Appellate Court Slams Scofflaw Tenant for Bogus Anti-SLAPP Motion

This case pitted the competing goals of two very important statutory schemes.  On the one hand, an unlawful detainer action provides landlords a means to evict a tenant in a short, simplified proceeding where the only issue to be tried is whether the tenant is in lawful possession of the premises.  The availability of such an expedited procedure is hugely important to landlords, especially given that landlords are prohibited from using “self-help” to remove a tenant.


This case pitted the competing goals of two very important statutory schemes.  On the one hand, an unlawful detainer action provides landlords a means to evict a tenant in a short, simplified proceeding where the only issue to be tried is whether the tenant is in lawful possession of the premises.  The availability of such an expedited procedure is hugely important to landlords, especially given that landlords are prohibited from using “self-help” to remove a tenant.


On the other hand, the anti-SLAPP statutory scheme is designed to deter the filing of non-meritorious lawsuits which are aimed at thwarting a party’s valid exercise of protected activity, such as the exercise of free speech or the filing of a lawsuit to remedy a wrong.  When invoked by a defendant in a proper case, a plaintiff must present evidence at the very beginning of a case to establish the probable validity of their case or face dismissal.  Moreover, discovery is stayed pending resolution of the motion.


In what may have seemed like clever legal maneuvering at the time, the tenant in this case (who was behind in rent and presumably knew that eviction was inevitable) filed an action claiming its landlord was liable for allowing another tenant to monopolize parking spaces in a shopping center.  After the landlord filed a separate unlawful detainer (eviction) action, the tenant responded by filing an anti-SLAPP motion to strike which argued that the landlord’s unlawful detainer action was filed to thwart tenant’s exercise of its free speech rights.


The trial court denied the motion to strike and sanctioned the tenant almost $3,500 for filing a frivolous motion, finding that the purpose of the landlord’s unlawful detainer action was to address the tenant’s failure to pay rent and common area charges rather than to thwart the tenant’s public participation in a protected activity.  The Court of Appeal agreed that while the tenant beat the landlord to the courthouse by filing its action first, the mere timing of the two lawsuits was not dispositive.  The court looked to the California Supreme Court’s opinion in Navellier v. Sletten, (2002) 29 Cal. 4th 82, which provides that the mere fact that an action was filed after, or even triggered by, protected activity does not establish that the action arose from that activity as required by the anti-SLAPP statute.


Applying the holding of Navellier, the Court of Appeal concluded that “the unlawful detainer complaint arose from Tenant’s unprotected activity in allegedly failing to pay rent and CAM charges, rather than from its protected petitioning activity in filing the prior lawsuit.”  According to both the trial court and appellate court, this was not even a close call.


This decision is yet another reminder that, as powerful as an anti-SLAPP motion to strike can be, discretion must be used in bringing such motions because they are only proper in cases which truly arise from protected activity.

Olive Properties v. Coolwaters Enterprises, Inc. (2015) 241 Cal.App.4t 1169


Physical Division of Property Does Not Necessarily Equate to Division Under the Subdivision Map Act

Save Mount Diablo v. Contra Costa County involved the question of whether an imminent domain taking which physically splits an existing parcel into several non-adjacent pieces constitutes a subdivision of the original parcel under the Subdivision Map Act, thus allowing a would-be developer to forego the often onerous requirements of the Subdivision Map Act.


The property in question consisted of a large undeveloped tract off Vasco Road in Eastern Contra Costa County. Historically, the tract had been recorded as a single parcel and used for agricultural purposes, but in the mid-1990s the Contra Costa Water District (“District”) acquired two narrow intersecting strips of land by eminent domain for an underground pipeline and to relocate Vasco Road, respectively. The District’s acquisition of the strips in fee left a remaining property consisting of four irregularly shaped parts, each physically separated from the other parts by one of the strips owned by the District.


