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There are numerous anti-deficiency laws concerning California real estate. An Important one, especially with commercial real estate, is CCP section 726(a). It is broadly described as the “one form of action” rule. This broad rule has two components – a) the “one action rule”, a prohibition of multiple lawsuits to collect a debt secured by real estate; and b) the “security first rule,” which requires the creditor to proceed first against all the real property security (exhausting the security) first through judicial foreclosure before enforcing the underlying debt. 726 provides for a lender to file a judicial foreclosure lawsuit which will allow them to recover a deficiency judgment against the borrower. This statute is subject to many Judge-made requirements and sub-rules, and a careful lender or borrower will want to consult a Sacramento real estate attorney. In a decision from Southern California, the lender got a big surprise when they discovered that because of its mistake, it could not obtain a deficiency judgment.

NOTE: A petition for review was granted by the Supreme Court; this case may not be cited.

Sacramento security first attorney.jpgIn First California Bank v. McDonald, the bank made a $1.5 million dollar loan to a husband and wife. The loan was secured by a deed of trust on property in Wasco. As additional security, the wife signed a deed of trust on her separate property located in Shafter. Eventually, Sally wanted to sell the Shafter property. The Bank agreed to the sale with the understanding that the bank would get the proceeds, and the couple would not be released of liability. The husband did not sign the release agreement.

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An equitable easement is judged-created on equitable grounds even though the user is not entitled to an easement on one of the more traditional grounds. The judge balances the rights of the various parties and decides whether there should be an injunction to prohibit the trespass, or alternatively to convert the trespass into a right, and order compensation for the victim. They were first developed to prevent a property owner inconvenienced to a “minor degree” by a trespass from nevertheless engaging in “legal extortion” against an innocent trespasser by demanding an exorbitant sum in exchange for not filing suit to enjoin the trespass. When wondering whether they have such an easement, a property should consult with the Sacramento real estate attorney, as there are usually several other grounds in play, such as a prescriptive easement, or easement by necessity. In a recent decision, the court of appeals found that the burden of removing some patio furniture was not sufficient to establish an equitable easement.

Sacramento equitable easement attorney.jpgIn Lilli SHOEN, v. Juliet ZACARIAS the parties were two neighbors who lived on the side of a hill. Between their adjacent lots there was a small patch of flat land, about 500 square feet that was mostly on Shoen’s lot. However, due to steepness, it was difficult to access and use from Schoen’s parcel. However, it was accessible from Zacarias’s lot by way of a staircase. Zacarias had placed patio furniture on the flat patch, and used it. An owner prior to Shoen had given Zacarias permission to use the flat patch as long as that owner continued in possession. The property was eventually sold, and Shoen took possession in 2012. Shoen demanded that they remove the furniture, to no avail. Shoen sued for injunctive relief and damages; Zacarias countered with easement claims.

The trial court found that Zacarias was entitled to an equitable 15 year easement, on payment to Schoen of $15,000. The court found that for Schoen to build a staircase would cost $100,000. It cost Zacarias $275 to have the patio furniture removed. The appellate court overturned the decision, because it was ridiculous.

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A license gives authority to a licensee to perform an act or acts on the property of another pursuant to the express or implied permission of the owner. The licensor generally can revoke a license at any time without excuse or without consideration to the licensee. Also, the license is lost if the licensee conveys their property – the license is personal to the individual and does not attach to the land. However, the license can become irrevocable when a landowner knowingly permits another to repeatedly perform acts on his or her land, and the licensee, in reasonable reliance on the continuation of the license, has expended time and a substantial amount of money on improvements with the licensor’s knowledge. Under such circumstances, it would be inequitable to terminate the license. (Miller & Starr, as cited by Richardson v. Franc) Often in these cases, Sacramento real estate attorneys focus on whether the owner granted permission or the activity was obvious so that the owner was aware, and whether or not the actual expenditures were substantial. In a recent Northern California decision, none of these factors were even close, and an irrevocable license was found.

Sacramento irrevocable license lawyer.jpg In James Scott Richardson v. Greg Franc, the Richardsons had a deeded easement across the defendants’ property in Novato for “access and public utility purposes.” For twenty years, the Richardsons (and the prior owners) maintained landscaping, irrigation, and lighting on both sides of the road within the easement area. They had installed drip irrigation with pumps and separate drip lines for the individual trees and plants. They installed water fixtures for fire control. And they installed electric lights. They regularly maintained the landscaped area, trimming, weeding and replacing plants. They also had a landscaper performing these functions. They and their predecessors had never asked for permission, nor did the owners of the land which the easement crossed (the servient property) expressly grant permission. Six silent years after the defendants bought the servient property, they suddenly demanded that the plaintiffs remove the landscaping and improvements within the easement. They cut the irrigation and electrical lines. Plaintiffs filed this lawsuit, alleging equitable easement and irrevocable licenses. The trial court found an irrevocable license, and the defendants appealed.

The court first found that there was no equitable easement established. This would have required the plaintiff – easement holder to be without knowledge, or the means of knowledge, of the facts. Here their Grant Deed on its face described the easement for access and public utility purposes. The landscaping and improvements are not required for these purposes. The owner is charged with knowing what their deed says, so they were with knowledge.

