Easements May Be Limited to Initial Use

The existence of an easement on a parcel of real property is a title issue that should be carefully evaluated in the purchase of the property, and some general rules should be considered before the purchase. 

Initially, the preliminary title report should be carefully reviewed to determine the nature and scope of easements.

The dominent tenement is the parcel of land that benefits from the easement, and the servient tenement is the parcel that is burdened by the easement and is typically where the easement is located.

The method of creation determines the extent of an easement's use. (Civil Code § 806.)  

Civil Code § 806 provides:  The extent of a servitude is determined by the terms of the grant, or the nature of the enjoyment by which it is acquired.

The extent to which an expressly created easement can be used by its owner is determined by the terms of the instrument of its creation. The recipient of an easement has the burden of proving what rights of use are attendant to the easement. 

Generally, a grantee of an easement receives only those rights of use expressly conveyed, and any additional rights that are necessary and reasonable for enjoyment of the easement incidental to the grant, and consistent with its purpose. 

When the instrument of conveyance grants an easement in general terms, without specifying or limiting the extent of its use, the permissible use is determined in the first instance by the intention of the parties and the purpose of the grant. 

Once the easement has been used for a reasonable time, the extent of its use is established by the past use. Thereafter, an owner cannot make changes in its use that would substantially modify or increase the burden of the servient tenement. 

Once an easement has been created both parties have the right to insist that so long as the easement is enjoyed it shall remain substantially the same as it was at the time the right accrued, regardless of the question as to the relative benefit and damage that would ensue to the parties by reason of a change in the mode and manner of its enjoyment. 

The owner of the easement can make minor changes in the use of the easement so long as there is no material or substantial increase in the burden on the servient tenement. 

Once the extent of an easement's use has been established, the easement owner cannot subsequently enlarge its character so as to materially increase the burden on the servient tenement. An easement acquired for a specific purpose generally cannot be used for a different purpose. 

An unreasonable increase of the burden may ripen into a prescriptive right, and until then it is a nuisance that can be enjoined by the owner of the servient tenement. 

When a party already has an easement, the use of the easement may be enlarged by prescription if the excessive use is of a nature and duration sufficient to put the owner of the servient tenement on notice of the greater rights claimed by the user. 

The owner of an easement cannot change or increase the use of the easement in any manner that imposes a new or greater burden on the servient tenement without the consent of the servient owner.  An unreasonable increase in the burden on the servient tenement resulting from an increase or change in the sue of an easement is called a "surcharge".

The extent to which the use of an easement can be altered, and the question whether the use is excessive and amounts to a surcharge on the servient tenement, are issues of fact in each case. 

A person other than the owner of the servient tenement, and possibly a person holding a lien on the servient tenement, cannot challenge the existence or use of an easement over the land of another. 

An easement may be unenforceable when its use is illegal, such as a commercial use in a residential zone in violation of the zoning laws. The owner of the easement may not enforce the illegal use, and it may be enjoined as a nuisance.

When considering the rights of the parties relating to an easement, the rights and duties of each party are relative to the rights and duties of the other party.  The rights of the owner of the easement are restrictive, and the rights of the owner of the servient tenement are residual, but both must act reasonably toward the other.  

As a general rule, the owner of the dominent tenement must use the easement in a manner that imposes the least burden on the servient tenement. Every incident of ownership that is not inconsistent with the use and enjoyment of the easement is reserved to the owner of the servient estate. 

The issue of whether a change in the use of an easement is excessive and a surcharge on the servient tenement is a question of fact in each case that requires a determination as to whether the alteration will cause an unreasonable increase in the burden of the servient tenement. 

LESSONS:

1.         An easement can have significant impact on both the dominent tenement (may increase its value or access) and the servient tenement (may decrease its value or restrict the use of the property).

2.         Both the owners of the dominent tenement and servient tenement should evaluate the use and extent of the easement, and carefully monitor its use over time to determine if the use is being increased so as to create a surcharge on the servient tenement.

3.         If the servient tenement determines that there has been a surcharge in the use of the easement, the owner of the servient tenement may file a legal action for nuisance and seek to enjoin the increased use in the easement.

4.         The use of the easement may be enlarged by prescription if the excessive use is of a nature and duration sufficient to put the owner of the servient tenement on notice of the greater rights claimed by the user.

Be Careful to Sign and Save Contracts

In the recent California decision in Juen v. Alain Pinel Realtors, broker/defendant appealed from an order denying its motion to compel arbitration, arguing that the trial court erred in finding no enforceable arbitration agreement. 

The Court of Appeal affirmed the order because broker failed to show through custom and habit evidence that the broker had initialed the arbitration clause on the original residential listing agreement, or that the broker had assented to arbitration through other conduct. 

Seller/Plaintiff engaged broker Pinel to sell his Danville home in 2008. In 2015 he filed a putative class action lawsuit on behalf of California residents who between August 2004 and July 2011 had used Pinel in a transaction to buy or sell a home in California and had utilized TransactionPoint, a real estate software program developed by Fidelity National Financial, Inc. 

