Volume 5, Number 6

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May 2010 

Special Message

In this month’s edition of the Newsletter, we are including the second installment of the new statutes summary prepared by Tina Estrailian and her colleagues at Garrett & Tully:A User’s Guide to 2008-2009 California Statutes Relating to Title Insurance.  We appreciate their efforts.

As the Section’s Executive Committee completes its review with our partner, the Ziman Center for Real Estate at UCLA, of this year’s Crocker Symposium and starts the process of preparing for next year’s event, now is a good time to let us know your thoughts on how we can present programs of most interest to you.

This is also a good opportunity to remind our readers that the Section’s subsection steering committees will be scheduling their meetings soon to plan the programming for next fiscal year. If you are interested in participating, contact the appropriate subsection chairperson listed at the bottom of this Newsletter.

Sincerely,

Norm Chernin , coeditor, Real Property Section Newsletter
E-mail address:
nchernin@firstam.com

Real Property Scheduled Events 
View All Real Property Events

May 27, 2010: Rent Relief Amendments–What Retail and Office Landlords and Tenants Should Consider (12:30 PM).

June 9, 2010: Real Property Section Twelfth Annual Installation and Awards Dinner (6:00 PM).

June 17, 2010:  “So You Think It Never Rains in Southern California? An Update on Municipal, Construction, and Industrial Enforcement and Compliance” (12:00 PM).

Recent Cases
Cases from April 1 through April 31

Bankruptcy
CEQA
CEQA
CEQA
CEQA
CEQA
Construction Law
Construction Law
Escrows

Land Use
Land Use Litigation
Landlord and Tenant
Redevelopment
Right of First Refusal
Title Insurance
Trust Deed Foreclosure
Trusts and Estates
Water Law


Bankruptcy

Money award under California Business and Professions Code Sec. 7031(b)--which provides that a client who employs an unlicensed contractor may recover all compensation paid to that contractor, regardless of whether the contractor has committed fraud and regardless of whether the client has sustained actual harm--did not fall within 11 U.S.C. Sec. 523(a)(2)(A)’s exception from discharge of any debt for money, property, services, or credit obtained by fraud because state statute was not premised on fraud or actual harm.
     In re Sabban - filed April 13, 2010
     Cite as 08-60017
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CEQA

When a properly filed notice of exemption (“NOE”) complies in form and content with California Environmental Quality Act requirements and declares an agency has taken an action that would constitute final approval of a project under a CEQA exemption, the 35-day period for challenging the validity of this asserted approval under CEQA begins to run. Flaws in the decision-making process underlying a facially valid and properly filed NOE do not prevent that notice from triggering 35-day period to file a lawsuit challenging agency's determination that it has approved a CEQA-exempt project.
     Stockton Citizens for Sensible Planning v. City of Stockton (A. G. Spanos Construction, Inc.) - filed April 1, 2010
     Cite as S159690
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CEQA

Although an environmental impact report must consider a reasonable range of potentially feasible alternatives and compare their environmental impacts, it does not have to identify and analyze alternatives that would not meet a project’s objectives nor does it have to discuss every possible permutation of alternatives. Where possibility of creating an off-site development would have prevented realization of project’s primary objective of creating a more campus-like setting and nullify most, if not all, of the other project objectives, EIR was not deficient in failing to consider this alternative. Substantial evidence supported conclusion that physical proximity was key to meeting project’s objectives. Plaintiffs’ general comments about water quality did not fairly apprise defendants about the specific issue of numerical water quality standards and the alleged violation of those standards.
     Jones v. The Regents of the University of California - filed March 12, 2010, publication ordered April 7, 2010, First District, Div. Four
     Cite as 2010 SOS 1894
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CEQA

