Tenants Have Options to Delay Eviction, Including a Jury Trial

In a typical landlord-tenant relationship, the landlord wants the rent paid or the tenant evicted, and has well respected property rights to lease and use the real property.  The tenant also has rights, and may want to pay as little rent as possible, or none at all, and remain in the property as long as possible to avoid the universally recognized displeasure of moving.  An option available to a tenant who wants to remain in the premises as long as possible, preferably without paying rent, is the tenant can request a jury trial in the unlawful detainer action (UD Action) filed by the landlord. 

Although most UD Actions are defaults by the defendant or end in a trial by the judge, the California Constitution guarantees tenants the right to a jury trial.  The tenant's request for a jury trial may delay the trial because of the lack of court time for a jury trial, the need to summon and pick a jury, agree on jury instructions, and the other necessary preparations for a jury trial.

The typical process if the tenant does not pay the rent or is given an eviction notice and refuses to vacate the premises, is the landlord files a UD complaint, and it is given preferential treatment in the setting of the trial (within 20 days after the demand for trial is filed), which the landlord normally prefers to be a court trial (decided by the judge alone).  This early trial setting is the California Superior Court's recognition of the landlord's valuable right to have the property returned to him, or a vindication of the tenant's defenses and claims, as expeditiously as possible, and special Superior Court departments exist that handle the typical UD Action so they can be quickly resolved.

Some tenants are not only judgment proof (meaning they have no assets to satisfy a money judgment against them), but they can also claim no employment and minimal earnings sufficient to qualify for a fee waiver by the court ( the lowest appearance fee by a defendant is $240 for the majority of residential premises claims of $10,000 or less).  Some tenants can file a request for a fee waiver, and demand a jury trial, without the need to pay an appearance fee of $240, or post jury fees of $150, or pay for the jury during the trial (normally the responsibility of the party demanding the jury).

Knowing the leverage provided by the tenant's demand for a jury trial, some tenants or law firms they hire, may demand a sum of money from the landlord, such as $5,000, as a condition for the tenant moving out without the delay in eviction.  From the perspective of the landlord, not only is the tenant occupying the premises without paying rent, but the UD Action is costing attorney's and court costs.  It is a tempting option for the landlord to pay the $5,000, or other sum, for the tenant's vacating the premises by a set date.  Such settlements should be in writing signed by all parties to the dispute or legal proceeding, and the settlement sum should be held in an escrow account or paid after the tenant has vacated the premises.

In fashioning a defense and to provide more possibilities for success at trial, some tenants may file complaints with Los Angeles City housing department about the habitability of the premises.  If there are uninhabitable conditions (for example, leaky roof, no electricity or water, or pest infestation), such complaints are valuable because such conditions legally excuse the tenant from paying rent.  If the housing department issues the landlord a notice to repair or correct, and the landlord attempts to correct the unlawful condition, the tenant may interfere with the corrective attempts by the landlord who is trying to comply with the notice from the housing department.  If the landlord persists in the efforts to comply with the housing department notice, some tenants will claim harassment by the landlord with their right to quiet enjoyment of the premises, and may file a separate legal action for the damages they claim the harassment by the landlord caused them.

A tenant can also serve requests for information to the landlord, which are called discovery, to increase the landlord's legal fees.  In this type of combative UD Action, the tenant can delay the eviction at no cost, while the landlord is unable to recover possession of the premises and also incurs increasing amounts of attorney's fees and costs.

If the rental agreement provides for the recovery of attorney's fees by the prevailing party, a successful tenant may delay eviction, pay no costs or fees, and recover attorney's fees from the landlord.  An attorney may agree to represent the tenant and only be paid from the attorney's fees collected from the landlord, not by the tenant, who may not have any money to pay the attorney.  For this reason, landlords should consider language in the lease that limits the recovery of attorney's fees in any legal action to a minimal sum such as $500, so there is less incentive for an attorney to represent the indigent tenant on a contingency basis because of the inability to recover significant attorney's fees.

If the lease provides for the recovery of attorney's fees and the landlord loses at the trial and has little change to prevail on appeal, the landlord should consider paying the judgment as expeditiously as possible because the tenant's attorney can request additional attorney's fees for enforcing the judgment with post-trial legal proceedings.

This article is not meant to be encouragement for tenants to not pay rent and delay eviction, nor a pessimistic description of the possible outcome for landlords.  It is intended to generally describe some of the issues involved in a UD Actions for the reader who may be a tenant or a landlord, and both tenants and landlords can benefit from legal counsel in such situations so they understand their legal rights.

