27th Annual Real Property Law Retreat

May 16, 2009

Lake Tahoe, California

THE LAW PROFESSORS’ ROUNDTABLE:

IMPORTANT RECENT DEVELOPMENTS

IN REAL PROPERTY LAW

Roger Bernhardt, Golden Gate University

Eric C. Christiansen, Golden Gate University

Kurt Eggert, Chapman University School of Law


The Speakers

Roger Bernhardt is Professor of Law at Golden Gate University in San Francisco. He is the author of the California Continuing Education of the Bar book: California Mortgage and Deed of Trust Practice, and also Bernhardt’s California Real Estate Codes. He is also the Editor (and commentator) of CEB’s California Real Property Law Reporter.  Professor Bernhardt has also authored or coauthored for law students: Real Property in a Nutshell, The Black Letter Law of Real Property, for West, and Casebook on Real Property and Casebook on California Real Estate Finance for Carolina Academic Press. He has been Advisor to the Executive Committee of the Real Property Section of the California State Bar, Chair of the Legal Education Committee of the Real Property Trust and Estate Section of the American Bar Association, and a Member of the American College of Real Estate Lawyers, the American College of Mortgage Attorneys, and the American Law Institute.

Eric C. Christiansen is an Associate Professor of Law at Golden Gate University School of Law.  He teaches in the fields of Property Law and Constitutional Law and researches, writes and speaks in the areas of real property law  and comparative constitutional law.  Additionally, he is the Academic Director of GGU’s acclaimed Honors Lawyering Program and its Paris Nanterre Comparative Law Program.  Professor Christiansen attended New York University School of Law as a Root-Tilden Scholar and, following graduation, clerked for Chief Justice Arthur Chaskalson of the South African Constitutional Court.  Prior to joining academia, Professor Christiansen was in private practice, specializing in international capital markets work for the London and San Francisco offices of Latham & Watkins.  He received an M.A from the University of Chicago as an Andrew W. Mellon Fellow of the National Endowment for the Humanities and received a B.A from the University of Notre Dame.

Kurt Eggert is a Professor of Law and Director of Clinical Legal Education at Chapman University School of Law. He also runs Chapman;s Alona Cortese Elder Law Center, and teaches both clinical and doctrinal classes. His scholarship has focused on several different areas, among them predatory lending, consumer credit, consumer protection, gambling regulation, and elder abuse. He has testified to Congress on predatory lending issues and was a member of the Federal Reserve Board’s Consumer Advisory Council, where he chaired the subcommittee on Consumer Credit. He has lectured internationally on gambling issues, focusing on consumer protection for gamblers.  Previously, he was an adjunct professor of law, teaching Elder Law, at Loyola Law School. From 1990 until 1999, he was a senior attorney at Bet Tzedek Legal Services in Los Angeles, where he specialized in complex litigation, including consumer fraud and home equity fraud.


1. Baychester Shopping Center v San Francisco Residential Rent Stabilization And Arbitration Board, 165 Cal App 4th 1000, 2008.

Successor landlord liable for rent overcharges collected by previous owner.

Fingerhut,  one of the tenants in Hansen's nine unit apartment building filed a claim with the San Francisco Rent Board in October 2005, alleging rent overcharges for the previous three years. While the matter was awaiting a hearing before an administrative law judge, Hansen sold the building to Baychester and Fingerhut amended his petition to include Baychester.  At the hearing, the administrative law judge found that there had been rent overcharges and awarded Fingerhut $41,000, holding Baychester liable for that amount. The Rent Board denied Baychester's appeal;  the trial court thereafter denied its petition for a writ of mandate, and the Court of Appeal affirmed.

Under San Francisco’s rent ordinance, a landlord is liable to a tenant for up to three years of past rent overpayments, and as successor to Hansen, Baychester owed that amount even though it had not been the one who received the money. Civil Code section 1466, providing that successor owners are not liable for breach of covenant by its predecessor, does not apply, because the liability here is statutory, based upon the rent ordinance rather than contractual. Nor is the city's rent for those preempted by state law.

