When Does a Contractor Legally Abandon a Construction Project?

By Rick Erickson

Lately, we’ve been spending more time as litigators pursuing and defending claims of abandonment against contractors. It has become apparent that abandonment is often misinterpreted in its legal meaning and effect.  Here are some thoughts on abandonment to consider.

On its face, the concept of abandonment is simple enough. For any number of reasons, a contractor abandons a project when the contractor stops showing up.  Abandonment is major concern for all players on the project because it causes critical path delays and significant costs to replace the contractor with another contractor, many times at a much higher cost than the original contractors’ bid.… Read More »

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California Supreme Court Hands Victory to Private Property Owners Over Public Use

By:  Sean M. Sherlock

In 1970 the California Supreme Court held that, under certain circumstances, private property owners impliedly dedicate their property to the public if they permit the public to use it. Gion v. City of Santa Cruz (1970) 2 Cal.3d 29.  This holding was controversial, and the next year the California Legislature enacted Civil Code section 1009 limiting the public’s ability to permanently use private property through an implied dedication.

In the 40-plus years since then, the lower courts have wrestled with the issue of whether the statute limiting implied dedication applies only to recreational uses by the public, or also to nonrecreational uses.… Read More »

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Does Your 998 Offer to Compromise Include Attorneys’ Fees and Costs?

By: Anthony J. Carucci

In California, the “prevailing party” in litigation is generally entitled to recover its costs as a matter of law. See Cal. Code Civ. Proc. § 1032. But under California Code of Civil Procedure section 998, a party may make a so-called “offer to compromise,” which can reverse the parties’ entitlement to costs after the date of the offer, depending on the outcome of the litigation. Cal. Code Civ. Proc. § 998. The potential payoff of a 998 offer to compromise is explained in section 998(c)(1):

If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.

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Arizona Supreme Court Holds a Credit Bid at a Trustee’s Sale Should Not be Credited to a Title Insurer Under a Standard Lender’s Title Policy To the Extent the Bid Exceeds the Collateral’s Fair Market Value

By:  Richard H. Herold

The Arizona Supreme Court recently addressed what impact, if any, a lender’s credit bid at an Arizona trustee’s sale has on an insurer’s liability under Sections 2, 7 and 9 of the standard’s lender’s title policy (“Policy”), holding in Equity Income Partners, LP v. Chicago Title Insurance Company, 241 Ariz. 334, 387 P.3d 1263 (February 7, 2017) as follows:

  1. Section 2 of the Policy, entitled “Continuation of Insurance,” not Section 9, entitled “Reduction of Insurance; Reduction or Termination of Liability,” applies when a lender acquires property at a trustee sale by “either a full- or partial-credit bid” since Section 2 directly addresses the existence and amount of coverage in such circumstances.
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What Do I Do With This Stuff? Dealing With Abandoned Property After Foreclosure

By: Lyndsey Torp

You’ve successfully foreclosed on a commercial building in California, and, thankfully, the borrower moved out after foreclosure or after a period of tenancy. But the borrower left behind all sorts of property – furniture, filing cabinets, records, and other assorted property.  While you may be tempted to just toss it all in the dumpster, doing so may subject you to liability.  There are several statutes that you should consider when determining how to handle the abandoned property.

Statutory Options for a Landlord

A landlord-tenant relationship may arise following foreclosure if, for example, the owner of the property accepts rent from the former owner.… Read More »

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Developer Awarded Cost of Preparing Administrative Record in CEQA Lawsuit

Lawsuits under the California Environmental Quality Act (“CEQA”) typically proceed as petitions for administrative mandamus. This means the petitioner is asking the court to review an agency’s decision and ultimately issue a mandate directing the agency to set aside its decision.  In this respect the court acts like an appellate court, reviewing the agency’s decision.  There are no witnesses or trial exhibits or jurors or opening statements.  The court reads the parties’ briefs, hears their arguments, and makes its decision based on the evidence in the administrative record of proceedings.

