Real Property

16
Aug

There’s an old saying – “You can’t fight city hall.”  In the case of a homeowners association, the saying should be, “You can’t afford to fight a homeowners association.”  Because the deck is stacked against the homeowner.

In the recent case of Rancho Mirage Country Club Homeowners Ass’n v. Thomas B. Hazelbaker (Aug. 8, 2016) ___ Cal.App.4th ___, the stakes for the homeowner were dramatically low.  “Defendants made improvements to an exterior patio, which plaintiff Rancho Mirage Country Club Homeowners Association contended were in violation of the applicable covenants, conditions and restrictions (CC&Rs).”

What was the original dispute? “The agreement called for defendants to make certain modifications to the patio, in accordance with a plan newly approved by the Association; specifically, to install three openings, each 36 inches wide and 18 inches high, in a side wall of the patio referred to as a ‘television partition’ in the agreement, and to use a specific color and fabric for the exterior side of drapery.”

It seems the defendants had a burr under their saddle regarding the modifications.  “Subsequently, the parties reached [a modified] agreement … instead of three 36-inch-wide openings, two openings of 21 inches, separated by a third opening 52 inches wide, were installed in the wall, and a different fabric than the one specified in the mediation agreement was used for the drapery.”

Oy vey.  Someone went to court over this issue?  “While the lawsuit was pending, defendants made modifications to the patio to the satisfaction of the Association.  Nevertheless, the parties could not reach agreement regarding attorney fees.”

In the end, the fight was over attorney’s fees.  Here’s a big hint – never go to trial if the only issue in dispute is attorney’s fees.  Figure out how to settle.

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According to the court, the Association prevailed in the litigation.  “The analysis of who is a prevailing party [ ] focuses on who prevailed on a practical level by achieving its main litigation objectives … The Association wanted defendants to make alterations to their property to bring it in compliance with the applicable CC&Rs, specifically, by installing openings in the side wall of the patio, and altering the drapery on the patio.  The Association achieved that goal.”

Another hint – The homeowner, as a practical matter, will never achieve a complete victory in litigation.  Any relief to the Association tips the attorney’s fees statute to the Association.

Held the court, “Once the trial court determined the Association to be the prevailing party in the action, it had no discretion to deny attorney fees.  The magnitude of what constitutes a reasonable award of attorney fees is, however, a matter committed to the discretion of the trial court.  As noted above, in reviewing for abuse of discretion, we examine whether the trial court exceeded the bounds of reason.”

And, to rub salt in the wound, “The Association correctly asserts that if it prevails in this appeal it is entitled to recover its appellate attorney fees …

“The judgment [for $18,991 in attorney fees, plus $572 in costs] is affirmed.  The Association is awarded its costs and attorney fees on appeal, the amount of which shall be determined by the trial court.”

Rancho Mirage Country Club Homeowners Ass’n v. Thomas B. Hazelbaker (Aug. 8, 2016) ___ Cal.App.4th ___

Category : Case law | Developments | Real Property | Blog
21
Jul

The recent decision in Janice H. v. 696 North Robertson, LLC (July 14, 2016) ___ Cal.App.4th ___ addressed the always difficult question of premises liability.  More specifically, When is the operator of real property liable for an injury to a guest in a unisex bathroom?  The court’s answer – a resounding, It depends.

The facts were somewhat lurid, or as we might say, Only in LA.  “On a Sunday in March 2009, Plaintiff drank with a friend at bars in Pasadena and then in West Hollywood.

“Plaintiff went to Here Lounge to wait for her friend. At the time, Here Lounge was a very popular West Hollywood dance club and bar … Here Lounge also fostered a sexually charged atmosphere by permitting bartenders to wear nothing but underwear.”

Comment – The Dept of Alcoholic Beverage Control later closed the club, which was described as a gay bar, based on “allegations of lewd conduct by go go dancers.”

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From the Here Lounge (now closed).

Explained the court, “Here Lounge designed the bar to have a common restroom area accessible to both men and women.  On busy nights, a long line of patrons waited to use the restrooms …

“Plaintiff went into an ADA restroom stall and shut the door.  As was common among patrons of Here Lounge, Plaintiff did not lock the door.”

Comment – How in the world was this fact proven – That it was “common” for patrons at the club to leave the door to the bathroom stall unlocked?

