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Category Archive: K. Nina Reynolds

  1. Under Right to Repair Act, Builder Must Timely Respond to Homeowner’s Notice of Claim Despite Inadequate Specificity of Alleged Defects

    Maria Tanzillo2017-04-20April 20, 20178:46 pmComments Off on Under Right to Repair Act, Builder Must Timely Respond to Homeowner’s Notice of Claim Despite Inadequate Specificity of Alleged Defects
    By: , Posted:

    In California, the Right to Repair Act, codified at Civil Code sections 895 et seq., was established with the goal of resolving construction defect claims in an expeditious and nonadversarial manner. The Act requires that, prior to filing a lawsuit, a homeowner must provide the builder with a notice of claim. The notice must contain the claimant’s name, address, and preferred method of contact. The notice must also state that claimant is alleging a violation pursuant to section 910 of the Act, and describe the claim in reasonable detail sufficient to determine the nature and location, to the extent known, of the alleged defects.

     

    Once such a claim is delivered via overnight mail, certified mail, or personal delivery to the builder, the statutory timelines go into effect. The builder must acknowledge receipt of the claim within 14 days, may elect to conduct an initial inspection of the property within the following 14 days, and may offer to repair the violation and compensate the owner within 30 days of the initial or second inspection. The owner then has 30 days to authorize the builder to proceed with the repair or request alternative contractors. If the builder fails to strictly comply with any of the requirements or timelines, the owner is released from the requirements of the Act and may proceed with filing a lawsuit.

     

    In a recent case, Blanchette, the owner of one of 28 homes constructed by GHA Enterprises, served GHA with a notice of claim under the Act. GHA did not respond to the notice until 21 days later. GHA’s response asserted that Blanchette had not alleged the defects with sufficient detail as required by the Act. Because the response took 21 days, Blanchette took the position that it was untimely and filed a construction defect class action against GHA. GHA moved to stay the lawsuit, and the trial court granted the motion, agreeing that Blanchette’s notice of claim lacked sufficient detail to trigger GHA’s obligations under the Act.

     

    The Court of Appeal reversed the trial court decision, finding that the timelines under the Act are to be strictly construed. Although the Court agreed that Blanchette’s notice of claim lacked sufficient detail of the alleged defects, the Act nonetheless requires that the builder respond and acknowledge the claim within 14 days. Here, the builder should have raised any objection to the sufficiency of the notice within the 14 day time period rather than relying on that defect as a basis to delay the response. Because GHA did not timely acknowledge receipt of the claim and set forth its objections, Blanchette was released from the requirements of the Act and could proceed with the lawsuit.

     

    This case serves as a reminder to builders in California to make sure and strictly comply with all provisions of the Right to Repair Act, or risk becoming embroiled in what may become much more lengthy and expensive civil litigation.

     

    Blanchette v. Superior Court (GHA Enterprises) (Feb. 10, 2017) 17 C.D.O.S. 1302

    (2/17)

  2. Broker Denied Commission Is Allowed to Proceed With Case Against Non-Signing Owners

    Maria Tanzillo2017-04-208:45 pmComments Off on Broker Denied Commission Is Allowed to Proceed With Case Against Non-Signing Owners
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    Jacobs, a licensed real estate broker, signed a vacant land listing agreement granting her the exclusive right to sell a parcel of property in Marin County. The listing agreement was signed by one of the property owners, Locatelli, as trustee for the Locatelli trust. There were signature lines on the listing agreement for five additional owners, but they did not sign. However, the term “owner” was defined in the agreement as the Locatelli trust “et al.”, which means “and others”. Locatelli told Jacobs he was authorized to act on behalf of all owners.

     

    Jacobs marketed the property and found a potential buyer, The Trust For Public Land (TPL). When Jacobs informed Locatelli, he claimed that he had already been speaking with TPL for 3 years and would deal with them directly. He instructed Jacobs to cease all communications with TPL. The owners later sold the property to TPL, and refused to pay Jacobs a commission.

     

    Jacobs filed a complaint against the owners and TPL to recover the commission. The owners who had not signed the listing agreement moved to dismiss the case against them, and the trial court granted their demurrer. The court of appeal reversed the decision, thus keeping all the owners in the case.

