The decision in Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935 reminds us that all opinion testimony must be supported by reasonable foundation.  The underlying complaint was based on an allegation “the bank breached an agreement to postpone the trustee sale and, by reason of that breach, plaintiffs lost their equity in the property.”

The court “explained that a gratuitous oral promise to postpone a sale of property pursuant to the terms of a trust deed ordinarily would be unenforceable under [Civil Code] section 1698.  This is because the oral promise had not been executed by the parties, as required by section 1698.”

The homeowners did not prevail because they “produced no evidence showing that they refrained from bringing their loan current in reliance on the June 18 sale date because they had no ability to do so … Plaintiffs did nothing to substantially change their position before their home was sold, and they intended to do nothing other than to seek another postponement.”

More significantly, “Wachovia is entitled to summary judgment for the additional reason that plaintiffs failed to present sufficient evidence of injury.”  The court’s analysis is as follows.

“[Plaintiff] claimed that the $555,000 sale price was substantially below the current market value of the home due to demolition conducted by the seller.  The trial court sustained Wachovia’s objection to that opinion testimony for lack of foundation …

“An owner’s right to testify regarding the value of real property under [Evidence Code] section 813 is not absolute … A property owner is bound by the same rules of admissibility as any other witness regarding the value of real property.  (Evid. Code, § 814 [requiring a foundation for real property value opinion based on information ‘of a type that reasonably may be relied upon by an expert in forming an opinion as to the value of property.’]”

Lacking proper foundation – in other words, a factual basis for his opinion of value – the owner was barred from stating his opinion regarding the value of his property.  “A foundation must be laid indicating the other property sold was sufficiently similar to the property in litigation to indicate the price realized for the other land may fairly be considered as shedding light on the value of the land in question.  It must also appear that the other sale was genuine and sufficiently voluntary to be a reasonable index of value and that the price was actually paid or substantially secured.”

Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935

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

A 2013 decision from the Fifth District Court of Appeal (based in Fresno) has bedeviled the lending community.  In Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, the court held that the borrower could state a “cognizable claim for wrongful foreclosure under the theory that the entity invoking the power of sale (i.e.,  Bank of America in its capacity as trustee for the WaMu Securitized Trust) was not the holder of the [ ] deed of trust.”

This drives lenders bonkers because the lending community wants to cut off challenges to post-funding assignments of the loan.  The new decision in Saterbak v. JPMorgan Chase Bank, NA (Mar. 16, 2016) __ Cal.App.4th ___ casts aspersions on the Glaski decision.

Before reviewing the new case, let’s start with the 2013 case.  The plaintiff in Glaski argued that his loan was untimely transferred to the WaMu Securitized Trust, specifically that the “note and loan were not transferred to the WaMu Securitized Trust prior to its closing date … the transfer to the trust attempted by the assignment of deed of trust recorded on June 15, 2009, occurred long after the trust was closed; and the attempted assignment was ineffective.”  218 Cal.App.4th 1079, 1094.

Glaski held that “a borrower can challenge an assignment of his or her note and deed of trust if the defect asserted would void the assignment.”  218 Cal.App.4th 1079, 1095.  Glaski found that “a legal basis for concluding that the trustee’s attempt to accept a loan after the closing date would be void as an act in contravention of the trust document.”

Glaski further held that, in its review of New York law (the WaMu Securitized Trust was controlled by New York law), the complaint sufficiently alleged a claim for wrongful foreclosure, based on allegations that the assignment occurred after the closing date for the trust.

Now to the new case.  In  Saterbak v. JPMorgan Chase Bank, NA (Mar. 16, 2016), the plaintiff sought pre-foreclosure relief from the court.  Contrast this to Glaski, which involved claims for post-foreclosure relief.  Specifically, “Saterbak filed suit in January 2014.  She alleged the [deed of trust] was transferred to the 2007-AR7 trust four years after the closing date for the security, rendering the assignment invalid … She also sought declaratory relief that the same defects rendered the assignment void.”