Public policy supports the city’s mechanism of enabling a tenant to recover rent overpayments from the current owner, nor it the current owner denied due process because it is required to pay an overcharge which it never received. The burden is on that successor landlord to exercise due diligence in purchasing rental property to determine if past rents were properly charged, and it is also in a better position to seek recourse against the previous owner if there were such overcharges.

A previous decision that had held a successor landlord not for its predecessor’s having provided reduced services to the tenants did not constitute res judicata because that had involved a different position of the ordinance.


2. Birke v. Oakwood Worldwide Inc., 169 Cal.App.4th 1540, 2009.

An asthmatic girl's public nuisance suit against her apartment complex over secondhand smoke in exterior common areas is permitted to proceed.

The Second Appellate District Court of Appeal revived a 5-year old girl’s public nuisance claim against the owner of her family’s apartment building (Oakwood) based on the landlord’s failure to limit secondhand cigarette smoke in the outdoor common areas of the complex.

The complaint alleged that Oakwood “allowed, encouraged and approved a toxic, noxious, hazardous, offensive—and in fact carcinogenic—condition to be present in all of the outdoor common areas of the complex,” a situation which “obstructed the free use of the property, so as to interfere with the comfortable enjoyment of life or property by residents.”  Birke’s complaint relied upon a January 2006 finding by the California Air Resources Board that environmental tobacco smoke is “an airborne toxic substance that may cause and/or contribute to death or serious illness” and a June 2006 conclusion by the Office of the Surgeon General that there is “no risk-free level of exposure” to secondhand smoke and that nonsmokers exposed to secondhand smoke increase their chance of developing heart disease and lung cancer.

Importantly, the court of appeal denied the applicability of Venuto v. Owens-Corning Fiberglass Corp., 22 Cal.App.3d 116 (1971), which the trial court had found would preclude a public nuisance suit.  Venuto held that an individual’s aggravated allergies and respiratory disorders were simply a different degree of the same kind of harms as the respiratory irritation experienced by the public—and thus did not permit a claim of public nuisance. The court of appeals said “To the extent Venuto… can be read as precluding an action to abate a public nuisance by a private individual who has suffered personal injuries as a result of the challenged condition, we believe it is an incorrect statement of the law.”  When a nuisance is “a private as well as public one, there is no requirement that a plaintiff suffer damage different in kind from the general public,” according to the court.

Based on the Supreme Court’s decision in Acadia California Ltd. v. Herbert 54 Cal.2d 328 (1960) (an occupant of land who sustained physical injury proximately caused by a nuisance could recover damages on behalf of himself and his family), the appeal court reasoned that the girl also had standing to bring a private nuisance claim based on interference with her right to enjoy the common area of the Oakwood complex.

As a landlord, Oakwood had a duty to maintain its property in a reasonably safe condition. However (and unsurprisingly), the issue of whether the landlord’s failure to impose a limitation on smoking in common areas that the girl had a right to use and enjoy breached that duty could not be resolved on a demurrer.  The case was remanded in January 2009.


3. Building Industry Assoc. of Cent. California v. City of Patterson, 09 Cal. D. Op. Serv. 3636

Substantially increased in-lieu development fees violated vested rights because they exceeded the cost of the affordable housing program attributable to the development.

A developer with interests represented in litigation by the Building Industry Association of Central California (Industry Association), obtained a development agreement and tentative subdivision maps for the construction of two residential subdivisions in Patterson, California. At the time those documents were approved, the City of Patterson allowed developers to pay a fee of $734 per house in lieu of building affordable housing. The development agreement acknowledged that the developer would pay “an as-yet-undetermined amount” per new home for moderate, low and/or very low-income housing. Because Patterson was “currently preparing an updated analysis of its Affordable Housing fee,” increases in in-lieu fees were permitted under the development agreement if “reasonably justified.”  About three years after signing the development agreement, Patterson completed reevaluation of its affordable housing needs and altered its method for determination of in-lieu fees.  The new method resulted in increased fees of $20,946 per market rate unit.  Patterson sought to apply the increased fee to the developer’s two residential projects among others.