     

    The non-signing owners argued that Jacobs’ complaint was barred by the statute of frauds, which provides that a broker’s commission agreement is invalid unless some form of it is in writing and signed by the party to be charged or the party’s agent. The court, however, found the statute inapplicable because Jacobs alleged there was a written agency agreement between Locatelli and the owners allowing him to act on their behalf, and he signed the listing agreement. In addition, Jacobs alleged that at least two of the other owners had acknowledged her as the listing broker during the marketing of the property. As such, the court of appeal held that the trial court should have allowed extrinsic evidence on these claims rather than dismissing the complaint.

     

    The owners also argued that the parol evidence rule barred introduction of extrinsic evidence to dispute the listing agreement because it was a fully integrated and thus a final agreement. The court of appeal also found this rule inapplicable, because there was no apparent contradiction between the terms of the listing agreement and Jacobs’ allegations, i.e., that all owners had retained her through their agent, Locatelli.

     

    This case was decided correctly under the facts and circumstances involved. It is nonetheless an important warning and reminder to brokers and agents to ensure that all necessary parties sign listing agreements and other transaction documents, so as to avoid unnecessary litigation and problems down the line.

     

    Jacobs v. Locatelli (Feb. 9, 2017) 17 C.D.O.S. 1232

    (2/17)

  3. Where Broker Acts as Dual Agent, Listing Agent Owes Equivalent Fiduciary Duty to Buyer

    Maria Tanzillo2017-04-208:42 pmComments Off on Where Broker Acts as Dual Agent, Listing Agent Owes Equivalent Fiduciary Duty to Buyer
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    It is settled law in California that a real estate broker representing both seller and buyer has fiduciary duties to both parties. In a recent decision, the California Supreme Court has now confirmed that, when there is such dual agency by the broker, the associate licensee acting solely as the listing agent under the broker’s license also has a fiduciary duty to the buyer.

     

    In this case, seller retained Coldwell Banker to list a luxury residence for sale. The listing agent marketed the home as having approximately 15,000 square feet, which was more than reflected in public records. Buyer was also represented by Coldwell Banker, but by a different salesperson in a separate office. As required by law, buyer had knowledge of and consented to the dual agency. The listing agent provided copies of public records and the marketing flyer, but did not advise buyer to verify the square footage. After the purchase, buyer discovered the discrepancy and sued for breach of fiduciary duty.

     

    Initially, the trial court decided that listing agent had no fiduciary duty to buyer. After the Court of Appeal reversed that decision in 2014, the California Supreme Court agreed to hear the case. The court first examined the history of dual agency in California, noting many developments since the early 1980s. At issue was interpretation of the final two sentences of Civil Code section 2079.13(b), in which the term “agent” refers to the broker and contemplates a real property transaction: “The agent…bears responsibility for his or her associate licensees who perform as agents of the agent. When an associate licensee owes a duty to any prinicipal, or to any buyer or seller who is not a principal,…that duty is equivalent to the duty owed to that party by the broker for whom the associate licensee functions.”

     

    The listing agent argued that, taken in context, the “equivalent” language merely clarifies that the broker assumes duties owed by its agents, not the other way around. The court, however, agreed with buyer’s contrary position that because the agent’s authority derives solely from that of the employing broker, the second sentence imposes on the agent the same responsibility as held by the broker. This reading of the statute is supported by its full legislative history.

     

    As such, the court affirmed that listing agents, when their brokers act as dual agents, owe buyers a duty to learn and disclose all information materially affecting the value or desirability of the property being purchased. In this instance, that included a duty by the listing agent to the buyer to investigate and disclose everything he could learn about the square footage. Here, the duty to investigate arose because there was a known discrepancy regarding square footage.  This decision further clarifies and strengthens protection afforded to real estate buyers in California.

     

    Horiike v. Coldwell Banker Residential Brokerage Company (Nov. 21, 2016) 16 C.D.O.S. 12228

    (12/16)

  4. Interfere With Your Neighbor’s Trees, Be Prepared to Restore Them And Pay Money Damages Times Three

    Maria Tanzillo2016-06-28June 28, 20164:30 pmComments Off on Interfere With Your Neighbor’s Trees, Be Prepared to Restore Them And Pay Money Damages Times Three
    By: , Posted:

    The Salazar family (“plaintiffs”) lived in San Francisco but owned, since 1982, a 10-acre parcel of rural property in Mendocino County that they visited frequently over the years.  The property, which included many large trees and a spring, was completely undeveloped except for a small cabin, and the family enjoyed it as a respite from city life.  Plaintiffs valued the property and the trees in their undisturbed natural state for aesthetics, recreation and privacy.