Plaintiff sued Pinel, certain managing owners and brokers,and Fidelity subsidiaries alleging breaches of fiduciary duties, aiding and abetting, violations of Civil Code section 1710 and Business and Professions Code section 17200, constructive fraud, and unjust enrichment. 

Plaintiff alleged Pinel had entered into unlawful sublicensing agreements with Fidelity subsidiaries Ticor Title Company of California, Fidelity National Home Warranty Company, and Chicago Title Company (the Fidelity defendants), allowing those entities to contract their settlement services to Pinel clients using TransactionPoint; during the class period Pinel had used the software to contract for real estate settlement and related services; and the Fidelity defendants paid unlawful sublicensing fees to Pinel in return for the TransactionPoint - generated business. 

Pinel and all individual defendants except the Pinel defendants moved to compel arbitration in the trial court, relying on the arbitration clause (paragraph 19B) in plaintiff’s residential listing agreement. Following that clause, the agreement contained a notice provision required by Code of Civil Procedure, section 1298, subdivision (c) with spaces for the client’s and broker’s initials. 

In support of their motion, the Pinel defendants produced a copy of the listing agreement signed by plaintiff and Pinel’s listing agent, Sue Smith. The section 1298(c) notice on the copy showed plaintiff’s initials, but the space for Pinel’s initials was blank. 

To establish that the original listing agreement had actually been initialed by Pinel, the Pinel defendants submitted the declaration of Lisa Crosby-Torres, the managing broker of Pinel’s Danville office at the time the listing agreement was executed. Crosby-Torres explained that:

- the files maintained by her office relating to the sale of plaintiff’s home (including the original listing agreement) were destroyed in accordance with Pinel’s normal document retention policy; 

- that she had obtained a copy of plaintiff’s listing agreement from Smith to support the Pinel defendants’ arbitration demand; 

- that at the time Pinel and plaintiff entered into the listing agreement it was Pinel’s policy, custom, and practice to allow a client to elect whether to assent to the arbitration provision by initialing paragraph 19B; 

- that “the policy in my office required an agent, like Smith, who had obtained a Residential Listing Agreement to promptly present the executed [agreement] to [Crosby-Torres] for [her] review”; and that in the event the client had initialed the arbitration provision, Crosby-Torres (rather than the listing agent) “would as a matter of policy and custom and practice adopt the election of the client and initial Paragraph 19B on behalf of [Pinel].” 

Crosby-Torres further explained: “In the case of Plaintiff’s Residential Listing Agreement, I would have, as a matter of policy and custom and practice, adopted his election of arbitration and initialed Paragraph 19B on behalf of [Pinel], and placed the original Residential Listing Agreement bearing Plaintiff’s initials and my initials on Paragraph 19B in the file maintained by [Pinel] on the subject transaction.” 

The declaration continued: “At the time of execution of the Residential Listing Agreement, and continuing to the present, it has been the policy to retain files relating to closed listing and sale transactions for a period of five (5) years. Escrow closed on Plaintiff’s sale of the Subject Property on July 11, 2008. The file maintained by [Pinel] relating to the subject transaction, including the original Residential Listing Agreement bearing Plaintiff’s initials and my initials on Paragraph 19B, was therefore destroyed in 2013 pursuant to the normal document retention policy of [Pinel].” 

The Pinel defendants argued in the trial court that destruction of the original listing agreement bearing Crosby-Torres’s initials did not preclude their arbitration demand because Crosby-Torres’s declaration established through practice and custom that the original listing agreement had been initialed by Crosby-Torres on behalf of Pinel. 

Alternatively, they argued (1) under the Federal Arbitration Act, parties to an executed listing agreement are not required to initial the arbitration provision, and (2) even if Pinel had not assented to the arbitration provision, the provision is enforceable against plaintiff under Grubb & Ellis Co. v  Bello, which concluded that a mutual agreement to arbitrate was not required in order to enforce an arbitration clause in a real estate listing agreement against an assenting party. 

After a hearing, the trial court issued a written order denying the Pinel defendants’ motion. The court concluded that the Crosby-Torres declaration failed to establish that Pinel had initialed the arbitration provision. 

It rejected the reasoning in Bello, and instead adopted the reasoning in Marcus & Millichap Real Estate Investment Brokerage Co. v. Hock Investment Co. to find no enforceable arbitration agreement. The court concluded that the language of the arbitration provision contemplated that the seller and broker mutually agree to the provision and that each indicate its assent by initialing the provision. 

Having failed to show that the broker had initialed the provision, the Pinel defendants failed to establish the existence of an enforceable arbitration agreement. 

The validity of an arbitration agreement in California is determined by a petition or motion to compel arbitration. Motions for arbitration are adjudicated summarily. Factual issues may be submitted on declarations and affidavits, or by oral testimony in the court’s discretion.  

A proceeding to compel arbitration is in essence a suit in equity to compel specific performance of a contract. The party seeking arbitration bears the burden of proving the existence of an arbitration agreement by a preponderance of the evidence, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any defense.

An arbitration agreement must be in writing to be valid and enforceable.  The existence of an enforceable arbitration agreement is established under state law principles involving formation, revocation and enforcement of contracts generally.