The new method of calculation based the need for low and moderate housing on a Regional Housing Needs Assessment at a county (Stanislaus) level rather than relying on fixed estimates of below-market housing needs:  5% low and very-low income and 5% moderate.  The new method divided the total costs of developing all assigned affordable housing units in Patterson by the number of eligible market-rate units.

 

The court of appeal agreed with the Industry Association that the builder had vested rights once it obtained the vesting tentative map. But, “if the increased fee is authorized by the Development Agreement, it will not offend the rights established by the approval of the vesting tentative map.”  Patterson was free to change the method of determining the in-lieu fee, but the new method must be “reasonably justified” (as required by the terms of the development agreement).

 

The court of appeal concluded that the meaning of the contractual term “reasonably justified” presented a question of law and that, under an objective test, the term was meant to incorporate the legal standards generally applied to in-lieu development fees. Those legal standards require that the amount of a development fee be limited to the cost of that portion of a public program attributable to the development.  Relying on San Remo Hotel v. San Francisco, 27 Cal.4th 643 (2002), the court reasserted that “formulaic, legislatively mandated fees imposed as conditions to developing property [as opposed to] discretionary ad hoc exactions” are not subject to the Nollan/Dolan/Ehrlich heightened scrutiny standard but are subject to “a means-end test—that is, it requires the property regulation in question (the means) to advance the purpose the government is seeking to achieve (the end).”

 

Patterson failed to show that its in-lieu fee, as determined by the new method, bore a “reasonable relationship between the amount of the fee, as increased, and ‘the deleterious public impact of the development.’”  Because the new method failed established legal standards, it violated the “reasonably justified” requirement of the development agreement.


4. City of Stockton v. Marina Towers LLC, 171 Cal.App.4th 93 (2009)

Failure to identify a project with sufficient specificity cannot support the taking of private property.

As part of California’s comprehensive statutory scheme (Code Civ. Proc. § 1230.010 et seq.) covering virtually every aspect of eminent domain law, the state permits acquisition of property only for “a particular use.” A public entity desiring to condemn private property must pass a “resolution of necessity” that describes the proposed project and contains findings that the proposed project is necessary for the greater public good. The court called this a case of “condemn first, decide what to do with the property later” according to the court of appeal.

Soon after its city council passed “nondescript, amorphous resolutions of necessity” approving the condemnation of two parcels of real property on the North Shore of the Stockton Deep Water Channel (later valued at nearly $2 million), Stockton filed an eminent domain action to acquire the property, then owned by defendants and appellants Marina Towers LLC (Marina).

Stockton obtained a prejudgment order for possession and acquired the property, having conceded in its briefs that it did not have any specific purpose in mind when this condemnation was initiated. At the time the resolution of necessity was passed, multiple projects were still under consideration and planning for the area “resembled a complicated jigsaw puzzle with its parts still shifting.”  Months later, while Marina was fiercely contesting its right to condemn in court, Stockton built a parking lot and a baseball field on the property.

The court of appeal held that a resolution of necessity that does not identify a project with sufficient specificity, such that persons of ordinary intelligence can discern what the “project” is, cannot support the taking of private property. (It also qualifies as a gross abuse of discretion.)  A governing body of a public entity may not adopt a resolution of necessity until it has made the necessary statutory determinations in a project-specific manner and has given the owner proper notice and an opportunity to be heard.

If the “stated purpose” is impossible to identify, the court has no basis for adjudicating any of the statutory defenses to the public entity’s right to take include (1) that the plaintiff is not authorized by statute to exercise the power of eminent domain for the purpose stated in the complaint; (2) that the stated purpose is not a public use; and (3) that the plaintiff does not intend to devote the property described in the complaint to the stated purpose. (§ 1250.360, subds. (a)-(c).)

There was no dispute that, having acquired the two parcels, that Stockton has put them to public use. However, post-resolution conduct is not relevant to whether a resolution’s project description complies with section 1245.230.  An unconditional dismissal would have resulted in Marina reacquiring property that has possibly increased in value by hundreds of thousands of dollars as a result of improvements it did not make. It would have involved enormous cost to the taxpayers and cause significant disruption to ongoing City-run operations. Hence, the court ruled that Stockton should be afforded the opportunity to adopt new resolutions of necessity for the Marina property containing an adequate description of the proposed projects.