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California real property owners with larger parcels can occasionally have recreational users on the land. Invited or otherwise, hikers, bikers, hunters and fisherman may wander on personally property whether the owner is aware of it or not. Generally, they are not required to keep the property safe nor warn of hazards. If the recreational user is injured, the property owner has some protection from liability. But what if the user is injured by the landowner’s activities? A recent California Supreme Court decision has found that the active conduct of the landowner, if conducted negligently, may result in liability to a recreational user who is injured.

Sacramento recreational property liability attorney.jpgIn Klein v. United States, Klein was riding his bicycle on a road in a National Forest. It was a two-lane paved road open to the public. He was hit head-on by a car driven by a U.S Fish and Wildlife volunteer, on his way to watch some birds. Klein was seriously injured, lost the use of his left arm, and was forced to take a medical retirement. His wife also had to take an early retirement to care for him. They sued the United States in Federal Court.

Under the Federal Tort Claims act, the U.S. may be liable when, under state law, an individual would have liability. On appeal, the Ninth Circuit was concerned that there were no California decisions which directly addressed this issue, so they could not determine whether there was liability under state law. The Federal Appellate Court issued an order requesting the California Supreme Court determine how state law would be applied on these facts.

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All owners of real estate in California risk liability for injuries to others on the premises. The owner has possession (or control) of the property, and if it can be established they had knowledge of a dangerous condition, they are at risk. Real estate attorneys advise their clients that to establish liability the injured party must show that the owner had a duty of care to the injured party, there was a breach of the duty of care that was the proximate cause of the injuries, and the injured party suffered damages. But what about injuries that occur off the property? A landowner in LA County was disappointed to learn that they may have liability for an injury that occurred off the premises, to someone who had not been on the defendant’s property.

Sacramento property liability attorney.jpgIn Annocki v. Peterson Enterprises, LLC, a vehicle which exited the defendant’s restaurant parking lot collided with and killed a motorcyclist. The biker’s parents brought this suit for damages. The restaurant parking lot faced the Pacific Coast Highway, and there was a divided median. The patron left the parking lot and tried to make a left turn into oncoming traffic. The plaintiffs claim that the owner was negligent in that the design of the driveway created a decreased visibility of the adjacent highway. There were no signs indicating ‘right-turn only.”

The court first reviewed the law on determining whether the owner had a duty to someone off the premises. The California Supreme Court has determined that this requires balancing of a number of considerations; the major ones are

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Real estate contracts contain covenants and warranties that the parties sometimes want to enforce after the sale has been concluded. Whether or not they are still enforceable is determined by whether the covenants were “merged in the deed.” The idea is that, once the Seller grants and Buyer accepts the deed, the deed is conclusive and all bets are off. The general rule is that any covenants in a contract between the parties are merged into the deed. If a covenant is not performed, then the rights of the parties depend on the terms of the deed. If the deed does not discuss the covenants, then whether these covenants survive and remain enforceable after closing depends on the intent of the parties. The starting point for figuring out the party’s intent is the language of the deed. When a provision in a deed is certain and unambiguous it prevails over an inconsistent provision in a contract of purchase pursuant to which the deed was given. Sacramento real estate attorneys commonly see situations where the intent is clear – the contract states whether the conditions survive, or do not. More troubling is the case where the contract is not so clear.

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In Rams Gate Winery, LLC v. Joseph G. Roche, Rams Gate bought a Sonoma County winery property from Roche. As part of the agreement, the Roches agreed to provide

“[w]ithin ten days of the Effective Date” “written disclosure” of any “information known to Seller” regarding violations of “building, zoning, fire, health, environmental statutes, ordinances or regulations; [and] any known geological hazards; … soil reports, … geotechnical reports, … and all other facts, events, conditions or agreements which have a material effect on the value of the ownership or use of the Property….”

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In California, most lenders on real estate take back a deed of trust in which they are named the “beneficiary.” If the borrower defaults, the beneficiary may then instruct the trustee to proceed to foreclose. Occasionally there is more than one beneficiary, resulting in multiple cobeneficiaries. They may all have contributed a percentage of the funding, or may have been assigned a fractional interest in the note and deed of trust after-the-fact. If the borrower defaults on their loan, California real estate attorneys will advise their lender clients to instruct the trustee to initiate foreclosure proceedings by execution a declaration of default. But, what happens if the cobeneficiaries do not agree to proceed to foreclose? The law is clear that each cobeneficiary has a right to proceed with the foreclosure; however, trustees are not forced to agree, and are reluctant to do so. Beneficiaries must rely on a statutory agreement ahead of time if they want this protection.

Sacramento cobeneficiary dispute.jpgIn apparently the only California decision to address the issue head on, Perkins v. Chad Development Corp., there were two cobeneficiaries. The borrower had defaulted on loan payments, and had let the property taxes go in to arrears. One cobeneficiary wanted to proceed to a nonjudicial foreclosure, the other did not. The property was foreclosed, and the buyer brought a quiet title action to clear title in his name. A third party intervened, claiming an equitable interest in the property. His argument was that the foreclosure sale was not valid because the Notice of Default and Election to Sell had not been executed by both cobeneficiaries. The court did not agree.