Code or Civil Procedure, section 1298 is a notice provision applicable to real estate contract arbitration. Section 1298(a) applies to contracts to convey real property (such as residential purchase agreements between buyers and sellers), and subdivision (b) applies to contracts between principals and agents in real property sales transactions, including residential listing agreements. Section 1298(c) provides for initialing immediately before the line or space provided for the parties to indicate their assent or nonassent to the arbitration provision.

Evidence Code section 1105 provides “Any otherwise admissible evidence of habit or custom is admissible to prove conduct on a specified occasion in conformity with the habit or custom.”Defendants argue that the arbitration clause was executed by Crosby-Torres and therefore enforceable because Pinel had established through custom and habit evidence that Crosby-Torres had initialed the notice provision. 

While Crosby-Torres’s declaration may have established through custom and habit that she initialed the arbitration notice provision in all residential listing agreements presented to her in which the provision had been initialed by the client, the declaration does not establish Crosby-Torres ever having received or reviewed plaintiff’s listing agreement in particular. 

The declaration states that Pinel’s Danville office had a policy requiring its agents to present executed listing agreements to Crosby-Torres for review, but the existence of a policy is not evidence of adherence to the policy, and the Pinel defendants offered no evidence (directly or circumstantially through custom or habit) showing that Smith had actually presented plaintiff’s listing agreement to Crosby-Torres. 

“Habit” means a person’s regular or consistent response to a repeated situation. “Custom” means the routine practice or behavior on the part of a group or organization that is equivalent to the habit of an individual.

Here, the evidence presented in the declaration is not of such character and weight as to compel a finding that Crosby-Torres initialed the listing agreement as a matter of law.  What is missing is either a statement from Crosby-Torres establishing that it was her habit to account for and review every listing contract executed by Smith, or a declaration from Smith stating that she either presented Crosby-Torres with plaintiff’s listing agreement, or that as a matter of habit she presented all listing agreements to Crosby-Torres during the relevant time period. 

Without that evidence, the Pinel defendants failed to establish that plaintiff’s listing agreement was among those habitually reviewed and initialed by Crosby-Torres. Accordingly, the trial court did not err by concluding that the Pinel defendants failed to prove that in this particular instance Crosby-Torres initialed the arbitration provision.

LESSONS:

1.         Be careful to read all contracts, and initial the provisions you want enforced in the event of a dispute.

2.         Scan the key documents or otherwise maintain digital copies, and make paper copies of all important contracts, especially those that control the rights and obligations of the parties, such as arbitration provisions.

3.         Agents should keep their own files of key documents for every transaction and not destroy those files so they are available if the broker's file is lost or destroyed.

4.         Declarations in support of motions have to be carefully crafted to satisfy the proof issues in dispute, or they may be found lacking by a reviewing court.

Renting Bedrooms May Cause a Dwelling to Fall Within Los Angeles Rent Control Ordinance

In the recent case of Chun v. Del Cid, the Court of Appeal reviewed the nature of a residential building that was subdivided so Tenants could rent separate bedrooms.  Salaverria rented one bedroom, and the Del Cids together rented one or more separate bedrooms. Landlord brought an unlawful detainer action against the Tenants. 

The sole issue was whether the Property fell within the single–family dwelling exemption to the Rent Stabilization Ordinance of the City of Los Angeles (Ordinance). (§ 151.00 et seq.)  If the Property fell within the exemption, the Ordinance did not control the landlord-tenant relationship.   

The exemption applies to a “detached dwelling containing only one dwelling unit,” a “dwelling unit” being defined as “two or more rooms, one of which is a kitchen, designed for occupancy by one family for living and sleeping purposes.” 

A “family” means “one or more persons living together in a dwelling unit, with common access to, and common use of all living, kitchen, and eating areas within the dwelling unit.” 

The Property was originally constructed in 1908 as a single–family dwelling. However, in 1946, the Property was expanded to accommodate 7 households in 10 rooms. 

Currently the Property has 9 bedrooms, at least two bathrooms, and one kitchen. Four of the bedrooms are being separately rented to four separate households. The tenants share access to the bathrooms and kitchen, but they do not have access to each other’s rooms. Rather, each tenant has exclusive use of his or her own bedroom, which is equipped with a lock to exclude others. 

On these facts, the trial court ruled that the Property does not meet the definition criteria of the single–family dwelling exemption. On the Landlord’s appeal, the Appellate Division of the Superior Court reversed. 

The Court of Appeal held that regardless of the original design and use of the Property, its current configuration (nine bedrooms, two bathrooms, and one kitchen) and current use for occupancy (four individual bedrooms rented to separate households who share the kitchen and bathrooms, but who alone have exclusive access to and use of their rooms) does not qualify for the single–family dwelling exemption from the Ordinance, because it is not a “detached dwelling containing only one dwelling unit” within the meaning of the Ordinance.  

Therefore, the dwelling was subject to the Ordinance which was enacted to protect individuals in landlord– tenant relationships: it protects tenants from excessive rent increases and provides a defense to eviction, while at the same time providing landlords with a fair and reasonable return on their investments.