5. Monks v. City of Rancho Palos Verdes, 167 Cal.App.4th 263 (2008)

City’s new construction moratorium effected a permanent taking of the properties under the Lucas “deprivation of all beneficial use” standard.

In 1978, the City of Rancho Palos Verdes imposed a moratorium on new home construction on over 1000 acres of land.  Plaintiffs owned 16 lots of undeveloped land in Zone 2, a roughly 130-acre area that was the subject of this litigation.  The basis for the moratorium was past and potential future landslides.  Certain landslide areas of Palos Verdes remain active; most recently, slides occurred in the period immediately preceding the moratorium coming into effect (although not in the Zone 2 area).

In June 2002, while plaintiffs’ applications for exclusion from the moratorium were pending, the city approved Resolution No. 2002–43.  The Resolution formally rejected a consultant’s determination that there could be development of Zone 2 without destabilization and, as a condition for future development, required the owner to demonstrate a pre-determined minimum safety factor in the relevant zone as a whole. The Resolution effectively barred all new home construction on plaintiffs’ lots.  Plaintiffs claimed the Resolution affected an inverse condemnation in violation of the takings clause of the California Constitution (Art. I, §19).

The court of appeal concluded that “the resolution, by implementing the moratorium and continuing to prevent plaintiffs from building on their properties, deprived plaintiffs’ land of all economically beneficial use” as in the U.S. Supreme Court case, Lucas v. South Carolina Coastal Council, 505 US 1003 (1992).  In Lucas, the Supreme Court had held that a land-use regulation that requires an owner to “sacrifice all economically beneficial uses in the name of the common good” usually results in a categorical taking.

Once a private plaintiff has shown a deprivation of all economically beneficial use, the defendant government entity has the burden of proving that the moratorium was justified under the state’s law of nuisance. A government entity need not pay compensation when its new regulation is merely an expression of inherent limits to the owners’ use of their land because of “restrictions that background principles of the State’s law of property and nuisance already place upon land ownership.” 505 US at 1029.  There has been very little clarification about these “background principles” and none in California—until Monks.

The court of appeal rejected the trial court’s determination that the risk of land movement, however minor, would be a public nuisance. To constitute a public or private nuisance, the interference must be both substantial and unreasonable by an objective measure. The city did not produce substantive evidence of such an interference. There is nothing inherently harmful about homebuilding, especially in an area zoned for that purpose and provided with the necessary utilities.

The court of appeal reversed and remanded the case for determination of an adequate remedy, warning the city to proceed in good faith and without stalling tactics.


6. In re Owens (Shulkin Hutton, Inc., P.S. v. Treiger), 552 F.3d 958, C.A.9 (Wash.),2009.

Not abuse of discretion for bankrutpcy court to dismiss Chapter 11 bankruptcy for bad faith filing rather than converting to a Chapter 7, where it appears that purpose of bankrutpcy filing was to delay litigation and other creditors would fare worse under Chapter 7.

A married couple, J'Amy Owens and Ken Treiger, purchased a home using community asets, then separated in 2000 and received a final divorce decree in 2002.  Before the divorce decree, Treiger had filed for Chapter 13 bankruptcy and that bankruptcy court had ruled that the house was community property and therefore part of Treiger's bankruptcy estate.  Owens then bought out the Treiger bankruptcy estate's interest in the house, and the Treiger bankruptcy closed.  In their divorce litigation, however, the state court found that some of the money used by Owens to buy out the bankruptcy estate was community property, and that the house was therefore a combination of community and separate property, and so ordered the house sold the the proceeds divided evenly between Treiger and Owens.