While in the bathroom stall, plaintiff was assaulted by a “man [ ] later identified as Victor Cruz, a bus boy at Here Lounge … The assault, which caused Plaintiff to lose her virginity, lasted about five minutes and ended with Victor ejaculating on Plaintiff’s dress.”

The jury found in favor of plaintiff, and awarded $5.42 million in damages.  The verdict was affirmed on appeal, because, frankly, jury verdicts are always affirmed on appeal.

Here’s how the court handled the issue of premises liability.  “The issue is whether Here Lounge owed a duty to use reasonable care in securing the restrooms for its patrons … A possessor of land owes a duty to an invitee to make the property reasonably safe for the intended use by the intended user.  Thus, the property holder only has a duty to protect against types of crimes of which he has notice and which are likely to recur if the common areas are not secure.”

The club owner argued that it was not liable because there had been no prior assaults.  This argument was unavailing.  “Here Lounge argues it has no duty unless and until it experiences a similar criminal incident.  We disagree.  While a property holder generally has a duty to protect against types of crimes of which he is on notice, the absence of previous occurrences does not end the duty inquiry.  We look to all of the factual circumstances to assess foreseeability.”

Comment – Great.  It’s always a “facts and circumstances” question.

“In this case, Here Lounge promoted a sexually charged atmosphere and designed an open restroom area allowing unrestricted entry for men and women.  It designed the larger ADA stalls with full length walls shielding the occupants from view.

“Here Lounge knew that sexual activity in the restrooms and elsewhere in the club was an ongoing issue … There was testimony that sexual activity in the club increased towards the end of the night and tended to occur in the ADA bathroom stalls, like the stall where Plaintiff was raped, because the full length doors shielded the occupants from view.  The owner also admitted that an employee once observed a woman performing oral sex on a man at the club and ignored it …

“This evidence [ ] made the risk of harm to intoxicated and vulnerable patrons reasonably foreseeable, regardless whether the club was on notice of a prior similar incident.  Knowing the potential serious harm of non-consensual sex, a reasonable person managing the property would have posted a guard in the restroom area whenever the club was open to the public, even when attendance tapered off.

“The burden for monitoring the restroom area during business hours was small, requiring only a change in policy to eliminate the guards’ individual discretion to leave the restroom area and roam the premises when patronage dwindled.”

Result – Judgment for plaintiff affirmed.

Janice H. v. 696 North Robertson, LLC (July 14, 2016) ___ Cal.App.4th ___

Category : Case law | Developments | Real Property | Blog
29
Jun

The remedy of unlawful detainer is available in three situations under California law, most commonly when a tenant holds over after termination of the lease, or when the tenant continues to occupy the property after breach of the lease.

Less commonly, unlawful detainer is available to an owner “against an employee, agent, or licensee whose relationship is terminated,” and in the third situation, to a purchaser at a foreclosure sale against the former owner and other occupants.

In Taylor v. NU Digital Marketing, Inc. (2016) 245 Cal.App.4th 283, the parties entered into a hybrid contract.  Although styled a contract for sale, the court held that the contract actually was a lease, seemingly tied to an option to purchase, such that the remedy of unlawful detainer was available to the owner.

Note to potential purchasers: An unrecorded “contract of sale” that does not include a deed from the owner to the purchaser is an invitation for trouble.  The court will want to fit the contract into one of its traditional modes of analysis.  As the following decision shows, the court might view the document as a lease, with potentially disastrous consequences to the purchaser.  Be careful when you try to be creative in making a grant of real property.

Now to the facts.  In August 2012, the parties entered into an agreement entitled “Contract of Sale Residential Property.”  The contract provided that “plaintiffs (designated ‘Seller’ in the agreement) agreed to sell a piece of property to defendant (designated ‘Buyer’ therein) for $1.25 million subject to the following terms and conditions:

“Paragraph 1 required defendant to ‘consummate’ the purchase ‘within 60 months of the execution date of the agreement’ by making ‘payment’ of the purchase price, i.e.,  $1.25 million through [escrow].”

Comment: That sounds like an option, exercisable in 60 months.  An option to purchase is not the same a contract for sale.  The option must be exercised by act of the grantee, while the contract for sale is enforceable per se.

