Untitled - the Continuing Education of the Bar by yaoyufang

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									29 Real Property Law Reporter                                           May 2006                                                                      263


                                                                                                          Construction
         SUMMARY OF DEVELOPMENTS
                                                                              Construction and Construction Contracts;
                                                                              Mechanics’ Liens and Stop Notices
                                                                                Construction company’s performance of contract
                           Acquisitions                                         met statutory requirement of being “complete,”
Recording                                                                       for purposes of recording mechanic’s lien, on
  State recording statute governed priority of                                  anticipatory breach of other contracting party.
  interests in Native American tribal land.                                        Howard S. Wright Constr. Co. v BBIC
     Harrison v Emerald Outdoor Adver., LLC                                        Investors, LLC [Cal App]................................278
     (In re Emerald Outdoor Adver., LLC) [9th
     Cir]...............................................................273                         Construction Defects
                                                                              Construction and Construction Contracts;
                            Bankruptcy                                        Contractors
Chapter 11                                                                      Window manufacturer who agreed to defend claims
  Post-petition loan made to bankrupt condominium                               growing out of its work must provide defense
  project to protect initial loan (by enabling                                  to developer in construction defect suit even if
  completion of project) that does not include                                  ultimately shown not to have been negligent.
  payment to debtor’s counsel is enforceable.                                      Crawford v Weather Shield Mfg., Inc. [Cal
     Weinstein, Eisen & Weiss, LLP v Gill (In re                                   App] .............................................................279
     Cooper Commons, LLC) [9th Cir]....................274
                                                                                                          Development
Chapter 7
  Landlord’s sale of tenant’s bankrupt estate property                        Housing
  after receipt of bankruptcy petition was willful                              Review dismissed by supreme court.
  violation of automatic stay.                                                    Barratt Am., Inc. v City of Encinitas [Cal
     Ozenne v Bendon (In re Ozenne) [BAP 9th                                      App] .............................................................280
     Cir]...............................................................275   Land Use; Environment; Takings
                                                                                Landowner, whose lot split application was
                     Commercial Leasing                                         rejected by county, had ripe regulatory takings
Landlord-Tenant;                                                                claim without application for building permit,
  Trial court has equitable power to modify unlawful                            because denial of lot split application made
  detainer judgment by awarding per diem damages                                permissible use of property known to reasonable
  rather than rent specied in lease.                                           degree of certainty.
     Gill Petrolium, Inc. v Hayer [Cal App] .............276                       Dunn v County of Santa Barbara [Cal
                                                                                   App] .............................................................280
Ofce Leases; Landlord-Tenant
  Trustee’s interest in proceeds of letter of credit                          Planning and Land Use
  given to landlord as security deposit was property                            City’s agreement to settle challenge to its adoption
  of bankruptcy estate.                                                         of general plan, which involved interpreting the
     First Ave. W. Bldg., LLC v James (In re                                    plan in a particular fashion, did not surrender
     OneCast Media, Inc.) [9th Cir] .......................276                  police power or improperly amend plan.
                                                                                   108 Holdings, Ltd. v City of Rohnert Park
                          Condemnation                                             [Cal App]......................................................281
Inverse Condemnation; Notice                                                       Documents submitted by property owner to
  In failing to give trust deed holder adequate notice                             building department in support of application for
  of demolition of property, city violated trust deed                              building permit are subject to public inspection.
  holder’s due process rights.                                                       Ops Cal Atty Gen 05–1004 (Feb. 28,
     D & M Fin. Corp. v City of Long Beach [Cal                                      2006) ............................................................281
     App] .............................................................277
                                                                              Planning and Land Use; Zoning
Valuation                                                                       City ordinance, allowing large department stores,
  Review granted by supreme court.                                              but not small retailers, to sell furniture, denied
    Metropolitan Water Dist. v Campus Crusade                                   equal protection.
    for Christ, Inc. [Cal App] ...............................278                  Hernandez v City of Hanford [Cal App]............281
264                                                                     May 2006                                       29 Real Property Law Reporter


Zoning                                                                        Landowner/Premises Liability
  Zoning ordinance prohibiting development of “big                              Landlord’s sale of tenant’s bankrupt estate property
  box” retail stores did not require environmental                              after receipt of bankruptcy petition was willful
  review and was legitimate exercise of police power.                           violation of automatic stay.
     Wal-Mart Stores, Inc. v City of Turlock [Cal                                  Ozenne v Bendon (In re Ozenne) [BAP 9th
     App] .............................................................282         Cir]...............................................................287

                              Disputes                                        Rent Control; Mobilehomes and Mobilehome Parks
                                                                                Trial court exceeded its authority by setting amount
Indemnity and Contribution                                                      of rent increase instead of remanding to rent control
  Window manufacturer who agreed to defend claims                               board despite board’s failure to follow court’s order
  growing out of its work must provide defense                                  to consider debt service in setting rent increase.
  to developer in construction defect suit even if                                 Carson Gardens, LLC v City of Carson
  ultimately shown not to have been negligent.                                     Mobilehome Park Rental Review Bd. [Cal
     Crawford v Weather Shield Mfg., Inc. [Cal                                     App] .............................................................287
     App] .............................................................283
                                                                                               Miscellaneous Remedies
                           Environment
                                                                              Forfeitures
Land Use                                                                        Trial court has equitable power to modify unlawful
  Landowners’ access to their property inside                                   detainer judgment by awarding per diem damages
  national park by use of right-of-way was subject to                           rather than rent specied in lease.
  reasonable regulation by National Park Service.                                  Gill Petrolium, Inc. v Hayer [Cal App] .............288
     Hale v Norton [9th Cir]...................................283
                                                                              Quiet Title; Statutes of Limitations
                              Land Use                                          Actual notice of tax sale provided ample time
                                                                                for property owner to comply with one-year
Environment                                                                     limitations period for quiet title action.
  City cannot deny telecommunications company                                      Mayer v L & B Real Estate [Cal App] ...............288
  permit to construct and install wireless antenna
  based on aesthetic considerations.                                          Takings
     Sprint PCS Assets, LLC v City of La Canada                                 Municipal ordinance limiting amount of rent
     Flintridge [9th Cir] ........................................284           landlord can demand from former Section 8 tenant
                                                                                preempted by state statute.
First Amendment Restrictions                                                       Apartment Ass’n, Inc. v City of Los Angeles
  City’s sign ordinance was constitutional.                                        [Cal App]......................................................289
     G.K. Ltd. Travel v City of Lake Oswego [9th
     Cir]...............................................................284                   Shared Use and Ownership
   City’s suspension of permit of nude entertainment                          Easements and Licenses
   establishment due to violation of city’s                                     Posting of CC §1008 permission-to-pass signs by
   patron/entertainer “propinquity” regulations did                             lessee, who was not landowner’s authorized agent,
   not violate First Amendment.                                                 was ineffective to insulate land from neighbor’s
      Krontz v City of San Diego [Cal App] ...............285                   prescriptive easement claim based on open,
Native American Lands                                                           notorious, continuous, and adverse use of road
  State recording statute governed priority of                                  running across land by neighbor’s predecessor.
  interests in Native American tribal land.                                        Aaron v Dunham [Cal App] ............................289
     Harrison v Emerald Outdoor Adver., LLC                                        Landowners’ access to their property inside
     (In re Emerald Outdoor Adver., LLC) [9th                                      national park by use of right-of-way was subject to
     Cir]...............................................................286        reasonable regulation by National Park Service.
                                                                                      Hale v Norton [9th Cir]...................................290
                        Landlord-Tenant
Housing
  Municipal ordinance limiting amount of rent
  landlord can demand from former Section 8 tenant
  preempted by state statute.
     Apartment Ass’n, Inc. v City of Los Angeles
     [Cal App]......................................................286
29 Real Property Law Reporter                             May 2006                                                         265


                                                                    Given the potential for civil (and, under Pen C §418,
               FEATURED ARTICLES                                even criminal) liability for unlawful forcible entry or de-
                                                                tainer, the landlord is forced to choose between litigating
                                                                a dispute or attempting to negotiate a solution with its
  Landlord’s Dilemma When Faced With a                          tenant. Whether a landlord chooses to negotiate with a
  Defaulting Tenant: Negotiate or Litigate?                     defaulting tenant before or after the ling a lawsuit, one
            Grant Puleo and Lorne R. Polger                     thing remains the same—the necessity to prepare before
                                                                sitting down at the negotiation table.
                        Introduction                                At the outset, the landlord must decide if it is even will-
                                                                ing to negotiate with the defaulting tenant. If the landlord
   When a tenant defaults on its lease obligations, the         chooses to negotiate with the tenant, the landlord must
landlord has contractual and statutory remedies, includ-        then evaluate the tenant’s nancial condition. To that end,
ing the ling of an unlawful detainer (UD) or other civil       the landlord should request updated nancial information
action. See CCP §§1159–1179a. Additionally, the land-           from the tenant, including nancial statements, credit re-
lord may have the right to compel mediation or arbitra-         ports, tax returns, and account information for all ten-
tion, provided such right has been memorialized in the          ant bank accounts, together with any other information
lease agreement. Notwithstanding these rights, landlords        the landlord reasonably believes will assist in ascertain-
in today’s commercial real estate market may consider at-       ing the tenant’s true nancial condition. This will help
tempting to resolve problems with struggling tenants be-        the landlord determine if the tenant’s difculty in paying
fore they rise to the level of a default under the lease.       rent is the result of a short term nancial problem or an
   The landlord should evaluate how best to respond to          indication of bigger problems, such as a potential bank-
such tenants in light of current market conditions. Thus,       ruptcy. This nancial information should be attached to
when the real estate market is strong, a landlord may want      or referenced in any lease amendment, accompanied by
to declare a tenant in default so that it can lawfully evict    a representation from the tenant that the information is
the tenant and replace it with a more creditworthy ten-         “true, correct, and complete” in all material respects.
ant or a tenant willing to pay higher rent. However, in a           Next, the landlord must determine what it is trying to
weak real estate market, with higher vacancy and lower          achieve in the negotiation and select an approach that will
rental rates, it may be in the landlord’s interest to attempt   further that goal. Some of the questions the landlord must
to retain its struggling tenant, as opposed to letting the      ask and answer include:
premises sit vacant for a prolonged period of time. This
article addresses the landlord’s options, from negotiating      • Should the landlord attempt to retain the struggling
with tenants in a weaker real estate market (either to avoid        tenant? If so, what concessions is the landlord willing
defaults or to resolve such defaults and continue the ten-          to offer to assist the struggling tenant?
ancy) to ling a UD action to regain possession of the          • What should the landlord ask for in return for such
premises from the defaulting tenant.                                concessions?
      Evaluate Before You Negotiate or Litigate                 • Will the landlord’s lender allow the landlord to amend
   The landlord generally has several choices when deal-            or modify the lease?
ing with a defaulting tenant. A landlord’s rst reaction        • How will the retention of a nancially troubled tenant
may be to take matters into its own hands by exercising             (or any related concessions) reect on the value of the
“self-help” to remove the tenant. Under the common law,             building in the context of a future renance or sale?
a landlord had a right to self-help. The UD statute re-         • What is the likelihood that the defaulting tenant will
placed this common law remedy, which sometimes led to               be able to meet its lease obligations in the future if a
violence between landlords and tenants. See Daluiso v               compromise is reached allowing the tenant to remain
Boone (1969) 71 C2d 484, 495, 78 CR 707 (policy fa-
                                                                    in the premises?
voring “judicial adjustment of differences” concerning
right to possession of property). Today, even if a land-        • Should the landlord attempt to replace the defaulting
lord has legal title to the premises, it may not resort to          tenant? If so, what are the chances that the replace-
self-help. Glass v Naja (2000) 78 CA4th 45, 48, 92                 ment tenant will be as good as or better than the exist-
CR2d 606. A tenant, even one that is unlawfully remain-             ing tenant?
ing in the premises, is not treated as a “trespasser” and       • How long will it take to replace the existing tenant?
thus is entitled to peaceful and quiet possession until a       • What effective rental rate will the new tenant be will-
legal eviction process awards possession back to the land-
                                                                    ing to pay in a down market?
lord. Four Seas Inv. Corp. v International Hotel Tenants’
Ass’n (1978) 81 CA3d 604, 612, 146 CR 531. Indeed,              • What is the total cost to replace the existing tenant
“forcible entry” and “forcible detainer” are prohibited by          (consider broker commissions, attorney fees, costs of
statute. CCP §§1159 and 1160.
266                                                      May 2006                               29 Real Property Law Reporter


  removal of existing tenant improvements, construc-                            Inaction Not an Option
  tion of new tenant improvements, free rent, and other           Unless the commercial lease includes a well-drafted
  concessions)?                                                nonwaiver clause, the landlord’s failure to act on a ten-
• If the landlord has suffered additional damages,             ant’s default may be deemed a waiver of the landlord’s
  should it pursue legal action against the defaulting         right to declare future defaults. In addition, a landlord’s
  tenant after nding a replacement tenant?                    failure to force the tenant to cure its default or otherwise
                                                               address the problem can send a dangerous message to
           Litigation as Leverage to Aid in                    other tenants that the landlord does not enforce its leases.
                      Negotiations
                                                                                 Keep It Condential
  Whether the landlord les a UD action or an indepen-
dent civil action for damages, there are always pros and         Before settlement discussions even begin, the landlord
cons to litigation. From the landlord’s perspective, the       should insist that the tenant sign a condentiality agree-
advantages of litigation include:                              ment. This will help prevent other tenants from nding
• Possible ending of prolonged negotiations and tenant         out about any compromise the landlord has made and thus
                                                               avert requests for similar concessions from other tenants.
   stall tactics; and
• Substantial negotiating leverage.                                          Quid Pro Quo Negotiations

Filing will also start the court’s clock running to legally       A defaulting tenant may attempt to renegotiate only
evict the tenant under applicable law and may increase the     that portion of the lease with which it is having difculty
likelihood of there being assets to collect if the landlord    (e.g., rental rate). The landlord should not let the ten-
wins a judgment. Among the disadvantages of litigation         ant establish the rules of the game. The landlord should
are:                                                           determine that it has obtained as much as possible from
                                                               the tenant in exchange for concessions granted to the
• Consumption of time and money; and                           struggling tenant. The landlord should carefully review
• Possible destruction of the relationship with the ten-       all lease documents to determine what concessions were
   ant.                                                        originally granted to the tenant and which ones can be
                                                               taken back or renegotiated.
   Notwithstanding its disadvantages, most sophisticated
landlords will, as a matter of policy, serve a 3-day notice         Postpone or Restructure Rental Payments
and le a UD action at the earliest possible opportunity          If the tenant is facing a temporary cash-ow problem,
to motivate a tenant to operate in good faith and quickly      the landlord may consider giving the tenant a temporary
conclude negotiations.                                         period of free rent or reduced rent instead of a perma-
   A UD action is an expedited statutory procedure that        nent reduction in rent. The landlord may attempt to re-
allows a landlord to regain possession of the leased           cover this lost rent by increasing the term or increasing
premises occupied by a tenant or other occupant whose          the rental rate in the later years of the term, when the ten-
right to possession has terminated (i.e., due to an uncured    ant hopefully will not have similar cash-ow problems.
default). Even if the landlord has no desire to regain
possession of the premises, the expedited nature of this                           Extend the Term
procedure forces a tenant to act quickly and reasonably           A landlord may be reluctant to extend the term for a
during the negotiation process. This way, if negotiations      tenant who is not able to live up to the obligations of
with the tenant break down (or if the tenant is, e.g.,         the original lease. However, if a tenant is nancially sta-
using the negotiation process to stall or otherwise not        ble but unwilling to continue paying what it believes is
negotiating in good faith), the clock will be running          “above-market” rent, it may be advisable for the landlord
during the entire negotiation process; the landlord will       to have the tenant agree to add years to the lease term in
not lose valuable time if it must thereafter evict the         exchange for a short term rental concession. Under these
tenant. Any damage to the landlord/tenant relationship         circumstances, if a tenant later defaults, the period of time
(or concern that tenant will stop negotiations) is typically   for which the landlord can collect rent will have been in-
eliminated once it has been explained to the tenant that       creased.
commencement of litigation process is a matter of rou-
                                                                             Ask for Additional Security
tine to preserve the landlord’s rights and to ensure that
negotiations stay on track.                                       The landlord should ask for an additional letter of
                                                               credit, increased security deposit, or a surety bond. If
                       Negotiation                             the tenant’s nancial information reveals that the tenant
  The landlord has a number of options when negotiating        is unable to post additional security, consider obtaining
with its tenant, including the following:                      personal or parent guarantees.
29 Real Property Law Reporter                             May 2006                                                      267


