Legal News

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August 2012

Real Estate Broker Fraud: A real estate broker committed actual fraud by deceiving property owners to purchase four separate properties by intentionally misrepresenting the suitability of potential tenants once the income producing properties were purchased.  The case went to arbitration and the defrauded buyers were awarded a money judgment, but were unable to collect from the real estate broker.  Thus, the buyers sought help from the court by applying for reimbursement on the premise that the judgment on the arbitration award was based on fraud and thus was payable from the Real Estate Recovery Account.  The court found that a fraudulent breach of a fiduciary duty was within the purview of moneys that are payable from the Real Estate Recovery Account.  Therefore, the defrauded buyers could be compensated from the Real Estate Recovery Account.  Worthington v. Davi, 2012 WL 3193567 (Cal.App. 4 Dist.)

July  2012

Real Property:
A property owner demolishes a building with plans to redevelop the the property.  However, possibly as a result of the economic downturn, the property owner defaults on his monthly payments.  The lender then foreclosed by exercising the power of sale under the deed of trust and buys the property back at a foreclosure sale for less than the amount owed under the note.  The lender then sues the former owner for "waste," claiming that demolishing the building was an impairment of security and thus the lender is entitled to damages. The property owner claimed the lender could not sue based on the California antideficiency laws because his demolition of the building was not in bad faith, as there was no recklessness or intent to despoil at the time of demolition. The Court of Appeals held that California antideficieny laws did not bar this action on summary judgment because the impairment of security that results from the destruction of a building is actionable waste unless the destruction itself was somehow caused by the economic pressures of a depressed market.  Thus, there was a genuine issue of material fact as to whether prior owners committed “bad faith” waste which thus precluded summary judgment. Fait v. New Faze Development, Inc. 2012 WL 2403863 (Cal.App. 3 Dist.)

June 2012

Real Property:
This case involved a single lender making two nonpurchase money loans secured by two notes and deeds of trust against one piece of property.  The original lender then assigned one of the two loans to a second (junior) lender.  The borrower defaulted on both loans and the original lender foreclosed, wiping out the second lender's loan. The Court of Appeals must decide a novel question of law: "When a single lender contemporaneously makes two nonpurchase money loans secured by two deeds of trust referencing a single real property and soon thereafter assigns the junior loan to a different entity, can the assignee of the junior loan, who is subsequently “sold out” by the senior lienholder's nonjudicial foreclosure sale, pursue the borrower for a money judgment in the amount of the debt owed?" The court answered this question in the affirmative and said the second lender can pursue the borrower for a money judgment in the amount of the debt owed. The court declined to apply an "equitable" doctrine extending the reach of the antideficiency statute to junior loans made contemporaneously to foreclosed senior loans. Cadlerock Joint Venture, L.P. v. Lobel, 2012 WL 2335916 (Cal.App. 4 Dist.)

Estate Planning and Probate:
A widow sued both her stepsons and the estate planning attorneys who allegedly committed fraud on her late husband by getting him to execute deeds which eliminated her interest in his estate once he passed away.  The widow entered into a settlement agreement with the sons but continued in the lawsuit against the estate planning attorneys who helped the sons effectuate the fraud.  The court held that the widow's injury was one indivisible injury and thus a settlement agreement between the sons required an setoff against the claims against the attorneys.  The court reiterated the fundamental principle that a plaintiff may not recover in excess of the amount of damages which will fully compensate him for his injury.  Oliveira v. Kiesler, 2012 WL 2161139 (Cal.App. 4 Dist.).

Real Property:
A real estate salesperson, not a broker, acted negligently in handling a real estate loan.  The supervising broker, who is an officer of a real estate brokerage corporation, was sued individually for failure properly manage his employee salesperson who negligently handled the transaction.  The court held that the statute mandating duty of supervision and control does not create a right of action for third party clients of the brokerage corporation against the officer. Thus, the lawsuit was dismissed against the supervising broker. Sandler v. Sanchez 2012 WL 2226501 (Cal.App. 2 Dist.)

