Volume 5, Number 11

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Archive

October 2010


Special Message

This month we have an interesting group of cases covering a range of real property practice areas for your perusal. I hope that you find something of interest for your particular practice.

Sincerely,

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


Real Property Scheduled Events 
 View All Real Property Events

October 20, 2010: The Future of Commercial Real Estate Finance Begins Now: Lessons Learned and the Way Forward (12:30 PM)

October 26, 2010: Deal or No Deal: The Impact of Game Theory on Construction Claims, Negotiations, and Dispute Resolution (12:30 PM)

October 28, 2010: Issue Spotting in Development Due Diligence (12:30 PM)

November 3, 2010: Rents & Profits Receiverships: Conceptual and Practical Aspects (6:30 PM)

November 10, 2010: Ninth Annual Environmental Law Fall Symposium: Spills, Chills, and Bills: A Review of 2010 Environmental Developments (11:30 AM)

November 10, 2010: How to Be a Zealous Advocate for Your Client's Project before a Local Agency Board Without Violating the Brown Act (12:30 PM)

November 16, 2010: KWOK Talk and Title Insurance: Termination/Continuation of Coverage under Policies of Title Insurance (12:30 PM)

November 16, 2010: Complex Court Symposium (3:30 PM)

November 18, 2010: Financing Distressed Debt Purchases (12:30 PM)

Recent Cases
Cases from September 1 through September 30

Bankruptcy
CERCLA
Construction Law
Construction Law
Construction Law
Environmental Law
Environmental Law
Environmental Law


Land Use
Land Use
Land Use
Real Property
Rent Control
Title Insurance
Title Insurance
Trust Deed Foreclosure


Bankruptcy 
Where different debtors filed for Chapter 7 bankruptcy at a time when the value of the equity in their homes was less than the amount they were eligible to claim, respectively, under the federal or Arizona homestead exemptions, leaving no value in the homestead properties that could be claimed by the bankruptcy estate, but the value of the properties subsequently increased before the cases were closed so that the debtors had equity in excess of their exemptions, the trustee could force a sale of the properties in order to recover the excess equity because the exemptions allowed the debtors to claim an interest in dollar amounts, not specific properties. The fact that the value of the claimed exemption plus encumbrances equaled market value at the time of filing did not remove the entire asset from the estate. Assuming estoppel is available as a remedy in bankruptcy proceedings, debtor could not estop trustee from selling debtor's home where debtor made no showing that the trustee--who left the case open for years--intended for the debtor to act as if he would be able to retain the property permanently; that the debtor had a right to believe the trustee, by her inaction, intended the debtor to believe she had released all rights to the homestead; or that the debtor was ignorant of the true facts. Any duty to police misconduct by the trustee fell upon the U.S. Trustee in debtor's district, and abandonment of an asset is not a remedy for a trustee's alleged misconduct. 
     In the Matter of Gebhart - filed September 14, 2010
     Cite as 07-16769
     
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CERCLA
Where defendant settled previous litigation for having contaminated a parcel of land and obtained a release "from any and all claims, demands, actions, and causes of action arising from or related to" that parcel "including without limitation, claims arising from the release(s) of hazardous substances and/or contaminants at, on, under or emanating from" that parcel--and then sought enforcement of this agreement in federal court after defendant was sued in state court over residual contamination in a neighboring parcel-parties who were also named as defendants in the state court action who did not have notice of the original litigation and settlement agreement had a significantly protectable interest warranting an order allowing them to intervene as of right in the federal action. 

Settlement agreement did not provide defendant with protection against cross-claims for contribution and equitable indemnity in the state court action under CERCLA or the California statutes providing for confirmation of "good faith settlements" because CERCLA Sec. 113(f)(1) expressly authorizes claims for contribution and precludes any finding of preemption as to state law claims for contribution, and only nonparties with constitutionally sufficient prior notice may be bound by a "good faith settlement." District court did not abuse its discretion by denying defendant's fee application based on a finding there was no "prevailing party" where resolution of the dispute required interpretation of two contractual provisions, and defendant was only successful in securing a judgment in its favor as to one provision. 
     City of Emeryville v. The Sherwin-Williams Company - filed September 15, 2010
     Cite as 09-15018
     
