hazard disclosure reports, and home-warranty contracts) for Plaintiffs and other

members of the Class. In doing so, the brokers entered into sublicensing agreements with

providers of real estate settlement services, including the service provider defendants. Pursuant

to these agreements, the broker defendants received undisclosed payments from the service

provider defendants for the real estate settlement services ordered through TransactionPoint.”

Plaintiffs alleged that payments under the sublicense agreements operated in the nature of

kickbacks; when a broker ordered settlement services from a service provider through

TransactionPoint, the service provider paid the broker a “sublicense fee,” purportedly for the

service provider’s use of the software.

The defendants filed motions to compel arbitration under the REALTOR® form listing

agreement and purchase agreement at issue. The arbitration clause in the subject listing

agreement provided: “Seller and Broker agree that any dispute or claim in law or equity arising

between them regarding the obligation to pay compensation under this Agreement, ... shall be

decided by neutral, binding arbitration.” The arbitration clause in the subject purchase agreement

provided: “Buyer and Seller agree that any dispute or claim in Law or equity arising between

them out of this Agreement or any resulting transaction, ... shall be decided by neutral, binding

arbitration, including and subject to paragraph [ 17B(3) ] below.” Paragraph 17B(3) required

arbitration of disputes involving brokers, stating: “Buyer and Seller agree to ... arbitrate disputes

or claims involving either or both Brokers, consistent with 17A and B, provided either or both

Brokers shall have agreed to such mediation or arbitration prior to, or within a reasonable time

after, the dispute or claim is presented to Brokers.”

The trial court denied the motions to compel arbitration on the grounds that the arbitration

clauses in each did not cover the claims at issue. The court reasoned that the listing agreement’s

arbitration clause was inapplicable because the clause applied only to disputes over “the

obligation to pay compensation under this Agreement,” which runs from seller to broker.

Because the basis of the claims was defendants’ alleged failure to disclose the sublicense fees,

the trial court held, it did not concern the sellers’ obligation to pay their brokers. The court

concluded the purchase agreement’s arbitration clause was inapplicable because the clause

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required arbitration of broker/client disputes “consistent with” paragraph 17B. Since the

remainder of paragraph 17B applies only to disputes between sellers and buyers, the court

reasoned, the requirement of consistency with paragraph 17B limits client/broker arbitration to

“disputes between the buyer and seller which somehow entangle a broker.”

The First Appellate District reversed. After citing the strong public policy of enforcing

arbitration and basic rules of contractual interpretation, it reasoned the disgorgement claim was

in the nature of restitution of compensation—the brokerage commissions—and thus implicated

the arbitration clause in the listing agreement. It found the arbitration clause in the purchase

agreement applied to plaintiffs’ claims as they arose from the broker defendants’ conduct in

connection with the real estate transactions that were the subject of that agreement. It disagreed

that the language of the clause limited arbitration to claims between buyers and sellers finding

the “consistent with” phrase relied upon by the trial court should be read to refer to the manner of

arbitration, rather than any limit on its subject matter.

The current version of the CAR form of listing agreement no longer includes an

arbitration clause, and the current form of purchase agreement issued by the local association,

SFAR, excludes any reference to brokers.

Honorable Mention

Stella v. Asset Management Consultants (2017) (Fraud claim accrued for statute of limitations

purposes under discovery rule as reasonable person would have discovered fraud based upon

“clear and specific” statements in private placement memoranda for real estate investment.)

SURVEY OF SIGNIFICANT

REAL ESTATE DECISIONS

2017

PANEL

• Alexander M. Weyand, Weyand Law Firm, A Professional Corporation (Speaker/Moderator)

• Katharine Van Dusen, Coblentz Patch Duffy & Bass, LLP

• Elizabeth T. Erhardt, Earhardt Litigation

• Andrew J. Wiegel, Wiegel Law Group, PLC

Real Property Litigation Procedure

& Remedies

Mountain Air Enterprises, LLC v.

Sundowner Towers, LLC (2017)

3 Cal.5th 744

• Interpretation of Attorney Fee Clause

• Issue: Whether an affirmative defense based upon a contract is an “action or proceeding brought” to enforce the contract?

• Resolve Split between 1st and 2nd DCA

“To Enforce” Narrow Form Here

“If any legal action or any other proceeding…is

brought for the enforcement of this

Agreement or because of an alleged

dispute…in connection with any provision of

this Agreement, the prevailing party shall be

entitled to recover reasonable attorney

fees….”