“Paragraph 2 purported to divide the purchase price into five components: (1) a grant of equity in defendant corporation (referred to as the ‘Equity Grant’); (2) payment of all property taxes and insurance costs from the move-in date; (3) payment of all homeowners association fees and any related penalties or special assessments; (4) the ‘Down Payment’; and (5) ‘Probationary Installment’ payments of $2,300 per month for 60 months (also referred to as ‘Probationary Payments’).”

The dispute arose when “the probationary installment payments increased to $4,216.48 in accordance with the provision allowing for an upward adjustment of such payments to match plaintiff’s adjustable rate mortgage payment.”

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Now the conflict comes into sharper focus.  If you “rented” a property, with a fixed purchase price, and paid 100% of the owner’s mortgage payments plus property taxes plus homeowners association fees, then you might believe you had purchased the property.  But this court did not agree – “In addition to awarding possession to plaintiffs, the court awarded damages in the amount of $31,683.68 and declared the agreement forfeited.”

The court started by explaining that “Unlawful detainer actions are authorized and governed by state statute.  The statutory scheme is intended and designed to provide an expeditious remedy for the recovery of possession of real property … Unlike the foregoing situations, a vendee in possession of land under a contract of sale who has defaulted in the payment of an installment of the purchase price, is not subject to removal by the summary method of unlawful detainer.”

Held the court, “The relationship created by the agreement must be characterized by reference to the rights and obligations of the parties and not by labels … While defendant also agreed to purchase the property within the lease term, possession of the property was conditioned upon payment of the probationary installments, which entitled defendant only to continued possession, and were therefore rent.”

“Probationary payments” in a real estate contract?  I never heard of such a thing, and neither had the court.  Taylor v. NU Digital Marketing, Inc. (2016) 245 Cal.App.4th 283

Category : Case law | Developments | Real Property | Blog
12
May

The decision in Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935 reminds us that all opinion testimony must be supported by reasonable foundation.  The underlying complaint was based on an allegation “the bank breached an agreement to postpone the trustee sale and, by reason of that breach, plaintiffs lost their equity in the property.”

The court “explained that a gratuitous oral promise to postpone a sale of property pursuant to the terms of a trust deed ordinarily would be unenforceable under [Civil Code] section 1698.  This is because the oral promise had not been executed by the parties, as required by section 1698.”

The homeowners did not prevail because they “produced no evidence showing that they refrained from bringing their loan current in reliance on the June 18 sale date because they had no ability to do so … Plaintiffs did nothing to substantially change their position before their home was sold, and they intended to do nothing other than to seek another postponement.”

More significantly, “Wachovia is entitled to summary judgment for the additional reason that plaintiffs failed to present sufficient evidence of injury.”  The court’s analysis is as follows.

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“[Plaintiff] claimed that the $555,000 sale price was substantially below the current market value of the home due to demolition conducted by the seller.  The trial court sustained Wachovia’s objection to that opinion testimony for lack of foundation …

“An owner’s right to testify regarding the value of real property under [Evidence Code] section 813 is not absolute … A property owner is bound by the same rules of admissibility as any other witness regarding the value of real property.  (Evid. Code, § 814 [requiring a foundation for real property value opinion based on information ‘of a type that reasonably may be relied upon by an expert in forming an opinion as to the value of property.’]”

Lacking proper foundation – in other words, a factual basis for his opinion of value – the owner was barred from stating his opinion regarding the value of his property.  “A foundation must be laid indicating the other property sold was sufficiently similar to the property in litigation to indicate the price realized for the other land may fairly be considered as shedding light on the value of the land in question.  It must also appear that the other sale was genuine and sufficiently voluntary to be a reasonable index of value and that the price was actually paid or substantially secured.”

Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935

Category : Case law | Real Property | Blog
30
Apr

Let me be up front – this author does not particularly care for homeowners’ associations.  In my opinion, they have too much power, which is often wielded with a heavy hand.

Now comes the decision in Almanor Lakeside Villas Owners Ass’n v. Carson (April 19, 2016) __ Cal.Rptr.3d __, which only reinforces this view.  Here is a synopsis of the facts:

The homeowners’ association sought to impose fines under CC&Rs against defendants.  “Almanor sought to impose fines and related fees [ ] for alleged rule violations related to the Carsons’ leasing of their properties as short-term vacation rentals.”

