Fresno Lawyer – Randolf Krbechek

Let me be up front – this author does not particularly care for homeowners’ associations.  In my opinion, they have too much power, which is often wielded with a heavy hand.

Now comes the decision in Almanor Lakeside Villas Owners Ass’n v. Carson (April 19, 2016) __ Cal.Rptr.3d __, which only reinforces this view.  Here is a synopsis of the facts:

The homeowners’ association sought to impose fines under CC&Rs against defendants.  “Almanor sought to impose fines and related fees [ ] for alleged rule violations related to the Carsons’ leasing of their properties as short-term vacation rentals.”

Defendants paid some of the fines, but disputed others.  More specifically, “The Carsons disputed both the fines and Almanor’s authority to enforce those rules, which the Carsons viewed as unlawful and unfair use restrictions on their commercially zoned properties.”

At trial, the homeowners’ association sought $54,000 in damages.  Defendants disputed this amount.  “The trial court determined that it would be unreasonable to strictly enforce the absolute use restrictions against the Carsons …

“Of the fines imposed in 2010, 2011, and 2012, the court concluded only the fines pertaining to the non-use of Almanor’s boat decals were reasonable.  Those fines amounted to $6,620, including late charges and interest.”

That’s right – the trial court awarded $6,620 solely for “non-use” of the Association’s “boat decals.”

Then, to pile on, the trial court awarded $98,535 in attorneys fees and $3,267 in costs, for a total award of attorneys fees and costs in the amount of $101,803.

On appeal, the court held that such determination was “reasonable.”  The court of appeal held that the homeowners’ association was the “prevailing party” within the meaning of the Davis-Sterling Act, and expressly held that the award of attorneys fees were “reasonable” within the meaning of Civil Code section 5975.

If you are practicing attorney, this case makes it difficult to advise a homeowner ever to contest any charge by the homeowners’ association, the matter what the merits.

In Almanor Lakeside Villas Owners Ass’n v. Carson, the homeowners’ association sought $54,000 at trial, and was awarded $6,600.  The appellate court established the following principle – if any amount is awarded to the homeowners’ association, then the association is the “prevailing party” and is entitled to recover its attorney’s fees “as a matter of right.”

To this end, the court of appeal ruled that, “after resolving the threshold issue of the prevailing party, the trial court had no discretion to deny attorneys fees.”

Almanor Lakeside Villas Owners Ass’n v. Carson represents a growing dichotomy in California.  This state is home to some fabulously wealthy people, in a few geographic areas.  Here we see the court applying a distorted economic viewpoint (Who on earth thought it was worth spending more than $100,000 in attorneys fees to seek $50,000 in court?) to achieve a shocking result.  “Reasonableness,” like beauty, is in the eye of the beholder.

Almanor Lakeside Villas Owners Ass’n v. Carson (April 19, 2016) __ Cal.Rptr.3d ___

Civil Code section 3346 authorizes an award of treble damages for “wrongful injuries to timber, trees, or underwood upon the land of another, or removal thereof.”  The defendant in the recent case of Salazar v. Matejcek (Mar. 10, 2016) 245 Cal.App.4th 63 learned that this statute can support very substantial damages.

The dispute concerned “a 10-acre piece of rural property near Covelo, California. The property was completely undeveloped except for a small cabin.”  The defendant was not able to obtain an adequate source of water.  According to the court, he “destroy[ed] an estimated 225 trees to build the road and clear the surrounding area to house his water storage devices.”

Argued the defendant “the trial court failed to consider that the area to be restored was approximately two-thirds of one acre out of the 10-acre parcel.”

Stated the court, “Under the circumstances of this case, we find a holistic approach to be reasonable.  Plaintiffs had never sought to develop any portion of their parcel.”

And what of the damages?  “At trial, Mr. Salazar testified he is saddened by the damage done to his property and he remains nervous about visiting it … Mr. Salazar testified that if he did receive an award of damages, he would use the money to restore the trees defendant had removed.”

Comment – Time will tell.  I’ll bet the money goes right into plaintiff’s pocket.

“Mrs. Salazar testified that the dispute with defendant has affected her physically and mentally.  She has felt powerless and belittled. She has anxiety and her sleep has been affected.  She does not enjoy going to the property anymore and feels as though the land was violated.”

How to calculate damages?  “Such damages are generally determined as the difference between the value of the property before and after the injury.  But diminution in market value is not an absolute limitation; several other theories are available to fix appropriate compensation for the plaintiff’s loss …

“One such alternative measure of damages is the cost of restoring the property to its condition prior to the injury, and a plaintiff may recover these costs even if they exceed diminution in value if there is a ‘personal reason’ for restoration.”