RSB Vineyards, LLC v. Orsi (2017)

15 Cal.App.5th 1089

• Primary Claim: Concealment

• But first line of opinion: “This is a breach of

warranty action in the absence of a

warranty.”

Proof of Knowledge for Purposes of Proving Concealment

• “ ‘[A]ctual knowledge can be inferred from the

circumstances only if, in the light of the

evidence, such inference is not based on

speculation or conjecture. Only where the

circumstances are such that the defendant

“must have known” and not “should have

known” will an inference of actual knowledge

be permitted.’ (Emphasis.)” (Id. at 1098.)

Imputed Knowledge

• “In contrast, if a service provider simply

furnishes advice and does not interact with

third parties as the representative of the

recipient of the advice, the service provider is

not acting as an agent.” (Rest.3d Agency, §

1.01, comment (c), p. 19 [Italics added].)” (Id.,

at 1100.)

Timing of Acquisition of Knowledge

• “…the knowledge gained by the agent in Herzog was gained while acting as the defendants’ representative and within the scope of that representation. For that reason, the agent had a fiduciary duty to reveal his knowledge to the defendants, and the defendants, in turn, had a duty to reveal it to the buyers of the home…. (Id., at 1101-1102 citing Herzog v. Capital Co. (1945) 27 Cal.2nd 349.

Krechuniak v. Noorzoy (2017)

11 Cal.App.5th 713

• Settlement Agreement with “Penalty”

provision

• Operation of Civil Code section 1671

Common Interest Developments

Retzloff v. Moulton Parkway

Residents’ Association (2017)

14 Cal.App.5th 742

• Scope of “Costs” under Civil Code section

5235(c)

Adverse Possession

Vieira Enterprises, Inc. V. McCoy (2017)

8 Cal.App.5th 1057

• “…the hostility requirement means, not that the parties must have a dispute as to the title during the period of possession, but that the claimant's possession must be adverse to the record owner, unaccompanied by any recognition, express or inferable from the circumstances of the right in the latter....” (Id., at 1077.)

People ex rel. Harris v. Aguayo (2017)

11 Cal.App.5th 1150

• Action by Attorney General

• UCL used to remedy taking by adverse

possession scheme

• Noerr-Pennington doctrine no defense

Partition

Orien v. Lutz (2017)

16 Cal.App.5th 957

• Rules for “Common Benefit” Fee Award

Cummings v. Dessel (2017)

13 Cal.App.5th 589

• No mixing of Statutory Procedures for

Partition by Appraisal vs. by Public Sale

Condemnation

Mercury Casualty Company v. City of Pasadena

(2017)

14 Cal.App.5th 917

• Inverse Condemnation claim by Insurer of

house damaged by tree owned by City of

Pasadena.

• Issue: Tree planted as part of planned project?

Dryden Oaks, LLC v. San Diego County

Regional Airport, et al. (2017)

16 Cal.App.5th 383

• Inverse claim arising from airport land use

compatibility plan

Easements

Hinrichs v. Melton (2017)

11 Cal.App.5th 516

• Equitable Easement and landlocked properties.

Scher v. Burke (2017)

3 Cal.5th 136

• Implied dedication limits.

Nuisance/Trespass/Trees

Scholes v Lambirth Trucking Company

(2017)

10 Cal.App.5th 590

• Application of Civil Code section 3346 re

“wrongful injury to …trees….”

• Application of CCP section 338(b) re damage

to trees caused by fires negligently set.

Clary v City of Crescent City (2017)

11 Cal.App.5th 274

• “[Plaintiff] has relentlessly asserted that the conditions on his properties, including high growing blackberry bushes…abundant trash and illegally dumped material, are not a nuisance. But what in his eyes is simply ‘natural landscaping’ that provides habitat for birds and other wildlife and ‘a more attractive vista than a lot scraped clean of all trees and bushes’ is in the City's view a blight, a habitat for rats and vermin and an attractive nuisance…we conclude the City acted lawfully and therefore affirm.” (Id. at 278.)