     

    Defendant Matejcek purchased the adjacent 20-acre parcel in 2007.  Without first conducting a survey, defendant cleared numerous trees on plaintiffs’ property, and added a road, fence, gate, plastic water tanks and a pool, all of which encroached on plaintiffs’ property.  He also apparently moved markers placed by plaintiffs’ surveyor.

     

    The court awarded money damages for encroachment, treble damages for removal of timber, and an injunction requiring defendant to restore plaintiffs’ land.  Defendant appealed.

     

    The measure of damages for wrongdoing that injures property, including trees, is the amount that will compensate for all the detriment proximately caused thereby.  (Civ. Code § 3333.)  Typically, this is measured by the monetary value of the property before and after the damage.  However, this measure may be insufficient where the aesthetic and personal value of the trees to the owner exceeds their monetary value.  In that case, the court may devise an alternative measure based on a more appropriate formula, such as the cost of restoring the property to its former condition even if the cost exceeds diminution in value.  Plaintiffs here relied on this “personal reason” exception to the standard measure of damages, and their expert estimated a cost of $67,500 to remediate the trees.  The court thus found that a damage award of $67,500 was reasonable even if the entire 10-acre parcel was worth only $75,000.

     

    The court then trebled the restoration damages to $202,500 based on a finding of willful and malicious conduct.  (Civ. Code § 3346; CCP § 733.)  The evidence showed that defendant had pulled records and harassed plaintiffs to sell him their property for years before he purchased the neighboring parcel, did not obtain a survey prior to the work, may have moved or ignored survey markers, and failed to advise plaintiffs of his construction plans.

     

    Defendant also argued that plaintiffs elected to recover money damages and could not also obtain equitable relief.  An injunction provides an equitable remedy as opposed to money damages.  In order to obtain such equitable relief, where the court orders that defendant take or refrain from some action, plaintiff must prove that there is no other adequate remedy.  The court can then fashion the remedy that is most appropriate under the circumstances.

     

    Here, plaintiffs alleged irreparable injury to their property rights because continuance of the encroachments could ripen into a prescriptive easement and give defendant legal rights to use it.  This could not be compensated by an ordinary damage award.  The court thus ordered a permanent injunction compelling defendant to remove the encroachments, return the roadway to its original grade, and to otherwise restore the property, after which plaintiffs could replant the trees for their use and enjoyment.  Had the encroachment been innocently made and not caused irreparable injury, and if cost of removal outweighed inconvenience to plaintiff, the court could have denied the injunction and awarded only money damages, but here both the legal and the monetary remedy were fully warranted.

     

    Salazar v. Matejcek (2016) 16 C.D.O.S 2682

     

    (03/16)

  5. SB800 Right to Repair Act Determined to Be Exclusive Remedy for Residential Construction Defect Cases

    Maria Tanzillo2015-12-09December 9, 201512:05 amComments Off on SB800 Right to Repair Act Determined to Be Exclusive Remedy for Residential Construction Defect Cases
    By: , Posted:

    The Fifth Appellate District of the California Court of Appeal recently held that SB800 (otherwise known as the “Right to Repair Act” and codified at Civil Code sections 895 through 945.5) is the only remedy available to homeowners for residential construction defect claims against builders. (McMillin Albany LLC v. Superior Court)

     

    In so holding, the court rejected the reasoning and outcome of the 2013 decision by the Fourth Appellate District in Liberty Mutual Ins. Co. v. Brookfield Crystal Cove LLC, which allowed for common law remedies outside SB800 when the defective conditions caused actual damage to property. (The Fifth Appellate District covers nine counties in central California:  Fresno, Kern, Kings, Madera, Mariposa, Merced, Stanislaus, Tulare and Tuolumne. The Fourth Appellate District covers six southern California counties: San Diego, Imperial, Orange, San Bernardino, Riverside and Inyo.) Given the split of authority, the issue may now be ripe for review by the California Supreme Court.

     

    Both cases examined the legislative history of the Right to Repair Act. Enacted in 2002, the Act established a mandatory process to manage residential construction defects prior to litigation. The Act set forth building standards, the violation of which constitute construction defects. Prior to litigation, homeowners must follow certain notification procedures and builders must be permitted to inspect, test, and offer to repair the defects. The Act also prescribes statutes of limitations, affirmative defenses, and recoverable damages.