This is not intended as legal advice and does not constitute or create an attorney-client relationship and is general information only.

Accepting Payments for Loan Modification Support Causes of Action

LEGAL NEWSLETTER

In the recent Ninth District U.S. Court of Appeals decision in Oskoui v. JP Morgan Chase Bank, the appellate court allowed Plaintiff Mahin Oskoui to proceed with her cause of action for breach of contract based upon evidence that:

-Oskoui properly requested and submitted the necessary information for Chase to evaluate her loan modification request under the federal program Making Home Affordable Program ("HAMP") and its own Chase Modification Program ("CHAMP");

-Chase concluded that Oskoui was ineligible for a loan modification for three separate reasons;

-Chase failed to disclose to Oskoui this information or its determination that she was ineligible for a HAMP or CHAMP loan modification;

-Chase continued to accept mortgage payments that Oskoui was induced to make based upon letters from Chase;

-Chase then informed Oskoui that she was ineligible for only one of the reasons,

-Chase continued to induce Oskoui to make additional payments that eventually totaled over $33,000, while it stated to Oskoui that it was exploring unexplained "other alternatives"; and

-Chase had knowledge of Oskoui's advancing age and precarious finances.

The Court of Appeals decided that these facts established a prima facie case (meaning that all of the necessary elements were established for each cause of action, subject to any defenses) of deceptive practices under California's Unfair Competition Law ("UCL"), as set forth in Business & Professions Code § 17200. 

Earlier, federal Judge George Wu found that Oskoui had presented the Court with a viable claim under California law for a fraudulent and unfair business practice, relying on the rule that a business practice is fraudulent under the UCL if members of the public are likely to be deceived.  As stated by Judge Wu, "If what Plaintiff alleges is true - that Chase's left hand sought payments from Plaintiff pursuant to a plan designed to give her an opportunity to modify her loan while, notwithstanding Plaintiff's payment in accordance with that plan, Chase's right hand continued all along with foreclosure proceedings and both hands should have known from the start that Plaintiff's loan would not be eligible for modification in any event - the Court can conceive of such allegations stating a section 17200 claim."

The facts appear similar to many other borrowers faced with financial disaster by the Great Recession. In 1990, Oskoui, a registered nurse, purchased her single-family home for $250,000.  After her home appraised for $1,250,000 in 2007 (the height of the "housing bubble"), she refinanced with a new loan from Washington Mutual Bank ("WaMu").  As a result of massive loan defaults and the severe national economic recession, WaMu was closed in September 2008, and its assets were transferred to Chase.

In November 2008, Oskoui missed a loan payment, and she applied for a loan modification to WaMu, not realizing it's demise.  Chase responded with a letter offering Oskoui a "Trial Plan Agreement".  Chase did not inform Oskoui of the requirements of a borrower or of a loan under the applicable modification rules.  The letter did advise Oskoui that "[i]f you comply with all terms of this Agreement, we'll consider a permanent workout solution for your loan once the Trial Plan has been completed."  The appellate court found the letter supported a breach of contract claim as it constituted a clear promise of an offer of a permanent modification if the borrower complied with its conditions.

Oskoui fully complied with the Agreement's payment term by timely paying Chase $9,840.15.  Thereafter, Chase informed Oskoui she did not qualify "at this time" for a modification under either HAMP or CHAMP because her income was insufficient for the amount of credit she requested.  Chase did not disclose to Oskoui that she was ineligible for the two additional reasons of (1) the unpaid principal balance on the loan of $833,000 exceeded the amount allowed by HAMP guidelines, and (2) the loan failed to satisfy the CHAMP net present value test ("NPV").  Internally, a Chase employee named "CHANG" determined in November 2009 that Oskoui's application should be rejected because "denied - income insufficient and did not pass the npv calc [i.e., NPV calculation] test."

However, Chase did not inform Oskoui that she was not eligible for the loan modification, and instead, told her that "we may be able to offer other alternatives to help avoid the negative impact" of foreclosure and a deficiency judgment (i.e., a judgment against Oskoui for the difference in the amount of the unpaid principal and the amount received by Chase at the foreclosure sale). Chase did not inform Oskoui what its "other alternatives" were or what Oskoui would need to demonstrate to qualify for them.

