Published on:

Assigning claims and causes of actions regarding real estate to someone does not necessarily give them the right to file a lawsuit for quiet title. A quiet title action seeks a declaration of the parties’ rights to the real estate. A description of the parties’ legal interests in real property is all that can be expected of a judgment in an action to quiet title. Without an interest in the property itself, a party has no standing to ask the court to quiet title in the property or to obtain damages for the cloud on title. An action to cancel a trustee’s deed or other instrument transferring title is no different. Parties in this situation should speak with a Sacramento real estate attorney to make sure that the assignment has them covered because the assignment needs something else – assignment of all the assignor’s interest in the property itself. This was a surprise to several people in a 2012 California decision.

Sacramento-real-estate-attorneyIn Chao Fu, Inc. v. Wen Ching Chen, Chao Fu Inc. (CFI) had a 25% interest in property at 852-860 Villa Street in Mountain View, CA (conveniently located between a brewpub and a beer garden.). CFI’s secretary, Kuo, borrowed money from Chen (Lender) and Chen received a promissory note. Chen got nervous and wanted security. They gave him a deed of trust against the Mountain View property. The CFI principals were out of the country for a long time, and the lender foreclosed, obtaining title to the property.

The lender, in a further attempt to collect on the note, sued Kuo. Kao obtained an assignment from CFI of its claims regarding the dispute with the lender. Important is the language of the assignment:

Published on:

In the ordinary real estate or business sale escrow, the escrow officer owes duties to the parties to only the parties to the escrow, and not to third parties. There are a few exceptions, such as when the parties real estate sale escrow instructions require following a third party’s instructions, such as lender’s instructions for closing a loan. But it is generally difficult to prove that an escrow holder owes a duty to a third party, the breach of which would result in a finding of negligence. Such was the case in a recent decision which resulted from a misguided and tangled effort to avoid the “no assignment” clause in a commercial lease; parties concerned with suck lease provisions should consult with a real estate attorney.

Sacramento-escrow-liability-attorneyIn Alereza v. Chicago Title, the plaintiff Bobby wanted to buy a gas station which was on leased property, which would require assignment of the lease to the buyer. Escrow #1 was opened, but the landlord required a personal guaranty to allow assignment and the plaintiff did not want to do that. The plaintiff formed an LLC and assigned the purchase contract to the LLC, but the landlord still wanted a personal guaranty. Escrow #1 was cancelled.

The parties had a new idea – plaintiff would buy the interest in the seller’s LLC, thus the tenant would not change, and there would be no assignment. They opened escrow #2. The landlord found out, and said he would consider it a breach of the lease. Escrow #2 closed, and the plaintiff was not a party to the escrow. The escrow officer obtained an insurance certificate for the purchased business, but incorrectly got it in the name of the plaintiff’s LLC (created for escrow #1), not the Seller’s LLC. The parties were not speaking at the time, and nobody knew what was happening. The insurer sent a notice of cancellation of the original policy, and the landlord demanded a personal guaranty. It was not given, and there was an eviction action. The plaintiff gave the personal guaranty, and sued the escrow company for negligence. The court found that, as the individual plaintiff Bobby was not a party to the escrow, there was no liability.

Published on:

It is not often that residential real estate cases make it to the Supreme Court, but in this instance Coldwell Banker tangled with a very wealthy buyer of a very expensive ($12.25 million) house. Presented was the common scenario in which the two agents in the deal both were licensed under the same large corporate broker. This house was marketed as 15,000 square feet, and the buyer discovered it was actually 3-5,000 sq. ft. smaller. The salesman who listed the property made the inaccurate representation. The Buyer claimed that, as the broker was a dual agent, so was this listing salesman (“associate licensee”) – owning the buyer the same duties that he had owed the seller. The Supreme Court addressed whether the associate licensee owed to the buyer a duty to learn and disclose all information materially affecting the value or desirability of the property, including the discrepancy between the square footage of the residence’s living area as advertised and as reflected in publicly recorded documents. This is an issue frequently presented to Sacramento real estate attorneys – whether the listing agent owes any duty to the buyer. It was undisputed that Coldwell Banker owed such a duty to the buyer. Now, the Supreme Court has ruled that the associate licensee, who functioned on Coldwell Banker’s behalf in the real property transaction, owed to the buyer an “equivalent” duty of disclosure under Civil Code section 2079.13, subdivision (b).

