Articles Posted in real estate law

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A California quiet title action can be brought to establish legal or equitable right, title, estate, lien, or interest in property or cloud upon title against adverse parties. Sacramento and Yolo real estate attorneys occasionally advise clients who, not being able to pursue an action, are interested in assigning their claims to another party. In a recent decision, a party who was assigned a claim for quiet title was not assigned an interest in the property. Surprising to everyone was how well that mistake worked out for the original owner.

In Chao Fu Inc. v. Chen, CFI corporation owned a 25% interest in real estate in Mountain View. CFI’s secretary, Mali, had been doing unrelated business with Chang and had borrowed money from him. Chang got nervous about getting paid, and wanted security for the debt. Mali, with approval of the other principals of CFI, gave Chan a deed of trust against the Mountain View property (owned by CFI) and Chang recorded it.

quiet title action Yolo attorney.jpgWhile the principals were overseas, Chang, the lender, successfully foreclosed the deed of trust and became owner of the 25% interest in the property. To further collect on the balance of the money owed by Mali, the Lender sued her. Mali had CFI assign to her “all of its right, title, interest, and standing to bring suit, to, in, and on, any and all claims and causes of action which it has against Chen…” Mali then filed a cross-complaint against the Lender for wrongful foreclosure & slander of title. However, Mali had to dismiss her claims just before trial, because CFI’s corporate status had been suspended, and thus had no power to pursue legal actions- as a result, the assignment of claims to Mali was void. Mali assigned the claims back to CFI.

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In California contracts sometimes a party is obligated to use “best efforts” to accomplish a goal of the contract. For example, a contract to buy real estate may be subject to a condition to obtain financing. In such a case, the implied covenant of good faith requires the buyer to exert their best efforts to satisfy the condition. Or, the actual requirement may be in the contract, such as for a holder of water rights to use “best efforts” to maintain the level of water in a reservoir. California courts have never defined best efforts, but look to the specific facts of each case to determine if best efforts were actually made. A party with such an issue is well advised to consult with a Sacramento or Placer real estate and business attorney to determine how far their efforts must extend. A property owner’s associations in Modoc County recently was disappointed that a best efforts provision did not make the other party a fiduciary.

sacramento real estate attorney best efforts.jpgIn California Pines Property Owners Association v. Pedotti, the association owned the land in where the reservoir was, and it had lake-side houses. Pedotti owned a 1700 acre cattle ranch. Both parties had rights to water that enters the reservoir. Pedotti used the water to irrigate his ranch, and the association wanted to keep enough water in the reservoir to maintain its aesthetic value. Pedotti’s water rights required him to use “best efforts” to maintain a full reservoir. The association did not appreciate the low water levels in 2006 through 2008, and sued. It claimed that best efforts means the efforts required of a fiduciary. The court disagreed.

Pedotti had the local Cooperative Extension farm advisor testify as an expert that his flood irrigation technique was typical for ranches in Modoc county, and to change to an enclosed pipe system would cost over a half million dollars. In 2006 through 2008 Pedotti took less water than he was entitled to, and supplemented it from another source.

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Boundary disputes are common in California real estate, in all cases- residential, commercial, and agricultural properties. Experienced Sacramento and Yolo real estate attorneys often see cases of adverse possession and prescriptive easement claims. Another theory that is occasionally used is the doctrine of boundary by agreement. In this scenario, when the parties are not sure of he location of the boundary, they agree on a location and live with it. Recently in San Luis Obispo County, the parties accepted a boundary location for over sixty years. But there never was an agreement to set it there, so the true boundary was the legal boundary set out in the deed.

agreed boundary.jpgIn Martin v. Van Bergen, The Martins owned a vineyard next door to Van Bergan’s almond orchard in Paso Robles. A fence ran between them, but it was on the Martin’s property, off the true boundary. Of course, Van Bergan’s orchard was planted up to the fence, so it encroached on Martin’s property. Martin brought a quiet title action. Defendant claimed the “boundary by agreement defense.”

Testimony at trial was that an old cattle fence was located where the current fence is, and the two neighbors cooperating in replacing it with a deer fence. The assumed that the fence was on the boundary. Subsequent surveys revealed the fence was not on the border, and that the orchard encroached on the neighboring property.

