The Top Ten Real Property Cases of 2016

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by

The Top Ten Real Property Cases of 2016

Basil "Bill" Shiber and Star Lightner

Basil ("Bill") Shiber

Basil ("Bill") Shiber is a shareholder with Miller Starr Regalia. His practice focuses on disputes involving secured transactions, commercial leasing, condemnation, and land use. He is also a contributing author of Chapter 23, "Inverse Condemnation," Chapter 24, "Eminent Domain," and Chapter 30, "Community Redevelopment," of Miller & Starr, California Real Estate 4th.

Star Lightner

Star Lightner is senior counsel with Miller Starr Regalia. She is senior editor of Miller & Starr, California Real Estate 4th Edition, and a contributing author of Chapter 11, "Holding Title," Chapter 19, "Landowners’ Liability," and Chapter 38, "Discrimination." She also produces the bi-monthly Miller & Starr Real Estate Newsalert.

With contributions by Karl E. Geier, a senior shareholder with Miller Starr Regalia, Editor-in-Chief of Miller & Starr, California Real Estate 4th, and a contributingauthor of fifteen chapters in that publication.

I. INTRODUCTION

The process for selecting the "Top Ten" real estate cases of 2016 was made somewhat easier by an unusual level of activity by the California Supreme Court in the area of real estate law. Six of the Top Ten cases selected were decided by the California Supreme Court and address issues ranging from the fiduciary obligations of a real estate agent working for a brokerage handling both sides of a residential real estate transaction, to the constitutionality of precondemnation entry and testing statutes. Since California Supreme Court cases, by definition, address issues that are unsettled at the Court of Appeal level or otherwise present issues of great public significance, the Supreme Court’s pronouncements on these topics made them prime candidates for inclusion, given our standard: widespread impact on the practice of real property law.

There were also appellate court decisions worthy of inclusion addressing "bread-and-butter" issues such as the proper time to record a mechanics lien after completion of the work of improvement, and whether a breach of a residential lease agreement must be "material" in order to justify termination of the lease and eviction of the tenant. There were also more esoteric, but nonetheless significant, decisions, including whether and under what circumstances an old fire trail can be impliedly dedicated to public use, the liability of a church for off-premises parking creating dangers for users, and the propriety of efforts by a city to stymie the construction of a crematorium by changing the rules after the building permit had been issued.

All of these cases are addressed below, along with several "Honorable Mentions" that follow up on last year’s list of cases or otherwise complement cases on this year’s list. As always, selecting cases for inclusion is a subjective affair, but we offer the following as the most significant real estate cases of 2016.

II. TOP TEN CASES OF 2016

1. Horiike v. Coldwell Banker Residential Brokerage Company1

When the agent representing the seller in a residential transaction works for the same broker as the agent representing the buyer, the agent acts as a "dual agent" and owes fiduciary duties to both buyer and seller.

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In a dual agency case closely watched by the real estate brokerage industry, the California Supreme Court affirmed a 2014 Court of Appeal decision2 that involved a real estate agent’s knowledge of, and failure to disclose to the buyer, varying square footage estimates, and held that such failure was a breach of fiduciary duty where the agent’s broker represented both seller and buyer. Chris Cortazzo of Coldwell Banker, representing the seller of the property, advertised the property on the MLS as offering "approximately 15,000 square feet of living areas" despite the fact that public records showed the house as 9,434 square feet. The buyer, Horiike, was represented by a different Coldwell Banker agent. Later, having acquired the property and preparing to do work on it, Horiike reviewed the building permit and noticed that the property was significantly smaller in size than Cortazzo’s representation.

Horiike filed suit against Cortazzo and Coldwell Banker, alleging that both Cortazzo and Coldwell Banker breached fiduciary duties to Horiike either through deliberate misrepresentations or failure to investigate. The trial court instructed the jury that Coldwell Banker could only have liability if some agent of Coldwell Banker other than Cortazzo or Horiike’s agent had breached a fiduciary duty to Horiike. As a result, the jury returned a special verdict in favor of Coldwell Banker on all causes of action and Horiike appealed, arguing that under Civil Code section 2079.13(b), Cortazzo owed him a fiduciary duty equivalent to that of Coldwell Banker because Coldwell Banker was a dual agent. Under section 2079.13(b), "[t]he agent in the real property transaction bears responsibility for his or her associate licensees who perform as agents of the agent." Thus, providing false information that he reasonably believed to be true did not satisfy Cortazzo’s duty as a fiduciary to Horiike because the broker, as a fiduciary, has a duty to learn the material facts that may affect the principal’s decision.3

The Supreme Court granted review on the specific issue of whether an associate licensee owes the same fiduciary duties as its broker. Since a corporate brokerage, as a "fictitious legal entity," can only act through its agents, the Supreme Court considered untenable Coldwell Banker’s argument that the different agents for the same corporate broker owed different obligations to the buyer and the seller. The court specifically rejected the argument that Cortazzo could not have been charged with agency duties to Horiike because Horiike had never engaged Cortazzo as his agent, noting that "Cortazzo, as a salesperson acting under Coldwell Banker’s corporate license, could not represent any party in the transaction independently of Coldwell Banker, the broker under which he was licensed." In response to Coldwell Banker’s argument that this conclusion would require salespersons in dual agency to breach their clients’ confidences, the court observed that the legislature could amend the statute to "uncouple associate licensees’ duties from those of the brokers they represent."

Comment: The implications of this holding for large brokerages that regularly engage in dual agency are significant. Listing agents working for a brokerage company acting as a dual agent will have duties to buyers beyond being "honest and fair,"4 instead having a "fiduciary duty of utmost care, integrity, honesty, and loyalty" to both parties.5 While the court found the statute to be clear that both brokers and their associate licensees owed such duties, the decision creates a distinct tension between the duties of disclosure and confidentiality. In addition, Civil Code sections 2079.13 through 2079.24 were amended effective January 1, 2015, to apply not only to residential but to commercial real estate transactions.6 Because many agent responsibilities under other inspection and disclosure statutes7 are limited to residential real estate, the application of Horiike in the commercial context remains to be determined.

2. Property Reserve, Inc. v. Superior Court of San Joaquin County8

Precondemnation entry and testing statute survives constitutional challenge after California Supreme Court "reforms" statute to allow for post-entry jury determination of damages.

From statewide water projects to high-speed rail, public works projects in California depend on precondemnation entry statutes that allow agencies to gain access to properties to conduct investigations and testing without the expense and delay of formal condemnation proceedings. In Property Reserve, the California Supreme Court preserved the challenged statute in a significant victory for public agencies.

In connection with the proposed construction of tunnels or canals through the Sacramento-San Joaquin Delta, the Department of Water Resources sought to conduct precondemnation environmental and geological studies and testing9 on more than 150 privately owned parcels of land contemplated for acquisition through negotiation or eminent domain. Property owners challenged the procedures as a taking under the California Constitution, and the trial court authorized entry for conducting environmental testing (generally a single day of "non-invasive" activities conducted by walking, visual observation, minor soil and plant sampling and testing, photography, and trapping and releasing small animals), but not for geological testing (drilling holes up to 205 feet in depth that would be refilled after the rod was withdrawn, necessitating multiple vehicles and people for several days). The Court of Appeal reversed as to the environmental testing only, holding that the entry order constituted a temporary easement, and that it was "self-evident" that granting the order would result in loss of the owners’ right to the quiet use and enjoyment of their properties—therefore a "full" condemnation action with all associated procedural protections was required.

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The California Supreme Court granted review. After initially concluding that the precondemnation entry and testing procedure under Code of Civil Procedure section 1245.030 "implicitly" requires a trial court hearing and an opportunity for the property owner to present evidence relative to the factors to be considered, the court went on to find that the statute is not limited to activities "that are only innocuous or superficial." Rather, activities that cause physical changes to the property are contemplated. Thus, it found both the environmental and geological testing to be the types of activities governed by the statute.

Turning to the constitutional question, the court focused on the fact that the state’s taking clause not only requires just compensation ascertained by a jury, but—unlike the federal takings clause—requires such compensation to have been first paid to the owner or paid into court for the owner.10 However, based on the constitutional language,11 "[t]he Legislature may provide for possession by the condemner following the commencement of eminent domain proceedings upon deposit in court and prompt release of the money determined by the court."12 The court discussed two different types of "condemnation," one being a "classic condemnation action" required once a public entity has made the determination to acquire legal title, and the other being a post-damage adjudication of inverse condemnation in which the government has already taken or damaged the property and the issue is the compensation owed to the landowner.