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Construction Law
Bid for government contract was erroneously rejected as nonresponsive where reply to question was responsive on its face but was determined to be false based on extrinsic investigation. Bid could have been rejected on ground that bidder was non-responsible, but such rejection requires a hearing before the bid is rejected.
     Great West Contractors, Inc. v. Irvine Unified School District - filed August 31, 2010, Fourth District, Div. Three
     Cite as G041688
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Construction Law
Trial court did not err in enforcing oral home improvement contract in suit by general contractor against homeowners--even though Business and Professions Code Sec. 7159 requires that such contracts be in writing--because the homeowners failed to show they were the type of persons who came within Sec. 7159--and that an exception to the statute did not apply where the project was a complex, high-end remodel on which the design continued to evolve over the years of planning and construction; the owners' architect and designer had extensive involvement in the project as their representative; and the owners would be unjustly enriched if contractor was denied recovery. Contractor was entitled to an award of attorney fees for prevailing on the cause of action under Civil Code Sec. 3260.1, which governs withholding of progress payments on a construction contract, where a jury found that homeowners withheld an amount exceeding 150% of the disputed amount from progress payments to the contractor, and where the legislature intended to authorize both a 2% charge in lieu of interest and attorney fees to a prevailing party. 
     Hinerfeld-Ward, Inc. v. Lipian - filed September 1, 2010, Second District, Div. Four
     Cite as 2010 S.O.S. 5246
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Construction Law
Where subcontractor served 20-day preliminary notice required by Civil Code Sec. 3097 on bank that was erroneously listed as the lender in "preliminary information" sheet furnished by owner, and there was no evidence it had reason to know of the error, subcontractor was not required to search county records to determine who the actual lender was. Where subcontractor sued lender for disbursing payments after service of bonded notice, summary judgment for lender was erroneous, as triable issue existed as to whether plaintiff served preliminary notice on reputed lender in good faith.
     Force Framing, Inc. v. Chinatrust Bank (U.S.A) - filed August 31, 2010, Fourth District, Div. Two
     Cite as 2010 S.O.S. 5236
     
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Environmental Law
U.S. Army Corps of Engineers' decision approving the construction of a business park on protected wetlands was not arbitrary and capricious where Corps stated a rational connection between facts found and conclusion that proposed site was the least environmentally damaging practicable alternative. U.S. Fish and Wildlife Service's biological opinion that proposed project "would not result in the adverse modification or destruction of critical habitat" for certain species was not arbitrary and capricious because agency's definition of "adverse modification" did not ignore the value of critical habitat for the recovery of the affected species, agency's no-adverse-modification finding did not conflict with its determination that project would destroy certain amounts of affected species' critical habitat, and agency was not required to address the rate of loss of critical habitat for the species in question.
     Butte Environmental Council v. U.S. Army Corps of Engineers - filed June 1, 2010, amended September  1,

     2010
     Cite as 09-15363
     
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Environmental Law
Federal courts lack subject-matter jurisdiction to conduct review of administrative compliance orders issued by the Environmental Protection Agency pursuant to the Clean Water Act before the EPA has filed a lawsuit in federal court to enforce the compliance order. Preclusion of pre-enforcement judicial review does not violate due process.
     Sackett v. U.S. Environmental Protection Agency - filed September 17, 2010
     Cite as 08-35854
     
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Environmental Law
Where natural gas pipeline operator that only shipped gas south to Mexico sought authorization to expand and modify its existing system to allow for the transport of foreign-sourced natural gas northward, the Federal Energy Regulatory Commission's ("FERC's") environmental impact statement--which explicitly considered the environmental impact of end-use consumption and imposed what the FERC reasonably believed to be effective measures to mitigate the impact, and was reasonably thorough given the uncertainty surrounding the impact of burning imported natural gas--did not violate the National Environmental Policy Act. The FERC's reliance on the California Public Utilities Commission's ("CPUC's") previous findings setting standards with respect to natural gas quality was not unreasonable or an abuse of discretion where the state agency's determination was the product of a lengthy decision- making process subject to ample challenges. Plaintiff failed to meet its burden of showing that the FERC abused its discretion under the Natural Gas Act, which grants the FERC power to authorize interstate pipeline projects, where the agency determined that approval of the project, as conditioned upon compliance with the CPUC's gas quality standards, would serve the public interest. The FERC was not obligated to perform a full conformity determination under the Clean Air Act regarding the eventual burning of natural gas shipped in proposed pipeline because the Act did not require that the FERC attempt to "leverage its legal authority to influence or control" state air quality issues, and because there remained substantial uncertainty regarding such eventual burning. 
     South Coast Air Quality Management District v. Federal Energy Regulatory Commission - filed September 9,

     2010
     Cite as 08-72265
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Land Use
Local ordinance subjecting mobile home park conversions to more stringent requirements than those imposed by state law was preempted. 
     Colony Cove Properties, LLC v. City of Carson - filed August 31, 2010, Second District, Div. Four
     Cite as 2010 S.O.S. 5239
     