The house sale was scheduled for September 18, 2006 and 11 days before the sale date, Owens filed for Chapter 11 bankruptcy, claiming the house as her only significant asset and listing as an unsecured creditor Shulkin Hutton, to which she owed legal fees for an earlier Chapter 11 case.  Treiger filed a motion to dismiss Owens's Chapter 11 filing as a bad faith filing and/or to order that the house be sold.  The bankruptcy court dismissed Owens's Chapter 11 filing, as a litigation tactic designed to delay the sale of the house, noting that Owens annual income capacity was between $150,000 and $800,000.  Shulkin Hutton appealed this dismissal to the BAP, which affirmed the dismissal, and then appealed the BAP's decision.  The Court of Appeals affirmed the dismissal.

Shulkin Hutton had argued that even if there were cause for dismissal, which Shulkin Hutton did not contest, the bankruptcy court should have coverted the case to a Chapter 7 instead of dismissing it since, Shulkin Hutton claimed, conversion would be in the "best interests of creditors and the estate."  The Court of Appeal found, however, that while such conversion might benefit Shulkin Hutton, Owens's other creditors would fare worse under Chapter 7, as a discharge of their debts under Chapter 7 would deny them access to the future earnings of Owens.  The Court of Appeal also found that state court had acted within its jurisdiction because Treiger's bankruptcy proceeding had already ended.


7. Patel v Liebermensch, 45 Cal.4th 344, 2008

Option contract is specifically enforceable despite omission of provision regarding time of payment.

In July 2003, the Liebermensches sent Patel a proposed lease of their condominium unit, which Included an option to purchase during the tenancy for $299,000 with the price increasing 3% after 2003.  In July 2004 Patel notified the Liebermensches of his intent to exercise the option. The Liebermensches replied that they would require 90 or more days to close escrow in order to complete a 1031 exchange. Since his loan broker had advised him that his financing terms could not be guaranteed that long, Patel responded with a proposal for the Liebermensches to be responsible for escrow expenses after 30 days. The Liebermensches rejected that and also rebuffed Patel’s other efforts to acquire the property on any terms.

In Patel’s suit for specific performance, the jury found that there had been an agreement and that its terms were clear, whereupon the trial court ordered specific performance in favor of Patel, requiring performance within 60 days after entry of judgment.  The court of appeal reversed, holding that the omission of an agreement as to time of payment rendered the arrangement unenforceable.

A unanimous Supreme Court revered the court of appeal.  Although there is language in earlier cases that time and of payment are essential terms in a contract to convey land, that is not accurate.  In this case there was no dispute as to the manner of payment, and the time of payment is implied as reasonable if it is not otherwise specified in the contract. CC 1657.

It was possible for the parties to have provided for a special time of payment in their contract, but they did not do so.  This was not a matter left for future agreement, since the Liebermensches had never raised that matter when the option was being first negotiated.

While the trial court had incorrectly allowed the jury to decide whether the contract was sufficient clear, it had nevertheless reached the correct result in decreeing specific performance.


8. Rand Corp. v. Yer Song Moua, --- F.3d ----, 2009 WL 723267, C.A.8 (Minn.),2009

Three-Year right to rescind triggered under TILA where on date of loan closing borrower directed to sign acknowledgment that three-day right to rescind has already expired.

Yer Song Moua and Manisy Moua were married and owned and inhabited a house in Maplewood, Minnesota.  They had obtained a loan which the opinion says is from Mortgage Electronic Registration System, Inc. (MERS) and fell behind on their payments.  MERS foreclosed and a foreclosure sale was held in December 2004, subject to a six-month redemption period that was to expire in June 2005.  During the redemption period, the Mouas applied for a loan from Rand to redeem their house, and the loan closed in April 22, 2005.  Rand contends that it provided the Mouas with all disclosures required by TILA and HOEPA on the date of closing and that the Mouas chose to waive the three-day advance disclosure period because of their bona fide personal financial emergency.  According to Rand, this emergency included that the sheriff had failed to provide timely redemption payoffs, they had to redo all of the loan documents, and they risked losing their loan approval if the loan did not close by April 22, 2005.