The court then decided that the statutes at issue involved a factual setting—precondemnation entry and testing—that falls somewhere between these two scenarios. Because the public entity was only considering whether or not to pursue a formal condemnation proceeding, its preliminary entry and testing activities were not in the nature of a "classic condemnation." Rather, such activities were more analogous to the general police power recognized at common law, which authorizes public entities to execute search warrants, to conduct health and safety inspections, to enforce fish and game regulations, to carry out workplace inspections, and to investigate and eliminate nuisances.

In a footnote, the court observed that "[e]ntries onto private property by public officials or employees to conduct statutorily authorized activities are a long-recognized limitation of a property owner’s right to exclude others,"13 and therefore such activities involve no taking of any of the essential "sticks" in the bundle of property rights.

However, the court acknowledged that the California constitution clearly contemplates a jury determination of damages, which the precondemnation statutes in this case did not include. To overcome this constitutional deficiency, and citing legislative intent that the owner obtain a jury determination of damages in the precondemnation proceeding, the court "reformed" the statute14 by essentially adding language to the statute that was not there, entitling the landowner to a jury trial on the issue of damages.15

The statute thus reformed, the court held that the environmental testing activities were both authorized by the statute and satisfied the constitutional standards.

Comment: In addition to saving the legislature from itself by reforming the statute to include an omitted right to a jury trial, the Supreme Court in this case took the position that the general powers of the government to enter onto property for "police power" functions extend not only to the government’s enforcement of other laws and regulations, but to the government temporarily occupying private property to determine if it is suitable for permanent acquisition.

Opinion on remand: After the Supreme Court dealt with the constitutional issues, it remanded the case back to the Court of Appeal to resolve remaining procedural issues. In its opinion on remand,16 the Court of Appeal held that a landowner was entitled to discovery in a precondemnation entry proceeding although the trial court’s denial of discovery in this case was harmless error. Justice Blease, in a concurring opinion, disagreed with the majority’s conclusion that discovery is authorized in a precondemnation entry proceeding. He was of the view that to the extent discovery was permissible, it was only appropriate after the entry had occurred since at that point, the question of resulting damage was at issue. Justice Blease also noted in his concurrence that in the event a jury trial is demanded regarding damages for precondemnation entry and the government proceeds with a condemnation action for the underlying property, the issue of damages resulting from precondemnation entry may be raised by cross-complaint in the main condemnation action.

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3. Friends of the Hastain Trail v. Coldwater Development LLC17

An old fire trail used by the public was not subject to implied dedication for public use where it was coextensive with existing fire road easement, and evidence of public use was not substantial enough to put owners on notice of possible dedication.

In response to the California Supreme Court’s 1970 decision in Gion v. City of Santa Cruz,18 which found an implied dedication of private land after five years of public use, and to encourage private landowners to allow recreational use of their property, the California State Legislature in 1972 enacted Civil Code section 1009. This code section provides that "no use of [private real property] by the public after the effective date of this section shall ever ripen to confer upon the public . . . a vested right to continue to make such use permanently" without an express dedication by the owner.19 Thus, a claim of implied dedication of private land requires proof of continuous use for at least five years before 1972.

The Hastain Trail and Peak Trail are located on public and private land in the Santa Monica Mountains. Both originated as fire roads along ridges, but both roads were relocated in the 1940s to lower and more stable elevations, leaving behind trails that have been used by hikers for decades. The private land through which the trails run began being developed in the 1990s, and a group of "legacy hikers" who had hiked the trails before 1972, brought suit claiming that the trails had been dedicated to the public. The trial court’s judgment created a new trail easement, finding that defendants’ predecessors had impliedly dedicated an easement for "public recreational uses of hiking, jogging, and dog-walking," and finding defendants’ inability to develop the property to be irrelevant. After rejecting defendants’ argument that the trails could not have been dedicated under Gion because that case was limited to coastal properties or roads, the Court of Appeal examined whether plaintiffs proved that the public "used the land as they would have used public land."20

However, the prefatory issue posed by the court was whether the land upon which the old fire road was located could be the subject of implied dedication. Based not on the trial court record, but on its own determination of the legal status of "fire trails," the court found that it could not. The court referenced Public Resources Code sections, California regulations, and Los Angeles Municipal Code sections confirming the nature of a fire road as an easement for use by the fire department. "Use sufficient for implied public dedication must ‘clearly indicate to the owner that his property is in danger of being dedicated.’"21

Because the court determined that the Hastain Trail was "atop" the "temporary easement" comprising the public fire road, the court found that property owners and the public could reasonably expect it would be used by hikers, but that there could be no reasonable contemplation that the hikers’ use would become permanent,22 because to do so would substantially increase the burden on the servient tenement by restricting its future development.23 Thus the court concluded that use of a fire road does not constitute use of, or grant prescriptive rights to, the servient tenement. The court went on to find insufficient evidence of regular use of the Peak Trail by the "legacy hikers" and thus no implied dedication.

Comment: Judge Johnson’s lengthy dissent asserted a lack of evidence, inappropriate standard of review, and the defendants’ failure to raise issues addressed by the majority:

Despite [the] complete dearth of evidence, the majority inexplicably concludes that there was a ‘public easement’ on the fire road throughout the five-year implied dedication period and therefore the legacy hikers’ use of the fire road could not have put the property owners on notice of possible dedication of the trail to the public for recreational use. This edict must be seen and highlighted for what it is—judicial fiat; it is legally wrong and unsupported by facts in the record.24

The Court of Appeal appeared to reject factual findings by the trial court in its assessment of the legal status of fire trails, which may have contributed to the unusual situation of all three judges of the appellate panel filing separate opinions.

A previous decision by the Second District Court of Appeal, Scher v. Burke,25 which we discussed in last year’s article,26 was—as we predicted—accepted for review by the California Supreme Court and is currently pending before that court with respect to the following related issue: Can a post-1972 non-recreational use result in an implied public dedication of fire roads for continued vehicular use?

4. Boston LLC v. Juarez27

Forfeiture clause triggered by "any breach" of a rental agreement is unenforceable unless the breach is material.

We discussed this Los Angeles Appellate Court Division decision in last year’s article28 and noted that it was a bad decision. This year, the Court of Appeal exercised its discretion to review the decision and reversed it, as discussed below.

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With rents rising in many California cities, landlords have an incentive to evict tenants and raise rents to market rates, particularly where rent control otherwise limits rent adjustments. In this case, use of an extremely broad forfeiture clause to effectuate such eviction ultimately backfired. Juan Juarez had rented an apartment from Boston LLC for fourteen years, but was served on a Friday with a three-day notice to perform or quit that required Juarez to obtain renter’s insurance over a holiday weekend. Although Juarez obtained the insurance shortly after the three-day period expired, his landlord terminated his lease based on a forfeiture clause stating that "any failure of compliance or performance by Renter shall allow Owner to forfeit this agreement and terminate Renter’s right to possession." The trial court and Appellate Division of the Los Angeles Superior Court held (the latter in a 2-1 ruling) that the forfeiture provision in the lease precluded Juarez from defending himself on the ground of materiality of the breach or raising certain other affirmative defenses.

