Community Property

Spouse vested as sole owner of community property conveys valid title

Reported by Anthony Renaud

A husband and wife purchased property and title was vested in the wife’s maiden name as a single woman. No document stating a contrary intent was signed by the wife. The down payment on the price and all installments on the trust deed loan were made by the husband. Later, the couple separated and the husband remained in possession, occupying the property. The wife told a buyer she had never been married, was the sole owner of the property and identified the occupant not as her husband, but as the tenant residing in the property. The wife then sold the property without her husband’s consent. After escrow closed, the buyer discovered the tenant in possession of the property was the husband. The husband sought a cancellation of the deed, claiming the sale of the property was invalid since he held a community property interest in the property and did not consent to the sale. The buyer claimed the sale was valid since he took title to the property in good faith and without knowledge of the seller’s marital status or of the husband’s claim to an interest in the property. A California appeals court held the sale of the property by the wife was a valid transfer of the entire fee interest since title to the property was vested in the wife’s maiden name as a single woman and no document existed to refute the status of title as the wife’s separate property. [In Re: Marriage of Brooks (December 16, 2008) __CA4th___]

Covenants, Conditions, and Restrictions

HOA must strictly enforce tree-trimming height restrictions in CC&Rs

Reported by Anthony Renaud

An ocean view of a homeowner within a Homeowner’s Association (HOA) became obstructed by trees growing on a neighbor’s parcel located within the HOA. The owner requested the HOA take action to enforce the HOA Covenants, Conditions and Restrictions (CC&Rs) calling for foliage or trees to be trimmed to the roof top of residences on each lot. The HOA refused to enforce the CC&Rs and adopted new rules redefining “view” to include only what can be seen straight ahead with no object to the right or left of the property line considered an obstruction. The owner sought enforcement of the CC&Rs by the HOA, claiming the new rules were in direct conflict with the CC&Rs since the CC&Rs protected his right to an unobstructed view free of any tree tops in any direction. The HOA claimed that the new rules defining the owner’s “view” did not place a duty on the HOA to enforce the tree trimming portion of the CC&Rs since the new rules precluded the owner from considering the trees an obstruction. A California appeals court held the HOA must enforce the CC&Rs and ensure any view-obstructing trees are trimmed or removed since the CC&Rs protect the owner’s ocean view and the HOA was given no authority by the CC&Rs to define what constitutes a “view”. [Ekstrom v. Marquesa at Monarch Beach HOA (November 13, 2008) __CA4th___]

Editor’s note—Who said condominium ownership is a panacea for those seeking ownership of shelter? Closing escrow is more like opening Pandora’s box!


Co-owner’s homestead exemption based on his share of mortgage debt

Reported by Bradley Markano

The co-owner of a property filed a bankruptcy petition and sought to avoid a judgment lien as impairing his homestead exemption. The co-owner claimed the mortgage debt encumbering the entire fee ownership, plus his homestead exemption amount, had priority over the judgment lien and left no equity for the lien to attach. The judgment creditor claimed the homestead exemption was not impaired since the co-owner had not limited the amount of the mortgage debt to his pro rata share of the mortgage before calculating his equity and determining whether his homestead was impaired by the judgment lien. A Bankruptcy Court held the co-owner’s pro rata share of the mortgages encumbering the property, plus his homestead exemption, left sufficient equity in the property for the judgment creditor’s lien to attach. [In re Meyer (November 15, 2006)__BR4th___]

Option contracts

Purchase option enforceable without method of payment or closing date

Reported by Anthony Renaud

An owner and a tenant signed a lease agreement granting the tenant an option to purchase the leased property. The option included the identities of both parties, the property, and the price to be paid, but was silent on the escrow period for delivery of the price and deed after exercise of the option. The tenant timely exercised the option and escrow was opened. The owner responded to the exercise by placing conditions on the escrow period not included in the option, negotiating to prolong the close of escrow until the seller located a §1031 exchange replacement property. The tenant countered, attempting to resolve the owner’s demand for an extended escrow and the buyer’s need to record a purchase assist loan to fund the purchase price. The owner then refused to perform, claiming the option could not be enforced since ongoing negotiations to resolve the time for payment of the price and delivery of the deed were essential terms and did not exist in the option. The tenant made a demand on the owner to close escrow, claiming the option was enforceable since it need not include more than the identities of the buyer and seller, the property, and the price. The California Supreme Court held the option agreement was enforceable since it identified the parties, the property, and the price while time for payment of the price in exchange for the deed is to be implied as a reasonable time (60 days) after exercise of the option when the option did not reserve for later decision the length of the escrow period. [Patel v. Liebermensch (December, 22, 2008) ___C4th__]

Editor’s note— The appeals court decision for this case appeared in the first tuesday Journal’s Recent Case Decisions for October 2008. Also see first tuesday Form 161: Standard Option to Purchase.

Property Management

Lease subrogation waiver bars recovery from tenant by landlord’s insurer

Reported by Bradley Markano

A landlord and tenant entered into a lease agreement containing a waiver of any recovery by subrogation for losses paid by the insurers and a provision calling for both parties to be named as additional insureds under each insurance policy. The enforcement of these provisions was not conditioned on compliance with other provisions in the lease agreement. One of the tenant’s patrons was injured on the premises, and made a demand on the landlord to recover losses caused by his injury. The landlord’s insurer paid the claim, and then made a demand on the tenant to recover its payment. The tenant claimed the subrogation waiver in the lease agreement barred the landlord’s insurer from recovery of any claim paid by the insurer. The landlord’s insurer claimed the lease agreement’s subrogation waiver was unenforceable since the tenant had failed to comply with the lease provision requiring the tenant to name the landlord as an additional insured on his insurance policy. A California appeals court held the tenant was not liable for the claim paid by the landlord’s insurer since the lease agreement contained a subrogation waiver provision barring the insurer from recovery of any payment made under any insurance policy, and the waiver was not conditioned upon the tenant’s compliance with other lease provisions. [Fireman’s Fund Ins. Co. v. Sizzler USA Real Property, Inc. (2008)169 Cal.App.4th 415]