The Ordinance applies to any rental unit in a building for which a certificate of occupancy was issued before October 1978, unless it falls within an enumerated exemption. Landlords are prohibited from evicting tenants except for specific reasons stated in the Ordinance.  To assure compliance, violations of the Ordinance may be raised as an affirmative defense in an unlawful detainer action. 

The Ordinance provides that, since July 1979, no landlord may demand or accept rent for a rental unit without first procuring and serving on the tenant or displaying in a conspicuous place a valid written registration statement from the Housing Department or its designee.

Since April 30, 1983, the Ordinance has also provided that landlords may not demand or accept rent for a rental unit without first serving a copy of a valid registration or annual renewal statement on the tenant of that rental unit.  

Landlord argued, and the appellate division appeared to agree, that in determining whether a structure qualifies for the single–family dwelling exemption, the original design of the structure controls–once a single–family dwelling, always a single–family dwelling–regardless of changes to configuration and use. The Court of Appeal disagreed. 

Based on the interlocking definitions of “dwelling unit” and “family,” and because Tenants (regardless of familial relationship) did not have common access to and use of all living areas that form the purported dwelling unit, they did not comprise one family within the meaning of the Ordinance. 

LESSONS:

1.         Careful review of the Ordinance is essential to determine if a dwelling falls within the definitions in the Ordinance.

2.         Subdividing a single family residence into separately rented bedrooms may cause the dwelling to fall within the Ordinance.

3.         Given the significant restrictions in the Ordinance on the Landlord - Tenant relationship, Landlords should consider renting dwellings that do not fall within the Ordinance.

Effect of Signing Agreement as to Form and Content

It is common for attorneys to sign agreements, typically settlement agreements, confirming their agreement as to form and content of the settlement agreement, but the meaning and effect of such execution is not well understood. In its recent decision in Monster Energy Company v. Schechter, the California Supreme Court explained the meaning and effect of attorneys signing as to form and content.

In the underlying case, the parties to a tort action agreed to settle their lawsuit. Their agreement was reduced to writing and included several provisions purporting to impose confidentiality obligations on the parties and their counsel. All parties signed the agreement and their lawyers signed under a notation that they approved the written agreement as to form and content. 

Counsel allegedly violated the agreement by making public statements about the settlement and were sued for breach of contract. Counsel argued they were not personally bound by the confidentiality provisions and moved to dismiss the suit. The trial court denied counsels’ motion. The Court of Appeal reversed that ruling, concluding the notation meant only that counsel recommended their clients sign the document. 

The Supreme Court concluded the notation does not preclude a factual finding that counsel both recommended their clients sign the document and intended to be bound by its provisions. 

In 2012, Wendy Crossland and Richard Fournier sued Monster Energy Company (“Monster Energy”) for products liability and wrongful death following the death of their daughter (hereafter “the Crossland suit.”).  In 2015, the parties entered into a confidential settlement agreement that stated that it was made “on the behalf of the settling Parties, individually, as well as on the behalf of their, without limitation, respective beneficiaries, trustees, principals, attorneys, officers, directors, shareholders, employers, employees, parent company(ies), affiliated company(ies), subcontractors, members, partners, subsidiaries, insurers, predecessors, successors-in-interest, and assigns.”(Emphasis added.) 

The agreement included a confidentiality clause: “The Parties understand and acknowledge that all of the terms, conditions and details of this Settlement Agreement including its existence are to remain confidential. Plaintiffs and their counsel agree that they will keep completely confidential all of the terms and contents of the Agreement.

A section entitled “Binding Agreement” stated: “The Parties acknowledge that this Settlement Agreement, inclusive of the releases contained herein, was the product of good faith negotiations, is final, and wholly binding upon them, as well as inure to the benefit of the Released Parties, inclusive of, but not limited to, their respective successors, devisees, executors, administrators, affiliates, representatives, insurers, spouse, dependents, successors, heirs, issue, assigns, officers, directors, partners, agents, subcontractors, attorneys, employers, and employees.” 

The agreement stated that “[i]n regard to any communication concerning the settlement of this Action, the Parties and their attorneys and each of them hereby agree that neither shall make any statement about the Action, each other party or Defendants’ products in relation to this Action, in the media, including but not limited to print, television, radio or Internet,” and any comment “shall be limited to the following, or words to their effect: ‘This matter has been resolved.’ ” (Emphasis added.) The agreement also contained other provisions referring to attorneys for the parties in the Crossland suit.

The provisions included: (1) a release and discharge of the parties and their attorneys from claims arising from the suit, except that “[n]othing herein, however, shall be deemed a limitation of any kind, release, and or discharge on, or prohibition of Plaintiffs’ attorneys’ prosecution of any current or future claims against the Released Parties not arising out of parties. The parties’ attorneys signed under the preprinted notation “APPROVED AS TO FORM AND CONTENT.” 

Shortly after the settlement, an article appeared on the website “LawyersandSettlements.com” entitled “ ‘Substantial Dollars’ for Family in Monster Energy Drink Wrongful Death Suit.” The article attributed several quotes to Crosslands' attorney. 