The Court of Appeal asserted jurisdiction29 to settle the question of "[w]hether a tenant’s breach of a LARSO [Los Angeles Rent Stabilization Ordinance] rental contract, regardless of the breach’s materiality or impact on the landlord, justifies the landlord forfeiting the agreement and terminating tenancy."30 Observing initially that the unlawful detainer statute governs forfeiture procedure but does not create substantive rights,31 the Court of Appeal found case law to be dispositive. "[A] lease may be terminated only for a substantial breach thereof, and not for a mere technical or trivial violation."32 Based on these cases, the court rejected Boston’s argument that the forfeiture provision in the lease agreement foreclosed the tenant’s materiality argument. The court found that the materiality limitation has been applied in the context of Code of Civil Procedure section 1161(3),33 and that such application is supported by significant public policy reasons, such as safeguarding tenants from excessive rent increases. The Court of Appeal found such public policy to outweigh the freedom to contract, in contrast to the appellate division, which found such freedom to be paramount.34 Unequal bargaining power was evidenced here by the unilateral forfeiture clause that entirely benefitted Boston. Permitting such unequal bargaining power would allow landlords such as Boston to "strategically circumvent LARSO’s ‘good cause’ eviction requirements and disguise pretext evictions under the cloak of contract provisions."35

The court found Juarez’s failure to obtain renter’s insurance not to be a material breach as a matter of law because the primary purpose of renter’s insurance is to protect the tenant, not the landlord. Thus, Boston could not argue that it was harmed in any way by Juarez’s failure to obtain such insurance, and indeed, it only argued that it might be harmed if other tenants were encouraged not to comply. This was insufficient to justify forfeiture.

Comment: The lower courts’ opinions hinged on freedom to contract, but as the Court of Appeal made clear, "freedom to contract" in the absence of equal bargaining power can be oppressive. The Court of Appeal was pointed in its observation that Boston served the three-day notice on the Friday before a three-day holiday weekend, invoking the possibility of gamesmanship or a retaliatory motive on the part of Boston. Retaining the materiality requirement for a lease forfeiture and eviction, at least in the residential context, addressed that concern, in addition to adhering to decades of precedent. This is a good decision on both legal and policy grounds and raises the question: What were the trial court and majority judges of the Appellate Division thinking?

5. City of Montebello v. Vasquez?36

Vote by city council members to approve a waste hauling contract was protected activity under the anti-SLAPP statute.

The California Supreme Court decided two issues in this case regarding anti-SLAPP motions,37 the first being the breadth of a statutory exemption for public enforcement actions, and the second concerning the nature of acts "in furtherance" of free speech and petition.

This case is not a "real estate" case, per se, but it has numerous implications for governmental contracts and other public decisions, including real estate and land use, and is included here for that reason. The City of Montebello filed an action against several City Council members and a city administrator for conflict of interest in violation of Government Code section 1090 for their actions relating to, and subsequent vote on, a waste hauling contract.

The defendants moved to strike under the anti-SLAPP statute (Civil Code section 425.16), contending that votes were protected activity. The City responded that its action fell within the public enforcement exemption of section 425.16, and that in any event the defendants’ actions were not protected under the First Amendment. The trial court found that the public enforcement exemption did not apply because the City engaged outside counsel to bring its action, and that although defendants’ actions were protected activity, the City was likely to prevail because there was sufficient evidence of a conflict of interest regarding the contract. The Court of Appeal affirmed as to the public enforcement exemption, but it found that defendants’ votes on the contracts were not protected activity under section 425.16. The Court of Appeal, therefore, did not review the question of whether the City could establish a probability of prevailing on the merits.

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The Supreme Court granted review on both issues. The statute provides: "This section shall not apply to any enforcement action brought in the name of the people of the State of California by the Attorney General, district attorney, or city attorney, acting as a public prosecutor."38 Noting a split of authority in the appellate districts, the court disapproved the broader interpretation taken by the Second District Court of Appeal, which had analogized to Civil Code section 998(g)(2) as broadly applying to "civil enforcement actions."39 Finding no ambiguity in section 425.16(d), the court agreed with the Fourth District Court of Appeal that exempt enforcement actions must be brought both "in the name of the people of the State of California" and "by the Attorney General, district attorney, or city attorney, acting as a public prosecutor." Because the action was brought by outside counsel for the City, not the City Attorney, the exemption did not apply.

Turning to the substantive issue, the court distinguished between protected activity under the First Amendment and under the anti-SLAPP statute, explaining that the anti-SLAPP statute is more expansive because it includes not only the constitutional rights of speech and petition, but "any act . . . in furtherance of" those rights.40 Therefore, Nevada Commission on Ethics v. Carrigan,41 which held that "the act of voting [is] . . . nonsymbolic conduct engaged in for an independent governmental purpose," and that restrictions upon legislators’ votes are, therefore, not restrictions upon legislators’ protected speech, was not dispositive.

Noting that the anti-SLAPP statute is to be broadly construed,42 the court concluded that "[r]equiring the moving party to make a constitutional case in support of every anti-SLAPP motion would be inconsistent with the Legislature’s desire to establish an efficient screening mechanism for ‘disposing of SLAPP’s quickly and at minimal expense to taxpayers and litigants.’"43 Further, the court cited cases holding that, "courts determining whether conduct is protected under the anti-SLAPP statute look not to First Amendment law, but to the statutory definitions in section 425.16, subdivision (e)."44 Thus, because the defendants’ votes and statements made in the course of their deliberations at city council meetings qualified as "any written or oral statement or writing made before a legislative . . . proceeding,"45 the court found the votes were made in furtherance of defendants’ rights of advocacy and communication with their constituents regarding the waste hauling contract.46

Justice Liu dissented, disagreeing that the act of voting itself (as distinguished from speech prefatory to the vote) could be an act in furtherance of a person’s right of petition or free speech, and asserting that the majority opinion was, therefore, in direct conflict with Carrigan.

Comment: The court’s holding that voting is an act in furtherance of protected speech creates a new hurdle for bringing an enforcement action under Government Code section 1090, which prohibits the making of any contract by any public officer or by any board or body of which the officer is a member if the officer has a financial interest in the subject matter of the contract. Although section 1090 allows "any person" other than the financially interested officer to bring an action to set aside as void a contract made in violation of section 1090, the Supreme Court has now held that the far more recent anti-SLAPP law precludes "any person" (including but not limited to the affected public entity) from bringing such an action if the alleged violation is founded upon a vote to approve or disapprove a contract. Such an action may now be brought only by the district attorney or some other "public enforcement official" in order to survive an anti-SLAPP motion under the "public enforcement" clause of Code of Civil Procedure section 426.16(d). Thus, the anti-SLAPP law apparently trumps any private action to enforce Government Code section 1090 that is based on the participation of a financially interested party in a vote on a municipal contract. This decision continued the arguably unanticipated creep of the anti-SLAPP statute into more corners of the law, with unintended consequences, a phenomenon decried by some jurists who have suggested legislative reform.47

6. Picerne Construction Corp. v. Castellino Villas48

The proper time to record a mechanic’s lien is after completion of actual work, not after substantial completion of work.

California’s mechanics lien statute was enacted to protect laborers, material suppliers, and contractors.49 To be valid under the prior version of the Mechanics Lien Law, a mechanic’s lien must have been filed "before the expiration of (a) [ninety] days after the completion of the work of improvement as defined in [Civil Code] [section] 3106 if no notice of completion or notice of cessation has been recorded, or (b) [thirty] days after recordation of a notice of completion or notice of cessation."50 Although the former and current version of the statute defines "completion" in the context of private works as "actual completion of the work of improvement,"51 the facts of Picerne Construction Corp. v. Castellino Villas illustrate that this definition can be elusive.

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Picerne Construction entered into a contract to build an eleven-building apartment complex in the City of Elk Grove for Castellino Villas. Between May and July 2006, the City issued certificates of occupancy, with the final one being issued on July 25, 2006. Castellino did not release the retention proceeds at that time, and Picerne employees continued to perform work beyond July 25, 2006. Castellino signed a document accepting nine of the eleven buildings on August 28, 2006, and the final two on September 8, 2006, and it began renting apartments in October 2006. Picerne asked Castellino to release the retention proceeds in October 2006 and recorded a mechanics lien on November 28, 2006. Picerne filed suit on December 29, 2006. Castellino recorded a notice of completion for the project on April 20, 2007. The trial court determined that the project was completed no earlier than September 8, 2006, and that Picerne had timely recorded its mechanics lien.

On appeal, Castellino argued that Picerne’s mechanics lien was not valid because it was not recorded within ninety days after substantial completion of the project, as required by former section 3115. Circumstances deemed to be the equivalent of completion include (1) the occupation or use of a work of improvement by the owner or his agent, accompanied by the cessation of labor thereon; (2) the acceptance by the owner or his agent of the work of improvement; and (3) after commencement of work, the cessation of labor for a continuous period of sixty days, or a cessation of labor for thirty days or more if the owner records a notice of cessation of labor.52 The second circumstance was the basis for the trial court’s decision, with September 6, 2006, the date Castellino accepted the final two buildings, being the date of completion.