Oskoui submitted in January 2010 another application for a loan modification, without realizing that Chase has already determined that she was not eligible.  Chase responded with a letter dated March 1, 2010 ("March 1 Letter") stating that Chase "wants to help you stay in your home", and confirmed receipt and review of her "verification of income documentation."  Included with the March 1 Letter were three payment coupons and three return envelopes, each coupon in the amount of $2,988.49, and specifying they were due on April 1, May 1, and June 1, 2010.  The March 1 Letter also stated on the first page: "After successful completion of the Trial Period Plan, CHASE will send you a Modification Agreement for your signature which will modify the Loan as necessary to reflect this new payment amount." (Emphasis added.)  The March 1 Letter did not disclose Chase's concerns about her income.

The next day, Chase sent Oskoui a letter dated March 2, 2017 ("March 2 Letter"), telling her for the first time that she was not eligible for a federal HAMP modification "because the current unpaid principal balance on your Loan is higher than the program limit . . . ." The March 2 Letter did not disclose the fatal NPV test, but stated that Chase was "happy" to tell Oskoui that she "may be eligible for other modification programs", and that Chase may be able to offer "other alternatives" to stave off "the negative impact" of a possible foreclosure.  Because Chase had left the door open to relief and even urged Oskoui to make the additional payments, Oskoui made, and Chase accepted, an additional seven months payments.

Meanwhile, Chase proceeded with the foreclosure process, setting the trustee's sale on November 18, 2010.  Amazingly, Chase allegedly sent another letter dated November 1, 2010, encouraging Oskoui to continue to seek a loan modification.  By this time, Oskoui had paid Chase $33,738.00, with no results over two years.  By a letter dated January 4, 2011, Chase informed Oskoui that her application was denied, stating that it was unable to offer her a modification under HAMP or CHAMP "because you did not provide us with the documents we requested."

Based upon these allegations of fact, the Appellate Court agreed with Judge Wu's analysis, and found they "plainly demonstrate a viable UCL claim."  It found that the published HAMP Guidelines disqualified Oskoui, and Chase had the relevant information and could have made that "simple determination within a matter of minutes".  But instead of determining eligibility before asking for money, "a logical protocol called for by HAMP as of January 28, 2010", Chase requested more payments.  Even after Chase contradicted the March 1 Letter with the March 2 Letter, it did not inform her of her precarious situation, and accepted payments for seven additional months.

Describing Chase's conduct as "Kafkaesque" due to intent or corporate ineptitude, the appellate court held that "Chase knew that she was a 68 year old nurse in serious economic and personal distress, yet it strung her along for two years, kept moving the finish line, accepted her money, and then brushed her aside.  During this process, Oskoui made numerous frustrating attempts in person and by other means to seek guidance from Chase, only to be turned away." 

Fortunately for Oskoui, a federal judge and a federal appellate court have given Oskoui an opportunity to present her case at trial.

Elements of a Slander of Title Claim

In California, a cause of action for slander to title can be successful if there is sufficient proof of the essential elements of publication, falsity, absence of privilege, and disparagement of another's land that is relied upon by a third party, and which results in a pecuniary loss. 

Publication and falsity may be established if the defendant signs a false grant deed or quitclaim deed that places a cloud on plaintiff's title to the real property, and thereby disparages plaintiff's title.  Even an invalid document is sufficient to create a "cloud on title" and may give rise to an actionable tort.  A publication of no real legal consequence or one that creates no interest in the property may be a basis for a slander of title action if a third party might reasonably understand it as an announcement that a defendant was claiming an interest in the property.

For slander of title purposes, malice may be actual or implied, and will be implied when the circumstances are deemed in law to show a lack of privilege or good faith.  A defendant can argue that good faith reliance on the advice of counsel is a defense, if such legal advice was provided after full disclosure of all of the relevant facts. However, if the defendant had no interest in the real property at the time he signs the deed, it may be deemed the defendant acted maliciously and without privilege in issuing the deed.

A slander of title plaintiff need only show title or interest in the property, and even a leasehold interest is sufficient to assert slander of title.  An adverse possession title alone is not enough to support a slander of title tort, and because it is not marketable until the title is established by judicial proceedings against the record owner.  A plaintiff does not have to have a 100 percent marketable title in order to maintain a slander of title action.

The weight of California authority makes it clear that the owner can recover damages without proving that he or she lost a prospective lender, purchaser, or lessee as a result of the disparagement.  The question is whether it is reasonably foreseeable a purchaser or lessee would alter his or her conduct based on the disparagement. 

Nor is the absence of evidence of actual depreciation or pecuniary  loss resulting from the impairment of vendibility fatal to the cause of action.  A slander of title plaintiff's damages may include (1) the expense of legal proceedings necessary to remove the doubt cast by the disparagement, (2) financial loss resulting from the impairment of vendibility of the property, and (3) general damages for the time and inconvenience suffered by plaintiff in removing the doubt cast upon his property.  A plaintiff does not have to show specific harm to vendibility, such as proof of a lost sale or diminished value, and in cases where title was disparaged in a recorded instrument, attorney fees and costs necessary to clear title or remove the doubt cast on it by defendant's falsehood are, by themselves, sufficient pecuniary damages for purposes of a slander of title cause of action.