     

    The Act sought to abrogate the 2000 decision in Aas v. Superior Court, in which the California Supreme Court held that construction defects in residential properties must cause actual property damage or injury prior to being actionable. The Act, by contrast, was intended in part to grant statutory rights where construction defects caused economic damage alone. The Act made major changes to the law governing construction defects, and sought to respond to builders and insurers concerned about litigation costs as well as giving homeowners the ability to have defects identified and corrected before they caused actual harm.

     

    The Liberty Mutual case had interpreted the Act to not eliminate the property owner’s common law rights and remedies where actual damage occurred as a result of the defect. The more recent McMillin decision however undertook a more comprehensive analysis of the Act and concluded that the “groundbreaking reform” and “major changes” intended by the Legislature did not allow for the Act to be optional. The implications of the recent case for home builders are that claimants will have to comply with the Act before filing suit and will arguably have shorter time periods in which to do so.

     

    McMillin Albany LLC v. Superior Court (2015) 14 C.D.O.S. 9696

    (12/15)

  6. Damages for Wrongful Foreclosure Not Necessarily Limited to Lost Equity

    Maria Tanzillo2015-06-26June 26, 20151:03 amComments Off on Damages for Wrongful Foreclosure Not Necessarily Limited to Lost Equity
    By: , Posted:

    The recent case of Miles v. Deutsche Bank involves the measure of damages for wrongful foreclosure. In 2005, plaintiff refinanced the loan on his home in Riverside with an adjustable rate mortgage serviced by HomeEq. Plaintiff made regular payments until the rate increased in 2007 and then sought a loan modification. In early 2008, HomeEq agreed to modify the loan terms in exchange for a lump sum payment. Both parties signed the modification agreement and plaintiff made the first payment, but HomeEq then refused to honor the agreement.

     

    Plaintiff continued for a time to make monthly payments but HomeEq kept revising the agreement terms and demanding more lump sum payments to modify the loan. When plaintiff insisted on the terms of the original agreement, HomeEq recorded a notice of default and then a notice of trustee’s sale. Plaintiff obtained a court order temporarily preventing the sale of the home in 2009, but defendants proceeded with the sale and evicted plaintiff.

     

    Plaintiff sued HomeEq and Deutsche Bank, which owned the loan. The trial court in Riverside County without explanation sustained defendants’ demurrer to causes of action for breach of contract, fraud and negligent misrepresentation. The court also granted defendants’ motion for summary judgment on the remaining cause of action for wrongful foreclosure, finding that plaintiff had no equity in the property and thus could not prove damages. The Court of Appeal, Fourth Appellate District, reversed both rulings.

     

    The court first rejected the argument that plaintiff’s failure to attach a copy of the contract or plead its terms verbatim was fatal to the breach of contract claim. The correct rule is that a plaintiff may plead the legal effect of the contract rather than its precise language.

     

    On the fraud and negligent misrepresentation claims, defendants argued they could not lie where, as here, the representations pertained to future events and thus there could be no prior knowledge that assertions were untrue. The court rejected the argument, finding that such claims could be based on making promises, here to modify the loan, but having no intent to actually perform. The court also rejected the argument that the claims lacked specificity for failing to identify the specific misrepresentations and the persons who made them, finding that such information was more likely in the possession of defendants.

     

    With regard to the wrongful foreclosure claim, which requires “an illegal, fraudulent or willfully oppressive sale”, the court disagreed with the trial court’s conclusion that a plaintiff with no equity in the home cannot prove damages. Because wrongful foreclosure is a tort, the measure of damages includes “all the detriment proximately caused thereby” (see Civil Code § 3333), which in addition to lost equity the court noted might also include moving expenses, damage to credit, loss of rental income, personal injury including emotional distress, property damage and, upon a proper showing, punitive damages. The court made clear, however, that it was not suggesting any of these damages would be actually recoverable in the case, and noted that plaintiff’s damages, if any, might be entirely offset by the benefit of being free of an underwater loan.

     

    After the events giving rise to this lawsuit, the legislature enacted a statutory cause of action to recover damages for wrongful foreclosure, codified at Civil Code sections 2924.12(b) and 2923.6(c)(3), but the court took no position on whether this impacts the common law tort action.

     

    Plaintiffs’ Bar may attempt to rely on this case to seek broad damages in all real estate tort actions, but given other applicable case law, the scope of this particular ruling is arguably limited to instances where a party illegally, fraudulently or with willful oppression exercises a right to foreclose on property, evict an occupant, or both.

     

    Miles v. Deutsche Bank Nat’l Trust Co. (2015) 236 Cal.App.4th 394

    (06/15)