Monster Energy sued Crosslands' attorneys, alleging four causes of action: breach of contract; breach of the implied covenant of good faith; unjust enrichment; and promissory estoppel. 

Defendants filed a special motion to strike the complaint arguing the suit implicated the constitutional free speech rights of Crosslands' attorneys. The court found the settlement clearly contemplated counsel as being subject to the agreement and noted that Crosslands' attorney signed the agreement. The court concluded that the suggestion that Crosslands' attorney is not a party to the contract merely because he approved it as to form and content only is beyond reason. 

A settlement agreement is a contract, and the legal principles which apply to contracts generally apply to settlement contracts. An essential element of any contract is consent. The consent must be ‘mutual. Consent is not mutual, unless the parties all agree upon the same thing in the same sense. 

The existence of mutual consent is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe. Accordingly, the primary focus in determining the existence of mutual consent is upon the acts of the parties involved.

The Supreme Court found that there is no question that the language of the settlement agreement generally, and the confidentiality provisions in particular, purported to encompass not only the Crossland parties but also their respective counsel. Further, counsel could consent to be bound by the agreement’s provisions, and, ordinarily, in the absence of fraud, mistake, or another vitiating factor, a signature on a written contract is an objective manifestation of assent to the terms set forth there. 

Defendants argue that the signature of Crosslands' attorney on the settlement agreement did not manifest his consent to be bound by its provisions because he signed under the notation “APPROVED AS TO FORM AND CONTENT.” They argued his signature conveyed only that defendants were approving the agreement for their clients’ signatures. 

In light of the procedural posture, the issue the Supreme Court addressed is a narrow one, and it ruled that the notation “approved as to form and content” means that counsel has read the document, it embodies the parties’ agreement, and counsel perceives no impediment to his client signing it. 

A similar understanding of this phrase is reflected in case law regarding orders signed by the court and approved as to form and content by the parties’ attorneys. Thus, there appears a general consensus that “approved as to form and content” has a fixed meaning understood by the legal community. 

The legal question is whether counsel’s signature approving an agreement as to form and content for his clients’ signature precludes, as a matter of law, a finding that he also intended to be bound by the agreement.  An attorney’s signature on an agreement containing substantive provisions imposing duties on counsel may reflect an intent to be bound even though counsel also approves the document for his client’s signature. 

Here, a factfinder considering all the circumstances could reasonably conclude that Plaintiffs' attorney agreed to be bound.  The confidentiality provisions are not only extensive but repeatedly refer both to the parties and their counsel.

The Supreme Court's conclusion also recognizes the role that confidentiality plays in facilitating settlement agreements. The privacy of a settlement is generally understood and accepted in our legal system, which favors settlement and therefore supports attendant needs for confidentiality. Routine public disclosure of private settlement terms would “chill the parties’ ability in many cases to settle the action before trial. Such a result runs contrary to the strong public policy of this state favoring settlement of actions.  

The Supreme Court concluded that an attorney’s signature on a document with a notation that it is approved as to form and content does not, as a matter of law, preclude a factual finding that the attorney intended to be bound by the document’s terms. The intent question requires an examination of the agreement as a whole, including substantive provisions referring to counsel. Ultimately, that question would be resolved by the trier of fact.

The Supreme Court did not suggest that counsel’s signature on a settlement agreement approving it as to form and content will alwayscreate a triable issue of fact with respect to counsel’s intent to be bound by that agreement. A court may find as a matter of law that counsel could not have so intended under the circumstances where, for example, no substantive provisions imposed obligations on counsel.

LESSONS:

1.         Your signature is a very important factor in determining what you agreed to, so be very careful to read and understand documents before signing them.

2.         Confidentiality provisions in a settlement agreement will be enforced and should be complied with by the settling parties and their counsel, especially if counsel executes the agreement as to Form and Content.

Severing Joint Tenancy During Dissolution of Marriage Action

In the recent decision in Raney v. Cerkueira, the California Court of Appeal recognized that Civil Code § 683.2(c) provides that a written instrument severing a joint tenancy is not effective to eliminate the other tenant’s right of survivorship unless it is recorded before the death of the severing tenant (with one exception not relevant in that case). 

Family Code § 2040(b)(3) provides that the standard automatic temporary restraining order (ATRO) binding parties in a pending dissolution proceeding does not restrain one party’s elimination of a right of survivorship to property, provided that notice of the change is filed and served on the other party before the change takes effect. 

In Raney, the Appellate Court concluded that a party who is bound by the ATRO must satisfy both the generally-applicable Civil Code requirements and § 2040(b)(3)’s notice requirement before the severance of a joint tenancy with the other party is effective to eliminate the right of survivorship. 

However, these requirements may be satisfied in any order. Therefore, if a party records a joint tenancy severance in compliance with Civil Code § 683.2(c), before providing the notice required by § 2040(b)(3), the elimination of the right of survivorship takes effect when notice of the severance is filed and served on the other party. 

During their marriage, Veronica Cerkueira and appellant Lawrence Cerkueira held certain real property (the Property) as joint tenants. Veronica moved out of the Property in 2003 and Lawrence remained in possession. 