The administrative record is often voluminous. It includes not only the environmental reports, but also all project application materials, staff reports and related documents, public notices, written comments and responses, all evidence or correspondence submitted to or relied upon by the agency, hearing transcripts, written findings, and more. … Read More »

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California’s One-Action Rule May Apply to Federal Lenders

By: Anthony J. Carucci

California’s one-action rule provides that “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property or an estate for years therein . . . .” Cal. Code Civ. Proc. § 726(a). In other words, the one-action rule prescribes that the only process for recovery of a debt secured by a mortgage or deed of trust is to foreclose on the lien. The rule aims to prevent a multiplicity of actions and vexatious litigation, and to force a beneficiary to look to all of the security as the primary fund for payment of a debt before looking to the trustor’s other assets.… Read More »

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California Case Deals with Nuisance Lawsuit Intended to Delay Foreclosure

A recent California case provides good precedent for dealing with nuisance lawsuits that are intended to delay valid foreclosures. In Brown v. Deutsche Bank National Trust Company —Cal.Rptr.3d—, 2016 WL 2726229 (May 9, 2016), plaintiff sued defendants to stop them from foreclosing on her home.  The trial court sustained defendants’ demurrer without leave to amend, and dismissed plaintiff’s complaint.  The court of appeal affirmed.

In 2004, plaintiff took a $450,000 home loan from Washington Mutual Bank. Washington Mutual failed in 2008, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed its receiver.  The FDIC sold many of Washington Mutual’s assets, including loans and mortgage servicing rights, to JPMorgan Chase Bank (“Chase”). … Read More »

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Property Taxes: A Shopping Center May Not Always be a Shopping Center

By:  Rick Herold, Craig McPike & Ben Reeves

In the world of real property taxes, Valuation + Classification = Assessed Valuation.  Sounds simple, right?  The County Assessor determines the first factor, valuation (subject to certain guidelines under applicable Arizona law).  The Arizona State Legislature determines the second factor, the property’s legal classification and corresponding assessment ratio (i.e., tax rate).  Given the wide disparity in assessment ratios, classification can be a major issue for taxpayers.

Recently, the Court of Appeals confirmed that a shopping center for valuation purposes may not be a shopping center for classification purposes.  Scottsdale/101 Associates LLC v.Read More »

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Federal Courts to Apply More Protective State Law when Analyzing Validity of Pre-dispute Jury Trial Waivers in Diversity Jurisdiction Cases

By Anthony J. Carucci

The Ninth Circuit Court of Appeals recently held that federal courts sitting in diversity jurisdiction must apply the underlying state law to determine the validity of pre-dispute jury trial waivers where the state law is more protective than the federal law. In re Cnty. of Orange, No. 14-72343, 2015 WL 1727240, at *4–5 (9th Cir. Apr. 16, 2015).

Facts/Procedural History

In 2007, plaintiff County of Orange (the “County”) hired defendant Tata America International Corporation (“Tata”) to develop a property tax management system. Id. at *5. In 2008, the parties entered into a contract for that purpose, which included an unambiguous jury trial waiver.… Read More »

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Guarantor Waivers Narrowed

By:  Lyndsey A. Torp and Sean M. Sherlock

A general waiver by a guarantor of “all defenses” does not actually waive “all defenses.”   California Bank & Trust v. Del Ponti, — Cal.Rptr.3d —, 2014 WL 6908141 (Cal.App. 4 Dist.).  That was the holding in a recent opinion wherein the California Court of Appeal affirmed judgment against a lender, holding that the bank could not recover on its loan guaranties because it had breached the underlying loan agreement.

In California Bank & Trust v. Del Ponti, borrower obtained a construction loan from Vineyard Bank (which was later assigned to California Bank & Trust) to develop a townhome project, with guaranties from two principals of the borrower. … Read More »

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California Case Requires Arbitration Despite Lack of Actual Controversy

 

By:  Lyndsey A. Torp and Sean M. Sherlock

For parties to litigate a contract dispute in a court of law, the parties’ disagreement must have ripened into an actual controversy presenting more than a mere academic difference of opinion.  But under a recent California Court of Appeal opinion, no actual controversy is required to compel arbitration over a disagreement.  Bunker Hill Park Limited v. U.S. Bank National Association, — Cal.Rptr.3d —, 2014 WL 6684796 (Cal.App. 2 Dist.).  To avoid being compelled to arbitrate purely academic disagreements, parties should draft their arbitration clauses to limit arbitrable disputes to those that have ripened into actual controversies.… Read More »

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Nevada Supreme Court adds New Elements to Constructive Eviction Claims.