Defendants paid some of the fines, but disputed others.  More specifically, “The Carsons disputed both the fines and Almanor’s authority to enforce those rules, which the Carsons viewed as unlawful and unfair use restrictions on their commercially zoned properties.”

At trial, the homeowners’ association sought $54,000 in damages.  Defendants disputed this amount.  “The trial court determined that it would be unreasonable to strictly enforce the absolute use restrictions against the Carsons …

“Of the fines imposed in 2010, 2011, and 2012, the court concluded only the fines pertaining to the non-use of Almanor’s boat decals were reasonable.  Those fines amounted to $6,620, including late charges and interest.”

That’s right – the trial court awarded $6,620 solely for “non-use” of the Association’s “boat decals.”

Then, to pile on, the trial court awarded $98,535 in attorneys fees and $3,267 in costs, for a total award of attorneys fees and costs in the amount of $101,803.

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On appeal, the court held that such determination was “reasonable.”  The court of appeal held that the homeowners’ association was the “prevailing party” within the meaning of the Davis-Sterling Act, and expressly held that the award of attorneys fees were “reasonable” within the meaning of Civil Code section 5975.

If you are practicing attorney, this case makes it difficult to advise a homeowner ever to contest any charge by the homeowners’ association, the matter what the merits.

In Almanor Lakeside Villas Owners Ass’n v. Carson, the homeowners’ association sought $54,000 at trial, and was awarded $6,600.  The appellate court established the following principle – if any amount is awarded to the homeowners’ association, then the association is the “prevailing party” and is entitled to recover its attorney’s fees “as a matter of right.”

To this end, the court of appeal ruled that, “after resolving the threshold issue of the prevailing party, the trial court had no discretion to deny attorneys fees.”

Almanor Lakeside Villas Owners Ass’n v. Carson represents a growing dichotomy in California.  This state is home to some fabulously wealthy people, in a few geographic areas.  Here we see the court applying a distorted economic viewpoint (Who on earth thought it was worth spending more than $100,000 in attorneys fees to seek $50,000 in court?) to achieve a shocking result.  “Reasonableness,” like beauty, is in the eye of the beholder.

Almanor Lakeside Villas Owners Ass’n v. Carson (April 19, 2016) __ Cal.Rptr.3d ___

Category : Case law | Real Property | Blog
25
Apr

Civil Code section 3346 authorizes an award of treble damages for “wrongful injuries to timber, trees, or underwood upon the land of another, or removal thereof.”  The defendant in the recent case of Salazar v. Matejcek (Mar. 10, 2016) 245 Cal.App.4th 63 learned that this statute can support very substantial damages.

The dispute concerned “a 10-acre piece of rural property near Covelo, California. The property was completely undeveloped except for a small cabin.”  The defendant was not able to obtain an adequate source of water.  According to the court, he “destroy[ed] an estimated 225 trees to build the road and clear the surrounding area to house his water storage devices.”

Argued the defendant “the trial court failed to consider that the area to be restored was approximately two-thirds of one acre out of the 10-acre parcel.”

Stated the court, “Under the circumstances of this case, we find a holistic approach to be reasonable.  Plaintiffs had never sought to develop any portion of their parcel.”

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And what of the damages?  “At trial, Mr. Salazar testified he is saddened by the damage done to his property and he remains nervous about visiting it … Mr. Salazar testified that if he did receive an award of damages, he would use the money to restore the trees defendant had removed.”

Comment – Time will tell.  I’ll bet the money goes right into plaintiff’s pocket.

“Mrs. Salazar testified that the dispute with defendant has affected her physically and mentally.  She has felt powerless and belittled. She has anxiety and her sleep has been affected.  She does not enjoy going to the property anymore and feels as though the land was violated.”

How to calculate damages?  “Such damages are generally determined as the difference between the value of the property before and after the injury.  But diminution in market value is not an absolute limitation; several other theories are available to fix appropriate compensation for the plaintiff’s loss …

“One such alternative measure of damages is the cost of restoring the property to its condition prior to the injury, and a plaintiff may recover these costs even if they exceed diminution in value if there is a ‘personal reason’ for restoration.”