In December 2014, Veronica filed a petition for dissolution of their marriage (the Dissolution Action) and Lawrence was served with the petition and summons. The summons included the standard ATRO. 

The ATRO prohibited the parties from transferring any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, with certain narrow exceptions. The ATRO further provided the parties were prohibited from creating a nonprobate transfer or modifying a nonprobate transfer in a manner that affected the disposition of property subject to the transfer, without the written consent of the other party or an order of the court. 

Before revocation of a nonprobate transfer can take effect or a right of survivorship to property can be eliminated, notice of the change must be filed and served on the other party. The summons provided that the ATRO remained in effect until judgment, dismissal, or further order of the court. 

In January 2015, Veronica created the Veronica A. Cerkueira Family Trust (the Trust), and named her son, David Raney, as the trustee. Veronica was the sole beneficiary of the Trust until her death, when Raney would become the sole beneficiary. 

Also in January 2015, Veronica executed a document entitled “Transfer Grant Deed” (the Deed). The Deed stated Veronica severed the existing joint tenancy in the Property pursuant to Civil Code § 683.2, reserving to Veronica a 50% tenant in common interest; the remaining 50% tenant in common interest to remain belonging to Lawrence. The Deed also transferred Veronica’s 50 percent tenant in common interest to Raney, as trustee of the Trust. The Deed was recorded on February 5, 2015. There was no evidence in the record that Lawrence had notice of the Deed before its recordation. 

In April 2015, Raney, acting in his capacity as trustee of the Trust, filed the underlying complaint for partition (the Partition Complaint) requesting the Property be partitioned by sale. The Deed was attached as an exhibit to the Partition Complaint. 

After Lawrence was served with the Partition Complaint, he filed an answer asserting, as an affirmative defense, that Veronica “is subject to and in violation of the Standard Family Law Restraining Order.

In November 2015, Veronica died. In March 2016, the Dissolution Action was dismissed for lack of jurisdiction because the court had not terminated marital status at the time of Veronica’s death. 

Also in March, Veronica’s will was accepted into probate and Raney was appointed personal representative of her estate. Subsequently, in the partition action, Raney filed a motion to amend the Partition Complaint to add himself, in his capacity as personal representative of Veronica’s estate, as a plaintiff. The court granted the motion. 

A trial on partition was held and the court issued a statement of decision finding that Veronica’s severance of the joint tenancy substantially complied with the ATRO's provision that notice be provided before a right to survivorship is eliminated. 

However, the court found that Veronica’s transfer of her interest in the Property to the Trust violated the ATRO's prohibition on transferring property. The court cancelled the transfer and reformed the Deed to one severing the joint tenancy only. The statement of decision concluded that Raney, in his capacity as personal representative of Veronica’s estate, is the owner of an undivided one-half interest in the Property and is entitled to an order of partition by sale. 

On appeal, Lawrence argued the trial court lacked jurisdiction over the partition action following Veronica’s death because the Property was community property and, following Veronica’s death, no court had jurisdiction to divide their community property. However, the Appellate Court ruled that Lawrence’s characterization of the Property as community property was incorrect. 

A husband and wife may co-own property as joint tenants, tenants in common, or community property. Property cannot be held both as community property and in either a joint tenancy or a tenancy in common at the same time.  Accordingly, each spouse’s interest in a joint tenancy or a tenancy in common is his or her own separate property. 

Following dissolution, there is a rebuttable presumption that property acquired during marriage in joint form is community property. However, if one spouse dies during a dissolution proceeding but before there is a judgment of dissolution, this community property presumption does not apply.

Because Veronica died before dissolution, no community property presumption applies to the Property. If, as Lawrence contended, Veronica’s severance of the joint tenancy was ineffective, the Property was held in joint tenancy and passed to Lawrence upon her death by right of survivorship. 

If the severance was effective, as Raney contended, Lawrence and Veronica were tenants in common and Veronica’s 50 percent interest in the Property was her separate property, becoming part of her estate conveyed by her will after her death. 

In either event, the Property was not community property. 

The heart of the parties’ dispute is whether Veronica, in severing the joint tenancy, violated the ATRO's provision that before a right of survivorship to property can be eliminated, notice of the change must be filed and served on the other party. 

Lawrence argued the ATRO and § 2040(b)(3) provide that notice of a joint tenancy severance must be filed and served before the severance is recorded. 

A joint tenancy severance is not effective to eliminate a right of survivorship unless it is recorded before the death of the severing joint tenant (with one exception not relevant).  A distinctive feature of joint tenancy, as opposed to other interests in land, is the right of survivorship. This means that when one joint tenant dies, the entire estate belongs automatically to the surviving joint tenant(s).  The severance of a joint tenancy transforms it into a tenancy in common by extinguishing the right of survivorship.

Civil Code § 683.2 provides a joint tenant may sever a joint tenancy in real property as to the joint tenant’s interest without the joinder or consent of the other joint tenants by, among other means, execution of a written instrument that evidences the intent to sever the joint tenancy, or of a written declaration that, as to the interest of the joint tenant, the joint tenancy is severed.” (Civil Code, § 683.2(a)(2).)