Sacramento dual agent attorneyIn the case of Horiike v. Coldwell Banker Residential Brokerage Company, the buyer had been working with a Coldwell Banker agent in looking for a house. She connected him with this listing agent, who had listed this Malibu property for sale. According to an interview with the NY Times, this agent told the buyer that the property had 15,000 square feet of living area and was the largest property available in Malibu. “He said that there was new regulation that prohibited developers from building over 11,000 square feet, and that made the property unique and also a very good investment prospect.” This same agent had previously told a different potential buyer multiple times that they did not warrant the square footage, and that they should hire a specialist to verify it. However, he did not tell this to Mr. Horiike. After the sale closed, the buyer wanted to add a sunroom and learned about the discrepancy in size. This lawsuit followed. The NY Times article linked to above indicates that this particular salesman, with a Hollywood client list, has a record of overstating the size of homes which he has listed.

Sacramento  real estate broker dual agent attorneyThe defendant argued that the disclosure statutes only imputed the duties of the salesperson to the broker, and not the other way around – thus, the dual agency concern was not imputed to the salesmen. The court disagreed. Referencing Civil Code § 2079.13, it found that by describing an associate licensee’s duty in a real property transaction as “equivalent to” the duty of the “broker for whom the associate licensee functions,” the provision specifies that when an associate licensee represents a brokerage in a real property transaction, his or her duties are the same as those of the brokerage.

Published on:

Leases often have terms allowing extension or renewal for additional time (the difference between extension and renew discussed below). Sacramento real estate attorneys may be called on to interpret the terms of the renewal option when they are not clearly drafted; sometimes it takes a court ruling to reach a result. A well-composed lease will provide a way to determine the new rent, but otherwise the same lease terms generally will apply. However, what happens when the number of optional new terms is not clear?

Sacramento commercial lease option attorneyThat was the case in Ginsberg v. Gamson, where the parties entered a lease for a commercial property for sale of textiles and clothing on South Le Brea Avenue in Los Angeles. The parties got in a dispute, and the right to renew the lease was an issue. Of course, the landlord said the lease provided for only one renewal, the tenant that there were unlimited renewals. The “Option to Extend Renewal” which was under review is set out at the end of this blog.

California Courts apply two rules that apply to interpreting lease provisions that look like they allow perpetual renewals:

Published on:

A partition action is a lawsuit in which a co-owner of property can force the sale of a property and have the court determine how the proceeds are divided. In some cases, instead of a sale, the court will order the property be physically divided and distributed to the co-owners. It is used when co-owners disagree. A common question asked of real estate attorneys regards whether the plaintiff can recover their attorney fees for bringing the action. The answer is, maybe, a partial yes. The reason is that the statute gives the court discretion. CCP 874.010 describes “reasonable attorney’s fees incurred or paid by a party for the common benefit. “ When the services of attorneys for both parties are for the common benefit, the court may award fees to both parties. In the event the property is divided rather than sold, the costs awarded become a lien on the parties’ interest in the property. The person who is owed the money can even ask the court to sell the liened portion in order to get paid.

But the question remains- what is “for the common benefit”? Filing the action and getting it before the court is. In my experience contested litigation regarding the relative interests of the parties is likely not. After the sale of the property, the costs are reimbursed before any distribution to the parties. Generally, the court apportions the costs of partition among the co-owners in proportion to their interest in the property, or as it otherwise deems equitable. In an interesting decision, the court chose equity, and only awarded the defendants’ attorney fees – the plaintiff had been so manipulative in trying to take the property from her siblings that the court refused to award her fees.

Sacramento partition attorney fee attorneyIn Hong-Chuan Lin v. Ing-Jieh Jeng, the parties’ parents came to the United States and wanted to buy a house. As they did not have credit, plaintiff “Jane”, who was a real estate agent, obtained the loan. On the parents’ insistence, Jane’s brother Jack was on the loan with her and the two took title as joint tenants. Jack made all the payments on this house. They sold this house and bought another for their parents. The mother and several siblings contributed towards the down payment, and Jane and Jack again were on the loan. However, this time the deed listed Jane as 85% owner, and Jack holding only 15%. Jane then had her parents and her sister sign a written lease, requiring them to pay rent to Jane, though she never told her brothers that she was collecting rent. Jane took all the tax deductions for the mortgage.

Published on:

Real Estate Purchase Contracts encountered in California are often detailed and explicit as to the terms of the deal – parties, price, escrow, when closing is to occur, time for inspections, etc. While some terms are subject to varied interpretation, rarely do Sacramento real estate attorneys encounter contracts with glaring omissions. But when they do, the question arises, is the contract enforceable? In a 2008 Supreme Court decision, the court clarified that the only elements necessary for enforceability are the seller, the buyer, the price to be paid, the time and manner of payment, and the property to be transferred. Everything else can be provided by the court based on what is usual and customary.

sacramento real estate contract attorneyIn Sunil Patel v. Morris Liebermensch, Patel was a tenant in a building owned by Liebermensch. Patel held a lease option – he had the right to buy the property under specified terms. The option purchase terms were as follows:

“Through the end of the year 2003, the selling price is $290,000. The selling price increases by 3% through the end of the year 2004 and cancels with expiration of your occupancy. Should this option to buy be exercised, $1,200.00 shall be refunded to you.”