Castellino contended that the term "completion of the work of improvement" should be construed as meaning "substantial completion of the work of improvement," which Castellino argued occurred when the certificates of occupancy were issued in July 2006, and therefore more than ninety days before Picerne filed its mechanics lien. The court disagreed because Picerne continued to have its employees work on the project, including installation of grip tape on stairs for all eleven buildings and completion of roofing, after the certificates of occupancy were issued.

While a line of cases construed former Civil Code section 1187 (the predecessor of section 3115) as turning on whether a project had been "substantially completed" despite any "trivial imperfection in the said work," Section 1187 had been amended to delete reference to trivial imperfections with no indication that the amendment was not intended to change the meaning or substance of the statute.53 Moreover, later cases supported the trial court’s conclusion that something more than substantial completion is required to show completion of a project.54 Further, the court rejected the notion that interpreting section 3115 to mean "substantial completion" would be good public policy, as that interpretation would limit contractors’ ability to file mechanics liens, which would be counter to the aim of the statute.

Comment: The term "completion" includes several, sometimes-overlapping concepts. In this case, certificates of occupancy, cessation of work, written acceptance by the owner, and a notice of completion each occurred at different times. Picerne clarifies that to the extent "completion of work" is at issue, "substantial completion" will not suffice. Although decided under the former sections 3086 and 3115, the relevant language of the new sections 8180 and 8412 is substantially unchanged, so the same result should follow under the recodified mechanics lien law.

7. Friends of the College of San Mateo Gardens v. San Mateo County Community College District55

Agency’s determination as to whether proposed changes to a project are substantial and might have a significant environmental effect not previously considered is reviewed under deferential, substantial evidence standard.

As Justice Kruger so succinctly begins this Supreme Court CEQA decision, ". . . like all things in life, project plans are subject to change." The question that has caused disagreement among appellate courts is whether such project changes constitute a new project or merely a modification of an existing project.56 The answer is significant because it determines whether an agency’s determination to proceed under the statutory and regulatory rules governing subsequent or supplemental Environmental Impact Reports ("EIRs")57 is subject to a "threshold" question of law whether the proposal presents a new project altogether, or a more deferential "substantial evidence" standard of review.

The San Mateo Community College District adopted a facilities master plan in 2006 that proposed nearly $1 billion in new construction and renovations, including renovation of some buildings and demolition of others, and it certified a mitigated negative declaration for the project. The District later updated the project plans to instead demolish a building complex that had been slated for renovation and renovate two buildings that had been slated for demolition, concluding that no subsequent or supplemental EIR was required because "the project changes would not result in a new or substantially more severe impact than disclosed in the 2006 [initial study and mitigated negative declaration]. Therefore, an addendum … is the appropriate CEQA documentation."58

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The complex slated for demolition in the updated project plans included gardens that members of the community objected to demolishing, and Friends of the College of San Mateo Gardens filed suit challenging approval of the addendum. The trial court found that the demolition project was inconsistent with the previously approved plan, creating impacts not addressed in the 2006 mitigated negative declaration, and it ordered the District’s full compliance with CEQA. The Court of Appeal affirmed, concluding as a threshold matter of law that the proposed building demolition was a new project rather than a project modification.

The Supreme Court rejected an approach that it characterized as obligating courts to determine whether an agency’s proposal qualified as a new project. Rather, the court concluded that "when an agency proposes changes to a previously approved project, CEQA does not authorize courts to invalidate the agency’s action based solely on their own abstract evaluation of whether the agency’s proposal is a new project, rather than a modified version of an old one." Rather, it is for the agency to "determine whether the previous environmental document retains any relevance in light of the proposed changes and, if so, whether major revisions to the previous environmental document are nevertheless required due to the involvement of new, previously unstudied significant environmental impacts."

The court emphasized that the agency’s determination of changed plans or circumstances is predominantly a factual question for the agency to answer, drawing on its particular expertise, and that courts would review the agency’s determination for substantial evidence that the original environmental document retains some informational value relevant to the decision-making process. However, although the court acknowledged that "a court should tread with extraordinary care" before reversing an agency’s determination,59 it also stated that "judicial review must reflect the exacting standard that an agency must apply when changes are made to a project that has been approved via a negative declaration." The court clarified that the substantial evidence test does not apply to whether the project, as modified, would necessarily have significant effects, but rather to whether the proposed modifications will involve "substantial changes" that "require major revisions of the previous EIR or negative declaration due to the involvement of new or significantly more severe environmental effects."60

The court rejected plaintiffs’ contention that CEQA’s subsequent review provision (Public Resources Code section 21166) only applies to projects for which an initial EIR was prepared, and that Guidelines61 section 15162 is invalid to the extent it extends Public Resources Code section 21166 to projects initially approved with a negative declaration. Noting that the Resources Agency "filled a gap" by extending Guidelines section 15162 to projects initially approved by negative declaration, the court recognized that limiting agencies’ post-approval review obligations for projects initially approved via negative declaration is consistent with a statutory presumption of finality to which both negative declarations and EIRs are entitled once adopted.62

Comment: While not clearly articulated by the court, it appears that to the extent environmental impacts were considered by the prior negative declaration, they should be considered part of the environmental "baseline" and the adequacy of their analysis and mitigation should be conclusively presumed and not subject to further challenge— i.e., only the potential incremental impacts of the proposed project changes are at issue under the subsequent review rules, and only these are reviewed under the standard announced by the court.

8. Vasilenko v. Grace Family Church63

Church controlling an overflow parking lot that required guests to cross a busy street owed a duty of care to those guests.

Landowners generally have no duty to prevent injury on adjacent property.64 This rule makes sense if a landowner does not own, possess, or control that adjacent property. But what if the adjacent property is controlled by the landowner and poses risks to users of landowner’s property? That is the question posed by Vasilenko v. Grace Family Church, a case in which a large church contracted to use a neighboring property as its overflow parking lot. The parking lot was on the other side of a busy, five-lane street from the church, and the nearest intersection had no stoplight or crosswalk. The plaintiff, Vasilenko, was injured when he crossed the street from the overflow parking lot to the church and was hit by a car. He sued the church for negligence, but the trial court granted the church’s motion for summary judgment on the ground that the church had no duty to assist Vasilenko in safely crossing a public street that the church did not own, possess, or control.

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On appeal, Vasilenko reiterated his argument that the church’s duty was not based on whether it owned or controlled the public street, but on its selection of a location for its overflow parking on the other side of a dangerous street that guests would have to cross. Although a person generally "is liable for injuries caused by his failure to exercise reasonable care in the circumstances,"65 the Court of Appeal acknowledged that the California Supreme Court has identified several factors that, when balanced, may justify a departure from the duty imposed by Civil Code section 1714.66 Those factors include the closeness of the connection between the defendant’s conduct and plaintiff’s injury, the moral blame associated with defendant’s conduct, the policy of preventing future harm, and the burden to defendant and consequences to the community of imposing a duty to exercise care. The court also acknowledged that "usually a landowner has no duty to prevent injury on adjacent property."67 However, there are exceptions to that general principle.68

Analogizing to cases where liability was found for exposure to a dangerous condition on property not owned by the defendant,69 the court concluded that that once the church decided to operate an overflow parking lot, it knew or should have known that the location of the overflow lot would induce its invitees to cross a busy street, which created a foreseeable risk of harm to such persons. Thus, the court found that the church failed to establish that the general duty of ordinary care set forth in Civil Code section 1714 does not apply, and it reversed the judgment.

Comment: The dissent argued that cases relied upon by the majority were distinguishable because the church performed no maintenance and made no improvements or alterations to the overflow lot that increased the risk beyond that of simply being located next to a busy street, and further disagreed with the majority’s conclusion that the church had "created" any danger to Vasilenko. The key term appears to be "created," with the dissent focusing on actual creation of danger by way of, for example, physical modifications to the property, while the majority focused on creation of danger based on a foreseeable risk of harm. Although the church did not control the overflow parking lot itself, it controlled the decision to direct churchgoers to park there, with the associated foreseeable risk of harm.

The California Supreme Court has granted review of this case, so look out for further developments.