Hensley v. San Diego Gas & Electric

Company (2017)

7Cal.App.5th 1337 • Emotional Distress damages

• “Kelly stands only for the proposition that legal occupancy is required to recover damages for annoyance and discomfort in a trespass case, and that standard requires immediate and personal possession, as a resident or commercial tenant would have…Kelly does not hold that an occupant must be personally or physically present at the time of the harmful invasion to deem emotional distress damages….” (Id. at 1354.)

Fulle v. Kanani (2017)

7 Cal.App.5th 1305

• Emotional Distress damages and application of

Civil Code sections 733 and 3346.

Land Use

Lynch v. California Coastal Commission

(2017)

3 Cal.5th 470

• Effect of Accepting benefits of a development

permit

Surfrider Foundation v. Martins Beach 1,

LLC (2017)

14 Cal.App.5th 238

• Close a gate to prevent public beach access,

implicate Coastal Act

Protect Telegraph Hill v. City and County of

San Francisco (2017)

16 Cal.App.5th 261

• CEQA Exemptions applied to Telegraph Hill

Three unit Condo Development

Real Property Securities;

Enforcement & Wrongful Foreclosure

Gillies v JP MorganChase Bank (2017)

7 Cal.App.5th 907

• Wrongful foreclosure

• Res Judicata Preclusion?

Rincon EV Realty LLC v CP III Rincon Towers,

Inc. (2017)

8 Cal.App.5th 1

• Jury waiver and choice of law clause.

OC Interior Services, LLC v Nationstar

Mortgage, LLC (2017)

7 Cal.App.5th 1318

• Effect of Void Judgment subsequent transfer.

Faulks v Wells Fargo & Company (2017)

231 F.Supp.3d 387

• Loan modification negotiations and Lender

Duty of Care to Borrower

Hardwick v Wilcox (2017)

11 Cal.App.5th 975

• General release in loan modification

agreement and usury claim

PGA West Residential Association, Inc. v

Hulven International, Inc. (2017)

14 Cal.App.5th 156

• Fraudulent Transfer

• Statute of repose

Black Sky Capital, LLC v. Cobb (2017)

12 Cal.App.5th 887

• Nonjudicial foreclosure of a senior lien

• Issue: judicial action by junior lienholder to

recover amount due on its note precluded?

Deutsche Bank National Trust Company v.

Pyle (2017)

13 Cal.App.5th 513

• “Bona Fide Purchaser” Rules where trustee’s

deed remained in chain of title and default

judgment purported to cancel the trustee’s

deed.

Landlord-Tenant

Ayala v. Dawson (2017)

13 Cal.App.5th 1319

• Unlawful detainer action and Collateral

estoppel effect on claim of right to equitable

title in related action

Geraghty v. Shalizi (2017)

8 Cal.App.5th 593

• Agreement to vacate not barred by non-waiver

provisions of rent control law

Epps v. Lindsey (2017)

10 Cal.App.5th Supp. 1

• Post foreclosure under CCP 1161b

• Right of a successor in interest to evict for

owner occupancy

Fernandes v. Singh (2017)

16 Cal.App.5th 932

• Issue: Plaintiff support award of punitive

damages

• Declaration of plaintiff’s counsel

• Defendants failed to respond to order to

produce financial information

Dr. Leevil, LLC v. Westlake Health Care Center

(2017)

9 Cal.App.5th 450

• Issue: Must an owner record title before

serving a 3-day notice to quit?

BRE DDR BR Whittwood CA LLC v. Farmers

& Merchants (2017)

14 Cal.App.5th 992

• Issue: Whether a new tenant after lease

foreclosure that did not expressly assume the lease was bound by its obligations after it vacated?

Real Property Taxes

926 North Ardmore Avenue, LLC v. County of Los

Angeles (2017)

3 Cal.5th 319

• Issue: Whether documentary transfer tax

applied to unrecorded written instrument that

transferred beneficial ownership for

consideration?

Claims By and Against Real Estate

Brokers & Agents

Jacobs v. Locatelli (2017)

8 Cal.App.5th 317

• Broker Commission Agreement

• Statute of Frauds

• Issue: Whether 1 signature by co-owner

sufficed?

Laymon v. J. Rockcliff, Inc. (2017)

12 Cal.App.5th 812

• Issue: REALTOR™ form of listing agreement

and purchase agreement require arbitration of

claims by sellers for disgorgement of

commission and failure to disclose alleged

kickbacks from service providers.

Questions?

THANK YOU!