Manisy Moua claims that the loan closer asked her to hand-write a statement explaining that they were waiving the three day advance notice provisions because the county had not provided a timely payoff statement and because of the foreclosure proceeding.  The Mouas also received and signed two versions of the Notice of Right to Cancel (Notice), one version where their signature merely acknowledged receiving the Notice, and the other version acknowledging Receipt and that three days had passed since the date of the transaction and that they had not rescinded.  Rand does not dispute that the Mouas signed this second acknowledgment before the three-rescission period had in fact expired, but contends that they were directed to sign it by the title company closing the transaction, and not under the direction or authorization of Rand.  The Mouas allege that they returned home and reviewed their loan documents with their son and only then learned that their new payments were much higher than their previous payments had been, that they had waived the 3-day advance notice provisions of HOEPA and also their right to cancel by signing the Confirmation on the second Notice.

In December 2005, the Mouas stopped paying on the loan and in March 2006 Rand started foreclosure.  In April 2006, the Mouas sent a letter rescinding the loan.  Rand rejected the rescission request, arguing that the Mouas had not rescinded during the applicable three day period.  the Mouas home was sold to Rand at a sheriff's sale in May 2006.  The redemption period for this sale expired in November 2006 and Rand sued to evict the Mouas in January 2007 and the court found that Rand was entitled to possession.  The day before a February moveout date, the Mouas requested a TRO, which the court granted, and the Mouas continued to live in the house while making no further payments on the loan.  The Mouas also counterclaimed, alleging that Rand had violated TILA, HOEPA, and the Minnesota Prevention of Consumer Fraud Act by failing to provide an early warning three day notice before the loan closed, that the handwritten notice they signed at closing did not effectively waive this requirement, and that the Notice of Right to Cancel did not comply with TILA's requirements.  Therefore, the Mouas argued, they had a three-year rescission period. In addition, the Mouas argued that the prepayment penalty in the loan violated HOEPA.  After the trial court granted summary judgment to Rand, the Mouras appealed.

The Court of Appeal found that the Notices provided to the Mouas were confusing, given that they were asked both to acknowledge their right to rescind the loan transaction within three days but at the same time certifying that the three days had already elapsed and that they had not rescinded the loan.  The court noted that, "Requiring borrowers to sign statements which are contradictory and demonstrably false is a paradigm for confusion."  The court added that the average borrower would be confused by an instruction to certify a falsehood, as to instruction and also as to the effect of the falsehood.  Because Rand failed to clearly disclose the Mouas' three-day right to rescind the transaction, that failure gave rise to a three-year rescission period.  The Court of Appeal distinguished Smith v. Highland Bank, 108 F.3d 1325 (11th Cir.1997) because in that case, the borrowers had not signed the certification of the three day period of rescission until after that period had actually expired.  The court also found that even though the title company had directed the Mouas to sign the Notices, Rand is still responsible for TILA and HOEPA disclosures and defects therein.


9. Secrest v. Security Natl Mortgage Loan Trust (2008) 167 Cal.App.4th 544, 84 Cal.Rptr.3d 275 Cal.App. 4 Dist.,2008.  October 09, 2008, modified at 2008 Cal.App. Lexis 1721

Unsigned forbearance agreement  modifying note not binding on note holder because of statute of frauds and does not supersede note and prior signed agreement.

Appellants, Luther and Charmella Secrest, were homeowners and borrowers on a 1996 note secured by a deed of trust on their home for a $552,700 loan used to purchase their house.  The loan was sold to Ocwen in 1999, and then in April, 2001 the Secrests and Ocwen entered into a signed forbearance agreement requiring a reinstatement payment, a down payment and monthly payments.  By January 2002, the Secrests appeared to be in default again and negotiated a second forbearance agreement with Ocwen.  The Secrests corrected errors on the forbearance agreement that Ocwen faxed them, signed it, and faxed it back to Ocwen.  The Secrests also wire-transferred $13,422.51 to Ocwen. However, the second forbearance agreement was never signed by Ocwen.

It appears that the Secrest note was then securitized, and transferred to a trust, with SN Servicing Corporation as the servicer, JP Morgan Chase Bank as the trustee, and Security National Mortgage Loan Trust 2002-2 as the trust holding the note, though the opinion is not clear on this.