The court first noted that joint beneficiaries have a community of interest in the secured obligation akin to a joint venture or partnership, and any of them should have sufficient agency powers to record the notice of default to protect their mutual interests. As a cobeneficiary, beneficiary Perkins was a tenant in common in the beneficial interest under the note and trust deed. A cotenant has a right to protect the estate from injury or loss without the aid or assistance of other cotenants. As the borrower had defaulted on trust deed and had permitted the taxes to go delinquent, Perkins as a cotenant was entitled to protect the common beneficial interest by foreclosing the security.

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In order for a deed to be effective in California, it must be “delivered” and “accepted.” These terms do not have their normal meanings in this context. Delivery does not mean the physical act of transmitting the deed to the grantee. Delivery refers to the intention of the grantor that the deed be presently operative, with the grantee immediately becoming the legal owner. Delivery can be inferred if the deed is recorded or is in the grantee’s possession. The deed also must be accepted, which again refers to the grantee’s intent. The grantee must have the intention to become the legal owner of the property. Usually, these issues do not come up, except in unusual circumstances in which a party to a deed should consult an experienced real estate attorney. Such an unusual case came up when deeds were prepared for a trust that had not been created. After the grantee’s death, the grantors’ heirs wanted the property back. The grantors’ heirs were disappointed to learn that, nonetheless, the deeds had been delivered and accepted, and the property was not theirs.

Sacramento deed delivery attorney.jpgIn Gloria Luna v. Erica Brownell, the dispute arose regarding a house in Monterey Park. An attorney was involved and had the parties sign too many deeds, confusing everything. Al owned the property and wanted to plan for his passing. He signed a deed granting the property to himself, brother, and two sisters as co-owners. Later (here’s where the attorney got involved) the two sisters each signed two deeds, one granting their interest back to Al as an individual, the other to Al as trustee of a trust (that had not been created). Several weeks later, Al executed the Declaration of Trust. The sister’s deeds to the Trust were recorded, and Al died 11 days later.

The sisters’ heirs filed this lawsuit claiming that the deed to the Trust was void because the trust did not exist when the deeds were signed and delivered to the Lawyer. The defendant argued that the sisters, when they signed the deeds, had the intent to return title to Al, either as an individual or as trustee of the trust.

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Co-owners of property often enter agreements that include a right of first refusal. If one of the parties wants to sell their interest, and receives a bona fide offer, they must offer to sell to the co-owner on the same terms. Partition is a legal action which forces the sale of a property when co-owners cannot agree to another way to end the relationship. The right to partition can be waived by contract, either expressly or by implication. Parties entering a co-ownership agreement should consult with a Sacramento real estate attorney in drafting the agreement to ensure it will accomplish their goals, including waiver of the right to partition if that is what they want. In a decision regarding a Lake Tahoe vacation home valued at over $2.8 million, a truculent co-owner tried to argue that the right of first refusal waived the right to partition, but the court said no. If you want to waive all possibility of partition, you should clearly state that in your agreement.

sacramento right of first refusal attorney.jpgIn LEG Investments v. Boxler, the parties were 50% co-owners of a house on the water in Carnelian Bay. LEG was a general partnership, and Eppie Johnson (founder of Eppies restaurants and Eppies Great Race, the world’s oldest triathlon) was the general partner. The co-owners had a Tenant-in-Common Agreement, which included a right of first refusal.

The Right of First Refusal Language

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Under California foreclosure law, a trustee’s sale eliminates all interests in the property that are recorded after the deed of trust was recorded. For that reason, holders of interests want to get notice that the property is being foreclosed. Generally, the foreclosing trustee is only required to provide notice of the recording of the notice of default to the parties identified in statutes or specified in the deed of trust. Other persons with lesser interests that are junior to the deed of trust are not automatically entitled to notice. Civil Code section 2924b(a) provides a process for anyone to record a request for notice, which then obligates the trustee to send them a copy of the Notice Of Default. Civil Code 2924b (b), set out in full below, describes who otherwise must be provided notice. The trick is whether you are included in the specified categories. In a recent decision, an easement holder was disappointed to learn that he was not, and the easement was lost. They should have recorded a request for a copy of the notice of default.

Saccramento notice of default attorney.jpgIn George Perez as Trustee v. 222 Sutter St. Partners, there was a foreclosure and the subsequent quiet title action was about whether the foreclosure of 425 Bush Street in San Francisco extinguished easement rights. The easement holder had not received notice from the trustee of the foreclosure.

The easement holders argued that an easement holder is included in section 2924b, subdivision (c)(2)(A), as “[a] successor in interest, as of the recording date of the notice of default, of the estate or interest or any portion thereof of the trustor or mortgagor of the deed of trust or mortgage being foreclosed. It continued that it was a successor to the mortgagor of the deed of trust, who was the owner. But this is impossibility. An easement is an interest, but the mortgagor/owner cannot own an easement across one’s own property. Thus, the easement holder cannot be a successor to that interest.

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