“At trial an arborist named John Phillips testified for plaintiffs.  He prepared a tree replacement plan designed to remedy the effects of defendant’s encroachment.  He estimated that 225 trees will need to be planted to restore the property … Phillips estimated the total tree remediation cost would be $67,500.

“The court accordingly trebled the $67,500 award of compensatory damages for tree removal pursuant to Civil Code section 3346 and Code of Civil Procedure section 733, resulting in an award of $202,500 … The total judgment awarded, including costs, is $262,987.”

Ouch.  The damages to this parcel of undeveloped property, out in the middle of nowhere, greatly exceed the total value of the property.  Seems like a windfall to me.

One more point of pleading.  A generic defense interposing the statute of limitations does not set forth a valid defense.  Explained the court, “defendant filed a general denial that includes a broadly worded affirmative defense asserting all of plaintiffs’ claims ‘are barred by all applicable statutes of limitation contained in Code of Civil Procedure sections 312 to 366.3.’”

Explained the court, defendant “failed to articulate any specific statute of limitations argument in his denial or in his pretrial statement … There are two ways to properly plead a statute of limitations: (1) allege facts showing that the action is barred, and indicating that the lateness of the action is being urged as a defense and (2) plead the specific section and subdivision.”

“Here [the defendant] did neither … Raising the defense in the trial brief is [in]sufficient.  The failure to properly plead the statute of limitations waives the defense.”

Comment: Sounds like piling on.

Salazar v. Matejcek (Mar. 10, 2016) 245 Cal.App.4th 63

Category : Case law | Real Property | Blog
11
Apr

California law now prohibits the practice of “dual tracking,” whereby a lender simultaneously pursues a default while also engaging in loan modification negotiations with the borrower.  The question concerns the remedy available when there is a violation of the dual tracking law.

The court in Kazem Majd v. Bank of America, N.A. (Jan. 14, 2016) 243 Cal.App.4th 1293 held that a lender’s violation of the loan modification requirements established by the federal government in the HAMP program, and/or violation of the dual tracking prohibition, could give rise to a claim for wrongful foreclosure against the lender.

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The court also made important findings about the HAMP program.  Rejecting “a statement found in an unpublished federal district court decision, which decision in turn repeated a statement found in other unpublished district court decisions,” the court explained that, under “the relevant United States Department of the Treasury guidelines[,] where a borrower satisfies the relevant criteria, ‘the servicer MUST offer the modification.’”

Even more, the court held that the “tender requirement” does not apply when a plaintiff states a claim for wrongful foreclosure based on violation of the dual tracking statute.

Explained the court, “the whole point of Civil Code section 2923.5 is to create a new, even if limited, right to be contacted about the possibility of alternatives to full payment of arrearages … The purpose of the modification rules is to avoid a foreclosure despite the borrower being incapable of complying with the terms of the original loan.  It would be contradictory to require the borrower to tender the amount due on the original loan in such circumstances.”

But can such violation also support a claim to set aside the foreclosure sale?  Only in limited circumstances.  The case holds that the additional remedy of setting aside the foreclosure sale would only lie against the purchaser if the purchaser was not a “bona fide purchaser for value.”

In Majd v. Bank of America, the purchaser of the foreclosure sale was the secured lender.  But when the purchaser is a third-party, who had no reason to know that the lender had engaged in wrongful dual tracking, the remedy of setting aside the foreclosure sale would not be available.

Overall, Majd v. Bank of America offers important protections to homeowners whose rights have been violated by the lender’s unlawful “dual tracking.”

Category : Case law | Developments | Real Property | Blog
30
Mar

A 2013 decision from the Fifth District Court of Appeal (based in Fresno) has bedeviled the lending community.  In Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, the court held that the borrower could state a “cognizable claim for wrongful foreclosure under the theory that the entity invoking the power of sale (i.e.,  Bank of America in its capacity as trustee for the WaMu Securitized Trust) was not the holder of the [ ] deed of trust.”

This drives lenders bonkers because the lending community wants to cut off challenges to post-funding assignments of the loan.  The new decision in Saterbak v. JPMorgan Chase Bank, NA (Mar. 16, 2016) __ Cal.App.4th ___ casts aspersions on the Glaski decision.