                Secure Lease Obligations                        • That holds over after a xed term lease has expired;
   If the landlord did not obtain sufcient collateral or       • After service of notice terminating a month-to-month
security when the lease was rst entered into, the land-          tenancy (CCP §§1946, 1161(1));
lord should use its increased leverage to obtain such se-       • After notice terminating a tenancy at will; or
curity during the negotiation period. The landlord will
                                                                • After breach of a lease beyond all notice and cure
thus become a secured creditor if the tenant later les for
                                                                  periods and proper service of a 3-day notice (CCP
bankruptcy. The landlord should consider obtaining an
interest in any available asset. For example, there may           §1161(3)).
be equity in the tenant’s furniture, xtures, equipment, or     A landlord can’t begin such a lawsuit without rst legally
intellectual property.                                          terminating the tenancy. This means the landlord must
              Consider Creative Solutions                       provide the tenant with a legally adequate written notice.
                                                                If the tenant doesn’t move out or cure its default after
   The landlord should attempt to look for all potential        receipt of such notice, the landlord can then le a UD
ways to bridge the gap with the tenant. For example,            lawsuit to evict the tenant.
the landlord may be willing to accept “in kind” services
                                                                   Courts are required to give UD actions priority (CCP
or goods from the tenant in lieu of rent. The landlord
                                                                §1179a) and must set trial of a “contested” UD not more
should also consider accepting stock, options, or warrants
                                                                than 20 days after landlord’s request for trial setting (CCP
in the tenant company in lieu of rent, or holding an in-
                                                                §1170.5(a)). In reality, the 20-day deadline is rarely met.
terest-bearing note payable after tenant receives further       In addition to the court backlog, a tenant has a number
nancing. It may be possible to relocate the tenant to in-      of delay tactics at its disposal. Thus, a tenant who de-
ferior space within the landlord’s portfolio of space or re-
                                                                cides to mount a defense may be able to add months to
duce the amount of the tenant’s leased space, as opposed
                                                                the process—for example, a tenant can point to technical
to terminating the lease altogether.                            defects in the notice or the UD complaint (or improper
              Once Settlement Is Reached                        service of either) in an attempt to delay the case.
   When the landlord has reached an agreement with the             A tenant will have only ve days to respond in writ-
tenant, the landlord and tenant should memorialize their        ing to the landlord’s complaint. CCP §§1167, 1167.3. A
agreement in a condential amendment (see “Keep It              tenant may choose to demur to the complaint or move
Condential,” above) to the lease. The landlord should          to “strike” the complaint instead of answering. The ten-
insist that the tenant agree to a stipulated judgment for       ant may also answer the complaint by asserting various
the amount of the default (plus interest), rather than a dis-   afrmative defenses (e.g., fraud, breach of the covenant
missal of any pending action against the tenant. This will      of quiet enjoyment, waiver or estoppel, breach of ex-
act as a strong incentive for the tenant to live up to its      press promise to repair, breach of implied warranty of
obligations for the remainder of the lease term and will        habitability, retaliatory eviction, and discriminatory evic-
save the landlord time and money, because the landlord          tion) and equitable defenses (e.g., oral lease, no land-
will not need to sue the tenant to collect on the judgment.     lord-tenant relationship, landlord bad faith, landlord ac-
   The lease amendment should include language stating          quiescence to breach).
that all concessions granted to the tenant in the amend-           Once the complaint has been answered and the matter
ment will be withdrawn in the event of any future default.      is “at issue,” the court will hold a hearing at which the
This will prevent the tenant from obtaining a reduction in      parties can present their evidence and explain their cases.
rent or other lease obligations and then defaulting again,      The tenant has a right to a jury trial; either party can
thereby avoiding the full amount of damages that the ten-       request one. If the tenant has a good defense, the court
ant would have been liable for under the original lease.        will not evict the tenant. If the court decides in favor
                                                                of the tenant, the tenant will not have to move, and the
                Litigation as a Last Resort                     landlord may be ordered to pay court costs. The landlord
   If negotiations fail, the landlord’s only other alterna-     also may have to pay the tenant’s attorney fees if the lease
tive is litigation or arbitration. (While many leases con-      contains an attorney fee clause. See CC §1717; see also
tain arbitration and/or mediation provisions, well-drafted      Trope v Katz (1995) 11 C4th 274, 45 CR2d 241.
leases should “carve out” unlawful detainer from the me-           If the landlord prevails at the UD hearing, the court
diation/arbitration provisions, allowing the landlord to        may award the landlord damages (unpaid rent), court
use the courts to obtain expedited resolution of such dis-      costs, and attorney fees. The court will issue a writ of
putes.) If the tenant is still in possession, the landlord      possession, which orders the sheriff to physically remove
can pursue the expedited legal procedure of UD to regain        the tenant from the premises but gives the tenant ve ad-
possession of the premises.                                     ditional days from the date that the writ is served to leave
   A UD action is used to remove a tenant:                      voluntarily.
268                                                      May 2006                              29 Real Property Law Reporter


                       Conclusion                              status of the exposed individuals. (This situation is likely
   Negotiation, as opposed to litigation (or, in some          to be accompanied by large amounts of visible mold.) If
cases, contemporaneously with litigation), can often           the underlying water problem cannot be resolved quickly,
accomplish the goal of salvaging a troubled tenancy in a       removing the building’s occupants while the work is be-
weak commercial real estate market. The landlord should        ing completed may be prudent. Usually, this type of irri-
carefully prepare for and conduct creative negotiations        tation is both minor and temporal in nature.
from a position of strength to allow the tenancy (as well                When Lower Levels of Mold Exist
as the payment of rent) to continue. If negotiations fail,
                                                                  If the presence of mold is minor, i.e., there is no moldy
the landlord should retain experienced legal counsel to
                                                               smell, there is little visible mold, or the presence of mold
ensure that the technical requirements of the law are
                                                               is only identied through testing, evaluating potential
met and to increase the likelihood that the tenant will be
                                                               health claims will depend in part on the health status of
removed from the premises as quickly as possible.
                                                               the occupants.
                                                                  Those with diagnosed Type 1 allergies to mold (see 29
    Analyzing Mold Claims From Medical                         CEB RPLR 210 (Jan. 2006)) may be symptomatic in the
     and Scientic Perspectives: What                          presence of elevated levels of mold, even if others are
   Owners, Managers, Builders, and Their                       not irritated. If an individual with mold allergies also has
         Attorneys Need To Know                                asthma, there may be a greater level of concern. Like-
                                                               wise, if the occupants have a compromised immune sys-
                 Patrick S. Schoenburg                         tem, due to, e.g., medical treatment such as chemotherapy
                                                               or disease such as HIV, they are at a greater risk of sys-
                      Introduction                             temic fungal infection.
   This is the second in a two-part series on litigating the      On the other hand, the recent studies by the Institute
health effects of mold exposure. The rst article (see 29      of Medicine (IOM) and the Oregon Health Sciences Uni-
CEB 209 (Jan. 2006)) examined the categories of disease        versity (see 29 CEB RPLR 210 (Jan. 2006)) conclude that
associated with mold exposure and the most recent scien-       there is no scientic proof of mold toxicity. Accordingly,
tic studies on them. This article covers strategies for at-   in the absence of pre-existing allergies or a compromised
torneys representing property managers, contractors, de-       immune system, the primary health effects of mold ex-
velopers, and landlords in responding to mold exposure         posure would be limited to minor irritation, which would
claims, how to effectively litigate these claims (primarily    be unlikely to occur absent a perceptible amount of mold.
from a defense perspective), and ideas about the future of     See Mold Litigation, Steps 2, 10.
mold exposure claims.                                                          Prioritizing Responses
       Using the Disease Category Analysis in                     The above disease category analysis should be done
                 Nonlitigated Claims                           to determine the response to a nonlitigated claim from a
   Property managers, contractors, developers, or land-        medical perspective, both for the extent of the response
lords may be faced with water intrusion conditions in a        and the priority of work. Prioritization is particularly im-
building that result in mold growth, and they will need        portant when dealing with mass claims, such as a subdi-
to have a strategy for responding to nonlitigated claims.      vision with multiple homes with potential defects or an
Counsel for these parties may nd most helpful an analyt-      apartment building or ofce with a large number of po-
ical approach based on the disease categories in mold-re-      tential claimants.
lated illnesses (see 29 CEB RPLR 209 (Jan. 2006)).                Those with compromised immune systems should
   Under that analysis, rst, it must be assumed that some     probably be addressed rst due to the potential for in-
response to excess levels of mold will be made, in part        fection, followed by those with diagnosed mold allergies
because mold growth signals a water or moisture prob-          and related asthma, conditions that can be worsened by
lem. (Currently, there is no standard, government-man-         exposure. Moreover, attorneys and other professionals
dated or otherwise, on acceptable or unacceptable mold         handling nonlitigated claims should examine and pro-
levels in a building. See, e.g., Handling Mold Litigation      vide the most recent research in this area to the affected
in California, Step 11 (Cal CEB Action Guide October           parties to allay concerns about “toxic” mold. However,
2005). However, visible mold growth or mold levels that        some attorneys and members of the scientic community
are higher indoors than out are indicators of problems.)       disagree on this point. For further discussion, see Mold
                                                               Litigation, Step 2.
          When Higher Levels of Mold Exist
   If there is sufcient mold in a building to result in the
classic moldy smell, claims of minor eye and mucous
membrane irritation may be credible, despite the health
29 Real Property Law Reporter                             May 2006                                                       269


         How the Disease Category Analysis                      medical literature (see 29 CEB RPLR 210 (Jan. 2006)), a
                 Impacts Litigation                             strong argument can be made that plaintiffs cannot meet
   The complexity of the medical issues associated with         this burden. Interestingly, it is also difcult to prove that
mold exposure can adversely impact both plaintiff and           a given individual has been exposed to mycotoxins at the
defense counsel who fail to appreciate the true nature of       levels found in a residence. Accordingly, specic causa-
these claims. Those representing plaintiffs must learn to       tion will also be problematic for plaintiffs in a claim based
ascertain the specic type of injury their client allegedly     on mold toxicity. See, e.g., Geffcken v D’Andrea (2006)
suffers, retain the correct medical experts, and use this       137 CA4th 1298, 41 CR3d 80 (upholding trial court’s de-
information to determine the value of the claim and its         cision in toxic mold exposure action to exclude evidence
probable success. These are fundamental issues. An ex-          of environmental sampling data and two different blood
pert on infectious diseases may have little to add about a      tests measuring mycotoxin antibodies).
patient suffering from mold allergies. Likewise, making         Specic Causation in Cases Based on Allergy
arguments and allegations that do not apply to the medical      or Infection
conditions that afict the plaintiff may destroy credibil-
                                                                   Unlike the causation issues in toxic injuries, the spe-
ity and adversely impact the case. For further discussion,
                                                                cic causation issue is not a prominent defense in actions
see Mold Litigation, Steps 7, 10, 13, 24–26.
                                                                based on allergies or infections. Defendants would be
      Determining Whether General or Specic                    ghting an uphill battle if they choose to argue that mold
            Causation Is Best Defense                           does not cause specic allergies or infection. In actions
    Defense counsel must recognize that the nature of the       based on these disease models, the battle shifts to whether
defense in mold exposure actions will depend on the type        mold caused disease in a given individual. That issue may
of disease claimed. Of course, this means that the rst         turn on whether there is evidence of exposure or whether
task is to obtain sufcient medical information to perform      plaintiff had accurate diagnostic testing for allergies or
this analysis. The second task is to recognize how the          infection caused by mold. In other words, rather than ar-
various disease models will impact whether the medical          guing about the state of medical knowledge in this area,
issue in the case will involve general causation or specic     which is well established, defendants are better served
causation.                                                      by focusing on whether the plaintiffs prove exposure to
                                                                mold or produce accepted diagnostic tests reecting their
    General and specic causation are concepts borrowed
                                                                alleged injuries. For allergies, those tests are skin prick
from the eld of epidemiology. “Epidemiology focuses
                                                                tests or IgE serology antibody tests; for infection, pathol-
on the question of general causation (i.e., is the agent ca-
                                                                ogy tests of the infected tissue are used.
pable of causing disease?) rather than that of specic
causation (i.e., did it cause disease in a particular indi-          Understanding Complexity of Mold Claims
vidual?).” Reference Manual on Scientic Evidence, p               Another result of the multifaceted nature of mold ex-
336 (Federal Judicial Center 2d ed 2000). The Manual            posure claims is that they may be more difcult to de-
also states that “the distinction between general causa-        fend on the issue of causation than similar occupational
tion and specic causation is widely recognized in court        exposure actions. For instance, in a benzene exposure
opinions.” Manual, p 336 n6.                                    case, plaintiffs are likely to allege the development of a
    Under traditional common law tort theories of strict        single disease, leukemia, as a result of exposure. If de-
products liability and negligence, liability depends on a       fendants can demonstrate that plaintiff does not have a
showing by the plaintiff that the alleged injuries were         type of leukemia associated with benzene exposure (gen-
proximately caused by the act of the defendant or an            eral causation), they may be able to obtain summary judg-
instrumentality under the defendant’s control. Setliff v        ment. Defendants may also have viable defenses at trial if
E.I. Du Pont de Nemours & Co. (1988) 32 CA4th 1525,             they can prove alternative causes of the disease (specic
1533, 38 CR2d 763. In mold exposure actions, the issue          causation) or alternative exposures. Despite the state of
of causation is twofold: First, can mold cause the disease      the evidence, defendants can focus on a single disease.
at issue (general causation)? Second, did mold cause such          The situation is different in mold exposure claims.
a disease in the specic plaintiff (specic causation)? Ob-     These actions are rarely as focused. A defense lawyer
viously, if the answer to the rst question is negative, the    handling a silica case knows from the start that the
inquiry ends. Determining whether the real battle will be       medical issues are limited to a number of pulmonary
over general or specic causation depends on the nature         conditions. With mold, the defense lawyer is often faced
of the plaintiff’s medical claims.                              at the beginning of the action with amorphous allega-
General Causation in Toxicity Cases                             tions regarding “toxic exposure,” only to learn months
                                                                later that plaintiffs are actually suffering from allergies.
   If a plaintiff alleges toxic injuries, the focus should be
                                                                Defendants may spend months ascertaining the nature of
on whether sufcient scientic evidence exists to demon-
                                                                plaintiffs’ true medical condition, sometimes in the face
strate general causation. As reected in the most recent
270                                                        May 2006                               29 Real Property Law Reporter


of claims that their diagnosis was made by a physician           as resulting from mold exposure. Likewise, defendants
retained by counsel and the results are protected by the         who fail to properly analyze mold claims and to force
work-product doctrine.                                           the plaintiff to articulate the nature of his or her injury
                                                                 may have difculty in educating the judge and jury that
      Impact on Pretrial Motion Practice in Mold
                                                                 some, but not all, of the asserted claims are accepted by
                 Exposure Actions
                                                                 the medical community. In both instances, the result may
    The differences between mold exposure and similar            not reect the true state of medical knowledge.
occupational exposure actions may also impact pretrial
motion practice. Most occupational exposure actions turn                The Future of Mold Bodily Injury Claims
on the issue of one serious disease. In contrast, mold ex-          Some commentators expect that mold claims will ulti-
posure actions may involve a series of less serious medi-        mately come to the same end as breast implant litigation,
cal conditions, e.g., allergy, irritation. This makes it dif-    with many concluding that scientic studies such as the
cult for a defense attorney to address medical causation        IOM and Oregon reports do not support the claims. (De-
in a mold exposure case in a motion for summary judg-            spite the questionable nature of the science behind breast
ment or summary adjudication, because some issues are            implant claims, many manufacturers did enter into class
likely to remain unresolved, potentially implicating the         action settlements.) Both the IOM report and the recent
provisions of CCP §437c(f)(1).                                   Oregon study (see 29 CEB RPLR 210 (Jan. 2006)), which
    Accordingly, defense counsel should approach discov-         question the existence of mold toxicity, have been widely
ery and depositions by focusing on the disease categories.       publicized. Will this lead to a decrease in lings?
Plaintiffs and their doctors should be asked if the plain-             Claims Based on Allergy or Infection May
tiff has been diagnosed with allergies, infection, or other                            Thrive
types of reactions known to be caused by mold exposure.
Allergies and infections in particular are the subjects of           The fundamental complexity and nature of mold
specic diagnostic tests, and witnesses should be pressed        claims makes it unlikely that the litigation over this
for straightforward answers. Their responses can then be         issue will end in the same manner as other scientically
used to limit the scope of the case through pretrial mo-         controversial claims, such as those involving amorphous
tions, e.g., if plaintiffs have no diagnostic testing support-   diseases, e.g., sick building syndrome and multiple
ing allergies to mold, there is no evidentiary foundation        chemical sensitivity (MCS). As noted throughout both
for the introduction of such claims at trial. If plaintiffs      parts of this article, several types of disease (e.g., allergy
can be forced to concede that they are only proceeding           and infection) are well established as potentially being
on a toxicity theory, that claim may be subject to sum-          caused by mold. See Mold Litigation, Step 2. This alone
mary judgment based on a lack of general causation.              means that at least some claims will continue to be led,
                                                                 since plaintiffs’ attorneys will have less difculty prov-
    Even if summary judgment is not possible, expert tes-
                                                                 ing causation, a factor that resulted in some attorneys
timony on mold toxicity may still be challenged through
                                                                 losing interest in breast implant and MCS claims.
motions in limine arguing that the opinions lack adequate
foundation and should therefore be excluded under Gef-               In addition, many mold claims have more than just a
fcken v D’Andrea, supra, Lockheed Litig. Cases (2004)            bodily injury component. They arise from construction
115 CA4th 558, 10 CR3d 34, and Jennings v Palomar                defect claims and may involve real and personal prop-
Pomerado Health Syst. (2003) 114 CA4th 1108, 8 CR3d              erty damage, loss of use and similar damages. See Mold
363. (The supreme court will review a second Lockheed            Litigation, Steps 4, 10, 11, 13. In comparison, most oc-
case and may soon clarify the trial court’s role in scruti-      cupational exposure actions are limited to bodily injuries.
nizing expert medical opinion testimony. See Lockheed            When it becomes more difcult to prove medical causa-
Litig. Cases (review granted Apr. 13, 2005, S132167;             tion, the interest in these types of actions lessens. The
superseded opinion at 126 CA4th 271, 23 CR3d 762).)              same is true for mass torts such as breast implant litiga-
For further discussion of challenging expert qualica-           tion. Because most mold exposure actions have special
tions and testimony, see Mold Litigation, Steps 24–26.           damages that are not tied to the causation issue, plain-
                                                                 tiffs’ attorneys may be more likely to continue ling these
      Identifying Specic Diseases Early in the                  claims, calculating that they can afford to take a bigger
                       Action                                    risk in pursuing the medical claims since that is not the
   The bottom line is that both plaintiffs and defendants        entirety of their case.
should be better off if the plaintiff’s diseases are iden-              Claims Based on Toxicity May Diminish
tied and disease issues are claried early in the mold
exposure action. Plaintiffs have had the value of their ac-         From a defense perspective, the best outcome would
tions diminished by judges and juries who have become            involve the rejection by the courts of mold toxicity
skeptical of what some perceive as hype about “toxic”            claims. This would not eliminate mold claims, but would
mold, despite certain conditions that are well established       lessen their potential value, at least for actions involving
                                                                 otherwise healthy individuals. If toxicity is eliminated
29 Real Property Law Reporter                             May 2006                                                       271