The tort of another doctrine may be applied to slander of title cases to award attorney fees incurred to clear title to real property, and one case allowed attorney fees by analogizing slander of title to a malicious prosecution action.

However, the recoverable fees are for the legal efforts to clear the title and remove the disparagement (e.g., a quiet title action), and not for those incurred to prove the slander of title cause of action. Fees incurred merely in pursuit of damages against the defendant, or in negotiations with third parties over a sale or lease of the property, are not recoverable.

Lessons:     

1.      Avoid executing or recording a false deed or other document that creates a cloud on the title to real property claimed by another.

2.      Consultation with an attorney, and reliance on the attorney's advice after full disclosure, may constitute a viable defense, especially if the complexity of the legal issues is significant.

Listing Agreement Is Key To Collecting Commission

The recent case of Jacobs v. Locatelli outlines the importance of the listing agreement as a binding contract for a broker to recover a commission for the sale of real property, even if it was not executed by all of the owners.

The vacant land was owned by 6 owners, and Jacobs obtained an exclusive Vacant Land Listing Agreement for a list price of $2,200,000 that was only signed by Locatelli, with the other owners' signature lines left blank.  Jacobs alleged in her complaint that a written "agency agreement" exists between Locatelli and the other owners, Locatelli told her he was authorized to act on behalf of all of the owners, the other owners were aware of her retention as a broker, and two of the owners acknowledged her employment, were impressed by her performance, and inquired about working with her on other projects. These were important allegations, but not as valuable as obtaining all of the owners signature on the listing agreement to begin with.

Jacobs alleged that she spend significant time to market the property, and contacted a potential buyer named The Trust For Public Land (TPL), whose representative expressed interest in purchasing the property. However, when Jacobs informed Locatelli, of the interest from TPL, he was angry, asked for information regarding TPL, claimed he had been speaking with TPL for three years, and he wanted to change the exemption in the agreement from the Open Space Land Trust to TPL.

Subsequently, Locatelli informed Jacobs she was not to contact TPL, and that he would deal directly with TPL regarding the sale.  The owners of the land and TPL entered into an agreement for TPL to buy the property, but the sale was never consummated, apparently because issues arose between the owners and TPL.

Nevertheless, Jacobs filed a complaint against the owners for a $200,000 commission, alleging causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, anticipatory breach (implied repudiation), and specific performance.

The owners filed a demurrer, arguing that because all of the owners had not signed the listing agreement, the complaint was barred by the statute of frauds. Jacobs argued that Locatelli signed the agreement on behalf of the "joint venture" that consisted of all of the owners of the property.  The trial court sustained the demurrer, and after Jacobs filed an amended complaint, the trial court sustained the demurrer without leave to amend as to all owners who had not signed the listing agreement. 

In the listing agreement, "Owner" is defined as Locatelli, as trustee of his trust, "et al.", which the court of appeal ruled means "and others". Under the Statute of Frauds set forth in Civil Code, section 1624(a)(4), an agreement authorizing an agent or broker to purchase or sell real estate is invalid unless it is in writing and subscribed by the party to be charged or by the party's agent.  Any agency authority to enter into a contract required by law to be in writing must also be given by an instrument in writing under the equal dignities rule in Civil Code, section 2309.

In finding that the issue is whether Jacobs' allegation that Locatelli signed on behalf of the other owners who formed a joint venture is sufficient to satisfy the statute of frauds, the court of appeal applied the pragmatic approach of the California Supreme Court in its decision in Sterling v. Taylor, which states the Statute of Frauds was not enacted to afford persons a means of evading just obligations, and if after consideration of the surrounding circumstances, the pertinent facts and all the evidence in a particular case the trial court concludes the enforcement of the agreement will not subject the defendant to fraudulent claims, the purpose of the Statute "will be best served by holding the note or memorandum sufficient even though it is ambiguous or incomplete."

As a result of Sterling, when ambiguous terms in a memorandum are disputed, extrinsic evidence is admissible to resolve the uncertainty.  The agreement must still provide the essential terms that cannot be supplied by extrinsic evidence, but extrinsic evidence can be used to explain essential terms that were understood by the parties but would otherwise be unintelligible to others.  A cardinal rule of construction is when a contract is ambiguous or uncertain, the practical construction placed upon it by the parties before any controversy arises as to its meaning affords one of the most reliable means of determining the intent of the parties, and this rule governs the interpretation of a memorandum under the Statute of Frauds.