“At trial an arborist named John Phillips testified for plaintiffs.  He prepared a tree replacement plan designed to remedy the effects of defendant’s encroachment.  He estimated that 225 trees will need to be planted to restore the property … Phillips estimated the total tree remediation cost would be $67,500.

“The court accordingly trebled the $67,500 award of compensatory damages for tree removal pursuant to Civil Code section 3346 and Code of Civil Procedure section 733, resulting in an award of $202,500 … The total judgment awarded, including costs, is $262,987.”

Ouch.  The damages to this parcel of undeveloped property, out in the middle of nowhere, greatly exceed the total value of the property.  Seems like a windfall to me.

One more point of pleading.  A generic defense interposing the statute of limitations does not set forth a valid defense.  Explained the court, “defendant filed a general denial that includes a broadly worded affirmative defense asserting all of plaintiffs’ claims ‘are barred by all applicable statutes of limitation contained in Code of Civil Procedure sections 312 to 366.3.’”

Explained the court, defendant “failed to articulate any specific statute of limitations argument in his denial or in his pretrial statement … There are two ways to properly plead a statute of limitations: (1) allege facts showing that the action is barred, and indicating that the lateness of the action is being urged as a defense and (2) plead the specific section and subdivision.”

“Here [the defendant] did neither … Raising the defense in the trial brief is [in]sufficient.  The failure to properly plead the statute of limitations waives the defense.”

Comment: Sounds like piling on.

Salazar v. Matejcek (Mar. 10, 2016) 245 Cal.App.4th 63

In a lawsuit based on a contract, one party can seek relief based on the theory of rescission.  Rescission can be considered an equitable judicial remedy.  Under California Civil Code section 1689, rescission supports “extinction” of the obligation.

Rescission can be pled as a basis for affirmative relief, or it can asserted as defense to a claim based on contract.  Which is what happened in Ferguson v. Yaspan (2015) 233 Cal.App.4th 676 – the defendant asserted rescission as a defense to a contract lawsuit.

The dispute in Ferguson v. Yaspan arose between an attorney (defendant) and his former client (plaintiff).  In 1995, the plaintiff sold defendant an interest in a London flat owned by plaintiff.  Later, the Fergusons sought to set aside the written agreement.

Here’s the interesting part of the decision.  The court opined on rescission as a defense, holding that such a defense was not subject to the statute of limitations.  Explained the court

“The invalidity of a contract may be asserted either as a basis for affirmative relief or as a defense.  When a litigant seeks affirmative relief, her claim may be barred if filed outside the statute of limitations period.

“However, where invalidity is raised solely as a defense, there is no limitations period because statutes of limitations are designed to ‘act as a bar to actions or proceedings’ –  not to individual claims or defenses.”

Thus, a defense based on a claim of rescission is not subject to being struck as pled outside the statute of limitations.

California law now prohibits the practice of “dual tracking,” whereby a lender simultaneously pursues a default while also engaging in loan modification negotiations with the borrower.  The question concerns the remedy available when there is a violation of the dual tracking law.

The court in Kazem Majd v. Bank of America, N.A. (Jan. 14, 2016) 243 Cal.App.4th 1293 held that a lender’s violation of the loan modification requirements established by the federal government in the HAMP program, and/or violation of the dual tracking prohibition, could give rise to a claim for wrongful foreclosure against the lender.

The court also made important findings about the HAMP program.  Rejecting “a statement found in an unpublished federal district court decision, which decision in turn repeated a statement found in other unpublished district court decisions,” the court explained that, under “the relevant United States Department of the Treasury guidelines[,] where a borrower satisfies the relevant criteria, ‘the servicer MUST offer the modification.’”

Even more, the court held that the “tender requirement” does not apply when a plaintiff states a claim for wrongful foreclosure based on violation of the dual tracking statute.

Explained the court, “the whole point of Civil Code section 2923.5 is to create a new, even if limited, right to be contacted about the possibility of alternatives to full payment of arrearages … The purpose of the modification rules is to avoid a foreclosure despite the borrower being incapable of complying with the terms of the original loan.  It would be contradictory to require the borrower to tender the amount due on the original loan in such circumstances.”

But can such violation also support a claim to set aside the foreclosure sale?  Only in limited circumstances.  The case holds that the additional remedy of setting aside the foreclosure sale would only lie against the purchaser if the purchaser was not a “bona fide purchaser for value.”

In Majd v. Bank of America, the purchaser of the foreclosure sale was the secured lender.  But when the purchaser is a third-party, who had no reason to know that the lender had engaged in wrongful dual tracking, the remedy of setting aside the foreclosure sale would not be available.

Overall, Majd v. Bank of America offers important protections to homeowners whose rights have been violated by the lender’s unlawful “dual tracking.”