as a viable theory, would plaintiffs’ attorneys continue        der this type of standard, park owners have a right to
to le lawsuits that only involve environmental allergies       base period (usually pre-rent control) net operating in-
or irritation? (A case involving a fungal infection would       come, adjusted by the percentage increase in the Con-
certainly have greater potential value, although as noted,      sumer Price Index (CPI) since the base period. Although
systemic infections are extremely uncommon except in            most MNOI standards preclude consideration of debt ser-
those with compromised immune systems.) The answer              vice, in Carson Gardens, LLC v City of Carson Mobile-
is that such actions would likely only be led as an            home Park Rental Review Bd. (2006) 135 CA4th 856, 37
adjunct to a construction defect claim. But that has not        CR3d 768, reported on p 287, the Gross Prot Mainte-
yet occurred.                                                   nance (GPM) standard, which is included in the City of
   The true test will come when judges and juries have          Carson’s guidelines, is a variant that does take debt ser-
rendered a sufcient number of decisions and verdicts on        vice into consideration. Under the other common type
mold toxicity. At this point, we do not have enough actual      of fair return standard—i.e., fair rate of return on invest-
judgments on this issue, in part because lawyers have not       ment—fair return is measured by the return on the total
properly framed the question and the media fail to note         investment, rather than just the cash portion of the invest-
the difference between an allergy case and one involving        ment; because the return is based on the total investment,
toxicity. In the end, it will fall on defense lawyers to        mortgage interest payments do not come into play.
force this distinction, since it appears that it will benet       Some ordinances take a “middle” position with regard
their clients more to isolate and attack the toxicity disease   to mortgage interest by providing only for consideration
model.                                                          of increases in mortgage payments associated with obli-
                                                                gations incurred prior to the adoption of the rent regu-
                                                                lation (such as increases in variable interest rates or re-
 Should a Mobilehome Park Owner’s Debt                          nancing required by the terms of the pre-rent control
 Service Expenses Be Considered in a Rent                       mortgage obligation).
  Adjustment Standard in a Mobilehome                              From a policy perspective, consideration of debt ser-
   Park Space Rent Control Ordinance?                           vice in a fair return standard is not logical within the con-
                          Ken Baar                              text of a rent regulation. If debt service is considered,
                                                                owners who make equal investments in terms of purchase
                                                                price may be entitled to differing rents depending on dif-
                        Introduction
                                                                ferences in the size of their mortgages and/or the terms of
   Approximately 100 California cities and a few coun-          their nancing arrangements.
ties regulate the rents of mobilehome park spaces. Most            While it does not make sense to consider a park
of these rent ordinances authorize annual rent increases        owner’s debt service in a rent increase standard, it does
tied to the percentage increase in the Consumer Price In-       make sense to provide a uniform interest allowance to
dex (CPI). Virtually all mobilehomes in parks in urban          all owners on the cost of a capital improvement in order
areas are sold in place because it is not practically possi-    to provide a reasonable return on its cost. The allowance
ble to move mobilehomes from one park to another. Most          should be the same regardless of whether the funds were
ordinances do not permit additional rent increases when         borrowed in order to cover the cost.
mobilehomes are sold in place. Such provisions are con-            Generally, the judicial doctrine regarding fair return
sidered essential to preserving the equity of mobilehome        has been that “rent control agencies are not obliged by
owners. Some ordinances allow unlimited rent increases          the state or federal Constitution to x rents by applica-
upon in-place sales (vacancy decontrol) of mobilehomes;         tion of any particular method or formula.” Carson Gar-
others permit small rent increases when a mobilehome is         dens, 135 CA4th at 866. However, some courts have
sold in place.                                                  held that consideration of debt service within a fair return
                           Analysis                             standard has no rational basis. Westwinds Mobile Home
    All of the ordinances permit park owners to petition        Park v Mobilehome Park Rental Review Bd. (1994) 30
for additional rent increases on the basis that the other-      CA4th 84, 94, 35 CR2d 315; Palomar Mobilehome Park
wise allowable rent increases are not adequate to provide       Ass’n v Mobile Home Rent Review Comm’n (1993) 16
a “fair return.” Courts have universally accepted the prin-     CA4th 481, 488, 20 CR2d 371. In Westwinds, the court
ciple that park owners have a constitutional right to a fair    explained: “We have previously rejected the notion that
return. However, judicial doctrine regarding what con-          permissible rental rates based on a fair rate of return can
stitutes a fair return has proven to be imprecise and con-      vary depending solely on the fortuity of how the acquisi-
icting since the introduction of mobilehome space rent         tion was nanced.” 30 CA4th at 94.
controls in the 1980’s.                                            Courts in other states have also come to the con-
    The most commonly used fair return standard provides        clusion that mortgage interest payments should not be
for maintenance of net operating income (MNOI). Un-
272                                                             May 2006                              29 Real Property Law Reporter


considered. In 1978, when considering the constitu-                  land use regulation or regulation of rent increases. Fur-
tionality of an apartment rent control ordinance, the                thermore, long term owners could bring legal challenges
New Jersey Supreme Court concluded that “[s]imilarly                 to this type of legal scheme on the bases set forth in the
circumstanced landlords … must be treated alike. Dis-                cases holding that discrimination based on nancing ar-
crimination based upon the age of mortgages serves no                rangements has no rational basis.
legitimate governmental purpose.” Helmsley v Borough                    From a broader perspective, consideration of mortgage
of Fort Lee (NJ 1978) 394 A2d 65, 80. When this issue                interest and/or overall investment is “circular” in the con-
was rst addressed in the 1920’s, a New York court                   text of a rent regulation. If mortgage interest and/or the
explained, with reasoning that does not lose validity                total investment becomes a determinant of the allowable
over time, why the allowable rent should not depend on               return, the regulated owner becomes the regulator of the
the mortgage arrangements associated with the property               allowable return by virtue of establishing the level of debt
ownership (Hirsch v Weiner (Sup Ct 1921) 190 NYS                     service. The level of the investment in the purchase of a
111, 114):                                                           park, which includes the debt service obligation, should
      We think it matters not, in determining the reasonable-        be based on the permitted return under the regulation,
  ness of a rent charge, whether the property is mortgaged.          rather than being the determinant of the return.
  Its rental value is no way affected thereby. . . . If this
  were not the rule there would be discrimination, and the
  reasonable rental of one property would be larger than                       MIDCOURSE CORRECTIONS
  that of another though the properties and their operating
  expenses were identical.
   Another rationale for the policy against considering                Uncertain Dangers in Unlawful Detainers
debt service is that debt service arrangements may be                                     Roger Bernhardt
manipulated for the purpose of obtaining larger rent in-
creases. For example, a park owner could obtain higher                                Gill Petrolium v Hayer
interest nancing in order to justify a rent increase and
then renance at a lower interest rate or pay off the loan               The unlawful detainer action constitutes an essential
after the rent increase is granted. In any case, there is no         remedy for landlords, given that our public policy now ef-
incentive to obtain low cost nancing if the nancing cost           fectively prohibits all forms of self-help eviction against
can be passed through to the tenants.                                defaulting tenants. However, this remedy has the down-
                                                                     side effect of heavily complicating how tenants are to ne-
   While there is substantial precedent holding that debt
                                                                     gotiate with their landlords over honest disputes, because
service should not be considered, two California Court
                                                                     it raises the stakes so high for them if they turn out to
of Appeal cases have held that park owners have a vested
                                                                     be on the wrong side of the dispute. With unlawful de-
right to have their debt service considered if debt service
                                                                     tainer in the picture, the playing eld is not level, as Gill
was an allowable expense under the fair return formula
                                                                     Petrolium, Inc. v Hayer (2006) 137 CA4th 826, 40 CR3d
in effect at the time the park was purchased. See El Do-
                                                                     648, reported at p 276, shows.
rado Palm Springs, Ltd. v Rent Review Comm’n (1991)
230 CA3d 335, 281 CR 327; see also Palacio de Anza                       In Gill, the parties to a market/gas station lease dis-
v Palm Springs Rent Review Comm’n (1989) 209 CA3d                    agreed over who was required to pay the quarterly under-
116, 120, 257 CR 121, in which the court concluded that              ground storage tank fees the state was demanding. Out-
the guidelines in effect when the park was purchased                 side the landlord-tenant context, when two sides quarrel
                                                                     over an issue like that, the one who actually pays the fee,
  created land-use property rights which became vested …             or is forced to pay it, thereafter les an ordinary civil ac-
  when the nancing of the … purchase was undertaken in              tion against the other to recover that amount. But when
  reliance on the existing rent-control laws. In this sense,         a lease is involved, tenants who refuse to pay a claimed
  [the park owner] enjoys a situation or status analogous            obligation can be subject to an unlawful detainer action
  to that of one who has established the right to pursue a
                                                                     for possession and termination of their lease; if they turn
  nonconforming use on land following a zoning change.
                                                                     out to be wrong on the underlying question, they will not
   However, in this case, the park owner was requesting              only owe the landlord the disputed amount, they may also
a rent higher than had been authorized (the “existing”               be out of the lease. This is a much greater risk to take;
use) when it purchased the property. In land use cases,              it forces many tenants to think twice about whether they
courts generally consider whether a permit had already               really want to take on that battle. (This case presented
been granted and what steps had been taken based on the              a typical example: Because the tenants believed that the
permit, rather than what nancing obligations had been               landlord was the one who owed those fees, they did not
incurred in expectation of obtaining the permit. Other-              pay them; that forced the landlord to do so. The landlord
wise, purchase and nancing arrangements could be used               then sued the tenants not only for the amount it had paid,
to provide insulation against changes in the applicable              but also for forfeiture of the lease.)
29 Real Property Law Reporter                             May 2006                                                     273


   This risk to tenants who nd themselves being wrong          due §1179 does require as a condition of relief that the
in honest debates with their landlord is probably the rea-      application not be granted except on “full payment of
son that CCP §1179 permits a trial court to grant relief        rent due, or full performance of conditions or covenants.”
from forfeiture when they lose: Even if they are wrong          The combination of holding over after having received a
in asserting their defenses, they may have the chance of        3-day notice and then ultimately losing the case makes
preserving their leasehold.                                     the tenants retroactively trespassers during the holdover
   However, to gain relief under §1179, tenants who lose        period. That meant that they were liable for rental value
must show “hardship.” This is not a precise term; it ob-        rather than contract rent for that time period. See CC
viously leaves considerable discretion to the trial judge       §3334. (The interval in Gill was close to a year.) If they
(who has probably just held against the tenants on the          are thereafter granted relief from forfeiture, and thus be-
merits). Hardship clearly has to mean more than loss of         come tenants again, rather than trespassers, does that sal-
the leasehold estate, for that would just “strangle the dis-    vation also apply retroactively? The statute isn’t clear,
cretionary power at the very inception of its exercise.”        and good arguments can be made both ways. The land-
Olympic Auditorium, Inc. v Superior Court (1927) 81 CA          lord argued that such relief should not be allowed; had
283, 285, 253 P 944. Instead, it must include “a full ex-       that position been accepted by the court, the ante for ten-
amination of all of the equities involved” (Gray v Maier        ants would have been raised all the higher: Even if they
& Zobelein Brewery (1906) 2 CA 653, 658, 84 P 280), in-         were lucky enough to have their leasehold restored, after
cluding “hardship” to the lessor (Thrifty Oil Co. v Batarse     they lost the underlying case, they would still have to pay
(1985) 174 CA3d 770, 777, 220 CR 285).                          any higher amount that was found to have been the rental
   A landlord who has just completed a bitter ght to           value of their possession for the interim.
throw the tenants out is not likely to tolerate their imme-        This decision holds that reduction from rental value
diate return afterwards. Tenants’ counsel ought to warn         down to contract rent is also a proper kind of relief for
her clients that she cannot guarantee that they will be         hardship. But do not forget that it, too, is discretionary:
able to stay for the balance of the term if a judge (or         Nobody seemed to argue that once the tenants’ leasehold
jury) concludes that they were wrong in the dispute. That       is restored, back damages must be reduced to contract
would require being a sympathetic client, on top of being       rent.
legally correct. Merely assuring the tenants that they have        Thus, judges can restore leaseholds, but they need not
a good argument is not enough—their burden of proof             necessarily also write down the damages awarded. Keep-
is effectively raised from simple preponderance to clear        ing this in mind, counsel for disputing tenants should
and convincing (or maybe beyond a reasonable doubt).            want to include—as a precautionary part of her case—ev-
Thus, in a case like Gill, the tenants may be wiser to pay      idence that keeps those “trespass” damages low. Rental
the charge themselves—or, if they have already paid it,         value is an issue of fact, and a defendant tenant should
not to withhold that amount from their next rental pay-         be as free to opine on it as is the plaintiff landlord. (An
ment—and to thereafter sue separately to recover it. (Par-      appraiser, of course, would be an even better witness.) If
enthetically, full rent checks thereafter should be care-       the tenant can show that the contract rent was fair—i.e.,
fully monitored for language waiving any such rights,           equal to rental value—it could go a long way toward mit-
and the tenants’ lawyer should obviously check all of the       igating the nancial dangers of losing.
in terrorem clauses in the lease to make sure that your
client has not inadvertently run afoul of some other triv-
ial, but potentially fatal, obligation.) Theoretically, there                    DEVELOPMENTS
are other alternatives available to threatened tenants. For-
feiture may not be appropriate unless the lease contains a
forfeiture clause—but who ever saw a lease that did not                             Acquisitions
contain one? Forfeiture is also, technically, not manda-
tory when the landlord’s 3-day notice does not state an
                                                                                       Recording
intent to forfeit, because CCP §1174(c) gives the losing
tenants 5 days after judgment to pay all that they now          State recording statute governed priority of interests
owe and have their estate restored. But that cure period is     in Native American tribal land.
mandatory only when the lease omits a forfeiture clause;        Harrison v Emerald Outdoor Adver., LLC (In re
otherwise, it is discretionary, which again means that an       Emerald Outdoor Adver., LLC) (9th Cir, Apr. 13, 2006,
angry judge may not allow it and the lease will have ter-       No. 04–35647) ___ F3d ___, 2006 US App Lexis 9277
minated.                                                           In 1994, Business Finance Corporation (BFC) agreed
   In Gill, the relief sought was not only restoration of a     to a loan to Hargrove, a member of the Puyallup Tribe
forfeited lease, but reduction in the daily rental liability    who occupied a parcel of tribal land in the State of Wash-
imposed on the tenants for their continued possession af-       ington held in trust by the U.S. government. Hargrove
ter they received the 3-day notice. Code of Civil Proce-        executed a deed of trust in favor of BFC, and the Bureau
274                                                     May 2006                                    29 Real Property Law Reporter


