Fresno Lawyer – Randolf Krbechek

The remedy of unlawful detainer is available in three situations under California law, most commonly when a tenant holds over after termination of the lease, or when the tenant continues to occupy the property after breach of the lease.

Less commonly, unlawful detainer is available to an owner “against an employee, agent, or licensee whose relationship is terminated,” and in the third situation, to a purchaser at a foreclosure sale against the former owner and other occupants.

In Taylor v. NU Digital Marketing, Inc. (2016) 245 Cal.App.4th 283, the parties entered into a hybrid contract.  Although styled a contract for sale, the court held that the contract actually was a lease, seemingly tied to an option to purchase, such that the remedy of unlawful detainer was available to the owner.

Note to potential purchasers: An unrecorded “contract of sale” that does not include a deed from the owner to the purchaser is an invitation for trouble.  The court will want to fit the contract into one of its traditional modes of analysis.  As the following decision shows, the court might view the document as a lease, with potentially disastrous consequences to the purchaser.  Be careful when you try to be creative in making a grant of real property.

Now to the facts.  In August 2012, the parties entered into an agreement entitled “Contract of Sale Residential Property.”  The contract provided that “plaintiffs (designated ‘Seller’ in the agreement) agreed to sell a piece of property to defendant (designated ‘Buyer’ therein) for $1.25 million subject to the following terms and conditions:

“Paragraph 1 required defendant to ‘consummate’ the purchase ‘within 60 months of the execution date of the agreement’ by making ‘payment’ of the purchase price, i.e.,  $1.25 million through [escrow].”

Comment: That sounds like an option, exercisable in 60 months.  An option to purchase is not the same a contract for sale.  The option must be exercised by act of the grantee, while the contract for sale is enforceable per se.

“Paragraph 2 purported to divide the purchase price into five components: (1) a grant of equity in defendant corporation (referred to as the ‘Equity Grant’); (2) payment of all property taxes and insurance costs from the move-in date; (3) payment of all homeowners association fees and any related penalties or special assessments; (4) the ‘Down Payment’; and (5) ‘Probationary Installment’ payments of $2,300 per month for 60 months (also referred to as ‘Probationary Payments’).”

The dispute arose when “the probationary installment payments increased to $4,216.48 in accordance with the provision allowing for an upward adjustment of such payments to match plaintiff’s adjustable rate mortgage payment.”

Now the conflict comes into sharper focus.  If you “rented” a property, with a fixed purchase price, and paid 100% of the owner’s mortgage payments plus property taxes plus homeowners association fees, then you might believe you had purchased the property.  But this court did not agree – “In addition to awarding possession to plaintiffs, the court awarded damages in the amount of $31,683.68 and declared the agreement forfeited.”

The court started by explaining that “Unlawful detainer actions are authorized and governed by state statute.  The statutory scheme is intended and designed to provide an expeditious remedy for the recovery of possession of real property … Unlike the foregoing situations, a vendee in possession of land under a contract of sale who has defaulted in the payment of an installment of the purchase price, is not subject to removal by the summary method of unlawful detainer.”

Held the court, “The relationship created by the agreement must be characterized by reference to the rights and obligations of the parties and not by labels … While defendant also agreed to purchase the property within the lease term, possession of the property was conditioned upon payment of the probationary installments, which entitled defendant only to continued possession, and were therefore rent.”

“Probationary payments” in a real estate contract?  I never heard of such a thing, and neither had the court.  Taylor v. NU Digital Marketing, Inc. (2016) 245 Cal.App.4th 283

Today, McCulloch v. Maryland (1819) is cited for its interpretation of Congress’ powers under the Constitution.  But the case actually involved the Second Bank of the United States, a contentious period in our history.

The first Bank of the United States was established in 1791 by Congress.  It had a 20-year charter.  Hamilton was a strong proponent.  It was not rechartered at the end of its 20-year term.

Then came the War of 1812.  The war triggered additional financial obligations by the United States government.

In 1816, Congress chartered the Second Bank of the United States.  McCulloch v. Maryland was a challenge to the legality of the bank.  Chief Justice Marshall ruled in favor the bank.  Today, the case is largely known for its discussion of Congress’s ability to enact “necessary and proper” legislation in furtherance of its powers.