Before reviewing the new case, let’s start with the 2013 case.  The plaintiff in Glaski argued that his loan was untimely transferred to the WaMu Securitized Trust, specifically that the “note and loan were not transferred to the WaMu Securitized Trust prior to its closing date … the transfer to the trust attempted by the assignment of deed of trust recorded on June 15, 2009, occurred long after the trust was closed; and the attempted assignment was ineffective.”  218 Cal.App.4th 1079, 1094.

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Glaski held that “a borrower can challenge an assignment of his or her note and deed of trust if the defect asserted would void the assignment.”  218 Cal.App.4th 1079, 1095.  Glaski found that “a legal basis for concluding that the trustee’s attempt to accept a loan after the closing date would be void as an act in contravention of the trust document.”

Glaski further held that, in its review of New York law (the WaMu Securitized Trust was controlled by New York law), the complaint sufficiently alleged a claim for wrongful foreclosure, based on allegations that the assignment occurred after the closing date for the trust.

Now to the new case.  In  Saterbak v. JPMorgan Chase Bank, NA (Mar. 16, 2016), the plaintiff sought pre-foreclosure relief from the court.  Contrast this to Glaski, which involved claims for post-foreclosure relief.  Specifically, “Saterbak filed suit in January 2014.  She alleged the [deed of trust] was transferred to the 2007-AR7 trust four years after the closing date for the security, rendering the assignment invalid … She also sought declaratory relief that the same defects rendered the assignment void.”

The Fourth District Court of Appeal (based in San Diego) held that such claims were not cognizable, holding “Saterbak lacks standing to pursue these theories.  The crux of Saterbak’s argument is that she may bring a preemptive action to determine whether the 2007-AR7 trust may initiate a nonjudicial foreclosure.  She argues, ‘If the alleged ‘Lender’ is not the true ‘Lender,’ it ‘has no right to order a foreclosure sale.’

“However, California courts do not allow such preemptive suits because they would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.”

Now to the conflict with GlaskiSaterbak held that, on the issue of “whether, under New York law, an untimely assignment to a securitized trust made after the trust’s closing date is void or merely voidable … We conclude such an assignment is merely voidable.”

Saterbak added in a footnote, “the New York case upon which Glaski relied has been overturned … We decline to follow Glaski and conclude the alleged defects here merely render the assignment voidable.”

This author believes that Glaski was correctly reasoned.  But now we have a conflict in the case law.  For cases in the Central Valley, courts will have to wrestle with how to apply Glaski.

Category : Case law | Real Property | Blog
18
Feb

The recent decision in Orcilla v. Big Sur, Inc. (Feb. 11, 2016) __ Cal. App.4th __ continues the litigation fallout from the second depression (referred to in other parts of the country as the Great Recession).  In Orcilla v. Big Sur, the lender completed a nonjudicial foreclosure on the plaintiff’s residence.  The borrower sued to set aside the sale.  As discussed below, the court of appeal allowed the case to go forward based on a novel theory – unconscionability.

According to the court, “The Orcillas’ first claim is a cause of action to set aside the trustee’s sale.  The elements of an equitable cause of action to set aside a foreclosure sale are: (1) the trustee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a deed of trust; (2) the party attacking the sale was prejudiced or harmed; and (3) in cases where the trustor challenges the sale, the trustor tendered the amount of the secured indebtedness or was excused from tendering.”

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Here are the basic facts regarding the loan.  “On May 9, 2006, Teodora obtained a $525,000 real property loan from Quick Loan.  She alone executed an adjustable rate note …  The Note further provided that Teodora’s initial monthly payments would be in the amount of $4,220.49. (In 2005 and 2006, Teodora’s monthly income was less than $3,000 and Virgilio [her husband] did not work.)”

The court framed plaintiff’s argument as follows: “The Orcillas allege the loan from Quick Loan was unconscionable because the loan payments exceeded their income; they have limited education and English proficiency; they did not understand the details of the transaction; and the loan documents were on standard, pre-printed forms in English.

“They allege the 2008 loan modification agreement also was unconscionable because the loan payments exceeded their income; they have limited education and English proficiency; and the loan documents were on standard, pre-printed forms in English.”