The statute further provides that such a severance is not effective to terminate the right of survivorship of the other joint tenants as to the severing joint tenant’s interest unless one of the following requirements is satisfied: 

(1) Before the death of the severing joint tenant, the deed, written declaration, or other written instrument effecting the severance is recorded in the county where the real property is located; or

(2) The deed, written declaration, or other written instrument effecting the severance is executed and acknowledged before a notary public by the severing joint tenant not earlier than three days before the death of that joint tenant and is recorded in the county where the real property is located not later than seven days after the death of the severing joint tenant.

The purpose of Civil Code § 683.2(c), is to avoid potentially fraudulent behavior by the party who executes a document severing the joint tenancy, because absent the recordation requirement, the joint tenant could execute an undisclosed severance, deposit the severing instrument with a third person, and instruct the third person to produce the instrument if the severing joint tenant dies first so the severed half may pass to his or her heirs or devisees, but could also, if the other joint tenant dies first, suppress the severing instrument and take the other half of the property by survivorship.

Ordinarily, holding community property in joint tenancy form is mutually advantageous, during marriage as well as after dissolution. Once a dissolution proceeding is pending, however, it is illogical that the parties would envision or desire the operation of survivorship. An untimely death results in a windfall to the surviving spouse, a result neither party presumably intends or anticipates. Thus, once a dissolution petition has been filed, a spouse may well wish to sever any joint tenancies with the other spouse. 

Under the ATRO and Family Code § 2040, parties to pending dissolution proceedings are restrained from unilaterally eliminating a right of survivorship unless, in addition to the generally-applicable requirements for effectuating such a change, notice of the elimination is filed and served on the other spouse. 

The requirements to unilaterally eliminate a right of survivorship may be completed in any order. When the last remaining requirement is completed, the elimination of the right of survivorship takes effect.

Accordingly, when the Partition Complaint was filed and served on Lawrence in June 2016, Veronica’s severance of the joint tenancy became effective to eliminate the right of survivorship. When Veronica subsequently died, her 50 percent tenancy in common interest was her separate property and became part of her estate. 

LESSONS:

1.         Married persons need to carefully consider how they take title to real property.

2.         Property cannot be held both as community property and in either a joint tenancy or a tenancy in common at the same time. Accordingly, each spouse’s interest in a joint tenancy or a tenancy in common is his or her own separate property. 

3.         The rebuttable presumption that property acquired during marriage in joint form is community property does not apply if one spouse dies during a dissolution proceeding, but before there is a judgment of dissolution.

4.         Notice of the elimination should be filed and served on the other spouse to allow a spouse to unilaterally eliminate a right of survivorship.

5.         The requirements to unilaterally eliminate a right of survivorship may be completed in any order, and when the last remaining requirement is completed, the elimination of the right of survivorship takes effect.

6.         When in doubt regarding real property in a dissolution action, seek the written consent of the other spouse that is confirmed by court order, or make a request to the court for such an order.

Foreclosure Purchaser Must Perfect Title Before Serving 3-day Notice to Quit

What rights does a tenant have after a foreclosure of the premises?

Some answers were provided in the recent unanimous California Supreme Court decision in Dr. Leevill, LLC v. Westlake Health Care Center, a case that originated in Ventura County.

The Court decided a procedural question related to the timing of the notice that must precede an unlawful detainer action, where the action is not brought by a landlord but rather by a new owner that has acquired title to the property under a power of sale contained in a deed of trust. 

The Court concluded that the new owner must perfect title before serving the three-day written notice to quit, and the perfection of title, which includes recording the trustee's deed, is necessary before the new owner serves a three-day written notice to quit on the possessor of the property (i.e., tenant).  

Westlake Village Property, L.P. (Westlake Village) owned property in Thousand Oaks that it leased in 2002 to defendant Westlake Health Care Center (Westlake Health) so the latter could operate a skilled nursing facility on the property. 

Six years later, Westlake Village obtained a bank loan, executing a promissory note and a deed of trust on the property (the latter to secure the promissory note). After Westlake Village defaulted on the loan, the bank sold the promissory note and the deed of trust to Dr. Leevil, LLC (Dr. Leevil), the plaintiff in the action. Dr. Leevil then instituted a nonjudicial foreclosure and bought the property at a trustee's sale. 

The next day, Dr. Leevil served a three-day written notice to quit upon the property's tenant, Westlake Health, and five days after that, Dr. Leevil recorded title to the property. Westlake Health did not vacate the property, and Dr. Leevil initiated the unlawful detainer (UD) action 40 days after service of the written notice to quit.

Proceedings in the trial court ended in a judgment against Westlake Health, based on stipulated facts, with Westlake Health preserving its right to appeal various legal rulings of the court. On appeal, the Court of Appeal affirmed. 

Among other things, the Court of Appeal concluded that, under Code of Civil Procedure section 1161a, subdivision (b) (section 1161a(b)), an owner that acquires title to property under a power of sale contained in a deed of trust does notneed to perfect title before it serves a three-day written notice to quit on the tenant. Instead, the Court of Appeal concluded that the new owner may serve the notice to quit immediately after acquiring ownership, after which it may perfect title, so long as title is perfected before the new owner files a UD action. 

