In March, 2009, Sally DaVincenzo (“Sally”) and John DeVincenzo (“John”) were borrowers on a promissory note (“Note”) secured against a property in Wasco, California (“Wasco Property”) and a property in Shafter, California (“Shafter Property”).  The Wasco Property was community property while the Shafter Property was the sole and separate property of Sally.  At some point in time, Sally sold the Shafter Property with First California’s (the beneficiary of the Note) permission.  First California’s approval was based on its understanding that it would receive the net proceeds from the sale and the borrowers would remain liable on the Note.

Later that year, John passed away and the Note went into default.  Eventually, First California moved for a judicial foreclosure on the Note.  In that lawsuit, the trial court ruled in favor of First California by requiring the sale of the Wasco Property and finding that Sally and John were responsible for any deficiency.  John’s estate appealed the decision on the theory that a deficiency judgment was barred.

THE DECISION:

The Fifth Appellate District overturned the trial court’s judgment and remanded the case back to the trial court.  In First California Bank v. Mary McDonald, the appellate court reaffirmed earlier case law finding that a lender must get consent from all borrowers for any private sale or it will lose its claim for a deficiency.  The Appellate Court notes that California has a strong policy in favor of lenders pursuing any claims against the security and against a deficiency.  Accordingly, any requirements under the statute are strictly construed.  Here, Section 726 essentially requires that a lender must judicially foreclose on all of the secured property before it can get a personal judgment against a borrower.  The exception to this is if all borrowers waive the protections under Section 726 or consent to the lender’s action.  Here, First California only got the consent of Sally and did not get the consent of John.

WHY THIS DECISION IS IMPORTANT:

The Court reaffirmed the holding in a previous case, Pacific Valley Bank v. Schwenke.  On appeal, the lender explicitly contended that Schwenke was bad law and should have been overturned.  However, the Court went out of its way to reaffirm Schwenke’s holding – that a lender must get the consent of all borrowers even if one of the borrowers was not a party to the deed of trust.  Even though John had no interest in the Shafter Property, the fact that the Shafter Property was additional collateral was sufficient to protect John from a deficiency judgment.

COMMENT:

It is interesting to note that the Court found against the lender in this case even though it appeared that the lender’s actions most likely benefited John.  Presumably, the private sale of the property netted more funds than any foreclosure sale would have and would have reduced the amount owed on the loan.  In its decision, the Court did not address this issue and instead strictly interpreted the statute.

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California has had a spite fence law since 1885, and until very recently, the courts did not consider whether trees could be a “fence”.

841.4.  Any fence or other structure in the nature of a fence unnecessarily exceeding 10 feet in height maliciously erected or maintained for the purpose of annoying the owner or occupant of adjoining property is a private nuisance. Any owner or occupant of adjoining property injured either in his comfort or the enjoyment of his estate by such nuisance may enforce the remedies against its continuance prescribed in Title 3, Part 3, Division 4 of this code.

In a case of first impression, Wilson v. Handley involved neighbors in Yreka County.  Wilson was concerned that the row of evergreen trees the Handley’s planted would block the property’s view of Mount Shasta.  The Court found that yes, the row of trees could be considered a fence.  [Wilson v. Handley 119 Cal. Rptr. 2d 263. (2002).]The decision went no further, and so whether or not Ms. Handley’s testimony about needing more privacy would be found credible or whether the element of maliciousness required by the statute was satisfied went unanswered in the appellate decision.

California’s spite fence statute has a number of elements in it.  The fence has to be “unnecessarily” taller than 10 feet.  It’s unclear what would meet that standard.  Trees are inherently problematic because without trimming, they can obviously grow beyond 10 feet tall.

Also, the fence has to be “maliciously erected” or with “the purpose of annoying the owner”.  However, what facts would rise to the level of this type of willful intent?