of Indian Affairs (BIA) issued a certicate of approval of    §483a(a), Congress clearly directed the accommodation
the deed of trust, but failed to record it in the BIA Title   of state or tribal law, not preemption.
Plant as required. As required by state law, BFC recorded        Although it did not determine priority in this case,
the deed of trust in Pierce County, Washington, where the     the BIA recording system was not moot. Among other
land was located, in September 1994.                          things, it allows the BIA to exercise its duciary obliga-
   In January 1995, Hargrove and Emerald Outdoor Ad-          tions to maintain accurate records of the status of title to
vertising (Emerald Outdoor) executed a lease permitting       Indian land. Moreover, in some instances, recording in
Emerald Outdoor to erect advertising on Hargrove’s land.      the Title Plants could determine priority, such as when
Emerald Outdoor recorded its lease in the BIA Title Plant,    tribal law required it.
but not in Pierce County. The deed of trust was recorded           THE EDITOR'S TAKE: Although this decision interprets
in the BIA Title Plant in May 1997. In March 1998, after           Washington state law, the statutes in question are not
Hargrove defaulted on her loan, nonjudicial foreclosure            that different from ours. We require documents to be
was commenced on the deed of trust. In September 1998,             “recorded by the county recorder of the country in which
the BIA recorded a new certication, which specically             the real property affected thereby is situated.” CC §1169.
                                                                   We further provide that the recording of those documents
referenced the original certicate of approval signed by
                                                                   in the right place is what gives constructive notice. CC
the BIA in July 1994, as a trailer document to the orig-           §1213. Our race-notice and foreclosure statutes do not
inal deed of trust. The deed of trust was foreclosed in            have the same locational provisions as the Washington
2002.                                                              statutes quoted, but given the other sections I have men-
   Emerald Outdoor led for bankruptcy and sought to               tioned, those differences probably are irrelevant.
establish the validity of its lease. The bankruptcy court              I think the lesson is not that recording locally, as op-
determined that Emerald Outdoor’s lease was extin-                 posed to federally, is safe in all cases. It was sufcient
                                                                   here when both interests (a deed of trust and a leasehold)
guished upon foreclosure of the deed of trust because              were claiming under state law. Had both recorded only
the recorded deed of trust in Pierce County had priority           with the BIA, or had the rst recording been with the BIA
over Emerald Outdoor’s lease. However, on appeal, the              rather than with the county, we cannot be sure of the out-
district court concluded that the lease had priority over          come. The best advice, as the court observes in its rst
the deed of trust because it was recorded before the deed          paragraph, is that when in doubt, le everywhere.—Roger
of trust at the BIA Title Plant.                                   Bernhardt
   The court of appeal reversed. Holders of Indian trust
land are subject to foreclosure in accordance with the                                  Bankruptcy
laws of the tribe with jurisdiction over the land or, where
no tribal foreclosure law exists, in accordance with the
                                                                                          Chapter 11
laws of the state in which the land is located. 25 USC
§483a(a). Because the Puyallup Tribe had no laws gov-         Post-petition loan made to bankrupt condominium
erning the foreclosure of mortgaged land, Washington          project to protect initial loan (by enabling completion
law governed foreclosure.                                     of project) that does not include payment to debtor’s
                                                              counsel is enforceable.
   BIA regulations dictating that interests in Indian land
must be recorded in the BIA Title Plant did not estab-        Weinstein, Eisen & Weiss, LLP v Gill (In re Cooper
                                                              Commons, LLC) (9th Cir 2006) 430 F3d 1215
lish priority. The act of recording has no legal signi-
cance other than providing notice of an interest in land.        Cooper Commons, LLC (Cooper), whose business
Whether the notice achieved by recording establishes pri-     consisted of the construction and sale of a condominium
ority over another interest depends on the applicable sub-    development, entered Chapter 11 bankruptcy. Its prin-
stantive law. Here, Washington law governed priority          cipal creditor was Comerica Bank (Comerica). Cooper
because §483a(a) and its accompanying regulations say         acted as debtor-in-possession for nine months until the
nothing about priority of interests.                          appointment of Gill as trustee. During this period, the
   Washington law provides that any conveyance of land        Weinstein law rm helped Cooper negotiate an agree-
that is not recorded in the county in which the land sits     ment with Comerica for continued nancing necessary to
is void as against any subsequent interest that is duly       the completion of the condominiums, including $50,000
recorded. BFC perfected its lien as against subsequent in-    to pay for the services of retained professionals like the
terest holders such as Emerald Outdoor when it recorded       Weinstein rm.
in Pierce County, regardless of whether it also recorded         On January 3, 2003, Gill, as trustee, led a motion ask-
in the BIA Title Plant. Accordingly, the foreclosure sale     ing the bankruptcy court to approve additional nancing
extinguished Emerald Outdoor’s lease.                         from Comerica, including $888,469 to pay for services
   Recording in the BIA Title Plant would not have per-       by Gill and his professionals. A spreadsheet attached to
fected BFC’s interest. If it did so, the BIA recording sys-   the motion broke down the estimated services; no men-
tem would preempt Washington’s recording statute. In          tion was made of the Weinstein rm. The motion was set
                                                              for hearing on February 5, 2003. On January 31, 2003,
29 Real Property Law Reporter                                       May 2006                                                     275


Gill circulated a nal version of the proposed nancing                  or that helped motivate its extension of credit, and were
agreement; the amount set aside for Gill and his profes-                 thus protected by §364(e).
sionals remained the same. The Weinstein rm received                       The Weinstein rm failed to secure a stay. The
the January 3 motion and attached spreadsheet and the                    bankruptcy court’s express nding that Comerica acted
January 31 document.                                                     in good faith was not clearly erroneous. Accordingly,
   At the February 5 hearing, the Weinstein rm objected                 §364(e) mooted Weinstein’s substantive claims.
to the proposed arrangement, which excluded the Wein-
stein rm and other prior professionals of the bankruptcy                                        Chapter 7
estate, and to inadequate notice, stating that it had not re-
                                                                         Landlord’s sale of tenant’s bankrupt estate property
ceived the January 31 document until February 3. The                     after receipt of bankruptcy petition was willful viola-
bankruptcy court approved the proposed nancing agree-                   tion of automatic stay.
ment. The bankruptcy appellate panel afrmed.
                                                                         Ozenne v Bendon (In re Ozenne) (BAP 9th Cir 2006)
   The Ninth Circuit afrmed, holding that the Weinstein                 337 BR 214
rm was not denied due process. The Weinstein rm
was entitled to notice reasonably calculated to inform it                    Ozenne moved his personal property (Property) into
that the additional funds from Comerica would be applied                 a mini-storage unit at Dollar Self Storage (Dollar). Af-
only to Gill and his professionals received sufciently                  ter Ozenne fell behind on his rent, Dollar served a CCP
ahead of the hearing date that it could prepare objections.              §1161 pay or quit notice and later led an unlawful de-
The Weinstein rm was on notice of its exclusion from                    tainer action and obtained a default judgment awarding
the proposed nancing arrangement when it received the                   it possession of the storage unit and money damages,
January 3 motion.                                                        and ordering a sheriff’s lockout. When Dollar notied
                                                                         Ozenne that it intended to proceed with a sale of the Prop-
   The Weinstein rm sought three different kinds of                     erty, Ozenne unsuccessfully tried to work out a repay-
relief. First, it asked for a declaration that the nanc-                ment arrangement. To stop the sale, Ozenne led a Chap-
ing agreement was invalid and an order that Gill and                     ter 7 petition and personally delivered a copy of the pe-
Comerica renegotiate without ignoring the claims of the                  tition to Dollar the same day. Nevertheless, Dollar pro-
bankruptcy estate’s prior professionals (including Wein-                 ceeded with the sale without seeking relief from the auto-
stein). Second, as an alternative, it asked for an order that            matic stay. Thereafter, Dollar wrote to Ozenne, inform-
the $888,469 earmarked for Gill be distributed pro rata                  ing him of the sale and advising him that its attorneys had
among all the administrative claimants, including the                    reviewed the petition and given instructions to proceed
Weinstein rm. As a third alternative, it requested that                 with the sale (on the grounds that Ozenne’s property had
Comerica be ordered to loan additional money sufcient                   been abandoned).
to cover the Weinstein rm’s demands. All three kinds of
relief were mooted by 11 USC §364(e), which provides:                        Ozenne led his schedules, sought a determination that
                                                                         the sale was void as a stay violation, and moved for an
      The reversal or modication on appeal of an autho-                 order staying the resale of the Property and for sanctions
   rization under this section to obtain credit or incur debt,           against Dollar. The bankruptcy court concluded that the
   or of a grant under this section of a priority or a lien, does        sale violated the automatic stay, but found the violation
   not affect the validity of any debt so incurred, or any pri-          was not willful because of the lack of clarity of California
   ority or lien so granted, to an entity that extended such             law and refused to award sanctions.
   credit in good faith, whether or not such entity knew of
   the pendency of the appeal, unless such authorization and                 The bankruptcy appellate panel reversed and re-
   the incurring of such debt, or the granting of such priority          manded, nding that the landlord, having received notice
   or lien, were stayed pending appeal.                                  of the debtor’s bankruptcy and having made no attempt
                                                                         to seek relief from the stay, had an afrmative duty to
   The rst kind of relief sought—invalidating the nanc-                discontinue its postpetition collection actions. The bank-
ing agreement—would clearly affect the validity of any                   ruptcy court correctly concluded that Dollar violated the
debt incurred, and was therefore mooted by §364(e).                      automatic stay; the ling of a petition for bankruptcy
   The purpose of §364(e) was to overcome a good faith                   relief automatically stays the continuation of proceedings
lender’s reluctance to extend nancing in a bankruptcy                   against the debtor and the commencement of any act to
context by permitting reliance on a bankruptcy judge’s                   obtain possession of, or enforce a lien against, property
authorization. Protecting the validity of any clause of the              of the debtor or the estate. Collection of a prepetition
debt agreement that might have motivated the creditor to                 debt from a debtor/tenant or continuation of any legal ac-
extend the credit served this purpose. The provisions of                 tion to evict a debtor/tenant is generally a stay violation.
the nancing agreement that would be affected by the We-                     State law governs the debtor’s legal and equitable in-
instein rm’s second and third proposed forms of relief                  terests for purposes of determining the extent of the es-
were provisions that Comerica might have bargained for                   tate subject to the automatic stay. California’s statutory
                                                                         scheme applies to the rental of the storage units because
276                                                        May 2006                                   29 Real Property Law Reporter


Dollar was a landlord under CC §1980(a) and Ozenne                  The court of appeal afrmed. In the published portion
was a tenant under §1980(e). After a tenancy is termi-           of the opinion, the court rejected Gill’s claim that the trial
nated, the landlord must give the tenant 15 days’ writ-          court lacked jurisdiction under §1179 to reconsider and
ten notice. CC §1983(a), (b). A tenant who does not              modify the per diem damages awarded in the judgment.
take possession by the date specied in the notice may           However, in appropriate cases, courts retain the inherent
still claim the personal property up until the sale. CC          equitable power to relieve a party from the burdens of a
§1987(b). Civil Code §§1980–1991 unambiguously pre-              judgment.
serve the former tenant’s ownership interest by providing           Section 1179 vests a trial court with the authority to
an exclusive right to cure and claim the personal prop-          affect a judgment after its entry. It vests the court with
erty at any time up to the sale. When Ozenne led his            discretion to relieve a tenant from forfeiture and restore
bankruptcy petition, the Property became property of the         the tenant to his or her former estate or tenancy. As long
estate. Dollar’s sale violated both 11 USC §§362(a)(3)           as the court imposes the statutory conditions—the full
and 362(a)(4).                                                   payment of rent due or full performance of conditions or
    The bankruptcy court erred in nding that Dollar did         covenants so far as practicable—the court has broad eq-
not willfully violate the automatic stay. Willfulness re-        uitable discretion to determine the conditions upon which
quires only that (1) the creditor know of the automatic          relief will be granted.
stay and (2) the action that violates the stay be intentional.      While §1179 mandates that the trial court require the
Dollar admitted it had received a copy of the face-page l-      full payment of rent due, it does not make the court re-
ing the day before the sale; knowledge of the bankruptcy         quire the tenant to pay other sums. If, as Gill argued, the
ling is the legal equivalent of knowledge of the auto-          court’s power were limited to removing the declaration of
matic stay. Whether Dollar believed in good faith that           forfeiture from the unlawful detainer judgment, the court
it had a right to the Property was irrelevant. No specic        in many instances would not be able to provide the other
intent is required, and neither good faith reliance on the       relief authorized by the statute, namely, to restore the ten-
advice of counsel nor reliance on a state court’s determi-       ant to his or her former estate or tenancy. 137 CA4th at
nation is a defense.                                             833.
    Having erred in determining there was no willfulness,                Section 1179 does not, by its terms or by clear impli-
the bankruptcy court abused its discretion by basing its              cation, limit a trial court’s equitable discretion [as Gill
denial of sanctions on that determination. Noting that                suggested]. To the contrary, to fully serve its purpose,
Ozenne may be entitled to compensatory, punitive, and                 the statute must be construed to vest the trial court with
emotional distress damages, the court remanded for a de-              equitable power to consider and adjust all of the equities
termination of damages under 11 USC §362(h).                          between the parties.
                                                                      COMMENT: See Roger Bernhardt’s comments on Gill
                Commercial Leasing                                    Petrolium v Hayer appearing on p 272.—Eds.

                                                                               Ofce Leases; Landlord-Tenant
                     Landlord-Tenant
                                                                 Trustee’s interest in proceeds of letter of credit given
Trial court has equitable power to modify unlawful               to landlord as security deposit was property of bank-
detainer judgment by awarding per diem damages                   ruptcy estate.
rather than rent specied in lease.
                                                                 First Ave. W. Bldg., LLC v James (In re OneCast Media,
Gill Petrolium, Inc. v Hayer (2006) 137 CA4th 826, 40            Inc.) (9th Cir 2006) 439 F3d 558
CR3d 648
                                                                    OneCast Media (OneCast) leased ofce space from
   Gill Petrolium, Inc. (Gill) obtained an unlawful de-          First Avenue West Building (Landlord). The lease was
tainer judgment against the Hayers, which declared the           secured by a security deposit comprised of cash and a
forfeiture of the Hayers’ lease of the business premises.        letter of credit. After OneCast stopped paying rent and
The judgment also awarded per diem damages, based on             led for bankruptcy, the bankruptcy trustee for the estate
testimony as to the fair rental value of the premises, sub-      (Trustee) rejected the lease. The Landlord drew down
stantially higher than the rent specied in the lease for the    the letter of credit and retained the proceeds as a security
time the Hayers occupied the premises after expiration of        deposit. The Trustee sought to recover the remaining se-
the 3-day notice to pay rent or vacate. Thereafter, the          curity deposit in an adversary proceeding in bankruptcy
trial court granted the Hayers’ CCP §1179 motion for re-         court. The court ruled that to the extent the claim sought
lief from forfeiture of the lease, holding that “equity will     recovery of the portion of the security deposit secured by
be served” if they paid only the contract amount of rent         the letter of credit, the letter of credit was not property of
rather than the per diem damages set forth in the judg-          the bankruptcy estate and therefore not within the bank-
ment.                                                            ruptcy court’s jurisdiction. The court denied the Trustee’s
                                                                 motion for reconsideration.
29 Real Property Law Reporter                                      May 2006                                                                277