Related Case: Another 2016 decision involving off-premises liability, Wang v. Nibbelink,70 made it clear that the landowner’s shield from liability under the Recreational Use Statute71 is based on the nature of the use and is not limited to on-premises injury. In Wang v. Nibbelink, the court held that the immunity established in the third part of Civil Code section 846 applies to off-premises injuries caused by the recreational users to persons uninvolved in the recreational use. The case involved plaintiff Yan Wang, who was trampled by a horse that escaped from property upon which recreational activities were occurring. Wang was not a participant in or spectator of the recreational activities, and she was off-premises, on property adjacent to that on which recreational activities were occurring, when she was injured. The relevant portion of section 846 provides that a landowner "who gives permission to another for entry or use for the above purpose upon the premises does not thereby" warrant that the premises are safe for that purpose, give invitee or licensee status to the person to whom permission has been granted, or become liable for any injury to person or property caused by any act of the person to whom permission has been granted, with specified exceptions. This portion of Civil Code section 846 has been held to shield the landowner from liability for injuries caused by (rather than to) recreational users.72

The court found the language of section 846, on its face, to encompass off-premises persons such as plaintiff Wang, and it rejected plaintiff’s invitation to add language to limit immunity to injuries suffered by a person on the premises.73 The court found no reason the immunity should be subject to a bright-line result whereby it encompasses injury to a bystander two inches within the property but not to one standing two inches outside the property, and concluded that such a construction would be contrary to the legislative purpose.74

9. Stewart Enterprises, Inc. v. City of Oakland75

City’s emergency ordinance amendment to require further approval of crematorium for which building permit was already issued was improper deprivation of a vested right under the citys "permit vesting" ordinance.

Governmental agencies may apply new laws retrospectively where an intent to do so is apparent, but that retrospective application may be unconstitutional if it deprives a person of a vested right without due process of law.76 This case addressed whether plaintiff developer, Stewart Enterprises, Inc. ("Stewart") had a vested right in a building permit to install a crematorium in a Commercial Industrial Mix 2 ("CIX-2") zone, which allowed "general manufacturing" without a conditional use permit so long as it was not within 300 feet of a residential zone, but which required a use permit for specified "extensive impact" civic activities. After Stewart obtained a building permit, and in response to public outcry, the city council amended the CIX-2 district zoning ordinance to define a crematorium as an "extensive impact" civic activity that would require a conditional use permit, and the City’s building department revoked the building permit on this basis. The trial court granted Stewart’s petition for a writ of administrative mandamus and the City appealed.

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Applying an "abuse of discretion" standard of review under Code of Civil Procedure section 1094.5(b), the Court of Appeal addressed whether the application of the emergency ordinance was an abuse of discretion because it violated Stewart’s vested right under the vesting ordinance. There are three alternative grounds for creation of a vested right: First, under the common law "vested right doctrine," a party acquires a vested right in a building permit if the party has performed substantial work and incurred substantial liabilities in good faith reliance upon a permit issued by the government.77 Second, certain state statutes confer vested rights based on development agreements and vesting tentative maps. Third, local ordinances may confer vested rights earlier than may be available under the judicial doctrine.78

Based upon the third ground, the Court of Appeal’s analysis was: (1) whether Stewart had a vested right under the permit-vesting ordinance; (2) if so, whether the emergency ordinance impaired that right; and (3) if there was a vested right that was impaired, whether the impairment was justified because it was sufficiently necessary to the public welfare. The court concluded that the clear language of the City’s permit-vesting ordinance gave rise to a vested right that could be impaired by a subsequent amendment to the zoning ordinance, and that application of the ordinance to the proposed crematorium did, in fact, result in such impairment.

The court rejected the City’s argument that applying a new process (i.e., a conditional use permit requirement) after issuance of a building permit did no more than require further discretionary review rather than prohibit exercise of the building permit. "To impose a condition on a building permit is to prohibit the project until the property owner satisfies the condition," and in this case, the condition (approval of further application) could be denied.79

Assessing whether the impairment was sufficiently necessary to the public welfare to be justified, the court rejected the City’s argument that the same deferential standard of review applied as with any other land use ordinance. Rather, where a vested right is involved, a heightened standard of review applies, requiring substantial evidence of a menace to the public health and safety or a finding of a public nuisance. With no evidence of any particular public health problems that in fact would occur, no evidence of actual economic threats to the surrounding area, and insufficient evidence of a danger or nuisance to the public to justify application of the emergency ordinance, the trial court’s judgment was affirmed.

Comment: This decision runs counter to the usual analysis in land use-related vested rights decisions, which is that the government cannot be estopped from applying new laws and ordinances in its general exercise of the police power due solely to the issuance of previous governmental approvals based on the law as it existed before the change. For that reason, cases such as Avco Community Developers v. South Coast Regional Commission80 focus on the essential need for substantial construction or expenditures in reliance upon a validly issued building permit as a necessary element of the estoppel that supports an irrevocable vested right. Davidson and Stewart establish a separate line of authority for a different rule applicable in the case of a permit-vesting ordinance. This issue has not yet been addressed by the California Supreme Court. The City of Oakland has since repealed its permit-vesting ordinance, presumably in order to avoid another similar occurrence.

10. Yvanova v. New Century Mortgage Corporation81

California Supreme Court confirms foreclosed homeowner’s standing to assert defective assignment of note and deed of trust as basis for an action for wrongful foreclosure.

California appellate courts have reached conflicting results on whether homeowners have standing to allege wrongful foreclosure based on the validity of the assignment of the homeowner’s note and deed of trust. In Glaski v. Bank of America,82 the Fifth District Court of Appeal held that a foreclosed homeowner could challenge an assignment of his or her note and deed of trust if the defect asserted would void the assignment, not merely render it voidable. By contrast, in Jenkins v. JPMorgan Chase Bank,83 the Fourth District Court of Appeal held that a plaintiff homeowner, as an unrelated third party to such an assignment, was unaffected by such deficiencies and therefore had no standing to enforce the terms of the agreements that were allegedly violated.

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Subsequent decisions in the federal and state courts largely followed the Jenkins decision, which was based in part on the rationale that a judicial action to challenge the right, power, and authority of a foreclosing "beneficiary" or the "beneficiary’s agent" to initiate and pursue foreclosure would undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.84 The California Supreme Court has now weighed in, providing limited clarification.

In 2006, Plaintiff Tsvetana Yvanova executed a deed of trust securing a note for $483,000 on a residential property in Woodland Hills, California. The lender and beneficiary of the trust deed was New Century Mortgage Corporation ("New Century"). New Century went bankrupt in 2007 but thereafter, in 2011, purported to assign the deed of trust to Deutsche Bank National Trust, as trustee of a securitized mortgage trust. The trust at that time had been "closed" since 2007, i.e., could no longer receive additional mortgages.

Following non-judicial foreclosure in 2012, Yvanova filed an action for quiet title alleging that the assignment of the deed of trust was void due to the prior transfer of New Century’s assets to the bankruptcy trustee, and because the investment trust had been closed to new loans in 2007. The trial court sustained a demurrer without leave to amend. The Court of Appeal affirmed on the basis that Yvanova failed to allege a tender of repayment, and also because Yvanova lacked standing to assert defects in the chain of assignments or the authority of the foreclosing party to do so.

The Supreme Court granted review on the following issue: "In an action for wrongful foreclosure on a deed of trust securing a home loan, does the borrower have standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void?"

In a unanimous decision, the court held that a borrower has standing to challenge a foreclosure on the basis of a pre-foreclosure assignment of the note and deed of trust being void (as distinguished from merely voidable). A void contract is without legal effect, a legal nullity, whereas a voidable transaction is one in which one or more parties have the power to avoid the legal relations created by the contract. Thus, because only the entity holding the beneficial interest under the deed of trust may instruct the trustee to commence and complete a judicial foreclosure,85 if an intervening assignment is absolutely void, meaning of no legal force or effect whatsoever, the foreclosing entity is acting without legal authority and such an unauthorized sale is a wrongful foreclosure. By contrast, where the claim is that the transaction is merely voidable, a borrower does not have personal standing to assert rights or interests belonging solely to the other parties pursuant to the pooling and servicing agreement between them.