Some years after the Wilson decision, California saw its second spite fence case involving trees.  In Vanderpol v. Starr, the neighbors had a tree trimming arrangement that worked for many years.  Vanderpol was to use a licensed and bonded service and Starr consented to the trimming of the eucalyptus trees to a height Ms. Starr dictated.   At some point in 2004, Starr refused to allow Vanderpol to trim the offending trees (on Starr property) and Starr planted 20 pine trees and 65 Italian cypresses, ostensibly for privacy reasons.  At trial, Vanderpol prevailed and on appeal, the court spent more of the analysis on whether Vanderpol suffered injury “either in his comfort or the enjoyment of his estate” as required by the spite fence statute.  Instead, the trial court had found he suffered economic injury to the tune of $57k, but had made no finding on his loss of comfort or enjoyment, which on appeal, was identified as a separate and necessary element in order to prevail under the spite fence statute.   [Vanderpol v. Starr, 194 Cal. App. 4th 385 (2011).] For further details on this case, see also http://bayarearealestatelawyers.com/neighbor-issues/do-trees-qualify-as-a-fence-under-the-california-spite-fence-statute

Once again, the court did NOT address the malicious requirement at all, because the issue in that case was about whether there was injury.  However, one could infer that the subsequent planting of 85 trees could rise to the level of either maliciousness or the intent to annoy the neighbor.

 

CONCLUSION:   As a practical matter, it is always difficult to prove intent or ill will and would be heavily fact based.  Only discovery would reveal if a neighbor’s conduct was malicious or based on the intent to annoy a neighbor.   Certainly, most parties are likely to cite increased privacy as their reason for wanting to have taller rows of trees.  In some cases, municipal ordinances may govern the height of fences, and so the conduct of the planter may also be subject to scrutiny from the city or county.


 

If you are involved in a dispute over a boundary line or you believe the neighbor’s “privacy screening” has gone too far, please contact the Law Offices of Peter N. Brewer at 650.327.2900 or on the web at www.brewerfirm.com.

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The Law Offices of Peter N. Brewer put together an “Investment Property Blog Series.” We hope you find the information in this series to be informative as it covers important infomation surrounding investment properties. If you find yourself needing real estate legal counsel, don’t hesitate to contact our office at (650) 327- 2900 x 10 or on the web at www.BrewerFirm.com. Our team of knowledgeable and seasoned attorneys have extensive experience in litigation, representing their clients in various real estate matters in California.

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Henry Chuang, Esq.
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Court Limits Class Action Suits Against Landlords HC

In a recent Second Appellate District ruling, the court made it more difficult for tenants to sue landlords in class action lawsuits.  In. Hendleman v. Los Altos Apartments, the appellate court upheld a lower court’s decision to deny certification of a class by …


Julia M. Wei, Esq.
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Co-ownership of Real Property – Fighting the Partition Action Can Cost You.

There is a fundamental premise in California law that a co-owner of real property has the right to sever the co-ownership at any time by forcing a sale of the property through partition.  The only exception is if the co-owners have expressly waived the right to partition in a contract, such as…


Simon Offord, Esq.
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New ADA Requirements for Commercial Properties

As of July 1, 2013, a new lease disclosure requirement added one more responsibility for owners and lessors of commercial property. Civil Code Section 1938, part of the legislation designed to limit unwarranted…

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Monira Ulkarim, a tenant in a shopping mall, had a year-long lease with her landlord, Westfield.  In the middle of the tenancy, the landlord served Ulkarim with a notice of termination of the lease.  Ulkarim alleged that the termination was improper and was only done because Westfield had obtained another tenant who was the same market as Ulkarim.  A week after receiving the notice to terminate, Ulkarim filed suit against Westfield and the new tenant for the improper termination of the lease.  A week later, Westfield filed suit to evict Ulkarim.  Two months later, in the unlawful detainer action, a court awarded possession of the property to Westfield.

In response to the suit, Westfield filed a special motion to strike, also known as an Anti-SLAPP (Strategic Lawsuit Against Public Participation) motion.  The SLAPP laws are designed to protect freedom of speech to prevent lawsuits when individuals take certain actions.  In general, one of the protected categories is the filing of a lawsuit.  Prior to this case, courts had held that both the filing of the lawsuit and the giving of notice of termination before filing for an eviction were activities protected by the SLAPP statutes.  Given the precedent, the trial court granted Westfield’s motion stating that the SLAPP statutes were likely a complete defense against Ulkarim’s suit.

THE DECISION:

The California Court of Appeals, Second District, overturned the trial court’s decision and denied the special motion to strike.  In. Ulkarim v. Westfield LLC, the appellate court held that while the act of servicing a notice to terminate and filing a lawsuit are protected activities, it distinguished a suit based on the protected action versus a suit based on the motives behind a protected action.  Here, the Court found that Ulkarim’s suit wasn’t about the service of the notice, but the bad faith reasons behind deciding to terminate the tenancy.