City’s general plan contemplating a residential development in an unincorporated area adjacent to a municipal airport violated the State Aeronautics Act by failing to adopt the safety and density criteria established in the Airport Land Use Planning Handbook. Legislature did not intend to grant discretion to city located in a county that has neither established an Airport Land Use Commission nor adopted resolution for alternative procedures to decide which of the handbook’s criteria should be incorporated into a general plan. Nothing in Public Utilities Code reflects that it was intended to preclude a mandate action challenging the validity of a city’s general plan due to the city’s failure to comply with Public Utilities Code Sec. 21670.1(e). City’s approval of a final environmental impact report for that general plan violated the California Environmental Quality Act because the EIR failed to adequately analyze the airport-related impacts of the plan. City could not omit consideration of a reduced development alternative simply because such an alternative would not fully satisfy every one of the city’s objectives. Since environmental impacts of project were primarily due to the impacts of growth itself, alternatives analysis should have included an assessment of a reduced growth alternative that would meet most of the objectives of the project but would avoid or lessen these environmental impacts. An EIR for a general plan need not establish a likely source of water but need only address the reasonably foreseeable impacts of supplying water to the project, note any uncertainties that preclude the identification of future water sources, and discuss the reasonably foreseeable alternatives and environmental impacts of those alternatives. EIR concluding that water demand from a new development would be offset by conservation, conversion of agricultural lands to urban use, and other measures adequately analyzed the impact on the water supply.
     Watsonville Pilots Association v. City of Watsonville - filed March 15, 2010, publication ordered April 12, 2010, Sixth District
     Cite as H033097
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CEQA
Water Quality Control Plan for the Sacramento River and San Joaquin River Basins was a certified regulatory program under the California Environmental Quality Act. Staff report for salt and boron TMDL was a proper in-lieu equivalent to an environmental impact report; report was not required to analyze speculative impact of constructing and operating infrastructure to comply with TMDL. Report did not require new water to be found and imported. Staff report on dissolved oxygen levels could not be considered a negative declaration that improperly deferred analysis of environmental impacts. State board considered cumulative impacts of measures related to salt and boron TMDL and dissolved oxygen levels. Board did not unreasonably limit comments from interested parties.
     San Joaquin River Exchange Contractors Water Authority v. State Water Resources Control Board - filed April 13, 2010, Third District
     Cite as 2010 SOS 2014
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CEQA
Claimed deficiencies in an environmental impact report compelled de novo review where report did not adequately apprise all interested parties of true scope of proposed refinery project. EIR was inadequate as a matter of law where report did not address whether project would include any equipment changes that would facilitate the future processing of heavier crude oil, contained conflicting statements about the objectives of project, and failed to establish, analyze, and consider an environmental baseline. City’s decision to approve the project, after giving the city council final approval over a mitigation plan formulated a year after the EIR process, did not satisfy California Environmental Quality Act’s requirements. City’s treatment of hydrogen pipeline as a separate project did not constitute illegal piecemealing where real party in interest’s efforts to process a larger percentage of California fuel at refinery did not depend on construction of a hydrogen pipeline.
     Communities for a Better Environment v. City of Richmond (Chevron Products Company) - filed April 26, 2010, First District, Div. Four
     Cite as A125618
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Construction Law
Where plaintiff paid defendant for landscaping work at his home, his knowledge that defendant was not licensed when work commenced did not bar an action for full reimbursement under Business and Professions Code Sec. 7031(b) and plaintiff was entitled to recover the total amount paid even though defendant was licensed during a portion of the work. Plaintiff was also entitled to recover payments for materials retained by him, in addition to payments for labor.
     Alatriste v. Cesar's Exterior Designs, Inc. - filed April 6, 2010, Fourth District, Div. One
     Cite as D054761
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Construction Law
Money award under California Business and Professions Code Sec. 7031(b)--which provides that a client who employs an unlicensed contractor may recover all compensation paid to that contractor, regardless of whether the contractor has committed fraud and regardless of whether the client has sustained actual harm--did not fall within 11 U.S.C. Sec. 523(a)(2)(A)’s exception from discharge of any debt for money, property, services, or credit obtained by fraud because state statute was not premised on fraud or actual harm.
     In re Sabban - filed April 13, 201
     Cite as 08-60017
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Escrows
Where lender and the settling agent had a direct contractual relationship arising from the closing instructions--which provided for distribution of loan proceeds based on information lender had received from settling agent in the estimated HUD-1 prepared by settling agent--and settling agent certified that there were no additional payoffs or fees that were not included in the estimated HUD-1 or verbally disclosed to lender--settling agent was contractually bound to disclose any additional payoffs that were not disclosed in the estimated HUD-1 or verbally. This duty to disclose continued until the loans closed, not when escrow closed.
     Plaza Home Mortgage, Inc. v. North American Title Company, Inc. - filed April 27, 2010, Fourth District, Div. One
     Cite as D054685
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Land Use
City’s general plan contemplating a residential development in an unincorporated area adjacent to a municipal airport violated the State Aeronautics Act by failing to adopt the safety and density criteria established in the Airport Land Use Planning Handbook. Legislature did not intend to grant discretion to city located in a county that has neither established an Airport Land Use Commission nor adopted resolution for alternative procedures to decide which of the handbook’s criteria should be incorporated into a general plan. Nothing in Public Utilities Code reflects that it was intended to preclude a mandate action challenging the validity of a city’s general plan due to the city’s failure to comply with Public Utilities Code Sec. 21670.1(e). City’s approval of a final environmental impact report for that general plan violated the California Environmental Quality Act because the EIR failed to adequately analyze the airport-related impacts of the plan. City could not omit consideration of a reduced development alternative simply because such an alternative would not fully satisfy every one of the city’s objectives. Since environmental impacts of project were primarily due to the impacts of growth itself, alternatives analysis should have included an assessment of a reduced growth alternative that would meet most of the objectives of the project but would avoid or lessen these environmental impacts. An EIR for a general plan need not establish a likely source of water but need only address the reasonably foreseeable impacts of supplying water to the project, note any uncertainties that preclude the identification of future water sources, and discuss the reasonably foreseeable alternatives and environmental impacts of those alternatives. EIR concluding that water demand from a new development would be offset by conservation, conversion of agricultural lands to urban use, and other measures adequately analyzed the impact on the water supply.
     Watsonville Pilots Association v. City of Watsonville - filed March 15, 2010, publication ordered April 12, 2010, Sixth District
     Cite as H033097
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Land Use Litigation 
Complaint against city based on land use guidelines was not subject to a special motion to strike under Code of Civil Procedure Sec. 425.16 since claims were not based on any statement, writing, or conduct in furtherance of city’s right of petition or free speech, and were not made in connection with a public issue or an issue of public interest.
     USA Waste of California, Inc. v. City of Irwindale - filed April 26, 2010, Second District, Div. Five
     Cite as B212719
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Landlord and Tenant