Security National Mortgage Trust began foreclosure proceedings in September, 2004, filing a notice of default and election to sell, with the notice of default stating that the amount past due was $75,577.69.  The Secrests filed a lawsuit March 2005, for an injunction against the foreclosure and for declaratory relief.  By stipulation, the parties agreed that the only contested legal issue in the case was whether the January 2002 forbearance agreement, unsigned by Ocwen, is enforceable instead of its April, 2001 predecessor and that once the trial court determined that issue, a court-appointed referee would determine the amount of arrearages, if any.

Both the trial court and the court of appeal determined that the statute of frauds was determinative, that the January 2002 forbearance agreement fell under the statute of frauds, and because Ocwen had not signed the forbearance agreement, it was unenforceable and so not binding on Ocwen or its successors in interest.  Security National was therefore entitled to foreclose the deed of trust.

The Court of Appeal reasoned that neither Ocwen nor its agents signed the forbearance agreement.  Further,  a deed of trust clearly comes under the statute of frauds.  While a forbearance agreement did not create, renew or extend a deed of trust, it does modify the note and deed of trust, here by substituting a new monthly payment and altering the right to foreclose under the note and deed of trust.  The court noted that a few courts in other jurisdictions expressly concluded that forbearance agreements are subject to the statute of frauds, while other opinions implicitly relied on that assumption.  The court notes that Miller and Starr suggest that unsigned forbearance agreements are binding but cites to a case not making that holding.  The court concluded, therefore, that forbearance agreements do fall under the statute of frauds and the signature of the party being charged with the agreement was necessary for the agreement’s enforcement.

The Secrests had argued that by making a payment along with the forbearance agreement, they had made a part performance, thereby estopping Security National from asserting the statute of frauds as a defense.  However, the court found that mere payment of money does not constitute part performance of this contract and that the Secrests would have to recover their money, if they are entitled to, through other legal means.


10. Tan  v Arnell Management Company, 170 Cal App 4th 1087, 2009.

Prior violent acts are sufficiently similar to impose slight burden of additional security upon residential landlord.

Tan was assaulted and shot late at night in the parking lot of his large (620 unit) apartment building and sued his landlord for negligence in failing to properly secure the premises against foreseeable third-party criminal acts. The trial court held, after an Evidence Code section 402 hearing, that the three previous acts he sought to introduce were not sufficiently similar to demonstrate that the assault was foreseeable and to thereby impose a duty of care on the landlord. The Court of Appeals reversed.

A balancing test is applied which compares the foreseeability of the harm against the burden sought to be imposed, and the higher that burden is the greater must the foreseeability be. Conversely, however, when the burden in question is only slight, less foreseeability is required. In this case the plaintiff was not seeking to require the landlord to incur the permanent and ongoing costs of hiring security guards, but sought only to have the existing security gate lot relocated to a more forward space of the complex parking lot. Plaintiffs expert proposed to testify that even a minimal security gate would have a deterrent effect because potential assailants are concerned with their escape route and might shy away from an attack if they do not see one.

In-light the only slight burden that plaintiff’s demand would impose upon the landlord, the evidence he sought to introduce of similar prior incidents could be treated as sufficiently similar to make the assault on him sufficiently foreseeable and thereby impose a duty of care on the landlord.  Consequently the judgment on the pleadings that had been granted to the defendants was reversed.


11. U.S. v. Peterson 538 F.3d 1064 C.A.9 (Cal.),2008. August 13, 2008

Defendants violated federal law of causing false material statements to federal agency through scheme of submitting false down payment gift letters to HUD to obtain FHA mortgage insurance.

Paul and William Peterson ran a home building business called Peterson Land and Development.  Many of their potential buyers lacked down payments, but under the FHA program, their company could not give buyers the down payment.  To get around this rule, Paul Peterson purchased a cashier's check in the name of some third party, such as a family of the buyer, designated by the buyer. However, the third party never was given possession or control of the funds. Instead, the Petersons directly deposited the cashier's check into escrow for the down payment.  Also, the Petersons submitted a gift letter in the name of the third party to HUD, asserting that the down payment was a gift from the third party.  Paul Peterson claimed that the third party actually signed the gift letters, but there was testimony of forged signatures on gift letters.  Some of the borrowers involved defaulted on their loans, causing foreclosure and forcing HUD to assume repayment of their loans.