WHY THIS DECISION IS IMPORTANT:

This Court expressly stated that it was choosing not to follow two prior cases where courts had held that a special motion to strike was proper where there had been a notice to terminate issued.  This Court questioned the ruling in both previous cases because both of the cases alleged violations arising from conduct beyond just the service of the notice and the filing of the unlawful detainer suit.  Instead, this Court chose to follow a different line of cases that agreed that while a protected action may have been taken, the underlying decision could still be subject to a suit.

COMMENT:

This case highlights a split in decisions between various appellate courts that will need to be addressed by the California Supreme Court.  The appellate courts have come to decisions that directly contradict each other and only the California Supreme Court can resolve this dispute.  It will be interesting to see what the Supreme Court will decide.

As always, give us a call at (650) 327-2900 if you think you have a real estate matter and need legal representation or visit us on the web at www.BrewerFirm.com.

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The recent case of Hoffman v 162 North Wolfe LLC confirmed the statutory requirement that in order to prevail on a fraud claim for suppression of a material fact, the defendant must have a legal duty to disclose the fact to Plaintiff.

The Hoffmans (“Buyer”) purchased a commercial property in Sunnyvale, California.  Prior to their purchase, Buyer complained to one of the owners of the neighboring property (“Neighbor”) that vehicles servicing Neighbor’s property were using Buyer’s property. Neighbor allegedly claimed he would “take care of it.”

After escrow closed, Buyer notice that Neighbor’s vendors and employees were still using Buyer’s property to access Neighbor’s property.  Neighbor thereafter sent a letter to Buyer, claiming Neighbor held a prescriptive easement over Buyer’s property.  The parties thereafter sued one another, with Buyer suing for fraud for failure to disclose and Neighbor suing for a prescriptive easement.  Neighbor thereafter filed a motion for summary judgment, alleging that it had no duty to disclose the existence of the prescriptive easement to Buyer.  The trial court granted the motion.

THE DECISION

The appellate court affirmed the trial court’s decision.  The appellate court noted that failure to disclose constitutes fraud in only four circumstances: “(1) when the defendant is in a fiduciary relationship with the plaintiff, (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff, (3) when the defendant actively conceals a material fact from the plaintiff and (4) when the defendant makes a partial representation, but also suppresses some material facts.”

The court found there could not be any liability for nondisclosure unless there was “some sort of transaction” or “relationship” between Buyer and Neighbor. Buyer made the creative argument that there was a relationship by virtue of their “mutual interest” in the properties.  The court of appeal was not convinced.

The appellate court also affirmed that Buyer failed to establish justifiable reliance.  The court reasoned that since Neighbor continued to use the Buyer’s property for 8 months prior to Buyer closing escrow, despite the allegation that Neighbor would “take care” of the issue, there was no reliance.

WHY THIS DECISION IS IMPORTANT

This decision confirms the long-standing principle that in order to prevail in a failure to disclose lawsuit, the buyer must have either a contractual or fiduciary relationship with the defendant.  Here, since Neighbor was not a party to the transaction, Neighbor could not be found liable for failing to disclose the potential easement to Buyer.  Therefore, before filing suit for failure to disclose, one must first establish whether there was a duty to disclose in the first place.

COMMENT

It would be interesting to find out what, if anything, the seller disclosed to Buyer about this dispute.  It is not surprising that the Court found no duty as to Neighbor, but one must wonder if the seller was aware of these issues.  The case makes no mention of what the seller did or did not disclose.

That being said, one would imagine that Buyer would have had an uphill battle against the seller as well, as Buyer was clearly on notice of the issue but decided to close escrow anyway.

The Law Offices of Peter N. Brewer litigate failure to disclose cases regularly, and are here to help.  If you have any questions about this issue, or any real estate legal issues, please contact us at (650) 327-2900, or on the web at www.brewerfirm.com.

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Realtor Liability Blog Series


Camille Rogers

by Camille Rogers on September 25, 2014

in Litigation, Real Estate Law

Law Offices of Peter N. Brewer put together a “Realtor Liability Blog Series.” We hope you find the information in this series to be informative as it covers a few common liability pitfalls for Realtors®. If you find yourself needing real estate legal counsel, don’t hesitate to contact our office at (650) 327- 2900 x 10 or on the web at www.BrewerFirm.com. Our team of knowledgeable and seasoned attorneys have extensive experience in litigation, representing their clients in various real estate matters in California.