In a critical finding, the court stated “The Orcillas maintain that the disparity between the monthly loan payments and their income indicates that the loan and loan modification were overly harsh and one-sided.  We agree that the allegation that the monthly loan payments exceeded the couple’s income by more than $1,000 is sufficient to allege substantive unconscionability.”

Having started on the bridge to unconscionability, the court further held that plaintiffs were not required to plead tender of the past due amount to the lender.  “The Orcillas … allege the debt is invalid because the original loan and loan modification were unconscionable.  As discussed above, the allegations in the second amended complaint are sufficient to allege those agreements were unconscionable and thus unenforceable.”  Based thereon, court allowed the lawsuit to proceed.

This seems to be a peculiar decision.  Case law has long held that there is no fiduciary relationship between the lender and the borrower.  Rather, the relationship is considered to be an arms-length transaction.

By allowing a claim of unconscionability to creep in, the court suggests that the underlying loan and/or the modification could be demonstrated to be unconscionable.

The court cannot be suggesting that the borrowers do not owe the lender for their loan.  How does the court intend to rewrite the loan to render it “conscionable”?  The decision does not say, which provides little guidance to the trial judge.

Orcilla v. Big Sur, Inc. (Feb. 11, 2016) __ Cal. App.4th __

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20
Jan

The law of evictions – titled as “unlawful detainer” in California – is a technical area. The law has statutory roots as far back as the Forcible Entry Act of 1381, which prohibited the use of self-help to retake possession of real property.

That remains an important concept in an action based on the unlawful detainer statutes.  The principal objective in an action for unlawful detainer is a judicial determination whether the plaintiff or defendant is entitled, at that time, to possession of the property.  Unlawful detainer does not focus on ownership, and case law holds that the issue of plaintiff’s title to the property cannot be litigated in an unlawful detainer proceeding.

So, the objective is up to obtain a judgment for unlawful detainer, coupled with issuance of a writ of possession.  By law, the writ of possession is delivered to the sheriff, who has the responsibility to serve and enforce the writ of possession, ultimately using the sheriff’s office to restore possession to the plaintiff.

Remember – no self-help.  The court issues a judgment for possession, together with a writ of possession.  The sheriff enforces the writ of possession and restores possession to the plaintiff.

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Now mix in issues arising under bankruptcy law.  In In re Perl, __ F.3d __ (Jan. 8, 2016), the plaintiff in an unlawful detainer action obtained judgment and the court issued a writ of possession.  The writ was delivered to the sheriff.  Then, before the sheriff effected service, the tenant filed for bankruptcy.  Does the Sheriff’s actions in enforcing the writ of possession violate the automatic stay created under bankruptcy law?

“The question in this case is whether Perl had any remaining legal or equitable possessory interest in the property after … the state court fully adjudicated in the unlawful detainer proceedings.”  According to the 9th Circuit, the answer is No.

More specifically, “We conclude that under California law, entry of judgment and a writ of possession following unlawful detainer proceedings extinguishes all other legal and equitable possessory interests in the real property at issue.”

In so doing, the court overruled the decisions in In re Di Giorgio, 200 B.R. 664 (Bankr. C.D. Cal. 1996) and In re Butler, 271 B.R. 867 (Bankr. C.D. Cal. 2002).

It gets more interesting when the court reviewed the statutory scheme.  The court found that “Pursuant to Code of Civil Procedure § 415.46, no occupant of the premises retains any possessory interest of any kind following service of the writ of possession.”

Comment – Look up CCP § 415.46 for yourself.  It deals with the prejudgment claim to possession that can be asserted by third parties in possession of the property.  The court’s analysis is not supported by statute.

Thus, the court concluded that “The unlawful detainer judgment and writ of possession entered pursuant to California Code Civil Procedure § 415.46 bestowed legal title and all rights of possession upon Eden Place.  Thus, at the time of the filing of the bankruptcy petition, Perl had been completely divested of all legal and equitable possessory rights that would otherwise be protected by the automatic stay.  Consequently, the Sheriff’s lockout did not violate the automatic stay because no legal or equitable interests in the property remained to become part of the bankruptcy estate.”

Comment – I can’t agree.  Possession could be restored only by the sheriff acting pursuant to the writ of possession issued by the court.  As possession was restored by enforcement of a court order, I believe the act of restoring possession necessarily impacted the bankruptcy stay.

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