The Petersons moved for an acquittal claiming that the source of the down payment was immaterial to HUD and so they committed no crime.  This motion was denied.  The district court gave as a jury instruction that “a statement is material if it could have influenced the agency’s decisions or activities,” which is the Ninth Circuit Model Criminal Jury Instruction 8.66 on materiality.  The jury found the Petersons guilty on both counts of the indictment.  The court awarded restitution in the full amount that the government had requested for HUD’s losses.

The Petersons argued that the jury instruction was in error because it misstated the element of materiality, that the evidence was not sufficient to demonstrate that the false gift letters were material to HUD, and that the restitution error was in error because the government did not show that the Petersons false statements were the direct cause of their losses.  The court found that the instruction on materiality was not in error because it was substantially similar to the instruction that should have been given.  The court found that there was sufficient evidence to demonstrate materiality to HUD because it was undisputed that HUD barred direct gifts from sellers, that these were established rules and regulations of HUD, showing that they influenced HUDs decisions, and that a reasonable juror could conclude that HUD would not have insured the loans if HUD had known that the Petersons directly funded the down payment.  As to the amount of restitution, the court found that the gift letter fraud did cause lending banks to advance more money than they would have and FHA likely would not have insured the defaulting mortgages.  The court found that even though there were multiple links in the chain of proximate causation, the causal connection between the Petersons and the HUD losses was not unreasonably extended.


12. In re Vargas,  396 B.R. 511  Bkrtcy.C.D.Cal.,2008  October 21, 2008


MERS lacked standing to obtain relief from stay where it purported to join unidentified parties as successors in interest and where it failed to produce evidence regarding the authenticity of the deed of trust or the note, or to show the amount owed.

Debtor Homeowner Raymond Vargas, an 83 year old retired World War II veteran with a monthly income of $1312, had fully paid off his home, purchased in 1971.  He obtained a Wells Fargo reverse mortgage in 2003 to pay for medical expenses for his wife, who died in 2004.  Vargas himself appears to be physically debilitated and in a wheelchair.

There appear to be numerous loans to Vargas, including a loan for $630,000 made by Freedom Home Loans (FHM) another for $150,500 to FHM and another for $650,000 to Countrywide Bank.  Vargas alleged that his signature on each of these loans was a forgery.  Vargas filed bankruptcy and MERS, the Mortgage Electronic Registration System, Inc. sought relief from stay as to the $630,000 FHM loan, based on being listed as beneficiary under the deed of trust acting solely as a nominee for lender and lender's successors and assigns.  The motion included a declaration by an employee of Countrywide, as servicing agent of Movant, stating that the employee was a custodian of the books and records of Movant but omitting any hint according to the court, as to how the employee has custody of MERS books, records, or files or is even connected to MERS.  The employee also testified that his principal responsibility is to review draft motions for relief from stay to make sure numbers in two paragraphs of his declaration match up with numbers on his computer screen, but that he gives no consideration to anything else in the declaration.

The bankruptcy court denied relief from stay on several independent grounds.  First of all, MERS purports to join as moving parties its assignees and/or successors in interest but fails to identify them, though under both Federal Rules of Civil Proc. 10(a) and CD Cal Bankr Local R 1002-1(a)(8), unidentified parties are not permitted in a motion before the court.  The court noted that the note was likely securitized and that MERS is not likely the authorized agent of the holder of the note and is trying to obtain relief from stay for undisclosed note holders without showing its authority to act.  Furthermore, MERS failed to show that the witness, the employee of Countrywide, had any personal knowledge relevant to the motion, and failed to establish its computerized records as admissible.  The deed of trust also failed the requirement of authentication as MERS presented no evidence regarding the authenticity of the note.  MERS also failed to present any evidence that it could enforce the note, especially in the face of the debtors claims that the note was fraudulent.