By Bob L. Olson

Nevada, like many jurisdictions, has recognized the ability of a tenant to vacate property if it becomes unfit for occupancy for the purpose for which it was leased.  This is commonly known as a “constructive eviction.”  Traditionally, to establish a claim for or defense of constructive eviction, the tenant had to prove the following three elements:

1.         The landlord either acted or failed to act;

2.         The landlord’s action or inaction rendered the whole or a substantial part of the premises unfit of occupancy for the purpose for which it was leased; and

3.         The tenant must actually vacate the property within a reasonable time.… Read More »

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Easements Made Easier: Building Pipelines with the Power of Eminent Domain Under the Natural Gas Act

By: Richard H. Herold

Any person or entity seeking to construct a natural gas pipeline and successful in obtaining a certificate of convenience and necessity from the Federal Energy Regulatory Commission may exercise the power of eminent domain to obtain easements across private property when those easements are necessary and cannot be obtained consensually (by contract) from the landowners.  Columbia Gas Transmission, L.L.C. v. 76 Acres More or Less, 2014 WL 2960836 (D. Md. June 27, 2014).  the Columbia Gas Court recently held that (1) the property’s legal description need not be attached to sufficiently identify the property to be condemned, and (2) even in the absence of a federal condemnation statute authorizing immediate possession of the property, the condemning plaintiff may obtain an order to take immediate possession of the property since it would be wasteful and inefficient to skip over one or more parcels in the construction process – only if the condemning plaintiff is capable of satisfying the requirements for preliminary injunctive relief under Fed.R.Civ.P.… Read More »

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Guarantors Score Two Victories Before the Nevada Supreme Court.

By:  Bob Olson and Nathan Kanute

On May 29, 2013, the Nevada Supreme Court issued two decisions that all real estate lenders need to be aware of because they have the potential to eliminate the ability of a lender to recover a deficiency judgment from a guarantor.

In Nevada it is common for lenders to commence foreclosure proceedings and, at the same time, sue all guarantors that have waived the benefit of Nevada’s one-action rule for the full amount of the debt they guaranteed.  Often the foreclosure sale will occur before lender obtains a judgment against the guarantor.  In Lavi v.Read More »

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Nevada Supreme Court and District Court Issue Decisions Regarding Nevada’s Limitations on Deficiency Judgments.

By:  Bob Olson and Nathan Kanute

In 2011 the Nevada Legislature enacted Assembly Bill 273 (“AB 273”) which amended NRS 40.459 by limiting deficiency judgments to the difference between the amount the lender paid to acquire the loan or obligation and the larger of the market value of the property or the amount paid for the property at a foreclosure sale.  As one can imagine, a large number of borrowers and guarantors have tried to take advantage of this recent law to limit or in some cases eliminate their liability for deficiencies.  Creditors, on the other hand, have cried foul by arguing that, among other things, the law cannot be applied retroactively, it impairs the value of their pre-enactment paper and violates the Contracts Clauses of both the United States and Nevada Constitutions. … Read More »

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The Registrar is Changing the Game for Complaints Against Arizona Contractors

By Rick Erickson http://www.swlaw.com/attorneys/rick_erickson

Sweeping changes at the Registrar of Contractors have the construction and real estate industries concerned and curious.  The Registrar recently received some poor performance reports by the Auditor General and State Ombudsmen.  As a result, the Registrar overhauled its procedures for handling complaints and adjudicating contested cases against Arizona contractors.  You should be following these changes before the Registrar rolls out its new approach this summer.     

The Registrar regulates contractor licensing and enforcement of workmanship standards against thousands of licensees throughout Arizona.  In doing so, the Registrar dictates administrative remedies available to property owners on residential and commercial projects. … Read More »

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A Section 363 Sale Does NOT Transfer Property Free and Clear of an Equitable Servitude

By:  Ben Reeves

Sales in bankruptcy court under 11 U.S.C. § 363 (called “363 Sales”) are often used to sell property during a bankruptcy case.  The 363 Sale process provides an efficient procedure to liquidate estate property and offers several advantages to sales outside of bankruptcy – including the highly desirable ability to sell property “free and clear” of interests.  The procedure is used so regularly and with such great success that parties often expect 363 Sales to transfer property free and clear of all interests as a matter of course.  That result, however, is not always the case.