The court specifically noted that it was not deciding whether, even on the basis of an allegedly void transfer, the borrower could initiate a wrongful foreclosure action. That issue was deemed not to be before the court. The court also declined to address the issue of whether tender of payment of the sums owing is required to assert such a claim. The court also rejected the contention that if the true holder of the beneficial interest could have foreclosed, there was no "prejudice" to the borrower from the wrong person foreclosing following a void transfer: "the borrower owes money not to the world at large but to a particular person or institution, and only the person or institution entitled to payment may enforce the debt by foreclosing on the security. . . . It is no mere ‘procedural nicety,’ from a contractual point of view, to insist that only those with authority to foreclose on a borrower be permitted to do so."

Comment: Because the Yvanova Court limited its holding to circumstances where a plaintiff is challenging an assignment after a nonjudicial foreclosure has occurred, several post-Yvanova cases have declined to extend its rationale to preforeclosure actions.86 In addition, the Yvanova court did not decide the validity of the assignment in that case. So even though Yvanova confirms a post-foreclosure borrower’s standing where an assignment is void, some post-Yvanova courts have found such assignments to be merely voidable.87 Finally, although Yvanova claimed she was only seeking damages, meaning the issue of "remedies" was not before the court, the court did not address the question of whether the purchaser at the trustee’s sale is entitled to the presumption of validity arising from the trustee’s sale. For these reasons, and as the California Supreme Court noted at the beginning of its opinion: "Our ruling in this case is a narrow one."

Further eroding the significance of Yvanova is a Second District Court of Appeal decision, Yhudai v. Impac Funding Corporation88 in which the borrower, as in the Yvanova case, relied on Glaski v. Bank of America89 for the assertion that an assignment of the deed of trust was void under New York law. The Yhudai court rejected Glaski, noting that Wells Fargo Bank, N.A. v. Erobobo,90 upon which Glaski relied, was reversed in 2015, with the Court of Appeal holding that "a mortgagor whose loan is owned by a trust, does not have standing to challenge the [mortgage assignee’s] possession or status as assignee of the note and mortgage based on purported noncompliance with certain provisions of the [trust’s pooling and service agreement]." Subsequent cases relying on New York law reached similar conclusions.91 Thus, while Yvanova’s holding remains—distinguishing between "void" and "voidable" assignments to establish standing—the factual settings in which it applies appear to have narrowed considerably.

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III. HONORABLE MENTIONS

1. 616 Croft Ave., LLC v. City of West Hollywood92

Burden was on developer to show that fee in lieu of dedication for affordable housing purposes was unreasonable and was not an exaction under the holding of California Building Industry Ass’n. v. City of San Jose.

As we reported in last year’s article,93 the California Supreme Court held in California Building Industry Association v. City of San Jose California94 that inclusionary zoning is a land use regulation, not an exaction. That case involved a San Jose ordinance that required new residential housing projects of twenty or more units to sell at least fifteen percent of those units at a price that is affordable to low-income households, a requirement that could be satisfied by an "in-lieu" monetary contribution to the City.

616 Croft Ave., LLC v. City of West Hollywood is the first reported Court of Appeal decision to apply the holding of California Building Industry Association v. City of San Jose, and its facts were similar. The City of West Hollywood required developers to either sell or rent a portion of newly constructed units at specified below-market rates or pay an "in-lieu" fee to a fund for constructing the equivalent number of units. Croft chose to pay the in-lieu fee which, unfortunately for Croft, doubled during a project delay due to the economic downturn. Invoking California Building Industry Ass’n. v. City ofSan Jose, the Court of Appeal observed that this type of legislatively imposed affordable housing provision was not an exaction under the Mitigation Fee Act, and that such a restriction "is an example of a municipality’s permissible regulation of the use of land under its broad police power."95 Thus, an in-lieu fee, as an alternative to a requirement for on-site affordable housing cannot logically depend on whether the amount was reasonably related to the development’s impact on the City’s affordable housing need under Nollan or Dolan.96

The court rejected the contention that the City’s right of first refusal to buy set-aside units was an exaction for a number of reasons. Croft did not, in fact, set aside units. The ordinance provided a voluntary alternative to the set-aside, and the Mitigation Fee Act does not apply to an in-lieu fee.97 The court further noted the disclaimer in Article XIII D, section 1 (b) of the California Constitution that Proposition 13 was not meant to "[a]ffect existing laws relating to the imposition of fees or charges as a condition of property development,"98 thereby rejecting Croft’s contention that if the fees were not exactions, they were special taxes masquerading as fees. Finally, the court disagreed with the contention that the City was required to prove, dollar for dollar, that the fee charged was proportional to the negative impact of Croft’s development on the demand for affordable housing. Rather, the burden was on Croft to show unreasonableness, and the reasonableness inquiry related to whether the fee schedule itself was reasonably related to the overall availability of affordable housing, not whether the individual calculation of fees related to the impact of Croft’s development was reasonable.99

Comment: Croft did not challenge the City’s method in implementing the fee schedule, but instead brought an as-applied challenge to the fee itself, perhaps seeking a way around California Building Industry Ass’n. v. City of San Jose, which held that legislatively imposed and broadly applicable land use conditions are not subject to the Nollan/Dolan nexus and rough proportionality tests. This issue may arise again, given the increasing use of such regulations to create and preserve affordable housing. The United States Supreme Court denied certiorari for California Building Industry Ass’n. v. City of San Jose, but Justice Thomas wrote a concurrence in the denial in which he questioned the validity of distinguishing between legislatively imposed versus administratively imposed conditions when considering a takings challenge, and noted that the issue is ripe for further review.100

2. Pacific Shores Property Owners Association v. Department of Fish and Wildlife101

Department of Fish and Wildlife was liable in inverse condemnation for flooding of subdivision property that resulted from an intentional change in the historical level of flooding allowed by the Department.

For more than 100 years, a sandbar located in Del Norte County had been breached at four feet mean sea level ("msl"), first by residents, later by the County, and ultimately by the Department of Fish and Wildlife (the "Department"), in order to provide flood protection to nearby properties. With this historical use as a background, a large residential subdivision was approved in the 1960s, although the lots were never developed. Beginning in the 1980s, the Department increased the depth at which they breached the sandbar to instances exceeding six feet msl, asserting that breaching at lower levels adversely affected the lagoon’s environment. From 1989 to 2005, no permanent or long-term permits to breach the sandbar were issued by the California Coastal Commission (the "Commission"), which had jurisdiction over the sandbar. Instead, emergency and interim permits were issued when the water rose above eight feet, at which level roads and properties in the subdivision began flooding. In 2005, the Department approved a management plan calling for breaching at eight to ten feet, and plaintiff landowners sued the Department and the Commission alleging physical and regulatory takings.

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The trial court found a physical taking and awarded damages, but found the regulatory taking claim against the Commission to be barred because plaintiffs had sought the wrong relief (inverse condemnation instead of administrative mandamus). Plaintiffs and the State both appealed. The Court of Appeal first rejected plaintiffs’ argument that the Commission’s actions constituted a physical taking because the Commission’s actions were limited to denying and issuing various permits. The court also found that plaintiffs’ inverse condemnation claim was not barred by the statute of limitations because the situation had not stabilized102 until 2005.103

Noting that "[a] public agency’s intentional diversion of water from one location to flood another location may trigger strict liability,"104 the court disagreed that the Department had no duty to provide flood control, or flood control to a particular level of protection, and therefore, the Department had no liability in inverse condemnation. Rather, the court found the Department’s decision to breach the sandbar at eight to ten feet msl was an intentional decision to flood plaintiffs’ land by lessening flood protection it had historically provided to protect environmental resources, which resulted in strict liability. Moreover, the court determined that even if the breaching was a flood control project subject to the standard of reasonableness, the Department acted unreasonably because the project offered plaintiffs no reciprocal benefits to offset their losses.

The court also addressed the recovery of attorneys’ fees under Code of Civil Procedure section 1036, which authorizes an award of reasonable attorneys’ fees "actually incurred" in inverse condemnation cases, clarifying that a court may not award fees in excess of fees a plaintiff is required to actually pay under a contingency fee agreement, "no matter how ‘reasonable’ such an award might be in the abstract."105

Comment: Although the Department arguably was returning the sandbar to its original natural state by raising the level at which the sandbar was breached, the length of time the Department allowed breaching at lower levels, and the fact that the Department intentionally reduced that historic level of flood control, caused the court to find these historical flood control measures to be akin to natural conditions upon which plaintiffs were entitled to rely. This is an unusual example of a case going against the government in the context of flood control and environmentally sensitive private property.