The specific legal issue in McCulloch v. Maryland involved a tax that the state of Maryland levied on the operations of all banks within the state, including the Second Bank of the United States.  McCulloch, head of the Baltimore Branch of the Second Bank of the United States, refused to pay the tax. McCulloch was sued by the state of Maryland, and found liable for the tax.

The Supreme Court held that the tax as levied on Second Bank of the United States was unconstitutional, using the famous phrase, “the power to tax involves the power to destroy.”  At the same time, the court upheld the constitutionality of the bank.

Then came Andrew Jackson, elected in 1828, and reelected in 1832.  Jackson was  strongly opposed to the bank.  He vetoed congressional legislation in 1832 in 1834 and would have extended the charter of the bank.  Thus, the national bank came to an end at the end of its 20-year term; the bank continued as a private corporation in Philadelphia, and was ultimately liquidated in 1841.

There is some speculation that Roger Taney wrote Jackson’s veto of the 1832 legislation.  Taney also served as Secretary of the Treasury and U.S. Attorney General.  Interestingly, Taney became Chief Justice in 1836 after Marshall’s retirement.  Taney is infamous for the Dred Scott decision.

Not that I really understand national banking law, just that I can see how some of the pieces fit together.

The High Commission was a court that existed in England for more than a century, engendering substantial political dispute.  Originally intended for ecclesiatical disputes, the spread of its jurisdiction caused major friction.  Yet its records have all disappeared, save for contemporaneous writings.  Here is some facinating history.

“Historians have seen in the High Commission’s existence and character one of the chief causes of the Revolution of 1640, one of the most cogent explanations of the popular distrust of Charles I.  They have found it the only adequate explanation of the strength of the Puritan movement, which enabled it for a time to abolish the English Church altogether, and which must have rested (it has been supposed) upon a widespread popular hatred of the institution as it then existed.

“The question, however, can never be settled beyond dispute.  The one thing indispensable to the demonstration of the truth of this difficult matter, one way or the other, is the evidence of the official records, kept (as we know) by the various Registrars of ‘the Commission’.  These would at once reveal by the presence or absence of regularity and continuity, and by the date at which they began to be regular and uniform, whether and when there were various bodies of commissioners or one Court of High Commission.

“But the records have disappeared.  That they were accidentally lost during the seventeenth and eighteenth centuries seems improbable.  Surely mere accident can scarcely account for the disappearance of registry books, act books, immense files of pleadings and lawyers’ briefs, and bales and sacks of papers similar to those which the Commissioners left at Durham; in short, of every scrap of evidence great and small connected with the Court, except a couple of volumes of the Act Books containing the cases of Bastwick and Burton – needed of course as evidence in the proceedings in the House of Commons to annul their sentences – and a few score formal papers which happened to be in the bags of miscellaneous letters and petitions at the Tower.

“So large a bulk of papers, as the records of the Commission must have been, would, if merely mislaid, hardly have escaped the notice of the Historical Manuscripts’ Commissioners in either public or private archives; and if they were hidden at any time, there would seem to be at present no reason for longer concealment.

“The Great Fire, which destroyed the documents collected at St. Paul’s Cathedral, might explain the loss of the Commission’s records if it could also account for the disappearance of the archives of the Bishop of London at Fulham Palace, which must have been extraordinarily rich in material connected with the Court.

“But the records seem to have disappeared before 1645.  Laud complained of their seizure by his enemies in 1640; at his trial he pleaded for their production and claimed that they would completely vindicate him; from that day to this they have never been heard of.  All this lends colour to the hypothesis that they were destroyed by order of the Long Parliament, together with all the papers of the High Commission that could anywhere be found.

“The Puritans and the common lawyers united in the passage of that Act not only to abolish the Court which then existed but to make impossible its revival at any future time.  They well knew that the Act of one Parliament could not bind its successor; and how could they hope to be permanently successful in securing their object, if they left behind them a voluminous series of records, showing that a law-court had been in operation for at least half a century, not only with the full approbatian of the King and of the ecclesiastics, but with the acquiescence of the common lawyers.”

Roland G. Usher, Ph.D., The Rise and Fall of the High Commission (Oxford at the Clarendon Press 1913)