In re Hassen Imports Partnership reminds us that a 363 Sale does not automatically transfer title free and clear of all interests in real property. … Read More »

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Beyond Real Estate: Publicly Traded Homebuilders (And Other Public Companies) Must be Aware of Cybersecurity and Data Breach Disclosure Requirements Applicable to SEC Filings

By:  Richard H. Herold

Generally speaking, publicly traded homebuilders and other public companies must disclose material information in their SEC filings.  “Information is considered material if there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision or if the information would significantly alter the total mix of information available.”  Basic v. Levinson, 485 U.S. 224 (1988)

As the agenda of hackers and other criminals advances, so has the issue of cybersecurity, focusing on what risks exist in the company’s cybersecurity defenses and, if there has already been a data breach incident, whether the scope of the breach and the resulting adverse consequences (which may include regulatory investigations, SEC or FTC enforcement actions, securities class actions, and/or derivative lawsuits) is material and must be reported in SEC filings.… Read More »

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Not All Property Acquired Post-Petition is Safe from Creditors

By:  Ben Reeves

Although property obtained by a debtor after filing for bankruptcy is usually safe from creditors, a recent case from the Ninth Circuit Bankruptcy Appellate Panel allowed a Chapter 7 Trustee to sell real property obtained by the debtors post-petition.

In In re Jones, a debtor’s grandmother signed and recorded a “Beneficiary Deed” that transferred certain real property to the debtor effective upon the grandmother’s death.  A year and a half after the grandmother recorded the deed, the debtor filed for bankruptcy.  Three days after he filed for bankruptcy, the grandmother passed away.

The Chapter 7 Trustee attempted to sell the inherited property, but the debtor objected. … Read More »

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ABOR Fences Out a Property Owner’s Quiet Title Action

By: Cory L. Braddock 

In May of last year, the Arizona Court of Appeals determined that “the statute of limitations does not run against a plaintiff in possession who brings a quiet title action purely to remove a cloud on the title to his property.”  Cook v. Town of Pinetop-Lakeside, 661 Ariz. Adv. Rep. 31 (App, May 28, 2013).  The Cook decision was discussed in detail in our prior blog post entitled The Clock Doesn’t Tick-Tock for Owners in Possession.  Now, the Arizona Court of Appeals, presumably with some regret, has been forced to address real property statute of limitations issues for the second time within six months. … Read More »

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Bidding on State Land Trust Leases: Even the Top Revenue-Generating Bids Must be Balanced Against Qualitative “Best Use” Factors Designed to Protect the Land

By:  Richard H. Herold

The Court of Appeals recently held that that the Commissioner of the State Land Trust Department properly balanced Wildearth Guardians, Inc.’s higher revenue-generating bid against “best use” qualitative factors set forth in the Arizona Administrative Code.  As a result, the appellate court affirmed the Commissioner’s decision to award a 10-year grazing lease to the Knights for their 28-year record of stewardship and protection of the leased land near Springerville, Arizona, despite the $79,344 in additional revenue over 10 years which would have been generated for the benefit of Arizona’s public schools by the Wildearth Guardian’s bid.  Wildearth Guardians, Inc.Read More »

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A.R.S. § 33-814(A) and Bankruptcy Proofs of Claim: To File or Not to File…Conflicting Cases Leave Creditors With No Clear Answer

By: Ben Reeves

Under Arizona law, does a secured creditor need to file a deficiency action within 90 days after a trustee’s sale to preserve the unsecured portion of its claim in a bankruptcy case? Or is filing (or amending) a proof of claim sufficient? Two recent cases out of Arizona provide conflicting answers.

The two cases reached the issue based on a similar fact pattern. In both cases, the debtors stipulated to relief from the automatic stay to allow a trustee’s sale to occur. In both cases, the sales resulted in substantial, unsecured deficiencies. In both cases, the trustees objected to the unsecured portion of the unsecured claims based on the lenders’ alleged failure to comply with A.R.S.Read More »

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