   The district court reversed and remanded to permit                         came from a third party bank and independent of any off-
the Trustee to pursue recovery of damages up to the full                      set rights of the tenant under the lease, they were there-
amount of the security deposit, including the letter of                       fore not part of the tenant’s estate in bankruptcy. Inde-
                                                                              pendence only goes so far, said the Ninth Circuit: It may
credit.
                                                                              rob the bank of reasons not to have to honor the LC, but it
   The Ninth Circuit afrmed. Rejection of the lease did                      does not deprive the trustee of the right to include it in the
not bar the Trustee’s breach of contract action to recover                    estate. The LC proceeds may still ultimately be paid to the
the balance of the security deposit. Rejection of an unex-                    landlord, but subject to the cap and any other defenses
pired lease removes the lease from the bankruptcy estate                      the trustee may be able to devise. —Roger Bernhardt
and constitutes a breach of the contract or lease that is
effective immediately before the petition for bankruptcy.
11 USC §365(g). Rejection did not rescind the lease or                                           Condemnation
defeat any pending claims or defenses the debtor had in
regard to the lease. The statutory breach of contract put                                Inverse Condemnation; Notice
the estate in the position of a breaching party to the execu-           In failing to give trust deed holder adequate notice
tory contract; it did not divest the estate from the breach-            of demolition of property, city violated trust deed
ing party’s rights under the terms of the contract and ap-              holder’s due process rights.
plicable state law.                                                     D & M Fin. Corp. v City of Long Beach (2006) 136 CA4th
   The bankruptcy court had jurisdiction of the proceeds                165, 38 CR3d 562
of the letter of credit. There was no issue here concerning
                                                                           In July 2000, the City recorded a Declaration of
the bank’s performance under the letter of credit. Follow-
                                                                        Substandard Property against an apartment building (the
ing OneCast’s default under the lease, the Landlord drew
                                                                        Property). Thereafter, D & M Financial Corporation
down the entire letter of credit as the security deposit. The
                                                                        (D&M) acquired a trust deed on the Property, recorded
Trustee sought to recover as much of the security deposit
                                                                        on February 15, 2001. Although it was the City’s prac-
as exceeded the Landlord’s damages. The Trustee’s in-
                                                                        tice to obtain a title report before sending a 10-day notice
terest in those funds was property of the estate (11 USC
                                                                        of intent to demolish, the City did not obtain an update
§541(a)), and thus within the bankruptcy court’s jurisdic-
                                                                        before sending such a notice on February 26, 2001, and
tion. The fact that the debtor sought the return of funds
                                                                        sent no copy to D&M. In April 2001, the City had actual
that were proceeds of a letter of credit did not negate the
                                                                        notice that D&M held a trust deed on the Property, but
breach of contract claim in the underlying obligation.
                                                                        sent no notice to D&M until it mailed to D&M, based in
   Because the bankruptcy court committed clear error in                New Jersey, a copy of a warrant to inspect the Property
holding that it had no jurisdiction, its denial of the motion           for the purpose of demolition on August 7, 2001. D&M
to reconsider was an abuse of discretion. McDowell v                    received that copy on August 13, the same day it received
Calderon (9th Cir 1999) 197 F3d 1253, 1255.                             the City’s 48-hour notice of intent to demolish, mailed
   THE EDITOR'S TAKE: Commercial landlords have long                    on August 10. On August 14, the City demolished the
   preferred security deposits comprised of a letter of credit          Property.
   (LC) from their tenants. They have hoped that, when the
                                                                           D&M sued the City for deprivation of due process and
   tenant defaulted and led bankruptcy, rst, the trustee
   would have no claim to retrieve the LC because it was                for inverse condemnation. The trial court rendered judg-
   not part of the bankruptcy estate and, second, that even             ment for D&M.
   it was part of the estate, the landlord’s claim to it was at            The court of appeal afrmed. When a city threatens to
   least not subject to the one year’s rent cap of 11 USC               demolish structures, due process requires the city to pro-
   §502(b)(6).                                                          vide the property owner and other interested parties with
       Last year, in AMB Prop., L.P. v Ofcial Creditors for the        notice, the opportunity to be heard, and the opportunity
   Estate of AB Liquidating Corp.(In re AB Liquidating Corp.)
   (9th Cir 2005) 416 F3d 961, reported in 28 RPLR 133
                                                                        to correct or repair the defect before demolition.
   (Sept. 2005), the Ninth Circuit destroyed the second hope               Trust deed holder D&M was an interested party with
   by holding that the LC applies against the cap, reducing             standing to bring an inverse condemnation action. The
   both the gross and the capped claim, and probably forcing            beneciary of a deed of trust on property has a sufcient
   disgorgement of any excess over that amount. See Bern-               ownership interest to be entitled to just compensation in
   hardt, Gone With the Wind, 28 RPLR 131 (Sept. 2005).
   Now, with the Onecast Media decision, the rst hope is
                                                                        inverse condemnation. Ordinarily, the compensable in-
   also demolished.                                                     terest of the beneciary of a trust deed to recover an in-
       Letters of credit are subject to an “independence prin-          verse condemnation award derives from the owner/mort-
   ciple” that says that the issuing bank must honor them               gagor’s recovery. However, as in this case, an agreement
   when their stated conditions are met (e.g., proper pre-              between the parties to the trust deed creating the security
   sentment), regardless of any other defenses the customer             interest can permit the trust deed holder to recover an in-
   (tenant) may have against the beneciary (landlord). That            verse condemnation award directly.
   led landlords to hope that since the funds under the LC
278                                                     May 2006                                   29 Real Property Law Reporter


    The City did not give D&M notice of its intention
to demolish. The Declaration of Substandard Property                                  Construction
recorded in July 2000 did not put D&M on inquiry or
constructive notice that the City would demolish a struc-            Construction and Construction Contracts;
ture on the Property. It made no reference to demolition                Mechanics’ Liens and Stop Notices
of structures, and gave no express notice that demolition
                                                              Construction company’s performance of contract
of structures would occur or was even contemplated. It        met statutory requirement of being “complete,” for
stated only that the Property had been found to be sub-       purposes of recording mechanic’s lien, on anticipa-
standard but did not advise that demolition would occur       tory breach of other contracting party.
if the public nuisance was not abated.                        Howard S. Wright Constr. Co. v BBIC Investors, LLC
    The City violated its own ordinance requiring express     (2006) 136 CA4th 228, 38 CR3d 769
notice to mortgagees of orders and notices that affect
                                                                 BBIC Investors (BBIC) leased space to 360networks
buildings or structures found to be substandard. The City
                                                              (360) in its former warehouse in Oakland. 360 and the
also violated its own procedures when it failed to obtain
                                                              Wright Construction Co. (Wright) entered into a design-
an updated title report before sending a 10-day notice of
                                                              build agreement to install in the leased space a facility
intent to demolish on February 26, 2001, and sent no copy
                                                              for 360’s Internet business. BBIC posted and recorded a
to D&M. A city cannot rely on notice to prior owners of
                                                              notice of nonresponsibility at the premises to prevent the
record as determined by an out-of-date title search, and
                                                              attachment of any mechanic’s lien to its interest in the real
must make a timely title search to determine current own-
                                                              property.
ership of property. Moreover, in April 2001, the City had
actual notice of D&M’s interest in the Property, but failed      Wright began work under the design-build agreement
to send various notices and documents to D&M for four         in March 2001. In May, 360 placed the project on hold
months thereafter.                                            and the parties agreed that Wright would proceed with
                                                              closeout work. On June 18, in a phone conversation, 360
    The City failed to satisfy due process requirements un-
                                                              advised Wright that it was not going to pay Wright any
der Kornblum v St. Louis County (8th Cir 1995) 72 F3d
                                                              more money. Wright conrmed the conversation by letter
661, on which it relied. As in Kornblum, delay in demo-
                                                              on June 19, characterizing 360’s action as an anticipatory
lition contributed signicantly to the unreasonableness of
                                                              breach of the contract; 360 did not respond, and Wright’s
the notice. More than a year passed between the July
                                                              laborers and tradesmen left the construction site.
2000 recordation of notice of substandard property and
the ultimate demolition on August 14, 2001. The fore-            Wright recorded its claim of mechanic’s lien against
seeable risk that new parties would acquire ownership in-     the improved real property on June 20, and sued to
terests in the Property in that period made it reasonable     foreclose the lien on August 6. Soon thereafter, Wright
to require the City to determine those parties and to give    recorded a lis pendens against the property. At trial, after
them actual notice.                                           Wright rested its case on the issue of liability, BBIC’s
                                                              motion for judgment, asserting that Wright’s lien was
    The absence of notice of pending demolition also de-
                                                              recorded prematurely, was granted.
prived D&M of its right to repair defects at the Property.
Under Health & S C §17980(b), a property owner has a             The court of appeal reversed. The timeliness of record-
constitutional right to choose to repair or to demolish.      ing the claim of lien was governed by CC §3115, which
                                                              provides both a start date and a latest date for timely
                        Valuation
                                                              recording, as follows:
                                                                      Each original contractor, in order to enforce a lien,
Review granted by supreme court.
                                                                   must record his claim of lien after he completes his con-
Metropolitan Water Dist. v Campus Crusade for                      tract and before the expiration of (a) 90 days after the
Christ, Inc. (review granted Apr. 19, 2006, S141148;               completion of the work of improvement as dened in
superseded opinion at 135 CA4th 568, 37 CR3d 598)                  Section 3106 if no notice of completion or notice of ces-
   This case concerns the burden of proof and the relative         sation has been recorded, or (b) 60 days after recordation
roles of the judge and jury in eminent domain proceed-             of a notice of completion or notice of cessation.
ings.                                                            The trial court determined that Wright had recorded its
                                                              claim too early; therefore, the portion of §3115 dening
                                                              the earliest a claim of lien may be led and still be timely
                                                              was relevant: “after he completes his contract.”
                                                                 Generally, a contractor completes the contract on sub-
                                                              stantial performance of its obligations. As Wright con-
                                                              tended, a contractor also completes the contract when,
                                                              due to some event before full performance, it no longer
                                                              has any further obligations under the contract. If a con-
29 Real Property Law Reporter                            May 2006                                                        279


tract could never be deemed complete under §3115 until         claims, and on the developer’s claim for contractual
all the work was performed, a contract cut short by mutual     indemnity. After the jury’s verdict, the supreme court
termination or the owner’s material breach would never         handed down Jimenez v Superior Court (2002) 29 C4th
be complete, the contractor could never timely record its      473, 127 CR2d 614, which held that manufacturers
claim of lien, and its lien could never be enforced. Thus,     of component parts installed in mass-produced homes
a contract is complete for purposes of commencing the          can be subject to strict liability in tort. The trial court
recordation period under §3115 when all work under the         granted the homeowners’ partial new trial motion based
contract has been performed, excused, or otherwise dis-        on Jimenez, concluding that the failure to instruct the
charged.                                                       jury on strict liability was prejudicial.
    360 repudiated its obligations as to any and all of its       In a bench trial, the judge determined that, based on
contracts with Wright on June 19. Accordingly, Wright’s        their agreement to “indemnify” and “defend,” the win-
obligations under the design-build agreement terminated        dow manufacturer was responsible for the developer’s at-
due to 360’s anticipatory breach of that contract. Antici-     torney fees for defending the homeowners’ suit. The trial
patory breach arises when a party repudiates performance       court also awarded the developer attorney fees as the pre-
of its obligations before they become due; if sufciently      vailing party on its cross-complaint.
signicant, the anticipatory breach discharges the other          The court of appeal afrmed, holding that the trial
party’s obligations and creates in the other party the right   court did not abuse its discretion in granting the new trial
to pursue remedies for breach immediately. Because of          motion. The court rejected the window manufacturer’s
360’s anticipatory breach, Wright had completed its con-       argument that there was no prejudicial error because, in
tract within the meaning of §3115 on June 19. Accord-          order to determine that the window manufacturer was not
ingly, the recording of its claim of lien on June 20 was       negligent, the jury necessarily had to determine that the
not premature.                                                 windows were not defective. Although there can be sig-
                                                               nicant overlap between strict products liability and neg-
                                                               ligence, there are signicant differences in the two causes
                Construction Defects                           of action, particularly in elements, focus, and proof, such
                                                               that a strict product liability instruction in this case might
     Construction and Construction Contracts;                  have led to a different result. Moreover, it was not unfair
                   Contractors                                 to give retroactive application to Jimenez.
Window manufacturer who agreed to defend claims                   The court also rejected the window manufacturer’s ar-
growing out of its work must provide defense to de-            gument that, having been adjudged not negligent by the
veloper in construction defect suit even if ultimately         jury, it had no duty to defend claims against the developer.
shown not to have been negligent.                              The court found that the intention of the parties expressed
Crawford v Weather Shield Mfg., Inc. (2006) 136 CA4th          in the indemnity agreement should control.
304, 38 CR3d 787                                                  In using the verbs “indemnify” and “defend,” the
   A group of homeowners brought a construction de-            agreement contemplated two different actions from the
fect action against the developer of a housing project         promisor. Indemnity is the obligation resting on one party
and the project’s window manufacturer, a subcontractor.        to make good a loss or damage another has incurred.
Alleging that their windows were defectively designed          Defense is the rendering of a service—the mounting
and manufactured (causing them to leak and fog), the           or funding of a defense—in order to avoid or at least
homeowners sued the window manufacturer on theories            minimize liability. Because the obligation to defend was
of strict products liability, negligence, and breach of war-   an obligation to provide a present service, the obligation
ranty. Based on the window manufacturer’s promise to           could not have been contingent on the establishment of a
“defend” actions against the developer “founded on . . .       subsequent indemnity obligation to pay a settlement or
claims growing out of the execution” of the window man-        judgment. The idea that the window manufacturer had
ufacturer’s work, the developer asked the window man-          no duty to defend unless it was ultimately adjudged to be
ufacturer to defend it in the homeowners’ suit. The win-       negligent was thus incorrect as a matter of the text of the
dow manufacturer refused. The developer cross-com-             contract.
plained against the window manufacturer and the win-              It is a well-established rule that an indemnity contract
dow framer, seeking attorney fees incurred in defending        will not apply when the indemnitor is not negligent unless
the suit as well as indemnication for judgment or settle-     the contract specically says so. For example, Centex
ment. The developer settled with the homeowners.               Golden Constr. Co. v Dale Tile Co. (2000) 78 CA4th 992,
   The trial judged granted the window manufacturer’s          93 CR2d 259, noted that there must be some expression
motion to dismiss the homeowners’ strict liability claims      in the agreement indicating that the indemnitor’s fault is
against it. The jury found in favor of the window manu-        of no consequence in determining whether the indemnity
facturer on both the negligence and breach of warranty
280                                                       May 2006                             29 Real Property Law Reporter


obligation is triggered. Here, the expression of an obli-          Dunn moved for summary adjudication of his writ pe-
gation without fault was found in the phrase “and at his       tition and, alternatively, for judgment under CCP §1094,
own expense to defend any suit or action brought against       on the grounds that the County had not proceeded in the
Owner founded upon the claim of such damage.” It neces-        manner required by law and that the County’s decision
sarily contemplated application without an adjudication        was not supported by the evidence. The trial court denied
of negligence, because the defense of a claim must nec-        Dunn’s motion for summary adjudication of the petition
essarily take place before the claim itself is adjudicated.    on procedural grounds, denied the motion for judgment,
Furthermore, no statutory or public policy reason contra-      and accordingly denied the writ petition. The court also
vened what the subcontract here provided.                      granted the County’s motion for judgment on the plead-
   Finally, the trial court properly determined that the de-   ings as to the complaint, nding that Dunn could not state
veloper was the prevailing party on its cross-complaint        a claim for a physical taking, that his regulatory takings
for purposes of awarding attorney fees. The developer          claims were not ripe for adjudication, and that the remain-
prevailed on defense; the window manufacturer prevailed        ing constitutional claims were premature because they
on classic indemnity. Where results are mixed, under CC        derived from the unripe takings claims.
§1717, the prevailing party determination is within the            The court of appeal afrmed in part and reversed in
trial court’s discretion, which was not abused here.           part. The court agreed with the trial court that the sum-
                                                               mary adjudication procedure was improperly invoked.
                                                               When, as here, an administrative mandamus proceeding
                    Development                                purportedly presented no triable issue of fact or was based
                                                               solely on the administrative record, the proper procedure
                         Housing                               was a motion for judgment on the writ under CCP §1094.
Review dismissed by supreme court.                                 The court also concluded that the County proceeded
                                                               in the manner required by law as contemplated by CCP
Barratt Am., Inc. v City of Encinitas (review dismissed        §1094.5(b). The challenged regulations were consistent
Mar. 15, 2006, S123510; superseded opinion at 115
                                                               with the stated goal of the Coastal Act of 1976 (Pub Res
CA4th 837, 9 CR3d 457)
                                                               C §§30000–30900): to protect, maintain, enhance, and
   Reported in 27 CEB RPLR 99 (July 2004), this case           restore the overall quality of the coastal zone environ-
has been dismissed in light of the decision in Barratt Am.,    ment and its natural and articial resources. Pub Res
Inc. v City of Rancho Cucamonga (2005) 37 C4th 685, 37         C §30001.5(a). Because substantial evidence supported
CR3d 149, reported in 29 CEB RPLR 244 (Mar. 2006).             the County’s ndings that areas on Dunn’s property were
                                                               legally protected wetlands, and the County did not mis-
           Land Use; Environment; Takings                      interpret its own regulations or state law in making those
Landowner, whose lot split application was rejected            ndings, Dunn was not entitled to issuance of the writ.
by county, had ripe regulatory takings claim without               Judgment for the County on the physical takings claim
application for building permit, because denial of lot         was plainly correct because Dunn did not and could not
split application made permissible use of property             allege that the County took physical possession of his
known to reasonable degree of certainty.                       property or otherwise occupied it. However, Dunn’s
Dunn v County of Santa Barbara (2006) 135 CA4th                regulatory takings claims were ripe for adjudication,
1281, 38 CR3d 316                                              even though he had not applied for a permit, because the
   Dunn, as trustee of a family trust that owned a 6-acre      County issued what amounted to a nal decision that it
parcel, led an application to subdivide that property,        lacked discretion to grant any subdivision of his property,
which was zoned for a single-family residence, into two        and the permissible use of the property—the develop-
3-acre parcels. Two residences could conceivably have          ment of one single-family residence—was known to a
been developed on the parcel. The County determined,           reasonable degree of certainty. The ripeness doctrine
however, that the property was subject to development re-      does not require a landowner to submit further and futile
strictions under state law and local regulations enacted for   applications; a landowner is required to explore develop-
the protection of wetlands and environmentally sensitive       ment opportunities only if there is uncertainty as to the
habitat areas. After identifying two articially created       land’s permitted used. Palazzolo v Rhode Island (2001)
wetlands totaling approximately one-fth of an acre, the       533 US 606, 622, 150 L Ed 2d 592, 610, 121 S Ct 2448.
County concluded that only one residence could be built        Accordingly, the court reversed the judgment in favor of
on the property and denied the subdivision application.        the County on those claims, as well as the constitutional
Dunn led a petition for a writ of administrative mandate      and civil rights claims that were deemed not ripe on the
combined with a complaint, alleging, among other things,       same ground. In all other respects, the court afrmed.
that the County’s regulations had taken his property with-
out compensation in violation of the takings clause of the
Fifth Amendment of the U.S. Constitution.
29 Real Property Law Reporter                             May 2006                                                      281


