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A Notice of Action, also known as Lis Pendens (Latin for “a suit pending”), may be recorded in a lawsuit that involves title to real property. Because this will prevent sale or refinancing of the property it attracts the defendant’s attention, and they want to remove (“expunge”) it from the record. Anyone seeking money damages can throw in a real property claim, and the courts have weeded them out by looking at the overall lawsuit and determining whether or not it was really just about money damages. If it was damages, the courts concluded that it did not contain a real property claim and expunged the notice. Sacramento real estate attorneys are well aware of the risk of an expungement action, because the prevailing party is entitled to be awarded their attorney fees. In a recent decision from Alameda the court clarified that, in a lawsuit with 7 causes of action for damages and one for constructive trust, the constructive trust claim falls squarely within the plain language of the statute: it “would, if meritorious, affect … title” to specific real property. They were entitled to record the lis pendens.

Sacramento-real-estate-attorneyIn Shoker v. Superior Court, Ghuman lured the Shokers into investing $1.5 million in an unidentified technology company. He became familiar with the real properties they owned (and rented for income), and then promised the Shokers returns far exceeding those that they were receiving on their rental properties.

The SCAM

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What if you had an easement to place roads across property to access your own, and you then developed your property into a shopping center. Could you include parking spaces in the easement area? A recent California decision points out the requirement to be clear in drafting easement language because only necessary incidental uses are included.

Sacramento-easement-attorneyIn Prune v City & County of San Francisco (67 CalApp 5th 61) the City of San Francisco sought eminent domain and obtained title in 1951 to an 80-foot strip of land to construct a Hetch Hetchy pipeline to construct an underground pipeline conveying water to San Francisco from the grandparents of plaintiffs. The deed reserved certain rights in the plaintiffs’ family’s favor, including among other things the right to use the surface of the property for pasturage and the right to construct roads and streets “over and across” the property “but not along in the direction of the City’s pipeline or lines.” Plaintiffs developed the property into a commercial center, and 75% of the pipeline property had been paved. To allow this development, in 1967 the City granted a revocable permit to use the pipeline property for additional parking and landscaping for a fee of $50 per month. Years later the City wanted to increase the permit fee from $50 to over $4,500, and this lawsuit resulted.

The Deed to the City contained two reservations, fully set out below. In summary,

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Sacramento-prescriptive-easement-attorneyUnder California real estate law a prescriptive easement requires the trespasser showing that they have used the property “for the statutory period of five years, which use has been (1) open and notorious; (2) continuous and uninterrupted; (3) hostile to the true owner; and (4) under claim of right.” The way a property owner cuts off a possible prescriptive easement is by filing a suit for trespass or ejectment. But an action for trespass is designed to protect possessory –not necessarily ownership– interests in land from unlawful interference. As the landlord does not have a right to possession during the lease term, he may not bring an action for trespass. The prescriptive right does not arise against an owner that had no possessory interest in the land during the five-year period. What happens when the owner has leased the property? The tenant has the right to possession, not the owner. It appears that, in California, even if the owner has a moment of possession, such as between leases, a prescriptive easement may be created.

In King v Wu, a neighbor poured a concrete driveway partly encroaching on the neighboring property. The strip of driveway on the neighboring property (prescriptive strip) is approximately eight inches wide and 90 feet long. Many years later the property suffering the trespass was sold, and the new owners began constructing a metal guardrail over the prescriptive strip. Three days later the Kings filed a complaint seeking to quiet title over the prescriptive strip.

Sacramento-prescriptive-easement-lawyerThe owners raised one defense—that the property had been “continuously rented out,” and thus, as landlords, they had never been in possession over a period of five continuous years, and could not have filed an action for trespass or ejectment during that time. The owners had several successive leases with different tenants.

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In quiet title actions a common defense is the statute of limitations – has the plaintiff waited too long to file suit? Generally, the clock does not run while the defendant is in “undisturbed possession.” But what that means is often disputed in these cases, and there are no bright line rules. In a recent decision from El Dorado County, a South Lake Tahoe landowner was disappointed to learn that recorded documents are not sufficient to ‘disturb possession’, and the claim was not barred by the statute of limitations.