Published on:

When a lender holds multiple deeds of trust on the same California Real Estate, they may be forced to make a decision. If the borrower defaults on one of the notes, the lender has all the remedies as to that loan – he can conduct a judicial foreclosure, or hold a nonjudicial trustee’s sale and foreclosed under the power of sale. What concerns the lender and their real estate attorney is, once they foreclose, what happens to the other loan? What can they do to enforce it? If they had foreclosed the first, the second was wiped out. Are they a foreclosed junior lienholder, who can then sue for the debt? In one decision the senior and junior creditors were the same, and the court found that once they foreclosed on the first, they were out of luck on the second.

Sacramento antideficiency attorneyIn Simon v. Superior Court, the bank loaned $1.5 million in exchange for two notes, each secured by separate deeds of trust on the same property in Santa Clara County. The bank foreclosed by trustee’s sale on the senior deed of trust, then sued the borrower on the 2nd note and deed of trust.

the court concluded that, where a creditor makes two successive loans secured by separate deeds of trust on the same real property and forecloses under its senior deed of trust’s power of sale, thereby eliminating the security for its junior deed of trust, section 580d of the Code of Civil Procedure bars recovery of any “deficiency” balance due on the obligation the junior deed of trust secured.

Published on:

A title defect in California real estate transactions usually results in unsalable property – i.e., the property is unmarketable. But not all property with problems of marketability have a cloud on title. There just might not be a market for it – hazardous waste dump, steep unstable slopes, zoning restrictions, etc. Sacramento real estate attorneys and property owners are occasionally faced with the question – is the problem with the marketability of the title, or of the property? The reason this is important is thst it determines whether title insurance will provide coverage. In a decision from Santa Clara County, the buyer was disappointed that it was his property, and not his title, that was unmarketable.

Sacramento title insurance lawyerIn Dollinger DeAnza Associates v. Chicago Title Ins. Co., Dollinger bought 7 parcels of adjoining property, with a plan to sell parcel number 7. He discovered that the City had recorded a Notice of Merger which merged the properties together, prohibiting the sale of number 7 without going through the Subdivision Map process. He sued his title company, claiming that this was a defect of title making the property unmarketable. (It turns out that the City’s recorded Notice was improperly indexed, but that is not what the decision focused on.)

Title insurance (relevant code provision is set out at end of article), unlike other types of insurance, does not insure against future events. It insures against losses resulting from differences between the actual title and the record title as of the date title is insured. The policy does not guarantee the state of the title, but rather indemnifies the insured for losses incurred as a result of defects in or encumbrances on the title.

Published on:

A Quiet Title action is a lawsuit which a person files to establish their title against adverse claims. The plaintiff’s interest in the land can be the title to the property, an easement, a license, a lease, or title by adverse possession. Sacramento real estate attorneys often see quiet title used in situations where there is a dispute as to title and ownership in real estate. However, there is a general rule is that the holder of equitable title cannot maintain a quiet title action against the holder of legal title. This begs the question – what is the difference between legal title and equitable title?

Sacramento legal title attorneyLegal Title

A shorthand way to consider it is that legal title means that you are on the deed. The term ‘legal title’ has been defined as ‘one cognizable or enforceable in a court of law, or one which is complete and perfect so far as regards the apparent right of ownership and possession, but which carries no beneficial interest in the property, another person being equitably entitled thereto; in either case, the antithesis of “equitable title.” ’ ” (Solomon v. Walton, 109 Cal.App.2d 381)

Published on:

The plan to build tunnels to ship water from the Sacramento-San Joaquin delta is underway. The Department of Water Resources needed to conduct environmental and geological tests by boring test holes on over 150 privately owned properties. Normally, the government is not allowed to take actions on privately owned real estate without a standard condemnation proceeding, but the California Eminent Domain law provides a procedure for precondemnation entry and testing. Owners faced with such a situation may want to consult a real estate attorney to ensure that they are protected. In a recent test of the law, the Court of Appeal ruled that the state could not conduct geologic studies – boring deep test holes – without conducting a classic condemnation action. The Supreme Court disagreed.

Sacramento condemnation attorneyNO NEED FOR A CLASSIC CONDEMNATION ACTION

The court of appeal ruled against the state in finding that this procedure was not good enough and that a classic condemnation was required.