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Land Use
Substantial evidence supported UC Regents' finding that proposed training center for student athletes would not be an "addition" or "alteration," within the meaning of the Alquist-Priolo Earthquake Fault Zoning Act, to the adjoining stadium and thus would not be subject to the statute's value restriction on certain projects coming within those definitions. Regents acted in accordance with CEQA in certifying EIR that clearly disclosed project would be located in a delineated fault zone, assured the public that project would not be built across the trace of a known active fault and that further geological investigation would be conducted before the sites were developed to confirm this fact, and identified as a "significant and unavoidable" impact the fact that people or structures at the project sites could be exposed to potentially substantial adverse effects, including the risk of loss, injury, or death from rupture of a known earthquake fault or strong seismic ground shaking. 
     California Oak Foundation v. The Regents of the University of California - filed September 3, 2010, First

     District, Div. Three
     Cite as 2010 S.O.S. 5284
     
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Land Use
Requirement that a private Christian school secure a conditional use permit and comply with the California Environmental Quality Act did not constitute a substantial burden on the exercise of religious freedom under the Religious Exercise of Land Use and By Institutionalized Persons Act. Denial of school's clean hands waiver request based on neutral zoning considerations did not substantially burden its exercise of religious practices within the meaning of the Act. Absent any evidence that some other entity seeking to use the property would be treated any differently, trial court did not abuse its discretion in concluding no violation of the Act's equal terms provisions occurred. 
  County of Los Angeles v. Sahag-Mesrob Armenian Christian School - filed September 22, 2010,
   Second District, Div. Five
   Cite as B216888
   
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Real Property
Where plaintiff brought action to quiet title, and trial court found that plaintiff had legal title but that defendant retained an equitable interest, then directed defendant to quitclaim her interest to plaintiff and directed plaintiff to pay defendant the full market value, plaintiff's subsequent request--made prior to a hearing to value defendant's interest--was untimely and of no effect. The case had already been submitted, and the hearing did not have the effect of vacating the submission. Court had jurisdiction to set aside plaintiff's Code of Civil Procedure Sec. 473 motion to dismiss and to order plaintiff to pay defendant's attorney fees to defend against plaintiff's motion. Trial court had equity jurisdiction to award defendant compensation for her interest in the property, even though she did not file a cross-complaint seeking affirmative relief, where defendant sought "such other and further relief as the Court may deem just and proper." Substantial evidence supported trial court's valuation of defendant's interest--which was formerly a garage area connected to home on other lot--as a conforming legal lot where plaintiff previously intended to live in an apartment above the garage and give other lots to his daughters, defendant's appraiser testified that the garage area parcel conformed to the size requirement for a single family lot under existing zoning and could be a legal single family lot if it were approved by the city, and defendant's appraiser acknowledged that his valuation took into account the presence of functional utility hookups for the property. 
     Vanderkous v. Conley - filed September 2, 2010, First District, Div. Three
     Cite as 2010 S.O.S. 5275
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Rent Control
Landlords cannot circumvent their obligations under the Los Angeles Rent Stabilization Ordinance through the tenant's acquiescence or agreement. Plaintiff was entitled to recover her excess rent payments--even though the rented property lacked a certificate of occupancy and was not registered under the ordinance--where plaintiff learned of the unlawful status of her rental unit after she had lived there for over two years and had already entered into the rental agreement with landlord. Trial court did not abuse its discretion in awarding plaintiff costs where plaintiff initially alleged claims in good faith for all the rent she had paid as well as for trebled damages under the ordinance's penalty provisions but recovered less than the jurisdictional amount for an unlimited civil case. Plaintiff was entitled to recover attorney fees incurred on appeal since ordinance did not provide otherwise. 
    Carter v. Cohen - filed September 28, 2010, Second District, Div. Four
    Cite as 2010 S.O.S. 5580
    