Section 8 housing vouchers are not paid to the public housing authority, but to a landlord; such assistance payments are not included in a tenant's income for purposes of calculating the aggregate amount of cash available to tenant. Legislature did not intend to compel landlords to participate in the Section 8 program. Where tenant's use and enjoyment of her apartment was undisputed, trial court did not err in granting motion for non-suit on tenant's claim that landlord's rejection of Section 8 payments interfered with her use and enjoyment of the property. Trial court did not err in omitting to mention that tenant's sons were listed as lessees in issuing instruction for jury to not consider whether tenant or her children have been or were able and willing to pay rent.
     Sabi v. Sterling - filed April 8, 2010, Second District, Div. Eight
     Cite as B205279
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Redevelopment
A government agency may use funds earmarked for low- and moderate-income housing to purchase and renovate property to acquire and renovate buildings that will not themselves be used for affordable housing if such an acquisition is directly linked to a transaction that will increase the supply of affordable housing. City and redevelopment agency could use these funds to purchase and renovate property that would then be leased to a school district as part of an arrangement in which the district would in turn lease other property to the redevelopment agency and a nonprofit housing corporation for the construction of a low- and moderate-income apartment complex for senior citizens. Where only 16 percent of housing units within a privately owned development subject to taxation would be dedicated to very low- or low-income households, project need not be submitted to a vote of the electorate, since it would not qualify as a "low rent housing project." Even if school district should have offered the property it leased to city to all the public entities identified in Government Code Sec. 54222, failure to do so did not invalidate the transaction. Redevelopment agency was not required to demonstrate that senior housing project would eliminate blight.    
City of Cerritos v. Cerritos Taxpayers Association - filed April 20, 2010, Second District, Div. Eight
     Cite as 2010 SOS 2145
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Right of First Refusal
Right of first refusal in a tenancy in common agreement modified statutory right to partition and required a selling cotenant to first comply with the terms of agreement giving cotenant first offer to sell on terms as favorable as those offered by a prospective buyer before seeking partition after sale fell though. Trial court erred in finding the right of first refusal was a permanent waiver of the statutory right of partition for the term of the tenancy in common.
     LEG Investments v. Boxler - filed April 1, 2010, Third District
     Cite as C058743
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Title Insurance
Where lender and the settling agent had a direct contractual relationship arising from the closing instructions--which provided for distribution of loan proceeds based on information lender had received from settling agent in the estimated HUD-1 prepared by settling agent--and settling agent certified that there were no additional payoffs or fees that were not included in the estimated HUD-1 or verbally disclosed to lender--settling agent was contractually bound to disclose any additional payoffs that were not disclosed in the estimated HUD-1 or verbally. This duty to disclose continued until the loans closed, not when escrow closed.
     Plaza Home Mortgage, Inc. v. North American Title Company, Inc. - filed April 27, 2010, Fourth District, Div. One
     Cite as D054685
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Trust Deed Foreclosure
Plaintiffs' actions in procuring a high cost, high interest loan to avoid foreclosure by using other property they owned as security was sufficient to support detrimental reliance, although their actions provided no particular benefit to defendant. Bank agent’s alleged statement that he would postpone foreclosure sale to allow plaintiffs additional time to close on a loan if plaintiffs needed the time was sufficiently definite to support promissory estoppel. Where plaintiffs dismissed the third-party foreclosure sale purchaser from suit, they could not obtain remedy of setting aside the sale and recovering the property.
     Garcia v. World Savings, FSB - filed April 9, 2010, Second District, Div. Four
     Cite as B214822
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Trusts and Estates
Probate Code Sec. 850 allows any interested person to request probate court to order a conveyance or transfer of property "claimed to belong to another" and does not require probate court to find that property belonged to the petitioning party. Sec. 856 clearly and unambiguously grants a probate court the power to order a conveyance or transfer to the person entitled to the property in question, but also to grant other appropriate relief. Probate court therefore did not exceed its authority by placing misappropriated funds, together with the statutory penalty, in decedent’s estate for a future determination of their proper disposition. Probate court was not required to determine who was entitled to the funds before it could take them away from a person who was not entitled to them. When it is established that property is recoverable under Sec. 850 and that the party who took the property acted in bad faith, the Sec. 859 penalty may be imposed. Statutory emphasis is not on to whom the property belongs, but whether the person in possession in bad faith wrongfully acquired it. Probate court was not required to award statutory penalty to anyone.
     Estate of Kraus - filed April 27, 2010, Second District, Div. Five
     Cite as B213484
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Water Law
Settlement Act authorizes government to seek recoupment for irrigation district’s prior violations of operating criteria and procedures. Allowing such recoupment will not cause inevitable conflict with existing water decrees. Act validated 1973 operating criteria and procedures. Award of interest payable in water is not appropriate unless there is some factual basis for awarding more water than was originally taken so as to provide complete relief. Water interest is appropriate for post-judgment interest; it should be awarded prejudgment as well. Government did not unduly delay in filing action where Congress did not create government’s cause of action under the Settlement Act until 1990, and government did not file suit until after negotiations failed. District court erred in accounting for statistical uncertainty in flow data by subtracting confidence interval from published quantities. Where government failed to change operating criteria and procedures to reflect increase in diversion allotments and did not show that the diversions actually taken exceeded what the increased allotments should have been, government did not demonstrate its entitlement to recoupment for excess diversions for this time period. Irrigation district’s obligation to comply with water duties cannot excuse spills, because water duties are limited by beneficial use. District court’s determination that water rights holders had no liability did not require court to dismiss them from the lawsuit and put them in a position to collaterally attack the judgment; water rights holders were not prevailing parties.
     United States v. Bell - filed April 20, 2010
     Cite as 05-16154
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Los Angeles County Bar Association
2010 Real Property Section Newsletter
REAL PROPERTY SECTION REVIEW
Daniel L. Goodkin, Editor    *   Norman A. Chernin, Co-Editor