Sacramento-quiet-title-attorneyIn Kumar v.Ramsey (71 Cal.App. 5th 1110) Walker sold property on Dundee Circle in the City of South Lake Tahoe, California, to Kohs, reserving for themselves 23,188 square feet of land coverage. Land coverage rights consist of the right to place manmade structures on a certain parcel of land. These rights may be transferred in whole or in part to other parcels, granting purchasers the ability to build structures on their properties. Applications to transfer coverage rights are reviewed by the Tahoe Regional Planning Agency (TRPA).

The property was lost to foreclosure and then bought by Plaintiff Kumar. Prior to purchasing the property, Kumar conducted a title search which revealed multiple transfers of portions of the reserved coverage from Walker and Kohs to third parties between 2006 and 2007. As a result of those transfers, a TRPA tracking sheet indicated that the reserved coverage had been reduced to 6,959 square feet before Kumar purchased the property. Kumar understood that when he purchased the property, his purchase included the remaining 6,959 square feet of reserved coverage.

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Outside reverse veil piercing differs from traditional veil piercing, which is permitted due to the “‘The alter ego doctrine prevents individuals or other corporations from misusing the corporate laws by the device of a sham corporate entity. Traditional veil-piercing permits a party to pierce the corporate or limited liability company (LLC) veil so that an individual shareholder [or LLC member] may be held personally liable for claims against the corporation [or LLC However reverse veil piercing, rather than seeking to hold an individual responsible for the acts of an entity, seeks to satisfy the debt of an individual through the assets of an entity of which the individual is an insider. Outside reverse veil piercing arises when the request for piercing comes from a third party outside the targeted business entity. In a recent decision out of SLO County, where the wrongdoer was the owner of an LLC that owned land in Cambria. The trial court amended a judgment against the wrongdoer to reverse veil pierce and add the LLC. Sacramento-reverse-veil-piercing-attorney

The trial court’s adding the nonparty alter ego to the judgment was an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant.

The wrongdoer appealed, arguing that a charging order under Corporations Code section 17705.03 provides the sole remedy available, but the courts state otherwise. [T]he key is whether the ends of justice require disregarding the separate nature of the LLC under the circumstances. In making that determination, the trial court should, at minimum, evaluate the same factors as are employed in a traditional veil piercing case, as well as whether the plaintiff has any plain, speedy, and adequate remedy at law. Outside reverse piercing is permissible in the context of a limited liability company because, unlike a corporation, a limited liability company does not issue shares on which a creditor may levy and creditors do not have sufficient alternative remedies at law.

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A real property title defect will prevent you from selling your property or eventually cause future problems. When there is an issue regarding title to real property, a quiet title action is pursued which results in a court order clarifying the parties’ rights and interests. Such issues include ownership, and rights to ownership, removal of liens, boundaries, easements, licenses, and options. If a defendant who has a potential claim cannot be located or served, the court may order that they be served by publication of summons. The legal requirement is that the publication must “particularly describe the property,” plus provide its “common designation.” In a recent decision out of Riverside, the plaintiff was disappointed to learn that publishing just the Assessor’s Parcel Number did not qualify.

Sacramento-publish-summonsIn Douglas HUMPHREY v. Peter D. BEWLEY, the trial court ordered service of the summons and first amended complaint by publication. Humphrey filed proof of service by publication. In September, 2014, at Humphrey’s request, the trial court entered the default of all named parties.

In a quiet title action, “Whenever the court orders service by publication, the order is subject to the following conditions: “….The publication shall describe the property that is the subject of the action. In addition to particularly describing the property, the publication shall describe the property by giving its street address, if any, or other common designation, if any; but, if a legal description of the property is given, the validity of the publication shall not be affected by the fact that the street address or other common designation recited is erroneous or that the street address or other common designation is omitted.” (Code Civ. Proc., § 763.020.)

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Electronic signatures are commonly used in California, especially with real estate contract documents, and are accepted by real estate brokers and escrow officers. But what happens when there is a dispute and the person who supposedly e-signed denies doing so, claiming that the signature was forged? That was the case in a recent decision out of San Diego where a homeowner claimed that they did not sign a financing contract for solar panels. The solar company never proved that the “docusigned” electronic signature was the plaintiff’s by explaining the process used to verify the signature.

Sacramento-e-signature-real-estate-contract-attorneyIn Rosa Fabian v. Renovate America, Inc., Renovate made an unsolicited phone call to Fabian about solar panel financing. Fabian was never presented with any documents to sign, claiming that all communications were over the phone.