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Title Insurance
Document which undisputedly included all of the required elements of Insurance Code Sec. 382.5(a) constituted a "binder" as a matter of law. Trial court correctly left issue of whether this binder was enforceable to the jury. Insurer failed to raise a factual issue as to contract formation entitling it to a JNOV since insured was not required to sign an insurance application for binder to be enforceable; a binder serves as a memorandum evincing the existence of an insurance contract and need not recite the terms of that policy; a promise to provide coverage according to the terms customarily contained in insurer's standard policies and in standard insurance policies used by insurance companies in general for the same or essentially similar coverage in exchange for a specified premium payment is an acceptable mutuality of obligations; a binder need not identify any consideration because an agreement to pay insurer's usual premium is implied; and a binder need not contain language obligating insurer to provide any coverage pending issuance of a policy. Insurer's failure to offer proposed jury instructions on contract formation rendered any error in instructing the jury that the document at issue was a binder harmless. Substantial evidence supported jury's finding that party who executed the binder was insurer's actual or ostensible agent even though no appointment was filed with the Department of Insurance allowing that party to act as insurer's agent. Insurer forfeited any challenge to jury's finding that the binder was not legally cancelled by failing to challenge that finding in their opening brief or in their motion for a JNOV. Substantial evidence supported jury's finding that insurer acted in bad faith where binder was issued in accordance with insurer's instructions to agent but insurer then denied the agency relationship once insured's loss occurred. Plaintiff, whose possible negligence was not a direct cause of insured's loss, had superior equities to insurer who engaged in bad faith. Plaintiff's potential liability to insured for failing to pay the premium on her policy with insurer was a protectable interest sufficient to create subrogation rights. Insurer was not entitled to indemnity against agent because indemnity agreement with agent only provided for indemnity if agent issued an unauthorized binder and foreclosed recovery for bad faith conduct. 
     Chicago Title Insurance Company v. AMZ Insurance Services, Inc. - filed September 9, 2010, Fourth District, 
     Div. Three

     Cite as 2010 S.O.S. 5368
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Title Insurance
Where plaintiffs purchased property identified by two tax assessor parcel numbers and defendant title insurance company issued a preliminary report that referred repeatedly to both parcels and included a legal description matching that in plaintiffs' grant deed, and the legal description--but not the parcel numbers--was incorporated into the policy and a map showing both parcels was attached, but the plaintiffs later discovered that the legal description did not include the second parcel, defendant insurer--which declined coverage of plaintiffs' dispute with third party over ownership of the second parcel--was not entitled to summary judgment on plaintiffs' causes of action for breach of contract, bad faith, or declaratory relief based on the evidence that the second parcel was not included within the legal description. Plaintiffs presented sufficient evidence to create a triable issue by showing that their expectation of coverage for both parcels would not have been dispelled by a reading of metes and bounds description, which required professional training to decipher and was ambiguous to a layperson; such ambiguity was required to be resolved in favor of the insured. Trial court erred in granting summary judgment on plaintiffs' breach of contract cause of action based on the statute of limitations where there was a triable issue of fact whether plaintiffs were aware of the loss stemming from their defect because there was no evidence third party claimed ownership of the second parcel until plaintiffs investigated the parcel's location in order to sell their property; plaintiffs' escrow negligence claim was similarly not time-barred, and summary judgment was not appropriate, where there was a triable issue of fact whether defendant acted as the escrow agent. 
     Lee v. Fidelity National Title Insurance Company - filed September 16, 2010, First District, Div. One
     Cite as A124730
     
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Trust Deed Foreclosure
Plaintiffs' action to quiet title and for other relief, brought--on the grounds of improper notice and other irregularities in the sale--against defendant who acquired their home in foreclosure and evicted them, and others, was properly dismissed on the ground that stipulated judgment for possession in the unlawful detainer action precluded challenge to validity of the sale. 
     Malkoskie v. Option One Mortgage Corporation - filed September 23, 2010, Second District, Div. Eight
     Cite as 2010 S.O.S. 5567
     
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Los Angeles County Bar Association
2010 Real Property Section Newsletter
REAL PROPERTY SECTION PUBLICATIONS
Daniel L. Goodkin, Editor, Real Property Section Review
Norman A. Chernin, Editor, Real Property Section Newsletter

SECTION OFFICERS
Chair
Pamela L. Westhoff

First Vice Chair
Gregg J. Loubier

Second Vice Chair
Theresa C. Tate

Treasurer/Crocker Chair
Sarah V. J. Spyksma

Secretary
Norman A. Chernin


Immediate Past Chair
Michael S. Klein


Section Administrator
Terrina Scott

EXECUTIVE COMMITTEE MEMBERS

Eric Altoon
Nedra E. Austin
Babak B. Baradaran
Susan J. Booth
Claire Hervey Collins
Caroline Dreyfus
Brant Dveirin
Robert T. Flick
Daniel L. Goodkin
Marcia Z. Gordon

Linda S. Koffman
Trudi J. Lesser
Peter J. Niemiec
Robert C. Pearman
Leslie D. Reed
D. Eric Remensperger
Michael G. Smooke
Linda E. Spiegel
Andrew J. Yamamoto


SUBSECTION CHAIRS
Commercial Development and Leasing, Nadav Ravid
Construction Law, Richard Mah
Land Use Planning and Environmental Law, Laurence L. Hummer
Real Estate Finance, Owen P. Gross
General Real Estate Law, Brian R. Hochleutner
Title Insurance, Vanessa A. Widener

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