                 Planning and Land Use                          is a change in a locality’s most basic and fundamental
City’s agreement to settle challenge to its adoption of         land use policies. If a city agrees to take action that does
general plan, which involved interpreting the plan in           no more than carry out policies already established in the
a particular fashion, did not surrender police power            general plan, such action does not constitute a general
or improperly amend plan.                                       plan amendment. Except for the amendment of the City’s
108 Holdings, Ltd. v City of Rohnert Park (2006) 136            sphere of inuence, the provisions of the stipulated judg-
CA4th 186, 38 CR3d 589                                          ment did not rise to the level of general plan amendments.
   108 Holdings owned approximately 137 acres of prop-             Although amending the sphere of inuence constituted
erty (the Property) in the City of Rohnert Park (City).         an amendment of the general plan, the City followed the
In July 2000, the City adopted a new general plan that          required procedures for seeking this amendment. In such
included all of the Property within the City’s proposed         a case, the City’s action was reviewable only by the elec-
sphere of inuence. In August 2000, South County Re-            torate, not the courts. The separation of powers doctrine
source Preservation Committee (SCRPC) petitioned for            prohibits the judiciary from invalidating duly enacted leg-
a writ of mandate that challenged the City’s adoption of        islation in the absence of some overriding constitutional,
the general plan.                                               statutory, or charter proscription.
   In September 2002, the parties entered into a settle-           Finally, the court determined that the City’s demur-
ment agreement and stipulated judgment under which the          rer to the rst cause of action for writ of mandate was
City agreed to apply for an amendment of its sphere of          properly sustained because the complaint did not allege
inuence affecting the Property and to interpret and ap-        a defect in the proceedings the City followed when it ap-
ply certain policies concerning groundwater conserva-           proved an amendment to the plan removing the Property
tion, community design, and trafc in the manner set forth      from the City’s sphere of inuence on October 22, 2002.
in the stipulated judgment. On October 22, 2002, the City       Documents submitted by property owner to building
adopted a general plan amendment removing the Property          department in support of application for building per-
from the City’s sphere of inuence.                             mit are subject to public inspection.
   108 Holdings sued the City, alleging causes of action        Ops Cal Atty Gen 05–1004 (Feb. 28, 2006)
for declaratory relief, injunctive relief, and a writ of man-      Interim grading documents, including geology re-
date, contending that the City’s adoption of the October        ports, compaction reports, and soils reports, submitted
2002 amendment was unlawful. The trial court (1) sus-           by a property owner to a city’s building department in
tained the City’s demurrer to the third cause of action         conjunction with an application for a building permit are
for writ of mandate and (2) granted the City’s motion           subject to public inspection and copying under the Cali-
for judgment on the pleadings as to the rst and second         fornia Public Records Act (Govt C §§6250–6276.48) at
causes of action for declaratory and injunctive relief.         the time the documents are rst received by the building
   The court of appeal afrmed. The court concluded that        department.
the City’s acceptance of the stipulated judgment did not
constitute an improper surrender of its police power. The                  Planning and Land Use; Zoning
adoption and amendment of a general plan are legislative        City ordinance, allowing large department stores, but
acts that may not be surrendered or impaired by contract.       not small retailers, to sell furniture, denied equal pro-
A contract that surrenders, abnegates, or bargains away         tection.
control of a municipal function or police power is invalid      Hernandez v City of Hanford (2006) 137 CA4th 1397,
as contrary to public policy.                                   40 CR3d 905
   The settlement agreement and stipulated judgment                The City of Hanford (Hanford) amended a zoning
did not amount to a surrender, abnegation, or bargaining        ordinance, applicable to the Planned Commercial Zon-
away of the City’s legislative power. The City did not          ing District (PC zone), to allow department stores with
agree to refrain from legislating in the future on the          50,000 or more square feet of oor space to sell furni-
matters that were the subject of the stipulated judgment.       ture, limited to a 2500 square-foot display space, while
Its terms did not limit the City’s ability to alter or amend    denying that right to smaller retailers. The ordinance was
its general plan should future events so require. Reser-        intended to preserve the vitality of the downtown com-
vation of the police power is implicit in all government        mercial district while not discouraging large department
contracts. The court would not read into the contract an        stores from locating in the PC zone. The Hernandezes,
abrogation of the future exercise of the police power.          owners of a 4000 square-foot mattress store, challenged
There was no impropriety in resolving litigation in a           the ordinance on the ground that it denied them equal
manner that preserved the City’s authority to legislate in      protection. The trial court ruled in favor of Hanford.
the future.                                                        The court of appeal reversed. The equal protection
   The court next concluded that the City did not improp-       clause requires that persons similarly situated with re-
erly amend its general plan. A general plan amendment           spect to the legitimate purpose of the law receive like
282                                                           May 2006                                   29 Real Property Law Reporter


treatment. If a statute is found to discriminate between                 who decided this case. In Wal-Mart, Turlock’s ordinance
similarly situated persons, the classication must bear a                that disallowed retail stores over 100,000 square feet
rational relationship to a legitimate state purpose. In its              with more than ve percent of that space for groceries
                                                                         (i.e., a description that included Wal-Mart) was upheld
zoning ordinance, the governing body may not rely on
                                                                         on the ground that it was needed to protect smaller
a classication whose relationship to an asserted goal is                neighborhood commercial shopping centers; in this case,
so attenuated as to render the distinction arbitrary or irra-            Hanford’s ordinance, which permitted only department
tional.                                                                  stores over 50,000 square feet to sell furniture in ve
   To assist in achieving the zoning goals of preserv-                   percent of that space, was rejected as violating smaller
ing the economic viability of the downtown commercial                    stores’ equal protection rights. Maybe there are some
                                                                         legitimate planning or constitutional distinctions at play,
zone, Hanford restricted certain business activities, in-                but they do seem hard for an uninvolved outsider to
cluding furniture sales, in the PC zone. However, Han-                   perceive. Turlock enacted its ordinance at the behest
ford also wanted to attract department stores to the PC                  of rival grocery stores and the unions, while Hanford
zone. Accordingly, Hanford excepted department stores                    created its exemption to accommodate Gottschalks.
of 50,000 square feet or more from this restriction as long                  Both of these ordinances were given the same defer-
as the furniture display was limited to 2500 square feet.                ential treatment as that accorded to state and national
Allowing limited furniture sales by retailers in the PC                  legislation. What is displayed, however, is provincial and
                                                                         preferential treatment for friends and against foes. Courts
zone did not appear to affect furniture sales in downtown
                                                                         really need to come up with a more respectable and ac-
Hanford.                                                                 ceptable standard of review in these cases.—Roger
   Thus, Hanford created two classes of retailers in the                 Bernhardt
PC zone who devoted a portion of their display to fur-
niture. A retailer with over 50,000 square feet of store                                          Zoning
space could sell furniture, while a retailer with less than
                                                                   Zoning ordinance prohibiting development of “big
50,000 square feet could not, even though neither retailer         box” retail stores did not require environmental
could use more than 2500 square feet for the furniture dis-        review and was legitimate exercise of police power.
play. The trial court concluded that the ordinance was a
                                                                   Wal-Mart Stores, Inc. v City of Turlock (2006) 138 CA4th
valid exercise of the city’s police power—it did not vi-
                                                                   273, 41 CR3d 420
olate equal protection because, based solely on the size
differential, these classes of retailers were not similarly           In 2003, Wal-Mart Stores began taking steps to de-
situated—i.e., size differential was not a valid distinction.      velop a Wal-Mart Supercenter in the City of Turlock
   Both classes of retailers wanted to devote a portion of         (City). After local businesses and union representatives
their oor space to furniture. The difference in total oor        began lobbying against development, the City adopted
space was largely irrelevant. These retailers were in sim-         a zoning ordinance that prohibited the development of
ilar situations. Accordingly, in order for the ordinance to        “big box” retail stores containing a full service grocery
comply with equal protection principles, this classica-           department (Ordinance). The City led a notice of ex-
tion based on size must bear a rational relationship to the        emption from the California Environmental Quality Act
legislative goal, the preservation of downtown Hanford.            (CEQA) (Pub Res C §§21000–21178).
   With the blanket 2500 square-foot restriction on fur-              Wal-Mart sued, alleging the City’s approval of the Or-
niture in the PC zone, the small retailer posed the same           dinance violated CEQA and state zoning laws, and was
potential threat, if any, to the downtown merchants as             an arbitrary, capricious, and unlawful legislative act. The
the larger store. Limiting the furniture sales exception           trial court determined that the Ordinance was a valid ex-
to stores with more than 50,000 square feet was arbi-              ercise of police power and was not subject to further en-
trary. There was no rational relationship between the size         vironmental review because enactment of the Ordinance
classication and the goal of protecting downtown mer-             was not a project subject to CEQA review and, alterna-
chants.                                                            tively, various exemptions applied.
   The court rejected Hanford’s attempt to justify this dis-          The court of appeal afrmed. Noting that this was
parate treatment on the ground that the department store           the rst published opinion to do so, the court upheld the
exception beneted the community by making the PC                  approval of the project based on the application of 14 Cal
zone attractive to large retailers. However, it was not a          Code Regs §15183, which provides in pertinent part:
detriment to have smaller retailers in the PC zone. Thus,                   (a) CEQA mandates that projects which are consis-
the goal of promoting the PC zone did not validate the                   tent with the development density established by exist-
ordinance.                                                               ing … general plan policies for which an EIR was cer-
  THE EDITOR'S TAKE: I cannot help but wonder whether
                                                                         tied shall not require additional environmental review,
  the panel of the Fifth District that decided Wal-Mart                  except as might be necessary to examine whether there
  Stores, Inc. v City of Turlock (2006) 138 CA4th 273,                   are project-specic signicant effects which are peculiar
  41 CR3d 420, reported below, would have reached the                    to the project or its site. This streamlines the review of
  same result as did the three judges of that same district
29 Real Property Law Reporter                                     May 2006                                                            283


   such projects and reduces the need to prepare repetitive                  on the issue of a community’s effort to “zone out” the es-
   environmental studies.…                                                   tablishment of a Wal-Mart store: The Regulation of Super-
      (i) Where the prior EIR relied upon by the lead agency                 stores: The Legality of Zoning Ordinances Emerging from
   was prepared for a general plan … that meets the require-                 the Skirmishes Between Wal-Mart and the United Food
                                                                             and Commercial Workers Union, 58 Arkansas L Rev 833
   ments of this section, any rezoning action consistent with
                                                                             (2006). It is great reading for anyone interested in this
   the general plan … shall be treated as a project subject to               ongoing saga.—Roger Bernhardt
   this section.
    The court concluded that further environmental re-
view under CEQA was not necessary because the zoning                                               Disputes
amendments were consistent with City’s general plan
and were covered adequately by the prior environmen-                                     Indemnity and Contribution
tal impact report (EIR) prepared for the general plan.                 Window manufacturer who agreed to defend claims
The administrative record did not show any reasonably                  growing out of its work must provide defense to de-
foreseeable project-specic changes in the environment                 veloper in construction defect suit even if ultimately
that were signicant and peculiar to the zoning amend-                 shown not to have been negligent.
ments or their site. There was no evidence that it was                 Crawford v Weather Shield Mfg., Inc. (2006) 136 CA4th
reasonably foreseeable that the Ordinance would lead                   304, 38 CR3d 787
to the development of a multi-tenant shopping center
                                                                         This case is reported under Construction and
in the place of the proposed Wal-Mart Supercenter, as
                                                                       Construction Contracts; Contractors on p 279.
Wal-Mart contended. Moreover, the only project-spe-
cic result peculiar to the adoption of the Ordinance was
the elimination of one type of development possibility,                                         Environment
discount supercenters. Any other type of development
possibility also existed prior to the adoption of the Or-
dinance and could not be described as peculiar to its                                               Land Use
adoption.                                                              Landowners’ access to their property inside national
    The police power empowers cities to control and or-                park by use of right-of-way was subject to reasonable
ganize development within their boundaries as a means                  regulation by National Park Service.
of serving the general welfare. The City legitimately                  Hale v Norton (9th Cir 2006) 437 F3d 892
chose to organize development within its boundaries us-                   The Hales, whose land in Alaska was completely sur-
ing neighborhood shopping centers dispersed through-                   rounded by a national park and preserve, gained access
out the City. The Ordinance was reasonably related to                  to their property over what used to be the McCarthy-
protecting that development choice. No showing was                     Green Butte Road (MGB road), listed as abandoned by
made that the restrictions in the Ordinance signicantly               the Alaska Road Commission. After the Hales used a
affected residents of surrounding communities. Accord-                 bulldozer to bring in supplies over the MGB road with-
ingly, the restrictions in the Ordinance bore a reasonable             out rst seeking authorization from the National Park Ser-
relationship to the general welfare and, thus, the City con-           vice (NPS), the NPS posted a public notice stating that no
stitutionally exercised its police power.                              motorized vehicles except snow machines could use the
    An incidental anticompetitive effect did not render ar-            MGB road.
bitrary an ordinance enacted for a valid purpose. While                   In July 2003, the Hales contacted the NPS to request
zoning ordinances may not legitimately be used to con-                 a permanent permit to travel the MGB road with a bull-
trol economic competition, they may be used to address                 dozer and a trailer. The NPS responded, offering to assist
the urban/suburban decay that can be its effect.                       the Hales with the necessary application and environmen-
    The Ordinance was not enacted for the purpose of tar-              tal assessment. Instead of providing the additional infor-
geting Wal-Mart. It prohibited all discount superstores                mation the NPS requested, the Hales led suit in Novem-
within the City’s boundaries. Although Wal-Mart’s                      ber 2003, seeking (1) a declaration that the NPS was vio-
prospective competitors lobbied the City regarding en-                 lating their right of way over the MGB road by requiring
actment of the Ordinance, the validity of legislative acts             a permit and (2) an injunction requiring the NPS to pro-
must be measured by the terms of the legislation, not                  vide access to their property.
by the motives of or inuences upon the legislators.                      The district court denied the Hales’ motion for a tem-
The fact that Wal-Mart was the rst company to feel the                porary restraining order and dismissed the case for lack of
effect of the Ordinance was not sufcient to establish that            subject matter jurisdiction. The court ruled that, even if
Wal-Mart was targeted in any unconstitutional manner.                  the Hales had a right of way, their use of the road was sub-
   THE EDITOR'S TAKE: George Lefcoe, a superstar prop-                 ject to reasonable regulation by the NPS. Consequently,
   erty professor at USC, has just written a law review article        they were required to apply for a permit. Because the
284                                                       May 2006                              29 Real Property Law Reporter