In reaching that conclusion, the Court of Appeal expressly disagreed with the Appellate Division of the San Diego County Superior Court, which addressed the same issue in U.S. Financial, L.P. v. McLitus.  Because Dr. Leevil perfected title before initiating the UD action, although not before serving the notice to quit, the Court of Appeal concluded that the action complied with section 1161a(b). 

Section 1161a(b) authorizes a summary proceeding to remove the possessor of real property in specified circumstances. It is structured to enumerate five cases  in which its substantive provision applies. Specifically, section 1161a(b) opens with the phrase "[i]n any of the following cases," then it sets forth its substantive provision (authorizing an unlawful detainer action to remove a person who holds over and continues in possession of real property after a three-day written notice to quit the property has been served), and then it enumerates five separate situations in which its substantive provision comes into play. 

Thus, the substantive provision of section 1161a(b) has no operative effect unless one of the five enumerated situations (what the statute calls "cases") is present. Put another way, section 1161a(b) contemplates that a property owner seeking to avail itself of the statute's remedy will begin by looking at the five enumerated "cases," considering whether the conditions of any of them are satisfied. Only when one of the cases is satisfied may the substantive provision of the statute be invoked.

Section 1161a(b)(3) is one of those "cases," and it is the only provision on which Dr. Leevil relied. Therefore, Dr. Leevil was not entitled to the remedy provided by the substantive provision of section 1161a(b) unless it first satisfied the conditions of section 1161a(b)(3). 

Section 1161a(b)(3) describes the following case: Where the property (A) has been sold in accordance with Section 2924 of the Civil Code, (B) under a power of sale contained in a deed of trust executed by the holdover possessor, or a person under whom such person claims, and (C) the title under the sale has been duly perfected.

There are two things to notice about the language of section 1161a(b)(3). First, the provision is in the past tense ("has been sold" and "has been duly perfected"), suggesting completion. 

Second, the sale of the property in question is only one of three distinct conditions set forth in section 1161a(b)(3), and the use of the conjunctive word "and" to connect the three conditions can only mean that all three conditions must be satisfied. In other words, all three conditions of section 1161a(b)(3), including perfection of title, were prerequisites to Dr. Leevil having any right to the remedy section 1161a(b) affords. 

In this context, perfection of title requires that the instrument of conveyance (the trustee's deed) be recorded pursuant to Government Code section 27280. Title is duly perfected when all steps have been taken to make it perfect, i.e., to convey to the purchaser that which he has purchased, valid and good beyond all reasonable doubt, which includes good record title, but is not limited to good record title, as between the parties to the transaction.

The court in a UD action has jurisdiction to determine the validity of such defenses. Because one of the conditions set forth in section 1161a(b)(3) is that title under the sale has been duly perfected, Dr. Leevil was not entitled to a section 1161a(b) remedy until it first perfected title, which required, among other things, that the instrument of sale (the trustee's deed) be recorded. 

The most natural reading of the statute required Dr. Leevil to perfect title before invoking section 1161a(b)  but it is undisputed that Dr. Leevil served the three-day written notice to quit before it perfected title to the property. Dr. Leevil, therefore, took the first step in the removal process authorized by section 1161a(b) before satisfying all of the prerequisite conditions.

The UD statutes are to be strictly construed and that relief not statutorily authorized may not be given due to the summary nature of the proceedings. The remedy of unlawful detainer is a summary proceeding to determine the right to possession of real property. Since it is purely statutory in nature, it is essential that a party seeking the remedy bring himself clearly within the statute. 

Because Dr. Leevil served the three-day notice to quit before it perfected title, it did not bring itself within the scope of section 1161a(b), as that provision is most naturally read, before taking the first step in the removal process that the statute authorizes. Its notice to quit was, therefore, premature and void, and its UD action, improper.

A bidder at a trustee's sale might present a check for the purchase price of the property, but whether the bank account on which the check is drawn contains sufficient funds to cover the amount of the check remains to be seen. Therefore, the trustee is authorized to withhold the deed until the check clears. But withholding the deed prevents the purchaser from recording the sale and perfecting its title. The subdivision, therefore, affords a 15-day period during which the deed may be recorded and the sale deemed perfected as of the original sale date. That way, the original sale date may be memorialized even if the deed is withheld pending confirmation of the purchaser's payment of the purchase price.

Moreover, the apparent policy aims of the statute support an inference that the Legislature intended that a new owner of real property should perfect title before serving a three-day written notice to quit on the possessor of the property. In cases where the possessor of the property is a tenant of the former owner, not the former owner itself, the tenant may not know whether the entity serving the notice to quit is a bona fide owner. Thus, section 1161a(b)'s requirement that the new owner perfect title before serving a notice to quit protects the interests of such a tenant.

LESSONS:

1.  In California, the general purpose of the recording statutes is to permit the recordation of any instrument that affects the title to or possession of real property, and to penalize the person who fails to take advantage of recording.

2.  The foreclosure purchaser (or successor in interest) of a deed of trust must perfect title before serving the three-day written notice to quit required by Code of Civil Procedure section 1161a(b) to support a UD action.