Simon Offord, Esq.
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1) Court Again Punishes Dual Agents

We have previously stressed to real estate professionals, in our blog articles and in many of our speaking engagements, that dual agency is a very risky proposition for real estate brokers. The courts have consistently gone out of their way to find liability against…

2) Potential Pitfalls for Real Estate Agents Assisting in Home Improvement Projects

I was recently asked to speak at one of the local real estate associations about restrictions on real estate agents when assisting clients with repairs to property or preparing the property for sale.  It is a very interesting topic because it is a very common issue for real estate agents and has some potentially dangerous consequences.  Unfortunately,

Julia M. Wei, Esq.
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1) Real Estate Case Update: Dual Agents – Longer Liability Exposure

Bad Facts for the Licensee:

The buyers bought a house with substantial water damage.  The problem? The sellers had painted over the damaged areas with dark brown paint.  The bigger problem? The buyer’s agent was present and taking photos of the paint job.  The biggest problem? Nobody disclosed the water damage to the buyers and the agent did not give…

 

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For many people, their first experience with becoming a landlord is a bit of an accident.  They buy a new house and decide to lease out their former place until the housing market improves, or they may be moving for work and decide not to sell their home until things are more certain.  Maybe the homeowner buys a duplex and decides to occupy one unit and lease out the remaining one.  Regardless, more is involved in becoming a landlord than simply buying a pre-printed form lease online.  For example:

  1. Does your city have a rent ordinance?
  2. Do you know what disclosures to make?
  3. Have you read the law regarding security deposits?

It isn’t just cities like San Francisco, Oakland and Berkeley which have city ordinances regarding rents.  The City of Palo Alto has a rent stabilization ordinance that requires the landlord to register the rental units, provide additional disclosures to the tenant, and a mandatory one year minimum rental term.  The City of San Jose also regulates rental increases for apartments and mobilehomes, capping annual increases.

Just like a seller has state mandated disclosures to make to buyers, so too are landlords required to make certain disclosures to tenants.  For properties built before 1978, landlords must provide a lead-based paint disclosure to prospective tenants and a copy of the pamphlet “Protect Your Family From Lead in the Home.”  Other mandatory disclosures to prospective tenants include situations such as when the owner has applied for a demolition permit or if the property has been found to have methamphetamine contamination.

Security deposits can also be tricky because sometimes landlords request a “pet deposit” thinking it is a separate or additional deposit, however, there is a maximum deposit amount allowed under state law for residential leases regardless of what the landlord calls it.

  • If the security deposit is for a residential property without furniture, the security deposit may equal 2 times the rent.
  • If the residence is furnished, the landlord may charge up to 3 times the rent.

Leasing out a property is a new business venture and as such, has its own set of laws and regulations which can present hurdles to the landlord.  Gaining knowledge of the state and local laws governing leasing can assist the landlord before conflicts arise and litigation ensues.

The Law Offices of Peter N. Brewer has extensive experience in handling leasing disputes, both residential and commercial.  If you need guidance in the pre-leasing negotiations or after a dispute has arisen, we are here to help and can be reached at 650.327.2900 or on the web at www.BrewerFirm.com.

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Lender is Responsible for the Condition of the Property Following a Foreclosure

by Henry Chuang August 21, 2014 Foreclosure

Joseph Erlach rented a bedroom and bathroom in a house located in Monterey.  He entered into an agreement with the original owner, Mary Schwann, to rent the property for seven months with the lease ending in October.  In the middle of October, the parties agreed to extend the lease until the end of November.  However, […]

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Court Sanctions Buyer for Filing Frivolous Failure to Disclose Action

by Simon Offord August 11, 2014 Civil Litigation Defense

The recent case of Peake v. Underwood will hopefully deter frivolous claims against real estate agents. Peake purchased a home from Underwood.  Long after the sale closed, Peake filed suit against Underwood and his agent, claiming Underwood and his agent failed to disclose defective subflooring.   During the course of the litigation, Peaked admitted that, during […]

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Real Estate Case Update Blog Series

by Camille Rogers August 4, 2014 Legal Update

The attorneys at the Law Offices of Peter N. Brewer put together a “Real Estate Case Update Blog Series.” We hope that the information you find here will be relevant for you as it covers a wide spectrum of common real estate related issues. Our knowledgeable and seasoned attorneys also have extensive experience in litigation, […]

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