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A California slander of title suit is a claim that someone published a false statement about real estate which harms the properties value or salability. One of the requirements of the claim is that there be a direct pecuniary loss.

slander of title.jpgIn Sumner Hill v. Rio Mesa, A subdivision was built on bluffs overlooking the San Joaquin River in Madeira County. Owners in the subdivision has unrestricted private access to the river across other property using Killkelly Road. Killkelly Road was shown on the amended Subdivision Map as a dedicated public road. Property owners who believe the are victims of a slander of title should consult an experienced Sacramento and Yolo real estate attorney to see what their options are. In a recent decision, a defendant (the slanderer) was surprised that the plaintiff had no pecuniary loss other than the attorney fee involved in the lawsuit, and that was enough to make their case.

The other property, which Killkelly Road crossed, was sold, and the new owner planned a new subdivision. They were unaware of the neighbor’s right to use the road. One day the new owner saw someone in a truck on the road, who told him that all the owners in the subdivision had the right to use it. Panic ensued.

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It is a general rule of California real estate law that a forged deed is “void,” not merely voidable. Therefore it cannot convey title, even to a good faith purchaser. A good faith purchaser is one who has no knowledge or suspicion of a problem, and pays reasonable value for what they bought. This applies to a buyer at a foreclosure sale. In such a case the buyer, through no fault of their own, ends up with a legal problem and losing money, a good reason to consult an experienced Sacramento real estate attorney. In a recent decision out of Fresno, the buyer at a foreclosure sale not only lost out, but made their situation worse.

I2nd deed of trust foreclosure.JPGn La Jolla Group II v. Bruce (5th Dist. F061829; 211 CalApp 4th 461), the Baquiran’s owned their home for 16 years. In 2003 a notice of default & note of trustee’s sale were recorded for default on a second deed of trust secured by the residence. However, the Baquirans had no knowledge of a second deed of trust. The foreclosure sale occurred, and La Jolla Group bought the property at the trustee’s sale.

The Baquirans figured out that the second deed of trust was a forgery, and filed suit to quiet title to get the property back. They recorded a notice of action, or Lis Pendens, to provide notice of the suit so that any subsequent buyer of the property is subject to the results of the suit. It turns out that they refinanced in 1997 with broker Williams. Williams got them to sign some documents, which he later revised using whiteout and changing information provided on the document. He brokered some hard money loans, and revised the document so that it appeared to be a deed of trust to one of his hard money lenders. It was this lender who foreclosed.

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Often easement disputes revolve around the extent of the use, or interference with use. Usually an easement for road access purposes involves a dispute when the use increases dramatically- for example, a residential property becomes a heavy equipment yard. Or, the owner of the servient tenement (the land over which the easement runs) does something to interfere with use of the easement, such as put up a gate, or obstacles. Experienced Sacramento real estate lawyers see these problems frequently. In a recent Shasta County easement dispute, the trial court decided that the easement holder did not need all of an deeded easement, so reduced the size. The court of appeal said no, that cannot be done.

easement.jpgCottonwood Duplexes v. Barlow involved property alongside I-5. Parcels 1, 2 & 3 were adjacent to each other from West to East. They were burdened with a 60 foot easement running along their North boundary, which provided access to parcels to the North. Barlow had a property to the North, across from parcel 3. He was granted this easement for road and utility purposes. A developer acquired parcel three, and was subdividing. The developer needed to eliminate, or severely reduce, the easement in order to maximize the number of buildable lots. It got the owners of parcels 1 & 2 to give up, or reduce, their rights to the easement, but Barlow refused.

The trial court found that the county was unlikely to allow Barlow a primary access across the easement, that Barlow did not use the easement, and that Barlow’s utilities were accessed elsewhere. Therefore, Barlow did not require the full size and scope of the easement. The court reduced the easement both in width and length, essentially extinguishing part of the easement.