3. Save Mount Diablo v. Contra Costa County106

A condemnation proceeding physically separating a property into multiple parts does not "divide" the property within the meaning of the Subdivision Map Act.

The Subdivision Map Act107 (the "Act") requires every landowner who wishes to divide a single parcel of land into smaller parcels for individual sale to first obtain local government approval. Property owners may either apply for a final or parcel map effecting the subdivision or obtain a certificate of compliance with the Act for a division of property that has already occurred. The question in Save Mount Diablo v. Contra Costa County was whether condemnation would effect a subdivision under the Act.

Ronald and Shirley Nunn had purchased a 586-acre parcel that consisted of four parts, each separated from the other by two intersecting strips of land that had been condemned prior to the Nunns’ purchase by the Contra Costa Water District (the "District") to facilitate construction of a dam. The Nunns applied for a parcel map subdividing the property into four lots with one remainder parcel, but withdrew their application when Save Mount Diablo raised objections. Instead, the County Planning Commission issued certificates of compliance for each of the property’s four parts.108 The trial court granted Save Mount Diablo’s petition for writ of mandate to set aside the certificates, opining that the automatic subdivision that the Nunns contended occurred as a result of the condemnation action would set a "wide-ranging precedent potentially applicable to many property owners in the area."

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While recognizing that the condemnation resulted in physical separation of the four parts of the property, the Court of Appeal disagreed that it constituted a subdivision under the Act because simply characterizing the parts as "parcels" was not determinative. A prior division must be recognized by the Act for a property to be entitled to a certificate of compliance.109 In addition, the fact that the parts were separated by District-owned land did not establish a division because property is considered contiguous even if it is separated by roads, streets, utility easements, or railroad rights-of-way.110 The court noted that just because the division of the parcel was the lawful result of an eminent domain proceeding did not mean the separation constituted a division under the Act, particularly since the Nunns knowingly purchased the property as one parcel and the former owner had been paid $964,000 as part of the condemnation.

The court also rejected the Nunns’ argument that Government Code section 66428(a)(2), which provides an exemption for property transferred to or from a government agency as a result of a condemnation proceeding, warranted issuance of a certificate of compliance for the four parts of their parcel. The court held that the statute relates not to any property involved in or affected by such a conveyance, but only to "'[l]and conveyed to or from a governmental agency or public entity . . . for rights-of-way."111 Thus, only the intersecting condemned portions would be exempt. Further, a property division under the Act did not occur as the result of a conveyance because, while such a possibility is recognized by the Act,112 it applies in the context of an illegal conveyance, which was not the case with the Nunns’ property. The only parcels conveyed were those condemned by the District, while the remainder stayed under common ownership, was listed in a single deed, and was legally conveyed to the Nunns.

Finally, the court refused to interpret section 66499.35(b), which governs conditional certificates of compliance, as mandating the issuance of such certificates. The court found that the language of that subsection must work in tandem with that in section 66499.35(a), which allows an owner to obtain a certificate of compliance for a property that has already been divided. Thus, reading the subsections together, they apply only where there has already been a division of the property.

Comment: Although the case did not turn on the question, the court pointed out in a footnote that even if the land had been illegally divided, a conveyance of an illegally divided parcel is effective to convey title if not rescinded by the grantee within a year of discovery.113 Accordingly, the court stated, "as both a legal and practical matter, a division of the property through an illegal conveyance, if not voided by the transferee, is effective to subdivide property.

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Notes:

1. Horiike v. Coldwell Banker Residential Brokerage Co., 1 Cal. 5th 1024 (2016).

2. Horiike v. Coldwell Banker Residential Brokerage Co., 225 Cal. App. 4th 427 (2014).

3. Assilzadeh v. Cal. Federated Bank, 82 Cal. App. 4th 399, 414-15 (2000).

4. See Cal. Civ. Code § 2079.16.

5. Id.

6. See Cal. Civ. Code § 2079.13(k).

7. See, e.g., Cal. Civ. Code §§ 2079.1-79.12.

8. Property Reserve, Inc. v. Super. Ct. of San Joaquin Cty., 1 Cal. 5th 151 (2016).

9. See Cal. Civ. Proc. Code §§ 1245.010-1245.060.

10. Cal. Const., art. I, § 19.

11. Cal. Const., art. I, para. 9.

12. Property Reserve, Inc., 1 Cal. 5th at 187.

13. Id. at 216 n.18.

14. Cal. Civ. Proc. Code § 1245.060(c).

15. See Kopp v. Fair Pol. Practices Com, 11 Cal. 4th 607, 615 (1995).

16. Property Reserve, Inc. v. Super. Ct. of San Joaquin Cty., 6 Cal. App. 5th 1007 (2016).

17. Friends of the Hastain Trail v. Coldwater Dev. L.L.C., 1 Cal. App. 5th 1013 (2016).

18. Gion v. City of Santa Cruz (consolidated with Dietz v. King), 2 Cal. 3d 29 (1970).

19. Cal. Civ. Code § 1009(b); see Friends of the Trails v. Blasius, 78 Cal. App. 4th 810, 820 (2000).

20. Gion, 2 Cal. 3d at 39.

21. Cty. of Orange v. Chandler-Sherman Corp., 54 Cal. App. 3d 561, 565 (1976).

22. See Cal. Civ. Code § 806.

23. See Applegate v. Ota, 146 Cal. App. 3d 702, 711 (1983).

24. Friends of the Hastain Trail v. Coldwater Dev. L.L.C., 1 Cal. App. 5th, 1013, 1045 (2016).

25. Scher v. Burke, 240 Cal. App. 4th 381 (2015), cert. granted S230104, Nov. 24, 2015.

26. Shiber & Henderson, The Top Ten Cases of 2015, 34 Cal. Real Prop. J., no. 1 (2016).

27. Boston L.L.C. v. Juarez, 245 Cal. App. 4th 75 (2016).

28. Shiber & Henderson, supra note 26.

29. See Cal. R. Ct. Appellate rule 8.1002.

30. Boston L.L.C., 247 Cal. App. 4th at 79.

31. See Foster v. Britton, 242 Cal. App. 4th 920, 930 (2015).

32. Keating v. Preston, 42 Cal. App. 2d 110, 118 (1940); Randol v. Scott, 110 Cal. 590, 593 (1895) (requirement applies even where a lease purports to dispense with a materiality limitation).

33. See NIVO 1 L.L.C. v. Antunez, 217 Cal. App. 4th Supp. 1, 5 (2013).

34. See Green v. Super. Ct. of the City and Cty. of San Francisco, 10 Cal. 3d 616, 625 (1974).

35. Boston L.L.C., 245 Cal. App. 4th at 85.

36. City of Montebello v. Vasquez, 1 Cal. 5th 409 (2016).

37. See Cal. Civ. Code § 425.16.

38. Cal. Civ. Code § 425.16(d).

39. City of Long Beach v. Cal. Citizens for Neighborhood Empowerment, 111 Cal. App. 4th 302, 307 (2003). See also City of Los Angeles v. Animal Defense League, 135 Cal. App. 4th 606, 618 (2006).

40. Cal. Civ. Code § 425.16(b)(1).

41. Nevada Comm’n on Ethics v. Carrigan, 564 U.S. 117, 125-27 (2011).

42. See Briggs v. Eden Council for Hope & Opportunity, 19 Cal. 4th 1106, 1118 (1999).

43. Equilon Enter. v. Consumer Cause, Inc., 29 Cal. 4th 53, 66 (2002).

44. See, e.g., Schaffer v. City and Cty. of San Francisco, 168 Cal. App. 4th 992, 1001 (2008); City of Costa Mesa v. D’Alessio Inv., 214 Cal. App. 4th 358, 372 (2013).

