Real Property Law

Foreign Jurisdiction Cases of Note to California Practitioners

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By: Casey Bryan, Esq. and Isabella Chilingaryan, Esq.

Landlord – Tenant (Estoppel)

Uncle Tom’s, Inc. v. Lynn Plaza, LLC, 2021 Ill. App. Ct. (1st) 200205 (May 21, 2021)

Tenant, Uncle Tom’s, Inc. (“Tom’s”), alleged that landlord, Lynn Plaza, LLC (“Lynn Plaza”), improperly included a portion of the property management fees and the cost of leasing an easement in the common area maintenance (“CAM”) costs (collectively, the “Costs”) as Tom’s responsibility under the parties’ lease. In 1998, Tom’s had provided an estoppel certificate to Lynn Plaza in connection with the financing of a strip mall in which Tom’s operated a restaurant. The estoppel certificate stated, among other things, that there were “no defenses to or offsets against the enforcement of the Lease or any provision thereof by the Landlord.” The trial court found that Tom’s had knowledge of the Costs prior to providing the estoppel certificate from a detailed CAM statement they had been receiving for about a decade, with the more recent property management fee having been flagged with a notation to alert Tom’s six months prior to the estoppel certificate. Therefore, the estoppel certificate estopped Tom’s from subsequently taking a different position and also applied to amounts collected before and after the date of the estoppel certificate given that the amounts collected after were for the same type of charges that were collected before. The appellate court agreed with the trial court’s ruling and focused heavily on the fact that the tenant had prior knowledge of the contested Costs. The appellate court held that by executing the 1998 estoppel certificate, Tom’s was estopped from challenging CAM costs and easement charges it was aware of on that date. The appellate court reasoned that “[a]ny legal justification Tom’s had for not paying the disputed charges, including any claim that Lynn Plaza had violated the lease by assessing unauthorized charges, was just the sort of defense or offset against the landlord’s enforcement of the lease that the lender was attempting to uncover by requiring the certificate.” The appellate court agreed with Lynn Plaza that just because the tenant estoppel certificate “did not contain an exhaustive list of every provision of the lease with which Lynn Plaza was in compliance does not alter the clear language used in that document.”

Lending Law (UCC Lost Note)

Investors Bank v. Torres, 243 N.J. 25 (2020)

The defendant, Javier Torres et al. (“Torres”), challenged plaintiff’s, Investors Bank’s (“Investors Bank”), right to enforce a promissory note, which had been lost by the mortgage assignor and was assigned to Investors Bank, based on the fact that the original note holder had lost the original note and had executed a lost note affidavit which was subsequently assigned to Investors Bank. Investors Bank filed an action to foreclose the mortgage after having been assigned by mortgagor. Torres asserted that Article 3 of the Uniform Commercial Code (UCC) nullified a mortgage assignee’s right to enforce a promissory note that had been lost by the mortgage assignor. The New Jersey Supreme Court stated that Section 3-309 of the UCC “made clear that the provision was not intended to bar a transferee from seeking to enforce a negotiable instrument merely because the transferee did not possess the instrument at the moment it was lost” which would apply because otherwise, assignees would be deprived of their bargained-for rights, allowing a defaulting mortgagor to inherit a windfall by not having its debt be enforceable. 

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