NPS had not acted on their permit application, there was        manner as “not to incommode the public use of the road or
no nal agency action to review.                                highway.” Pub Util C §7901. Because the text of §7901
    The Ninth Circuit afrmed. The Hales’ ability to use        focuses on the function of the road—its use, not its en-
the MGB road was subject to reasonable regulation, even         joyment—it is unlikely that local authorities could deny
if they had a valid right of way over the MGB road, an          permits based on aesthetics alone absent an independent
issue the court did not decide. The NPS was empow-              justication rooted in interference with the road.
ered to regulate travel to an inholding across federally           Section 7901 has been modied by §7901.1, which
protected land. The power to regulate within a national         provides that municipalities have the right to exercise rea-
park to conserve scenery, nature, wildlife, and historic        sonable control as to the time, place, and manner in which
objects therein applies with equal force to regulating an       roads are accessed. However, §7901.1 only gives cities
established right of way within the park. U.S. v Vogler         the authority to regulate the manner in which roads are
(9th Cir 1988) 859 F2d 638, 642. The Alaska National            accessed, not the manner in which telephone companies
Interest Lands Conservation Act provides limited access         affect the road’s appearance. As with §7901, the regu-
rights for inholders in the absence of a right of way, but      latory authority is functional and does not extend to aes-
it also contemplates reasonable governmental regulation.        thetics. Thus, local regulators retain no authority to deny
16 USC §3170(b).                                                permits based on aesthetics under §§7901 and 7901.1.
    The district court lacked jurisdiction to reach the mer-       The Telecom Act’s proviso that it shall not limit or af-
its of the Hales’ suit. The Administrative Procedure Act        fect the authority of a state or local government over de-
provides for judicial review only of agency action made         cisions regarding the placement, construction, and mod-
reviewable by statute and nal agency action. 5 USC             ication of personal wireless service facilities (47 USC
§704. Because the permitting process had not resulted           §332(c)(7)(A)) does not save a local law that is invalid
in a nal action at the time of the Hales’ suit, the suit was   because it conicts with state law.
properly dismissed for want of jurisdiction.                       The Telecom Act requires permit denials to be sup-
                                                                ported by substantial evidence. Because the City over-
                                                                stepped its regulatory authority under state law, its wire-
                       Land Use                                 less ordinance was invalid, and no evidence supported the
                                                                City’s permit denial.
                       Environment
                                                                            First Amendment Restrictions
City cannot deny telecommunications company per-
mit to construct and install wireless antenna based             City’s sign ordinance was constitutional.
on aesthetic considerations.                                    G.K. Ltd. Travel v City of Lake Oswego (9th Cir 2006)
Sprint PCS Assets, LLC v City of La Canada Flintridge           436 F3d 1064
(9th Cir 2006) 435 F3d 993                                         In 2001, G.K. Ltd. Travel (G.K.) purchased a travel
   La Canada Flintridge (City) rejected the applications        business in the City of Lake Oswego, Oregon (City), and
of Sprint PCS Assets (Sprint), a wireless telecommunica-        changed the text on a pole sign advertising the business.
tions company, to construct and install two wireless an-        In order to reduce visual blight and protect trafc and
tennas under its local wireless ordinance, which autho-         traveler safety, the City had enacted a sign code ordinance
rized denial of applications based on aesthetic consider-       (Sign Code) regulating the type, size, and design of all
ations. Sprint sued the City, alleging violations of the        signs erected within its borders. The City notied G.K.
Telecommunications Act of 1996 (Telecom Act) (Pub L             that the change in the sign made it subject to the City’s
104–104, 110 Stat 56) and Pub Util C §§7901 and 7901.1.         Sign Code and required its removal. G.K. sought and was
The district court granted the City’s motion for summary        denied a permit and then a variance. After unsuccessful
judgment, ruling that substantial evidence supported the        appeal of the variance denial, G.K. sued, seeking to have
aesthetic rationale for denying the permits.                    the Sign Code declared unconstitutional on the basis of
   The court of appeals reversed. The Telecom Act re-           multiple as applied and facial challenges.
quires the City’s permit denials to be supported by sub-           The district court granted summary judgment for the
stantial evidence (47 USC §332(c)(7)(B)(iii)) in the con-       City, in large part, determining that only a limited portion
text of applicable state and local law. Metro PCS, Inc. v       of the Sign Code was content based and ordering those
City & County of San Francisco (9th Cir 2005) 430 F3d           provisions stricken.
715, 724. Under the California Constitution, state law             The Ninth Circuit afrmed. The government may im-
preempts local legislation if an ordinance duplicates, con-     pose reasonable time, place, and manner restrictions on
tradicts, or enters an area fully occupied by the general       protected speech provided that they are justied without
laws. Cal Const art XI, §7.                                     reference to content, narrowly tailored to serve a signif-
   State law authorizes telephone companies to construct        icant government interest, and leave open ample alter-
telephone lines along public roads or highways in such a        native channels for communication of the information.
29 Real Property Law Reporter                             May 2006                                                     285


Ward v Rock Against Racism (1989) 491 US 781, 791,              addressing problems that were difcult to dene in objec-
105 L Ed 2d 661, 675, 109 S Ct 2746.                            tive terms.
    The court held the Sign Code’s pole sign restriction,       City’s suspension of permit of nude entertainment
as applied to G.K., was constitutional. It was not a con-       establishment due to violation of city’s patron/enter-
tent-based regulation of speech; it was narrowly tailored       tainer “propinquity” regulations did not violate First
to achieve the City’s signicant interest in aesthetics and     Amendment.
trafc and traveler safety; and, although it foreclosed the     Krontz v City of San Diego (2006) 136 CA4th 1126, 39
availability of pole signs, it left open ample alternative      CR3d 535
means of communicating G.K.’s advertising message, in-             Krontz held a police permit to operate a “nude en-
cluding other types of signs and nonsign-based types of         tertainment establishment” in San Diego (City). The
communication.                                                  City’s municipal code provides that a nude entertainment
    The Sign Code, as a whole, was also content neu-            permittee “shall not permit or allow any person who is
tral. Its exemption from the permit requirement for public      nude to be within six feet of any patron” (six-foot rule)
signs, hospital emergency services, legal notices, railroad     and “shall not allow any adult entertainer to intentionally
signs, and danger signs provided exemptions to certain          touch any patron, or any patron to intentionally touch
speakers, not to particular content. The permit exemp-          any adult entertainer, whether or not the adult entertainer
tion for temporary signs in residential zones was event         is nude” (no-touch rule). Violations of the code may
based and explicitly demanded content neutrality, impos-        subject a business permittee to suspension of the permit.
ing only temporal and size restrictions. The grandfather        During a 10-month period, undercover police observed
clause required a City ofcial to determine only whether        numerous violations of the code provisions. Krontz
the text or logo of a sign had changed, not to evaluate         was sent written warning letters notifying him of the
its substantive message. The design review provision, al-       violations.
lowing the City to review signs for clarity and readabil-          The City notied Krontz that his permit would be sus-
ity, as limited by the City’s construction that clarity and     pended for 10 days based on the numerous and ongoing
readability referred only to legibility and not intelligibil-   violations. An administrative hearing ofcer concluded
ity, was also content neutral. The Sign Code was also nar-      that all but three of the violations were proven. Krontz’s
rowly tailored to achieve signicant government interests       petition for writ of administrative mandamus was denied.
and left open ample alternative channels for communica-
tion.                                                              The court of appeal afrmed, holding that the suspen-
                                                                sion was not an unconstitutional prior restraint. Prior re-
    The Sign Code’s provisions regulating temporary             straints must be distinguished from subsequent punish-
signs in residential zones did not impermissibly favor          ments. Arcara v Cloud Books, Inc. (1986) 478 US 697,
commercial over noncommercial messages or regulate              92 L Ed 2d 568, 106 S Ct 3172, rejected the argument
commercial messages on the basis of content. They ex-           that the closure of a bookstore used for illicit sexual ac-
empted signs from the permit requirement during certain         tivity was an unconstitutional prior restraint. Closure was
events, without reference to content.                           directed at unlawful conduct having nothing to do with
    The Sign Code’s permitting requirement was not an           expressive activity. As in Arcara, nude dancing in an es-
unconstitutional prior restraint on speech. The proce-          tablishment where Krontz allowed violations of a valid
dural safeguards of the prior restraint doctrine were not       regulation did not confer First Amendment coverage to
required because the Sign Code was content neutral. The         defeat the regulation, which was aimed at penalizing and
Sign Code contained reasonably specic and objective            terminating the illegal conduct, not the expressive activ-
standards cabining the permitting ofcial’s discretion.         ity, on the premises.
Although the design review criteria were somewhat                  The code provisions regulating conduct, which were
elastic and required reasonable discretion to be exercised      content neutral on their face, were valid time, place, or
by the permitting authority, that alone did not make the        manner restrictions. A content-neutral restriction on ex-
Sign Code an unconstitutional prior restraint.                  pressive activity is valid if (U.S. v O’Brien (1968) 391 US
    The Sign Code was not unconstitutionally vague. It          367, 377, 20 L Ed 2d 672, 680, 88 S Ct 1673):
clearly described what conduct was permitted, providing
                                                                • The regulation is within the power of the government
explicit sign size and type requirements. It was clear what
the ordinance prohibited; the clarity of the Sign Code’s            to enact;
proscriptions avoided fear of arbitrary and discriminatory      • It furthers an important or substantial governmental
enforcement. The court refused to invalidate the entire             interest;
Sign Code because of the reasonable subjectivity of the         • The government interest is unrelated to the suppres-
design review process. Vagueness doctrine could not be              sion of free speech; and
understood in a manner that prohibited government from
                                                                • The restriction is no greater than is essential to the
                                                                    furtherance of the governmental interest.
286                                                    May 2006                               29 Real Property Law Reporter


   Krontz conceded the rst two prongs of the test were
met. The third prong was met because the no-touch and                           Landlord-Tenant
six-foot rules did not involve protected activity; they
were justied by the government interest in reducing the                              Housing
negative secondary effects of adult-oriented businesses,
                                                             Municipal ordinance limiting amount of rent landlord
including increased criminal activity in the neighbor-       can demand from former Section 8 tenant preempted
hood, an interest unrelated to the suppression of speech.    by state statute.
Finally, the requirement that a regulation be narrowly
                                                             Apartment Ass’n, Inc. v City of Los Angeles (2006) 136
tailored is satised as long as the government’s asserted
                                                             CA4th 119, 38 CR3d 575
interest would be achieved less effectively absent the
regulation. Suspension furthered the goal of obtaining          The Section 8 federal housing assistance program
compliance with applicable regulations; that goal would      funded by HUD and administered locally by the Housing
be achieved less effectively absent the sanction. The        Authority of the City of Los Angeles (Housing Au-
suspension imposed was of very limited duration. A ne       thority) provides participant-tenants with vouchers to
could be less effective at achieving compliance since a      contract for housing with participating landlords. Sec-
business owner could pass along the nes to customers        tion 8 tenants—senior citizens, disabled or handicapped
as a cost of doing business and continue to engage in        persons, and those with very low income—pay about
violations.                                                  30 percent of their income toward their rent, and HUD,
   In addition, the regulation was not unconstitutional      via the Housing Authority, pays the rest of the rent to
under the California Constitution. Analysis of time,         the owner. In April 2002, in response to removal of
place, and manner in California has been fashioned from      numerous housing units from the Section 8 program, the
a long line of federal Supreme Court cases, and analysis     City of Los Angeles (City) adopted an ordinance (the
of speech regulation under Cal Const art I, §2(a), em-       2002 Ordinance) prohibiting a landlord, after termination
ploys time, place, and manner restrictions measured by       or nonrenewal of a Section 8 housing contract with the
federal constitutional standards. Los Angeles Alliance       Housing Authority, from charging the tenant more than
for Survival v City of Los Angeles (2000) 22 C4th 352,       the tenant’s portion of the rent under the former contract,
364 n7, 93 CR2d 1.                                           without any limitation as to time.
   Krontz was not denied due process. He had ample no-          Several associations representing owners and man-
tice of numerous violations occurring over a 10-month        agers of residential rental property in the City (Plaintiffs)
period and notice that his license could be suspended if     led a complaint for declaratory and injunctive relief
the violations persisted; he also had the opportunity to     challenging the validity of the 2002 Ordinance, claim-
challenge the violations following the issuance of each      ing, among other things, that its mandated reduction in
warning letter. Moreover, Krontz failed to show he suf-      the amount of rent constituted a taking of the owner’s
fered any actual prejudice. Although he pointed to de-       property without just compensation in violation of the
lays, the permit suspension was based on a persistent        state and federal constitutions.
pattern of violations showing Krontz tolerated violations       The parties agreed the case involved issues of law
within his establishment, not on the existence of a single   only and submitted the matter on trial briefs. The trial
violation. Any individual delays did not tend to under-      court ruled that the 2002 Ordinance was preempted by
mine the notice Krontz received of ongoing violations.       CC §1954.535, which provides that for a period of 90
Nor did he show that any delays resulted in the loss of      days following termination or nonrenewal of the contract,
witnesses or other relevant evidence.                        a tenant shall not be obligated to pay more than the ten-
                                                             ant’s portion of the rent under the former contract.
                Native American Lands                           The court of appeal afrmed. The City’s challenge
State recording statute governed priority of interests
                                                             to the Plaintiffs’ standing to prosecute the action was
in Native American tribal land.                              without merit. A landlord who violated the 2002 Or-
                                                             dinance faced very serious consequences—damages of
Harrison v Emerald Outdoor Adver., LLC (In re
                                                             three times the amount of excess rent. Declaratory relief
Emerald Outdoor Adver., LLC) (9th Cir, Apr. 13, 2006,
No. 04–35647) ___ F3d ___, 2006 US App Lexis 9277            is a proper vehicle for challenging the constitutionality of
                                                             penal statutes and ordinances and for testing the validity
  This case is reported under Recording on p 273.            of statutes of a nonpenal nature.
                                                                The Plaintiffs satised all three criteria for an associa-
                                                             tion’s standing to bring suit on behalf of its members:
                                                             • Their individual members could have challenged the
                                                                 validity of the 2002 Ordinance in their own right;
29 Real Property Law Reporter                            May 2006                                                              287


• The right to a fair rent was germane to the associa-         increase permitted by the Board with the current prot.
  tion’s organizational purpose; and                           Under this particular formula, debt service is considered
• Their facial challenge to the validity of the 2002 Ordi-     an operating expense. In this case, the prior park owner
  nance did not require the participation of any individ-      had no debt service costs, while the current owner had a
                                                               substantial mortgage associated with its purchase of the
  ual members.
                                                               property after the prior increase was granted. As a result,
   The 2002 Ordinance was preempted by CC §1954.535.           the GPM formula justied the applicant’s rent increase
Local legislation in conict with general law is void.         request due to the substantial increase in debt service
Conicts exist if the ordinance duplicates, contradicts, or    expenses.
enters an area fully occupied by general law, either ex-          The rent ordinance provides that the Board shall grant
pressly or by legislative implication. Western Oil & Gas       “such rent increases as it determines to be fair, just and
Ass’n v Monterey Bay Unied Air Pollution Control Dist.        reasonable,” taking into account comparable rents, oper-
(1989) 49 C3d 408, 423, 261 CR 384.                            ating costs, changes in the CPI and “any other relevant
   State law fully occupies the eld of the length of time     factors,” subject to the qualication that “no one … fac-
a tenant’s rent payment is frozen following notice of ter-     tor shall be determinative.”
mination or nonrenewal of a Section 8 agreement. The              Guidelines adopted under the ordinance state that:
Costa-Hawkins Act (CC §§1954.50–1954.535) generally
                                                                       Debt service incurred after adoption of the Ordinance
establishes vacancy decontrol for residential units and             to purchase a park may be an allowable operating ex-
preempts local rent control by permitting landlords to set          pense if the purchase price paid was reasonable in light
the initial rent for vacant units. Civil Code §1954.53 ad-          of the rents allowed under the Ordinance and involved
dresses operation of vacancy decontrol following the ter-           prudent and customary nancing practices.
mination or nonrenewal of a rental assistance contract be-
tween a landlord and a governmental agency. The 2002              In addition, the Guidelines state that a GPM analysis
Ordinance cannot be reconciled with §1954.535. They            shall be prepared for each Rent Review case. However,
address the identical subject: The ordinance imposes the       the Guidelines state that the GPM
same restriction as the statute, but without a time limit.          analysis is an aid to assist the Board[,] … to be considered
The purpose of the ordinance and the statute are iden-              together with the factors [specied in the ordinance and]
tical: the protection of tenants from sudden, signicant            other relevant evidence presented and the purposes of the
rent increases. Because the state statute fully occupied            Ordinance. The analysis is not intended to create any
the eld in this area, the ordinance, which purported to            entitlement to any particular rent increase.
confer greater protection on the tenant by freezing the ten-     The Board declined to apply the GPM analysis on the
ant’s payment indenitely, was preempted.                      basis that
                                                                       The comparison provided by … [the GPM] analysis
              Landowner/Premises Liability                          would not be meaningful because the estimated gross
Landlord’s sale of tenant’s bankrupt estate property                prot target for the park for Park set by the 1993 rent
after receipt of bankruptcy petition was willful viola-             increase was based on the absence of debt service ….
tion of automatic stay.                                             The Applicant who purchased the Park with notice of the
Ozenne v Bendon (In re Ozenne) (BAP 9th Cir 2006)                   rents allowed by the Ordinance at the time of purchase
337 BR 214                                                          and the limitations on rent increases provided by the Or-
                                                                    dinance and who incurred such a large amount of debt
   This case is reported under Chapter 7 on p 275.                  could not reasonably expect to earn the same prot as
                                                                    the prior owner.
Rent Control; Mobilehomes and Mobilehome Parks
                                                                  Instead, the Board granted a much smaller increase
Trial court exceeded its authority by setting amount           than requested—$23.05—based on the Consumer Price
of rent increase instead of remanding to rent control          Index. Carson Gardens petitioned for administrative
board despite board’s failure to follow court’s order          mandamus. The trial court issued a peremptory writ
to consider debt service in setting rent increase.             requiring a new hearing and requiring the Board to apply
Carson Gardens, LLC v City of Carson Mobilehome Park           GPM analysis or methodology that gave due considera-
Rental Review Bd. (2006) 135 CA4th 856, 37 CR3d 768            tion to debt service costs in calculating a fair return on
   Carson Gardens, a mobilehome park owner, applied            Carson Gardens’ investment.
to the City’s Mobilehome Park Rental Review Board                 The Board did not appeal. It conducted a new hear-
(Board) for a rent increase under the City’s mobilehome        ing, but employed an alternate fair return methodology
park space rent control ordinance. The owner requested a       that excluded debt service costs, but in the Board’s view
rent increase of $105.50 based on a “gross prots mainte-      complied with the ordinance and guidelines and, there-
nance” (GPM) analysis, which compares the gross prot          fore, had complied with the writ. This time a rent increase
level provided to the park as a result of the last rental      of $36.44 was granted.
288                                                           May 2006                              29 Real Property Law Reporter