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“Unclean hands” is a defense used in courts, in which a party claims the other side in not able to obtain relief because he comes to court with unclean hands- he has acted in bad faith or unethically. [Technorati J64A92HRG74M] The rule is sometimes stated “those seeking equity must do equity” or “equity must come with clean hands”. It is a defense to equitable remedies- remedies that are other than the payment of money. Anyone with knowledge of a forged deed should consult with an experienced Sacramento and Placer real estate lawyer. In a recent California 3rd District Court of Appeal decision, it was used against a party who was not following the advice of his attorney when he tried to set aside a forged deed.

forged deed.jpg In Estates of Augustus Collins and Elijah Flowers v. Darcy, there were several characters with unclean hands. Collins and Flowers, who jointly owned their residence, had passed away. Elijah’s son Joseph forged their signatures on a deed granting the property to McIntyre. Andre, another son and Joseph’s half brother, then proceeded to seize control of the house, as follows:

1st- he recorded a mechanic’s lien for $75,000, though he was neither a contractor nor gave notice of the lien, making it defective;

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California law provides double damages for harm caused to timber, trees, and underwood. Civil Code section 3346. Recently a Court applied it to harm caused by trimming a neighbor’s tree. It also found that the statute awarding attorney fees against an unlicensed contractor who causes harm (CCP 1029.8) cannot be applied to the landowner who hired him. Anyone faced with the problem of damage cause to aneighbor’s tree, or cause to their tree by a neighbor, should consult an experienced Sacramento or Yolo real estate attorney.

unlicensed laborer.jpgRona v. Costa starts with Paolo, the new home buyer in Tiberon, who wants to install a backyard pizza oven. The neighbor’s Monterey Cypress had limbs growing over the fence, so Paolo hired a day laborer to trim the limbs that would be hanging over the chimney. He paid the laborer under $500, so there was no need for a contractors license. The laborer went overboard, and whacked off limbs that were not overhanging the fence, but where on the neighbor’s side. The tree now had one denuded side, and was odd looking, an expert said it was now a hazard and needed to be removed. The neighbor was outraged, this lawsuit was the result.

The trial court judge found that Paolo was vicariously liable (superior responsible for conduct of his agent) for the damage the laborer caused to the Cypress. He found the damage to be the diminution in value of the tree, plus an additional $15,000. The complicated calculation is described in the opinion. Then the court doubled the amount under Civil Code section 3346. Everyone appealed.

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california anti deficiency 580b.jpg With rates at an all time low, many in California are rushing to refinance their real property mortgage loans. Often, borrowers are not aware that they may expose themselves to personal liability if they refinance the loan they originally used to buy their residence.

California has a number of statutes that protect borrowers from personal liability (deficiency judgments) for the loan balance remaining after a foreclosure trustee’s sale. If the property is the borrower’s home, there is protection for the loan used to buy the property. Recent legislation provides for protection in a short sale. Also, if the lender who made the original purchase money loan refinanced the loan, there is protection. With enactment of SB 1069, beginning January 1, 2013, ANY lender who provides a refinance of the purchase money loan will also be prevented from obtaining a deficiency judgment against the borrower. Each borrower’s situation is different, and anyone in a default situation should consult an experienced Sacramento real estate lawyer to determine their risk of personal liability.

California refinance loan liability.jpgThe change makes sense in light of the historic purpose of Civil Procedure section 580b. In the event of a depression of land values, it is to prevent aggravating the downturn that would result if defaulting purchasers lost the land plus had personal liability. It is based on the premise that the lender is in the best position to determine the true value of the security for its loan, which is the property. If the lender overvalues the property, the lender should bear the risk of not obtaining the balance of the loan value in a foreclosure sale.

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For tax purposes, housing debt that is forgiven or written off is treated the same as income. The difference between the short sale price, or price at a trustee’s sale, and the loan balance may be forgiven debt. It can be considered income, which is reported by the lender on form 1099-C. The Mortgage Debt Forgiveness Act, which applies if the debt was forgiven in years 2007 through 2012. This requires that the debt was incurred to buy or substantially improve the taxpayer’s principal residence. This includes a refinance loan, to the extent that the principal balance of the old mortgage would have qualified. Taxpayers concerned with whether their forgiven debt qualifies should consult with an experienced Sacramento and El Dorado real estate attorney.

california short sale.jpgThe Mortgage Debt Forgiveness Act requires that the debt was incurred to buy or substantially improve the taxpayer’s principal residence. This includes a refinance loan, to the extent that the principal balance of the old mortgage would have qualified. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The amount of debt forgiven must be reported on your tax return. The act first extended such relief for three years, applying to debts discharged in calendar year 2007 through 2009; with the Emergency Economic Stabilization Act of 2008, this tax relief was extended another three years, covering debts discharged through calendar year 2012.

short sale.jpgThe forgiven debt may also be excluded from your income if:

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