45. See Cal. Civ. Code § 425.16(e)(1).

46. See also Lee v. Silveira, 6 Cal. App. 5th 527 (2016) .

47. See Grewal v. Jammy, 191 Cal.App.4th 977 (2011) (opinion of Justice Richman).

48. Picerne Constr. Corp. v. Castellino Villas, 244 Cal. App. 4th 1201 (2016).

49. See Betancourt v. Storke Housing Inv’rs, 31 Cal. 4th 1157, 1166 (2003).

50. Cal. Civ. Code § 8414 (formerly Cal. Civ. Code § 3115). The former Title 15, §§ 3082-3267, was replaced by new Part 6, §§ 8000-9566, of Division 4 of the Civil Code, effective July 1, 2012. See Coast Cent. Credit Union v. Super. Ct. of Humboldt Cty., 209 Cal. App. 3d 703, 709 (1989).

51. See Cal. Civ. Code § 8180 (former Cal. Civ. Code, § 3086).

52. Id.

53. 1929 Cal. Stat. 1928-29.

54. See, e.g., Union Supply Co. v. Morris, 220 Cal. 331, 337-38 (1934); Hundley v. Marinkovich, 53 Cal. App. 2d 288, 293 (1942).

55. Friends of the College of San Mateo Gardens v. San Mateo Cty. Cmty. College Dist., 1 Cal. 5th 937 (2016).

56. Compare Save Our Neighborhood v. Lishman, 140 Cal. App. 4th 1288, 1300 (2006) to Mani Brothers Real Estate Group v. City of Los Angeles, 153 Cal. App. 4th 1385, 1400 (2007).

57. Cal. Pub. Res. § 21166; Cal. Code Regs. tit. 14, § 15162.

58. Friends of the College of San Mateo Gardens, 1 Cal. 5th at 947.

59. Moss v. Cty. of Humboldt, 162 Cal. App. 4th 1041, 1052 n.6 (2008).

60. Cal. Code Regs. tit. 14, §§ 15162(a), 15384.

61. Guidelines promulgated by the California Natural Resources Agency under Cal. Code Regs., tit. 14, §§ 15000-007.

62. See Cal. Pub. Res. § 21080.1(a); Benton v. Bd. of Supervisors, 226 Cal. App. 3d 1467, 1479-80 (1991).

63. Vasilenko v. Grace Family Church, 248 Cal. App. 4th 146 (2016).

64. See Owens v. Kings Supermarket, 198 Cal. App. 3d 379, 386 (1988).

65. Cabral v. Ralphs Grocery Co., 51 Cal. 4th 764, 771 (2011); Cal. Civ. Code § 1714.

66. See Rowland v. Christian, 69 Cal. 2d 108, 112 (1968).

67. See Owens, 198 Cal. App. 3d at 386.

68. See Annocki v. Peterson Enterprises, L.L.C., 232 Cal. App. 4th 32, 38 (2014).

69. See Barnes v. Black, 71 Cal. App. 4th 1473 (1999); Bonanno v. Central Contra Costa Transit Auth., 30 Cal. 4th 139, 148-49 (2003).

70. Wang v. Nibbelink, 4 Cal. App. 5th 1 (2016).

71. Cal. Civ. Code § 846.

72. Klein v. U. S., 50 Cal.4th 68, 78-79 (2010).

73. See Ornelas v. Randolph (1993) 4 Cal. 4th 1095, 1105 (rejecting judicial insertion of language limiting application of section 846 immunity to land "suitable" for recreational use).

74. See Hubbard v. Brown (1990) 50 Cal. 3d 189, 192.

75. Stewart Enter., Inc. v. City of Oakland, 248 Cal. App. 4th 410 (2016).

76. Davidson v. Cty. of San Diego, 49 Cal. App. 4th 639, 646 (1996).

77. Avco Cmty. Dev., Inc. v. S. Coast Reg’l Com, 17 Cal. 3d 785, 791 (1976).

78. Davidson, 49 Cal. App. 4th at 647.

79. Stewart Enter., Inc., 248 Cal. App. 4th at 419.

80. Avco Cmty. Dev., Inc., 17 Cal. 3d at 791.

81. Yvanova v. New Century Mortg. Corp., 62 Cal. 4th 919 (2016).

82. Glaski v. Bank of America, 218 Cal. App. 4th 1079 (2013).

83. Jenkins v. JPMorgan Chase Bank, N.A., 216 Cal. App. 4th 497 (2013).

84. See Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149 (2011); Herrera v. Fed. Nat’l Mortg. Ass’n, 205 Cal. App. 4th 1495 (2012).

85. Cal. Civ. Code § 2924(a)(1).

86. See, e.g., Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808 (2016); Lucioni v. Bank of America, N.A, 3 Cal. App. 5th 150 (2016); Mendoza v. JPMorgan Chase Bank, N.A., 6 Cal. App. 5th 802 (2016); Keshtgar v. U.S. Bank, N.A., 2016 WL 4183750 (2016) (unpublished) (on remand from California Supreme Court, distinguishing Yvanova v. New Century Mort. Corp., 62 Cal. 4th 919 (2016), as applying only to actions alleging wrongful foreclosure, not actions to preempt foreclosure).

87. See, e.g., Saterbak, 245 Cal. App. 4th at 808; Ames v. JP Morgan Chase Bank, N.A, 783 S.E. 2d 614 (Ga. 2016).

88. Yhudai v. Impac Funding Corp., 1 Cal. App. 5th 1252 (2016).

89. Glaski v. Bank of America, 218 Cal. App. 4th 1079.

90. Wells Fargo Bank, N.A. v. Erobobo, 127 A.D. 3d 1176 (N.Y. App. Div. 2015).

91. See, e.g., Ferguson v. Bank of New York Mellon Corp., 802 F.3d 777, 782-83 (5th Cir. 2015) (violation of a PSA would render challenged assignment of deed of trust "at most voidable but not void").

92. 616 Croft Ave., L.L.C. v. City of W. Hollywood, 3 Cal. App. 5th 621 (2016).

93. Shiber & Henderson, supra note 26.

94. See Cal. Bldg. Indus. Ass’n v. City of San Jose, 61 Cal. 4th 435, 443-44 (2015).

95. Id. at 461.

96. Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987); Dolan v. City ofTigard, 512 U.S. 374 (1994).

97. See Sterling Park, L.P. v. City of Palo Alto, 57 Cal. 4th 1193, 1207-08 (2013).

98. Cal. Const., art. XIII D, § 1(b).

99. Cal. Bldg. Indus. Ass’n v. City of San Jose, 61 Cal. 4th at 474.

100. Cal. Bldg. Indus. Ass’n v. City of San Jose, Calif., 136 S.Ct. 928, 928-29 (2016).

101. Pac. Shores Prop. Owners Ass’n v. Dep’t of Fish and Wildlife, 244 Cal. App. 4th 12 (2016).

102. See Boling v. United States, 220 F.3d 1365, 1370-71 (Fed. Cir. 2000) (stabilization occurs when (1) the process has resulted in a permanent taking, and (2) the extent of damage is reasonably foreseeable).

103. See Lee v. Los Angeles Cty. Metro. Trans. Auth., 107 Cal. App. 4th 848, 857 (2003).

104. See Bunch v. Coachella Valley Water Dist, 214 Cal. App. 3d 203, 214 n.8 (1989).

105. Andre v. City of W. Sacramento, 92 Cal. App. 4th 532, 535-36 (2001). To the extent Salton Bay Marina, Inc. v. Imperial Irrigation Dist, 172 Cal. App. 3d 914 (1985), could be read as authorizing fees in excess of those agreed to in a contingency agreement, the Pacific Shores court disagreed with Salton Bay Marina. Pac. Shores Prop. Owners Ass’n v. Dep’t of Fish and Wildlife, 244 Cal. App. 4th at 62.

106. Save Mount Diablo v. Contra Costa Cty., 240 Cal. App. 4th 1368 (2016).

107. Cal. Gov’t Code § 66410-499.38.

108. See Cal. Gov’t Code § 66499.35.

109. Id.

110. Cal. Gov’t Code § 66424; see also 61 Op. Cal. Att’y Gen. 299 (physical separation of property by a canal was not controlling for purposes of the Act).

111. Save Mount Diablo, 240 Cal. App. 4th at 1382 (emphasis added by court).

112. See Cal. Gov’t Code § 66499.30(a) and (b).

113. See Cal. Gov’t Code § 66499.32.