   After this hearing, the trial court granted Carson Gar-
dens’ motion for an order further enforcing the original                          Miscellaneous Remedies
judgment, nding that the Board’s decision was not in
compliance with the writ. The trial court declared the                                      Forfeitures
Board’s decision null and void and set the rent increase           Trial court has equitable power to modify unlawful
based on GPM analysis, concluding there was no evi-                detainer judgment by awarding per diem damages
dence in the record of any alternative methodology that            rather than rent specied in lease.
would comply with the requirements of the writ.                    Gill Petrolium, Inc. v Hayer (2006) 137 CA4th 826, 40
   The court of appeal reversed. The court noted that it           CR3d 648
was not writing on a clean slate. Instead, because the                   This case is reported under Landlord-Tenant on p 276.
Board had not appealed the original judgment, the court
could not review the fundamental issue of the meaning                          Quiet Title; Statutes of Limitations
of the City ordinance, including whether Carson Gar-
dens was entitled to rely on the Board’s use of the GPM            Actual notice of tax sale provided ample time for
                                                                   property owner to comply with one-year limitations
methodology or some other methodology that took into
                                                                   period for quiet title action.
account debt service in determining a fair return. Ac-
cordingly, the Board was bound to comply with the writ             Mayer v L & B Real Estate (2006) 136 CA4th 947, 39
                                                                   CR3d 327
requiring it to use GPM analysis or some other method-
ology giving due consideration to debt service costs in               This appeal arose out of a quiet title action by the May-
calculating a fair return.                                         ers to restore their ownership of a commercial property
   However, the court agreed with the Board that the trial         that was sold by the Los Angeles County Treasurer and
court exceeded its authority when it ordered a specic             Tax Collector (Tax Collector) to L & B Real Estate (L&B)
rent increase and should have remanded the matter to the           for unpaid property taxes.
Board for further consideration. The trial court order set            The Los Angeles County Assessor’s (Assessor)
a rent increase in an amount the Board expressly found             records did not show the Mayers as the owners of one
would create a windfall for Carson Gardens, and the trial          of the two parcels that comprised their property. Be-
court expressly recognized that, because the Board did             cause the Tax Collector used the Assessor’s records for
not use the GPM method, it could not tell whether an in-           property tax assessment, the Mayers, unaware of the
crease in an amount other than that ordered would pro-             error, were sent and timely paid annual property tax
vide a fair return. In overturning the trial court’s order         bills for only one parcel. The Tax Collector received
to grant a specic rent increase, the court concluded that         no payment on the second parcel’s tax bill; the Mayers
(135 CA4th at 868):                                                received no notices of delinquency or default. On July
                                                                   19, 1998, a delinquency notice was recorded. In 2001,
  we see no reason why the Board may not … consider
                                                                   the Tax Collector discovered the error but made no effort
  the results of the gross prots maintenance analysis, and
                                                                   to inform the Mayers. Instead, the Tax Collector sent
  make ndings as to the appropriate implementation of
  that analysis—all in consonance with its duty under the
                                                                   the Mayers an ofcial notice of auction on June 20,
  ordinance to grant an increase that both “protects Home-         2001, referencing the subject property by lot number and
  owners from excessive rent increases and allows a fair           incorrectly identifying the assessee.
  return on investment….”                                             On November 2, 2001, the Mayers received a notice of
                                                                   excess proceeds from the Tax Collector, notifying them
   When a judgment sets aside an agency decision, the              that the second parcel had been sold at auction on August
judgment “shall not limit or control in any way the dis-           6, 2001, designating them for the rst time as assessees,
cretion legally vested in” the agency. CCP §1094.5(f).             and giving them one year to apply for excess proceeds.
The trial court’s order setting aside the Board’s rent deci-       After several contacts with the Tax Collector, in which
sion and setting the rent eliminated any further exercise          they were advised the sale was valid and would not be
of discretion that was legally vested in the Board. The            cancelled, the Mayers led a quiet title action on Octo-
trial court was obliged to remand the case again, so that          ber 11, 2002. The trial court quieted title in favor of the
the Board could exercise its discretion on the question of         Mayers.
whether passing through the entire amount of debt ser-
vice costs was necessary to provide a fair return.                    The court of appeal reversed. The tax deed from the
                                                                   Tax Collector to L&B was executed on August 6, 2001.
                                                                   The Mayers’ October 2002 quiet title action was led
                                                                   after the one-year limitations period of Rev & T C §3725
                                                                   had expired.
                                                                      The trial court found that the Mayers were nondelin-
                                                                   quent owners in undisturbed possession of tax sold prop-
                                                                   erty and, thus, not subject to the statute of limitations.
29 Real Property Law Reporter                                   May 2006                                                           289


However, the rule only applies to an owner in possession
lacking any reasonable means of alerting itself to the tax                         Shared Use and Ownership
proceedings affecting its property. Kaufman v Gross &
Co. (1979) 12 C3d 750, 759, 153 CR 577. Here, the May-                                  Easements and Licenses
ers had actual notice of the tax sale when they received the
                                                                     Posting of CC §1008 permission-to-pass signs by
notice of excess proceeds on November 2, 2001, within                lessee, who was not landowner’s authorized agent,
three months of the limitation period’s triggering event.            was ineffective to insulate land from neighbor’s pre-
Constructive notice of clouded title and a duty to inquire           scriptive easement claim based on open, notorious,
were sufcient to defeat the undisturbed possession ex-              continuous, and adverse use of road running across
ception in Kaufman; accordingly, actual notice sufced               land by neighbor’s predecessor.
as to the Mayers.                                                    Aaron v Dunham (2006) 137 CA4th 1244, 41 CR3d 32
   In addition, the equitable tolling doctrine did not apply.
                                                                         In 2000, the Aarons purchased real property adjoin-
Equitable tolling operates to suspend or extend a statute
                                                                     ing property owned by the Dunhams. The Aaron prop-
of limitations as necessary to ensure fundamental prac-
                                                                     erty was served by a steep driveway, difcult to use and
ticality and fairness, and to prevent the unjust technical
                                                                     maintain, use of which had been discontinued by previ-
forfeiture of causes of action where the defendant would
                                                                     ous owners because more convenient access existed via a
suffer no prejudice. Lantzy v Centex Homes (2003) 31
                                                                     private road across the Dunham property (Texaco Road).
C4th 363, 370, 2 CR3d 655 (reported in 26 CEB RPLR
                                                                     The Texaco Road was built by lessee Texaco Inc. (Tex-
182 (Sept. 2003)). There was no evidence in the record
                                                                     aco) in 1982 to provide access to gas wells on neighbor-
that L&B knew anything about the manner in which the
                                                                     ing property. For nearly 20 years, occupants of the Aaron
Tax Collector gave the Mayers notice. As a bona de pur-
                                                                     property had made unimpeded use of the Texaco Road.
chaser for value, L&B’s post sale interest was substantial
                                                                     The Fullertons, who bought the property in 1989 and sold
and untainted. Moreover, there is no estoppel when there
                                                                     it to the Aarons, used the road without requesting permis-
is still ample time to take action within the statutory pe-
                                                                     sion to do so. In 1992, Texaco posted on the Dunham
riod after the circumstances inducing delay have ceased
                                                                     property CC §1008 permission-to-pass signs. In 1999,
to operate. The Mayers had more than ve months to le
                                                                     the Dunhams posted their own §1008 signs.
their action even after the Tax Collector made it clear the
sale would not be revoked.                                               The Aarons sued to establish their right to a prescrip-
                                                                     tive easement across the Dunham property, based on their
   For similar reasons, the doctrine of equitable estoppel
                                                                     predecessors’ use of the road. The jury found that ad-
was not applicable to L&B. Equitable estoppel requires
                                                                     verse, open, and uninterrupted use of the Texaco Road
that (Munoz v State (1995) 33 CA4th 1767, 1785, 39
                                                                     had been made at least from 1990–1995. The trial court
CR2d 860):
                                                                     ruled that Texaco’s §1008 signs were not effective be-
      (1) the party to be estopped must be apprised of the           cause they were not posted by the owner of the property
   facts; (2) the party to be estopped must intend his or her        and granted the Aarons a prescriptive easement.
   conduct shall be acted upon, or must so act that the party            The court of appeal afrmed. A party claiming a pre-
   asserting the estoppel had a right to believe it was so           scriptive easement must show use of the property that
   intended; (3) the other party must be ignorant of the true        has been open, notorious, continuous, and adverse for
   state of facts; and (4) the other party must rely upon the
                                                                     an uninterrupted period of ve years. Warsaw v Chicago
   conduct to his or her injury.
                                                                     Metallic Ceilings, Inc. (1984) 35 C3d 564, 570, 199 CR
   There was no evidence that L&B knew about any de-                773. Adverse use means only that the owner has not con-
ciency in presale notice. L&B’s refraining from more ac-             sented to the use by lease or license. Section 1008 pro-
tively asserting its ownership interest until the limitations        vides a means to insulate land from prescriptive claims.
period expired was not an afrmative attempt to mislead              It provides:
for estoppel purposes. In any event, the Mayers were not                       No use by any person or persons, no matter how long
ignorant of the true state of facts.                                       continued, of any land, shall ever ripen into an easement
                                                                           by prescription, if the owner of such property posts at
                           Takings                                         each entrance to the property or at intervals of not more
Municipal ordinance limiting amount of rent landlord                       than 200 feet along the boundary a sign reading substan-
can demand from former Section 8 tenant preempted                          tially as follows: “Right to pass by permission, and sub-
by state statute.                                                          ject to control, of owner: Section 1008, Civil Code.”
Apartment Ass’n, Inc. v City of Los Angeles (2006) 136                  A claim of prescriptive easement could not be based
CA4th 119, 38 CR3d 575                                               on the Fullertons’ use, which continued for no more than
   This case is reported under Housing on p 286.                     three years before Texaco posted its §1008 signs, if the
                                                                     Texaco signs were effective for their statutory purpose.
                                                                     The court concluded that the Texaco signs did not prevent
290                                                              May 2006                                    29 Real Property Law Reporter


the Fullertons from acquiring prescriptive rights because                       An “ouster” is the easiest way for possession to go
they were not posted by the owner or an authorized agent,                   from permissive to adverse: The occupant simply de-
as required by §1008. The statute specically states that a                 clares to the owner that he no longer needs her permis-
                                                                            sion to be where he is. But, unlike the original presump-
prescriptive easement cannot be obtained if the property
                                                                            tion, such an ouster is not presumed—it must be shown
owner posts an appropriate sign. Here, a lessee posted                      to have been made explicitly by the occupant or user to
the sign, and the sign was labeled with the name of the                     the owner, to make her aware that her clock has started
lessee, not the owner. This was not a case where the lit-                   running. That is a clear rule, and most neighbors should
eral language of a statute should be disregarded to avoid                   not be surprised by it. Equally clear is the outcome in the
absurd results or to give effect to the manifest purposes                   converse situation: If the owner advises the user or occu-
of the statute. The function of a §1008 sign is to give no-                 pant that her original permission is withdrawn, continued
                                                                            use by him is obviously (not just presumptively) hostile,
tice to the public that permissive use of the property has                  and the clock will be turned on by such further use.
been granted. Because the owner of the property is pre-                         What is not so clear is what presumption or rule to
sumptively the sole person or entity with legal authority                   apply to situations when possession or use started out
to grant such permission, it is reasonable to require that                  permissively, but there was a change of personnel there-
the sign have been posted by the owner.                                     after. If either the original owner or the original user has
   No principle of law or lease provision supported the                     transferred her or his property, does the presumption of
                                                                            permissiveness continue? Does it depend on what the
Dunhams’ contention that it was Texaco’s duty as lessee
                                                                            grantor told the grantee? If nobody says anything about
to post the §1008 signs. Assuming, without deciding,                        it—to either his or her own successor or to her or his
that §1008 extends to signs posted at the direction of the                  neighbor—is the ongoing use adverse or permissive?
landowner, no evidence suggested that Texaco acted as                           This decision seems to hold that a permissive activ-
an agent for, or with the awareness of, the owners when                     ity is converted into a hostile one automatically the mo-
it posted the signs.                                                        ment the actor (i.e., the user or dominant tenant) or use
   The Fullertons’ use of the Texaco Road was adverse                       changes, thus forcing the neighboring servient tenant ei-
                                                                            ther to object or to restate her consent if she wants to
because it was without express permission of the owners.                    keep the clock from starting. Personally, I do not believe
Continuous use over a long period of time constitutes                       that that consequence necessarily follows from the origi-
communication of the claim of right to the owner of the                     nal principle of presumed hostility in the absence of con-
servient tenement. Accordingly, the Fullertons acquired                     sent; an undiscussed possession that was commenced
a prescriptive easement to which the Aarons succeeded.                      in silence may be different from one that began with an
                                                                            initial permission.
  THE EDITOR'S TAKE: In the context of prescriptive
                                                                                But since, on the other hand, I would not necessar-
  easements, the presumption of hostility or adverse use
                                                                            ily be more comfortable with a reverse rule, i.e., one that
  that applies absent the landowner’s express consent
                                                                            always presumed that permissiveness continues despite
  probably works better for society than would a contrary
                                                                            changes of title or use, I hope there may be another way
  presumption. The latter would require us to inform our
                                                                            out. The opinion gratuitously mentions enough “equi-
  neighbors—even though they never asked—that we are
                                                                            table” considerations—i.e., facts that really don’t have any
  using their property because we think we have a right to
                                                                            real effect on the question of legal prescription—as to
  do so and not because they ever gave us permission (for
                                                                            make it plausible to think they may, in fact, have trumped
  example, if our titles or boundary lines were in error, thus
                                                                            the presumption that was stated as controlling.
  forcing us to rely on prescription or adverse possession
  to hold on to what we always thought was ours). For the                       We would probably be better off in these cases with-
  most part, we can expect our neighbors (and ourselves,                    out presumptions either way, treating the question as one
  when we are on the receiving end) to do the talking when                  of fact (and equity). After all, what is so bad about let-
  they or we believe that the other is trespassing.                         ting the good guys win, even if the law is slightly against
                                                                            them?—Roger Bernhardt
      While that works ne in most cases, it can’t apply
  to those cases where the activity started out with ex-              Landowners’ access to their property inside national
  press consent from the neighbor. Obviously, permissive              park by use of right-of-way was subject to reasonable
  use or possession alone should not create prescriptive              regulation by National Park Service.
  rights—otherwise, all tenants in time would become
  owners. A use or possession commenced permissively                  Hale v Norton (9th Cir 2006) 437 F3d 892
  triggers the statute of limitations only when that use                    This case is reported under Land Use on p 283.
  changes from permissive to adverse.
291                                                       May 2006                              29 Real Property Law Reporter



                                       TABLE OF REPORTED CASES

                       California                              Metropolitan Water Dist. v Campus Crusade for Christ, Inc.:
Aaron v Dunham: 289                                               278
                                                               108 Holdings, Ltd. v City of Rohnert Park: 281
Apartment Ass’n, Inc. v City of Los Angeles: 286
                                                               Ops Cal Atty Gen 05–1004 (Feb. 28, 2006): 281
Barratt Am., Inc. v City of Encinitas: 280                     Wal-Mart Stores, Inc. v City of Turlock: 282
Carson Gardens, LLC v City of Carson Mobilehome Park                                      Federal
   Rental Review Bd.: 287                                      First Ave. W. Bldg., LLC v James (In re OneCast Media, Inc.):
Crawford v Weather Shield Mfg., Inc.: 279                         276
D & M Fin. Corp. v City of Long Beach: 277                     G.K. Ltd. Travel v City of Lake Oswego: 284
Dunn v County of Santa Barbara: 280                            Hale v Norton: 283
Gill Petrolium, Inc. v Hayer: 276                              Harrison v Emerald Outdoor Adver., LLC (In re Emerald
                                                                  Outdoor Adver., LLC): 273
Hernandez v City of Hanford: 281
                                                               Ozenne v Bendon (In re Ozenne): 275
Howard S. Wright Constr. Co. v BBIC Investors, LLC: 278        Sprint PCS Assets, LLC v City of La Canada Flintridge: 284
Krontz v City of San Diego: 285                                Weinstein, Eisen & Weiss, LLP v Gill (In re Cooper Commons,
Mayer v L & B Real Estate: 288                                    LLC): 274




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