Real Property: A Homeowners' Association (HOA) brought an action against multiple developers, roof subcontractor, roof material supplier, and structural engineering firm for construction defects.  During the action, the developers cross-complained against the roof subcontractor and the roof supplier for indemnity.  The HOA subsequently settled with the developers.  The Court of Appeal found that the HOA settlement with the developers was in good faith and not appealable despite the fact that the developers had cross-complained for indemnity. Oak Springs Villas Homeowners Assn. v. Advanced Truss Systems, Inc., 2012 WL 2149923 (Cal.App. 2 Dist.)

Real Property and Landlord Tenant Disputes:
Best Buy in Manteca California claimed that the landlord breached their contract by overcharging them pursuant to a term of the lease agreement which reduced rent to 50% of the original agreed price when the gross leasable area of the shopping center where Best Buy was to open was less than 60%.  The court found that a there was a genuine issue of material fact as to whether "co-tenancy" provision of the lease requiring 60% occupation of the gross lease area was satisfied.  Thus, Best Buy in Manteca won the motion and is allowed to proceed on claims against the landlord for declaratory relief, money paid, money had and received, and breach of contract under California law.  Best Buy Stores, L.P. v. Manteca Lifestyle Center, LLC 2012 WL 929704 (E.D.Cal.)

May 2012

Business Organizations:
The novel question presented in this case was whether, under a conflict of laws principle known as the internal affairs doctrine, California law or foreign law applies to a claim brought by an officer of a foreign corporation for wrongful termination in violation of public policy. The Court held that California law applied to a claim of wrongful termination in violation of public policy brought by the former chief executive officer (CEO) of a Delaware corporation based in California, where the CEO alleged that the corporation removed or constructively discharged him in retaliation for his complaints of possible illegal or harmful activity in the corporation's investigation of accounting irregularities at the corporation's Japanese subsidiary.  The CEO's claims of wrongful termination by employers by coercing their employees to engage in criminal or other hamrful conduct were related to California's vital interests and thus California law applied. Lidow v. Superior Court 2012 WL 1861372 (Cal.App. 2 Dist.)

Real Property:
In a case involving an assigned deed of trust, the court held that the holder of the borrower's endorsed promissory note was entitled to foreclose on the property under the power of sale in a deed of trust.  The deed of trust stated that the nominal beneficiary and agent had a right to sell the property.   In re Salazar 2012 WL 896214 (S.D.Cal.)

Estate Planning and Probate: The so called equitable (fairness) doctrine of "unclean hands" barred an estate administrator from challenging the validity of forged deed that was transferred for no money or consideration.  The trial court in this case found that, even though the deed was forged and no consideration was given, the administrator was barred from challenging the invalidity of the deed because the administrator had wrongfully attempted to control the house by filing a mechanic's lien, improperly filed a lawsuit in his name and rented the home for his own benefit.  Moreover, the new homeowner had spent $15,000.00 for taxes and repairs on the home.  Thus, the court stated that the administrator could not attack the validity of the deeds, even though it was obvious to everyone, including the court, they were fraudulent. In re Estates of Collins, 2012 WL 1644484 (Cal.App. 3 Dist.)

Real Property
: Attorney's fees and costs incurred to clear title were sufficient pecuniary damages supporting slander of title claim.  That is, even when there was no actual damage to the Plaintiff, the cost of bringing the action to clear their title was enough to allow the homeowner's to sue for a slander of title claim.  The court reasoned that, where a defendant's tortious conduct forces the plaintiff to litigate in order to clear his title, the plaintiff's attorney fees and costs necessary to accomplish that purpose constitutes actual harm or injury to the plaintiff that was proximately caused by the tort and therefore should be compensated. The issue was one of first impression in the state. Sumner Hill Homeowners' Assn., Inc. v. Rio Mesa Holdings, LLC 2012 WL 1530094 (Cal.App. 5 Dist.).

**NOTE** The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. Please review our disclaimer policy.