2003: Recent Real Estate Cases

This material was used at a presentation to the San Mateo Board of Realtors in January, 2004.   Before acting on any matter contained herein, you should consult with your personal legal adviser.

There were many fascinating California legal cases during 2003.  Most are not very useful in daily life as a Realtor.  Here are some which are more relevant.

 Health Club Full Liability Waiver.  Does it include the TV falling off the stand when the victim adjusts the ankle?  Yes.   Benedek

Buyer tells his agent: "I am concerned about what's behind the paneling in the bonus room."  The Dual Agent said: "Don't worry; they're fine."
Broad damages allowed.       Fragale v. Faulkner

 Title Companies
Undisclosed illegal garage conversion of second "dwelling"; title company missed a recorded Substandard Notice requiring conversion back to garage.  Buyer sues Seller + Title Company.  Does Title Co have liability?

    NO.  They insure title, not condition.  They missed something affecting condition but not title to the property.  Elysian v. Stewart

HOA had an on-going dispute with its insurance carrier over earthquake coverage.  Ostayan owned a condo there.  He sold it for $53,500.  He did not know the HOA had filed a suit a week before closing.  Notice of the suit was sent out the next week.  2 years later, the cases settled: Ostayan's share would have been $180,000.  Who gets the $$$?
     LA Court: Buyer wins and HOA had NO DUTY to advise that they had filed a suit.
     Court of Appeals: Agreed          Ostayan v. HOA

Statute of Limitations
Flood Insurance Policy requires written proof of loss to insurance carrier within 60 days of flood.  Torrential rainstorm.  Insurance Adjuster rejected the claim; then agreed to reconsider.  Insurance carrier hired experts to review; they stiffed the experts.  By then, more than 60 days elapsed.  Coverage denied based on 60 day requirement. 

            Federal Court:  Homeowner loses.
Ninth Circuit Court of Appeals: Homeowner wins.     Pecarpovich v Allstate

Hidden Defects.  Builder tries for years to fix.  Then gives up.
    Tuolumne Court: 4 Year SOL for latent defect, from appearance.  Time NOT extended (tolled) while builder tries to fix it.  Mills v. Forestex

TILA defect suit must be filed against Lender within 3 years of loan.  Borrower filed against CW, not knowing they were mere servicers, but not against Lender.  SOL.   Miguel v. Countrywide

Liens
New Tenant to do his own Tenant Improvements.  Tenant hires TI contractor; Landlord records and posts Notice of Non-Responsibility.  Tenant dot-busts.  Since TIs were required by the Lease, should Landlord be responsible to contractor despite Notice of Non-Responsibility for Mechanics Liens?

         Alameda Court: No
        Court of Appeals: YES   Howard Wright Construction v BBIC

Deadbeat was underwater on 1st; the second was stripped by the Bankruptcy Court as an unsecured (and discharged) debt.  Later the home increases in value, all to the benefit of Deadbeat.

            Bankruptcy Court: Deadbeat loses
US District Court: Deadbeat loses
Ninth Circuit Court of Appeals: Deadbeat wins   Zimmer

Judgment Lien filed against Deadbeat when there was no attachable equity.  Years later, in 1998 Deadbeat filed for Bankruptcy when $32,000 attachable equity.

            Bankruptcy Court: When the lien was originally filed so the lien evaporates and becomes an unsecured loan and is therefore discharged in full.
Ninth Circuit Court of Appeals: Creditor wins.  Lien is valid because there was attachable equity at time of bankruptcy.  This overturns a 1997 Ninth Circuit Court of Appeals case (Jones).  Watts

Judgment Lien filed against Husband, a 50% tenant in common with Wife.  They convert to JT; H dies.  Does lien still exist? 
        Alameda Superior Court: NO; it evaporates when H dies. 
        Court of Appeal: Yes.   Dieden v Schmidt

GI (Generous In-law) Financing: Dad helped Daughter and Husband buy a home in 1992 by gifting / lending them the $143,000 downpayment.  They signed a Note and DoT (unrecorded).
    March, 1998: divorce.  H files for Bankruptcy.  Dad records the DoT.    Who wins?
        Bankruptcy Court: Filing DoT violates Bankruptcy law.  Dad owes Ex-H $201,000.
        US District Court agrees.
        Ninth Circuit Court of Appeals: Dad owes $150,000 + ???.