Nunn, the property owner who had purchased the property after the District’s acquisition of the strips, first attempted to subdivide the land using the parcel map process outlined in the Subdivision Map Act. After those efforts proved unsuccessful, Nunn changed course and instead sought a certificate of compliance from the County. While the County initially denied the request at the planning staff level, the matter was brought before the Planning Commission, which reversed the staff’s decision. The County Board of Supervisors eventually agreed with the Planning Commission and issued four certificates of compliance (i.e., one for each physically separated portion of the property) certifying that the four newly created parcels complied with the Subdivision Map Act.


Save Mount Diablo (“SMD”) filed suit, petitioning the Court for a Writ of Mandate requiring the County to set aside the four certificates of compliance. The trial court granted SMD’s petition and the Court of Appeal, First Appellate District, affirmed. The Court first examined the purpose of, and procedures mandated under, the Subdivision Map Act’s requirements for creation of a new legal parcel. Next, the Court considered Nunn’s main argument, that the District’s physical division of the Property by acquiring the strips traversing the Property constituted a “division” under the act. While Nunn contended that the District had effectively divided the Property because the result was four non-contiguous “parcels,” the Court disagreed.


While the Court agreed that the District’s acquisition of the strips physically divided the Property, such that a person would need to traverse the District’s property in order to travel from one portion of the Property to another, the physical division of the property by imminent domain did not constitute a division of the Property under the Subdivision Map Act. On this issue, the Court found that a physical division of property was not determinative, but that the key issue was whether the newly created parcels complied with the Subdivision Map Act. The Court noted that a division within the meaning of the Subdivision Map Act is not established merely because parts of a property do not touch. In reaching its holding, the Court looked a California Attorney General opinion which advanced the notion that the term “contiguous” could be used to not only denote two things which are in physical contact, but could also be used in this context describe two things which are “nearby.” The Court ultimately held that despite being separated by strips running across the Property, the portions of the Property were still contiguous and, therefore, no division had taken place.


The takeaway from this case: The Court was likely influenced by equitable considerations, as evidenced by the reference to Nunn’s predecessor’s receipt of almost $1 million from the District to compensate for the taking of the two strips of land and the fact that the remaining pieces of the Property were still easily accessible.


Save Mount Diablo v. Contra Costa County (Nunn) (2015) 14 C.D.O.S. 11084


Court Liens Away From Coverage in Title Insurance Case

Most real estate investors, and real property attorneys for that matter, think they know a lien when they see one. In a late December decision which was recently certified for publication (so it can now be cited as precedent in California), the California Court of Appeal for the Third Appellate District reminded one and all that the determination of whether a recorded document constitutes a defect, lien or encumbrance against title may require deeper analysis.


In Stockton Mortgage v. Tope, the Court reviewed the San Joaquin County trial court’s granting of First American Title Insurance Company’s summary judgment motion. First American had been sued by Stockton Mortgage under various theories for refusal to defend and indemnify Stockton Mortgage in a lawsuit brought by real estate investors. Stockton Mortgage contended that a “Notice of Abatement Action” recorded against the property by the County Environmental Health Department in 2004 pursuant to Health & Safety Code §17985 was covered by First American’s 2005 title insurance policy. The Notice at issue addressed the property’s substandard physical conditions, including 26 separate structural, mechanical, electrical and plumbing violations.


Alliance Title, acting as escrow for the transaction, attempted to resolve the issue, paying the County’s then current enforcement costs of $2,005. The County refused to issue a release because the underlying violations had yet to be cleared but escrow closed anyway.


In one of the principal issues decided by the case, the Court of Appeal upheld the trial court’s granting of First American’s summary judgment on the basis that the Notice related to physical condition of the property, which related to the value of the property rather than the marketability of its title. In other words, the Notice was not a lien or encumbrance because the property could be transferred without doubt as to who owns or has an interest in it. The Court reminded that “one can hold perfect title to land that is valueless; one can have marketable title to land while the land itself is unmarketable.” The Court relied heavily on a 2002 case involving similar issues. (Elysian Inv. Group v. Stewart Title.)


Importantly, the Court also followed longstanding authority which holds that no liability exists for statements issued in a Preliminary Report as it is neither an insurance contract nor a representation of the title. (Ins. Code §12340.11.)