The court found that Renovate met its initial burden to show an agreement to arbitrate by attaching a copy of the Contract to its petition, which purportedly bears Fabian’s electronic initials and signature. Because Fabian declared that she did not sign the Contract and the e-signature was forged, however, Renovate then had “the burden of proving by a preponderance of the evidence that the electronic signature was authentic.

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A quiet title action is brought to establish, or “quiet”, an interest in real estate between adverse parties. One can establish any interest in property or cloud upon title. (CCP §760.010) A common goal is to establish title by adverse possession. Adverse possession is a way of acquiring title to real property through continuous possession or use for a specified period of time. One of the elements required to prove adverse possession is that the possession or use must be “hostile to the owner’s title.” What happens if the adverse possession occurs on property with a deed of trust recorded, and the lender forecloses? In a recent California decision, the adverse possessor lost because the adverse possession did not count against the Lender until the lender acquired the property at the trustee’s sale.

Sacramento-Quiet-title-attorneyIn Charles Scott Bailey v. Citibank N.A. owners of property in Kern County had a deed of trust. They went into default and a Notice of Default was recorded, so the owners filed a series of bankruptcies. Apparently, the lender never completed the foreclosure, the bankruptcies concluded, and the owners walked away from the property. Plaintiffs, seeing it empty in 2013, saw that as a green light to take possession and pay property taxes. Citibank became the successor to the original deed of trust in 2017, and recorded a new notice of default, foreclosed, and became the new owner in 2018.

A few months later Plaintiffs filed their quiet title suit. There was much hubbub in the courts, a default & judgment for quiet title by adverse possession, the default judgment set aside, and appeals. For our purposes, an issue on appeal was whether, as a matter of law, plaintiffs’ possession was adverse to Citibank for the required five-year period.

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In California, a third party who acts in reliance on a quiet title judgment retains its property rights even if the judgment is later invalidated as void, as long as the third party qualifies as a bona fide purchaser for value. The third party must do so without knowledge of any defects in the judgment. But “knowledge” is a slippery term. Does it mean actual knowledge, or include “constructive” knowledge? is a legal concept that, in real estate, generally applies when the document must be recorded as prescribed by law. The buyer may not have seen it, but the law treats them as if they had. In a recent decision out of Inglewood, CA, the court decided that they must have neither actual notice or constructive notice. This decision is interesting because the buyer would have had to do some digging (and actually did obtain title insurance) to realize there was a defect.

Quiet-title-judgment-attorneyIn Tsasu LLC v. U.S. Bank Trust, N.A the court had a complicated series of facts.

– Celestine borrowed money from CIT, who assigned the deed of trust to US Bank. It was then assigned to DLJ.

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The alter ego doctrine is a procedure that creditors use when their judgment is against a corporation or LLC which is owned by, or controlled by, a sole shareholder. Usually, the corporation has no assets to collect from, and the goal of the creditor is to go after the shareholder’s personal assets, claiming that the corporation is a sham. In effect, the corporation is the shareholder’s alter ego and the shareholder should not hide behind the corporation. Reverse veil piercing is a newer concept in which a creditor with a judgment against an individual goes after the assets of the corporation which the debtor controls. In a recent decision from Southern California, two LLC members got slammed for a huge judgment – as aptly described by the Court: “There are numerous ways in which an LLC or corporation is undercapitalized. Here, wealthy principals of an LLC withdraw or add money at will. This enviable position does not allow the LLC to become undercapitalized when its shareholders intend to avoid liability.”

Sacramento-alter-ego-attorneyIn Triyar Hospitality Management, LLC v. WSI (III) – HWP, LLC (an unpublished decision), Triyar was under contract to buy a hotel from WSI; the hotel was subject to a Hyatt operating agreement. The Hyatt agreement terminated while Triyar was doing its due diligence, but Triyar did not know about the termination. (What is due diligence anyway?) Triyar passed on the purchase but then learned about the termination of the Hyatt agreement. In a costly case of chutzpah, Triyar then claimed that the Hyatt agreement was so burdensome, the termination increased the hotel value by $11 million, and sued ESI for fraud – I guess not telling them the agreement had terminated.

The trial court said haha; it’s your own fault for not doing your due diligence. The court awarded WSI over $2 million dollars in attorney fees. WSI could not collect the judgment, so moved the court to amend the judgment to add the Yari brothers, principals of Triyar, to the judgment on an alter ego theory. The court agreed, and this appeal followed.