 Community Property

At marriage, H owned 46.5 unimproved acres in Gilroy, worth $50,000.  During their 17 year marriage, H + W spent $80,000 to build a house.  They separated in 1994; 4 years later, before the divorce was finished, H died; the property was sold for $555,000.  What does W get? 
        Santa Clara Court: W gets zip: all was H's separate property; her share of CP spent on H's SP was a gift.
        Court of Appeals: Use of CP to improve SP is a buy in; W owns a piece.

                [Probably 1/2 of $80,000/(80,000 + 50,000) = 30%]  Bono v Clark

H had a home; 1995 he married his (5 year) live-in girlfriend.  In 1996, to add a nursery for their 2nd child, W gets H to sign the home into JT, to better qualify for the new home improvement loan.  1999 they divorce.  Who gets what share of the house?

            Marin Court: H gets whole house.  W is a fiduciary; it looks like undue influence; she has the burden of proof to show H intended a gift to her of 1/2 the house when he signed the deed.  Delaney

Racial Discrimination of Agent
Employers are responsible for the intentional racial discrimination of an agent, but does the individual sole owner-broker behind the corporation have personal liability?

            US District Court: No
Ninth Circuit Court of Appeals: YES 
US Supreme Court: NO 9-0!  Meyer v. Holley

NIMBY revolt put a ballot referendum against already approved low income housing project.  The city decided to wait and see the results of the referendum before issuing building permits.  The developer alleged racial discrimination.

            US District Court: Developer loses
Court of Appeals: Developer wins
US Supreme: The delay was not racially motivation (on the part of the city).

Landlord Liability for Criminal Acts (mugging, rape, etc)

Abusive neighbor tenant in apartment building.  At least 6 complaints by victim to managers, and many other neighbors had also complained.  Victim was thrown down the stairs.  Is landlord responsible?
            LA Court: No
            Court of Appeals: Yes, since foreseeable.  Landlord should have evicted the abusive tenant.     Madhani v. Cooper

Gang violence at ARCO Gas Station with history of criminal activity (after manager's repeated requests for security guards)? 
            LA Court: No
            Court of Appeal: Yes   Claxton v. ARCO

 Taco shop patron at 1 AM is victim of gang violence.  Store employees fail to call 911 cops / ambulance after violence was over.  Does taco shop owner have liability??

            San Diego Court: No, the incident was not foreseeable and there is no duty to call the cops / ambulance for things off premises.  There is no good Samaritan requirement.
Court of Appeals: Yes, because he is a frequent patron, the store owes him a higher duty and must summon help.  Morris v. De La Torre

                        "Hey, another mugging out front.  He's bleeding all over the sidewalk."
"Was it a regular customer?"
"I don't know, if he is a frequent customer, but he just bought a fajita here."

Landlord Tenant

Tenants complains repeatedly about bees (she's allergic).  The licensed exterminator sprays.  Tenant dies.  Family sues Owner.  Owner's insurance carrier denies liability for pollution.

        San Bernadino Court: Insurance Company wins
        Court of Appeals:  Insurance Company wins
        Cal Supreme: Insurance Company loses    MacKinnon v. Truck

 Is it unlawful to name the apartment highrise the Korean Towers to attract Asian tenants (believed to be better than average tenants)?

            US District Court issued a preliminary ruling that it is probably illegal racial discrimination in favor of Asians (against African-Americans) to use the word "Korean," but not the word "Asian."  Frankly, I don't get it.  Donald Sterling Corp

Tenants complain.  Landlord cannot evict due to the retaliatory eviction rules.  But the Landlord says: "I am tired of this #$%^&.  I quit.  I'm getting rid of them all and getting out of the rental business under the Ellis Act."
        SF Court: It's an unlawful retaliation.  Tenants win
        Appellate Division: Landlord wins
        Cal Supreme: If Landlord proves the property is out of the rental business, landlord wins.          Drouet

 Taxes:  You can write off business equipment in the year purchased, but you MUST file a §179 election with your tax return.  File the form or spread the cost over 5 + years.   Visin

WHAT DO WE LEARN FROM THESE?  COURTS AND THE JUDICIAL SYSTEM ARE CERTAINLY INTERESTING PLACES TO OBSERVE BUT NOT PARTICIPATE IN.

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