The Fourth District Court of Appeal (based in San Diego) held that such claims were not cognizable, holding “Saterbak lacks standing to pursue these theories.  The crux of Saterbak’s argument is that she may bring a preemptive action to determine whether the 2007-AR7 trust may initiate a nonjudicial foreclosure.  She argues, ‘If the alleged ‘Lender’ is not the true ‘Lender,’ it ‘has no right to order a foreclosure sale.’

“However, California courts do not allow such preemptive suits because they would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.”

Now to the conflict with Glaski.  Saterbak held that, on the issue of “whether, under New York law, an untimely assignment to a securitized trust made after the trust’s closing date is void or merely voidable … We conclude such an assignment is merely voidable.”

Saterbak added in a footnote, “the New York case upon which Glaski relied has been overturned … We decline to follow Glaski and conclude the alleged defects here merely render the assignment voidable.”

This author believes that Glaski was correctly reasoned.  But now we have a conflict in the case law.  For cases in the Central Valley, courts will have to wrestle with how to apply Glaski.

The recent decision in Orcilla v. Big Sur, Inc. (Feb. 11, 2016) __ Cal. App.4th __ continues the litigation fallout from the second depression (referred to in other parts of the country as the Great Recession).  In Orcilla v. Big Sur, the lender completed a nonjudicial foreclosure on the plaintiff’s residence.  The borrower sued to set aside the sale.  As discussed below, the court of appeal allowed the case to go forward based on a novel theory – unconscionability.

According to the court, “The Orcillas’ first claim is a cause of action to set aside the trustee’s sale.  The elements of an equitable cause of action to set aside a foreclosure sale are: (1) the trustee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a deed of trust; (2) the party attacking the sale was prejudiced or harmed; and (3) in cases where the trustor challenges the sale, the trustor tendered the amount of the secured indebtedness or was excused from tendering.”

Here are the basic facts regarding the loan.  “On May 9, 2006, Teodora obtained a $525,000 real property loan from Quick Loan.  She alone executed an adjustable rate note …  The Note further provided that Teodora’s initial monthly payments would be in the amount of $4,220.49. (In 2005 and 2006, Teodora’s monthly income was less than $3,000 and Virgilio [her husband] did not work.)”

The court framed plaintiff’s argument as follows: “The Orcillas allege the loan from Quick Loan was unconscionable because the loan payments exceeded their income; they have limited education and English proficiency; they did not understand the details of the transaction; and the loan documents were on standard, pre-printed forms in English.

“They allege the 2008 loan modification agreement also was unconscionable because the loan payments exceeded their income; they have limited education and English proficiency; and the loan documents were on standard, pre-printed forms in English.”

In a critical finding, the court stated “The Orcillas maintain that the disparity between the monthly loan payments and their income indicates that the loan and loan modification were overly harsh and one-sided.  We agree that the allegation that the monthly loan payments exceeded the couple’s income by more than $1,000 is sufficient to allege substantive unconscionability.”

Having started on the bridge to unconscionability, the court further held that plaintiffs were not required to plead tender of the past due amount to the lender.  “The Orcillas … allege the debt is invalid because the original loan and loan modification were unconscionable.  As discussed above, the allegations in the second amended complaint are sufficient to allege those agreements were unconscionable and thus unenforceable.”  Based thereon, court allowed the lawsuit to proceed.

This seems to be a peculiar decision.  Case law has long held that there is no fiduciary relationship between the lender and the borrower.  Rather, the relationship is considered to be an arms-length transaction.

By allowing a claim of unconscionability to creep in, the court suggests that the underlying loan and/or the modification could be demonstrated to be unconscionable.

The court cannot be suggesting that the borrowers do not owe the lender for their loan.  How does the court intend to rewrite the loan to render it “conscionable”?  The decision does not say, which provides little guidance to the trial judge.

Orcilla v. Big Sur, Inc. (Feb. 11, 2016) __ Cal. App.4th __