It is an understatement to say that pursuing a claim against the government for a Fifth Amendment regulatory taking is difficult. The United States Supreme Court has described such claims as presenting “an especially steep uphill battle” for the claimant. Two of these obstacles appear at the threshold – gaining access to federal court and identifying the relevant parcel to be used in the takings equation. Based on two recent petitions for certiorari, one granted and the other under review, the Supreme Court may be revisiting those obstacles in the near future.
The Court of Appeal has squarely held that a prohibition on development of a portion of a shopping center project site, in order to “bank” that property for possible future acquisition, was a temporary taking. (Jefferson Street Ventures, LLC v. City of Indio (2015) 236 Cal.App. 4th 1175.) The decision highlights the sometimes elusive line between a municipality planning for future land use needs, which is permissible, and a municipality completely eliminating the economic value of specific property through such planning, which it is not. It also confirms that when the government completely prevents the economic use of property, even for a temporary period, a compensable taking results. Continue Reading
The Court of Appeal has recently reminded land use practitioners of an important deadline when pursuing a takings claim: A takings challenge based on a land use determination must be filed within 90 days of that determination even though a claim for resulting damages may be asserted later. If not filed within the 90-day period, the takings claim is barred. (Honchariw v. County of Stanislaus (5th Dist. 2015) ____ Cal.App.4th ______ (Court of Appeal No. F069145).) Continue Reading
In a wrongful foreclosure lawsuit, the plaintiff may recover tort damages – i.e., any damages proximately caused by the foreclosing defendant, the Fourth District Court of Appeal held last week. Miles v. Deutsche Bank National Trust Co. (April 29, 2015) 2015 WL 1929732.
In considering the question of what damages may be recovered for a claim of wrongful foreclosure, the defendant foreclosing lender argued that because the plaintiff borrower owed the lender an amount greater than the value of the foreclosed property (i.e., there was no equity in the property), the plaintiff suffered no damages. The Court of Appeal disagreed with this contract analysis of damages and instead applied a tort measure of damages (“any damages proximately caused”) under Civil Code § 3333. Such tort damages may include, for example: moving expenses, lost rental income, damage to credit, emotional distress, and punitive damages.
As reported in our blog article below, in June the Second District Court of Appeal held that California’s non-judicial foreclosure statutes do not grant a defaulting borrower the right to enjoin a foreclosure sale by alleging that the lender lacks standing. (Keshtgar v. U.S. Bank, N.A. (2014) 226 Cal.App.4th 1201.)
Under California’s non-judicial foreclosure statutes, a defaulting borrower cannot enjoin a lender’s initiation of foreclosure proceedings by asserting that the lender lacks standing. (Keshtgar v. U.S. Bank, N.A. (2014) 192 Cal.App.4th 1149 (Second Dist., June 9, 2014) (“Keshtgar”).)
Relying principally on: (1) California’s non-judicial foreclosure statutes (Civ.Code, §§ 2924–2924k) and (2) the prior decision of Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149 (“Gomes”), the Second District Court of Appeal affirmed the lower court’s decision to sustain the foreclosing lender’s demurrer without leave to amend and enter judgment against the borrower. The court held that a defaulting borrower could not preemptively enjoin a non-judicial foreclosure sale even if the wrong entity was foreclosing on the property.
Keshtgar represents the “bookend” to the Fourth District’s 2011 Gomes decision, in which the court held that a defaulting borrower could not preemptively enjoin a non-judicial foreclosure sale by claiming that the lender (or its agent) lacked standing. In between Gomes and Keshtgar, the Fifth District’s decision in Glaski v. Bank of America, N.A. (2013) 218 Cal.App.4th 1079 (“Glaski”) distinguished Gomes in a post-foreclosure action for damages. Keshtgar’s disagreement with Glaski arguably creates a conflict between the districts that California Supreme Court may elect to address.
A new decision in Ash v. North American Title Co. holds that (1) contract damages based upon a bankruptcy were not foreseeable, and (2) an escrow holder was entitled to a jury instruction as to intervening or superceding causes (i.e., the bankruptcy). The decision also highlights a potential for some judges to try to impose greater responsibilities on escrow holders.
Currently, California law requires an escrow holder to be responsible only for following strictly the escrow instructions; it has no duty to police the transaction or the parties to it. ( See Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co. (2002) 27 Cal.4th 705 (“Summit”).) Because an escrow holder represents both parties to an escrow, it cannot have a full agency relationship with one without being in complete conflict with the other. ( See Lee v. Title Ins. & Trust Co. (1968) 264 Cal.App.2d 160 (“Lee”).) As a result of the potential for conflict, courts have stated that escrow holders are liable only for failing to comply with their explicit instructions, not for policing their parties (except in clear cases of fraud).
The “sham guaranty” defense may absolve a guarantor of liability when no deficiency is available against the borrower, and the guarantor is really the borrower with a different name. In California Bank and Trust v. Lawler (2013) 222 Cal.App.4th 625, the Court revisited application of the “sham guaranty defense” to enforcement of a guaranty given for a note secured by a deed of trust and held the guaranty was not in fact a “sham.” For context, California’s “antideficiency” legislation, enacted after the Great Depression, limits the ability of lenders to obtain a judgment for the amount the debt exceeds the value of the security. No deficiency may be obtained following nonjudicial foreclosure of real property (§ 580d) or judicial or nonjudicial foreclosure under a purchase money deed of trust (§ 580b). Because these protections are grounded in the strong public policy to avoid exacerbating real estate downturns, the protection cannot be waived by private agreement. Section 580b(c) was amended in 2013 to expressly provide that the antideficiency limitations do not affect the liability of a guarantor for that deficiency.
If an easement owner is required to obtain governmental approval in order to develop that owner’s property, and the neighboring property owner refuses to consent to the development (e.g. refusing to execute consent for a retaining wall permit), such refusal to consent may constitute an interference with easement rights and allow the recovery of tort damages. (Dolnikov v. Ekizian, 2013 WL 6680755 (Second Dist., December 19, 2013) (“Dolnikov”)
Dolnikov is the first published California decision in several decades to address the extent of an easement owner’s “secondary easement” rights. In addition, Dolnikov represents an important developed in easement law by applying centuries-old “reasonable use” standards to an “intangible act,” in this case the servient tenement owner’s refusal to execute documents required by the City in order to develop the easement owner’s land. In this case, the refusal to cooperate with the easement owner’s development plans resulted in the recovery of tort damages.
If an express easement does not specifically identify the area of use, then the scope of permitted use may be limited to the historical use of the easement. (Rye v. Tahoe Truckee Sierra Disposal Company, Inc., 2013 WL 6578784 (Third Dist., December 16, 2013) (“Rye”).
The holding in Rye affirms an important rule of easement law in California, though most of the cases addressing this rule date back 50-100 years. Simply because an express easement exists over a general area does not automatically permit the easement owner to use the entire area. Ultimately, the scope of an easement’s use will depend upon the language in the grant of easement, the intent of the parties, and the historical use of the easement (which may date back decades).