While this case did not change existing law, it is notable that the Court was able to distinguish the obligations, and perhaps the mistakes, of the escrow holder versus the title insurer.


Stockton Mortgage, Inc. v. Tope (2015) 233 Cal.App.4th 437


No Duty to Disclose Claim of Easement to Prospective Purchaser of Adjacent Property

The Hoffman v. 162 North Wolfe case involved claimed prescriptive easements over commercial property in Sunnyvale. In March 2010, Hoffmans purchased property at 170 North Wolfe (“170”). At the time of the purchase, Hoffmans were tenants of 170 and were thus familiar with that property and the adjacent property at 162 North Wolfe (“162”). After close of escrow, the owner of the adjacent property, 162 LLC, notified Hoffmans that they claimed a landscape easement and prescriptive easement rights of ingress and egress over 170. Thereafter, 162 LLC sued Hoffmans to quiet title to the landscape easement and prescriptive easement rights.


In an interesting twist, Hoffmans cross-complained against 162 LLC for fraud, alleging (among other things) that 162 LLC should have disclosed their claims or interest with respect to the disputed area and that its members had falsely told them that they had no claims. Hoffmans claimed that eight months before close of escrow they complained to Jonathon Owens, one of 162 LLC’s members, that vehicles servicing 162 were crossing over onto 170, and that Owens said he “would take care of it.” Notwithstanding this alleged conversation, the vehicles continued to cross onto 170 but the Hoffmans failed to raise the issue again.


The Santa Clara County trial court granted summary adjudication of Hoffmans’ on grounds that, without a preexisting relationship, 162 LLC had no duty to affirmatively disclose anything to Hoffmans. On both causes of action, the trial court found that the Hoffmans hadn’t justifiably relied on 162 LLC’s actions or inactions. The Court of Appeal for the 6th District upheld the trial court’s ruling.


On the concealment (fraudulent non-disclosure) cause of action, the Court of Appeal rejected Hoffmans’ claim that the parties’ mutual interest in purchasing 170 constituted a “preexisting relationship” sufficient to warrant a duty of disclosure. The Court found “no evidence in the record that 162 LLC or its members had any relationship with the Hoffmans.”


The Court went on to find that even if 162 LLC had owed Hoffmans a duty to disclose their easement claims prior to close of escrow, the Hoffmans’ fraud claims failed because they could not establish reliance. In order to satisfy the reliance element of actionable fraud, the purported reliance must be reasonable or justified. The Court first found that Steven Hoffman’s status, sophistication and experience was relevant to the determination of reasonable reliance. Hoffman was an “experienced real estate agent who had owned several businesses and owned several pieces of real property.” The Court explained that it was unreasonable as a matter of law for someone of Hoffman’s sophistication and experience to take no action, and fail to even make any further inquiry, while observing the tenants of 162 drive over the disputed area for eight months which was a “common occurrence” as the Hoffmans admitted at deposition.


On the fraud claim, while the Court appeared quite dubious of the Hoffmans’ argument that Owens’ statement that he “would take care of it” constituted an actionable promise, since it might be too vague to be enforceable even if it constituted a promise, the Hoffmans could not in any event establish reasonable reliance as a matter of law based on the analysis above.


This case is perhaps most interesting for what it did not do – the Court resisted the attempt to extend disclosure rules to third parties without any preexisting relationship. Requiring the owners of neighboring properties to essentially become part of their neighbor’s real estate transaction would have had a long-reaching, and potentially devastating, impact on almost every real estate transaction in California.


Hoffman v. 162 North Wolfe (2014) 228 Cal.App.4th 1178.


Obtained dismissal of title insurance company acting as trustee in wrongful foreclosure action in federal court

Resolved bankruptcy matter involving priority of lien on nightclub property by obtaining relief from stay and recording corrective deed of trust

Resolved dispute arising out of 1031 exchange involving apartment buildings that facilitated transaction to close within statutory time

Defended real estate brokers in litigation involving sale of numerous tenancy in common units which included complex “wrap” financing