Therefore, the court of appeal reversed the trial court's decision, and allowed the case to proceed to enable Jacobs to introduce extrinsic evidence of the manner in which Locatelli signed the listing. The listing specified that there were multiple owners, and that could be interpreted as referring to all of the members of the joint venture that Jacobs claimed to exist.  Of course, it is doubtful that the defendants will provide any written confirmation of Locatelli's agency authority to sign for the other owners, and the uncertainty of a trial decision may encourage the parties to reach a settlement.

LESSONS: 

1.         The listing agreement is the contract that provides the broker a legal right to recover a commission, and extensive care should be given to its preparation and execution.

2.         The owners of real property should be determined by the broker in   preparing the listing agreement, and all owners' signatures should be obtained on the listing agreement.

3.         If the listing agreement is properly prepared and signed, the commission may be earned when a sale contract is entered into between the seller and buyer, even if the sale was never consummated with a closing of escrow.

BFP's Purchase At Sheriff's Sale Prevents Restitution

In the recent case of Lee v. Rich, the California Court of Appeal recognized Code of Civil Procedure section 701.680 that provides that a Sheriff's execution sale (aka Trustee's Sale during a foreclosure proceeding), is "absolute and shall not be set aside for any reason", and ruled that because the purchaser of the real property at the Sheriff's sale was not the judgment creditor (i.e, lender, typically a bank) and was a bona fide purchaser ("BFP"), the debtor's remedies were limited to recovery of proceeds of the sale or equitable redemption.

Lee purchased his single family home in a common interest development (Homeowners Association-HOA), and ceased paying the HOA assessments.  The HOA dutifully sent Lee notices of delinquency, intent to record a lien, and recorded a lien on the property.  The HOA then filed a lawsuit against Lee that included foreclosure of the assessment lien.  Lee did not respond to the lawsuit, and after his default was entered, a judgment of foreclosure of the assessment lien was entered. 

Based on the default judgment, the HOA obtained a writ of sale, and a sheriff's deputy posted a notice of the sheriff's sale under foreclosure on Lee's front door that advised the property would be sold at auction to the highest bidder. 

Rich learned of the sheriff's sale, and the bidding opened for the amount of the HOA judgment, and overbids increased in $5,000 increments, until Rich made a bid of $210,000, and the property was sold to him for that amount.  Rich paid the required 10 percent deposit by cashier's check, and paid the balance at the end of the 3 month redemption period.  The property was subject to tax liens and other encumbrances that Rich paid.  Rich received a sheriff's deed to the property, and then filed an unlawful detainer action to evict Lee and obtained a default judgment.

Lee filed a motion to set aside and vacate the HOA's default judgment, arguing that he never received actual notice of the lawsuit because the summons was never mailed to his post office box address, but he did not serve Rich with the motion.  The Court granted Lee's motion to set aside and vacate the HOA's judgment and allowed him to file an answer.  Lee then filed a cross-complaint against the HOA, Rich, and the Orange County Sheriff for restitution of the amount of the judgment of $19,578.32.  Lee next filed a motion for restitution and to cancel the Sheriff's deed, which the court granted.

The Court of Appeal found that Rich was an indispensable party to the motion to set aside and vacate the default judgment because the potential effect of the motion would be to void Rich's title, and he was a party to the sale transaction.  Rich was a BFP at the Sheriff's sale, and the motion to vacate the default judgment impaired and impeded his ability to protect his interest in the property he purchased.

By statute, only the judgment debtor can set aside a Sheriff's sale for irregularity, and only where the purchaser was the judgment creditor.  Therefore, the sale to Rich, who was a BFP, could not be set aside, even if the underlying judgment was vacated.

The historical right of the debtor to exercise equitable redemption is only available where the judgment creditor purchases the property, and for a "grossly inadequate price", and where the purchaser is guilty of unfairness or has obtained an undue advantage.

This case is a good illustration of the steps involved in a Sheriff's sale following a judgment for an HOA against a debtor who fails to pay monthly assessments, and the limited ability of the debtor to recover the property after the sale.

The Lessons:

            1.  A debtor needs to enforce his/her rights before the Sheriff's or Trustee's Sale;

            2. A BFP is protected after purchasing the property at the sale; and

            3.  If the sale is to a BFP, The debtor is limited to recovery of proceeds of the sale or equitable redemption even if the underlying judgment is vacated.