SECTION OFFICERS
Chair
Michael S. Klein

First Vice-Chair
Pamela L. Westhoff

Second Vice-Chair
Gregg J. Loubier

Treasurer
Theresa C. Tate

Secretary
Sarah V. J. Spyksma

Immediate Past-Chair
Donald C. Nanney


Section Administrator
Terrina Scott

EXECUTIVE COMMITTEE MEMBERS

Eric Altoon
Nedra E. Austin
Babak B. Baradaran
Susan J. Booth
James L. Brat
Norman A. Chernin
Brant Dveirin
Robert T. Flick
Daniel L. Goodkin
Brian Richard Hochleutner
Linda S. Koffman
Rebecca H. Lessley

Peter J. Niemiec
Robert C. Pearman
Leslie D. Reed
D. Eric Remensperger
David C. Sampson
Michael G. Smooke
Linda E. Spiegel
Andrew J. Yamamoto


SUB-SECTION CHAIRS
Commercial Development & Leasing, Marcia Z. Gordon
Construction Law, Richard Mah
Land Use Planning & Environmental Law, Claire Hervey Collins
Real Estate Finance, Caroline Dreyfus
General Real Estate Law, Nadav Ravid
Title Insurance, Gytis L. Nefas

 

Readers are advised that changes in the law may affect the accuracy of this publication or the functionality of links after the publication date.