Insurance Adjuster Liable for Misrepresentation

By Laurie Murphy

When a large tree fell onto the insureds' property and damaged their home, they did what any other homeowners would do - they called their insurance company.  The insurance company, Travelers, sent out an adjuster who took some photos and told the insureds that their policy did not pay for cleanup.  Though they asked for another adjuster, Travelers refused to appoint one.  Based upon the adjuster's representations to them, the insureds paid to clean up the mess themselves.  They then sued the adjuster for misrepresentation on the theory that they relied upon the adjuster in spending their own money to clean up the damage.  The insurer argued that an adjuster could never be sued individually for misrepresentation in the course and scope of his employment.  The trial court agreed, but the appellate court reversed finding that an adjuster who misrepresents the terms of an insureds' policy to their detriment can indeed sue the adjuster individually for misrepresentation.  

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Lender Cannot Pursue Borrower For Deficiency Judgment After Short Sale

By Laurie Murphy 

Laurie Murphy

In a case decided on July 23, 2013, the court of appeal held that a lender cannot pursue a borrower for a deficiency judgment after a short sale.

When a borrower defaulted on her payment obligations under a purchase money note secured by a deed of trust on her residential property, the lender served a notice of default.  The borrower was able to negotiate a short sale with a third party prior to the foreclosure sale but the agreed to price was less than the amount outstanding on the loan.  The lender consented to the short sale with an agreement that they were only releasing the security, not any deficiency.  The borrower then sued the lender after it attempted to collect on the amount of the deficiency it claimed she still owed. 

The trial court sided with the lender.  On appeal by the borrower the court of appeal held that any lender who either forecloses or agrees to a short sale of residential property secured by a deed of trust cannot pursue the borrower for any deficiency after either a foreclosure sale or a short sale.  Coker v. JP Morgan Chase.

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New Requirement in Commercial Leases Effective July 1

By Laurie Murphy

Laurie Murphy

As of July 1,2013, all commercial leases must include a provision indicating whether the leased premises have been inspected by a certified accessibility specialist and if so whether the premises meet all the federal and state accessibility requirements. 

The provision is Civil Code section 1938. This statute compliments a larger statutory scheme enacted in 2012 (Civil Code sections 55.51-.55.57) designed to curb predatory lawsuits by Plaintiffs claiming damages for failing to maintain premises compliant with state and federal accessibility laws.  I had one such case of a client recently where the plaintiff had brought over 50 such lawsuits.
 
Because the landlord is strictly liable for statutory damages so long as a non-compliant conditions exist, landlords nearly always pay the statutory amount which makes them easy targets for lawyers who file these cases most of whom have a stable of professional plaintiffs who are disabled and who troll the area looking for establishments to sue.  The inspection by such a specialist can limit damages sought and/or provide the basis for a stay in litigation.  Commercial landlords are well advised to familiarize themselves with these new laws. 
Contact Laurie Murphy

Another Case on Unconscionability

By Laurie Murphy

Laurie Murphy

In previous blogs we've reported on what makes a boilerplate agreement unenforceable.  Recently another appellate court weighed in in another automobile purchase case.  Two buyers of a new car were presented with a long, two sided contract containing an arbitration clause on the back of one the pages at the very bottom of the page.

The arbitration clause itself was harsh and one sided favoring the dealer of course.  The buyers were not given the opportunity to review the contract and did not even know it was two sided.  The trial court did not find the contract was unconscionable.  The appellate court reversed finding both procedural and substantive unconscionability. 

The procedural unconscionability stemmed from the placing of the arbitration clause on the back of the two sided page at the bottom.  The substantive unconscionability stemmed from several clauses in the arbitration paragraph, one permitting an appeal in an award of injunctive relief, one permitting an appeal to an arbitration panel of three arbitrators if the award exceeds $100,000, another requiring the appealing party to pay the filing fee in advance and lastly a clause exempting repossession from arbitration though permitting injunctive relief.  Vargas v. SAI Monrovia  2013 DJDAR 7148. 

Contact Laurie Murphy

When Are Boilerplate Unfair And One-Sided Provisions In Consumer Agreements Unenforceable?

By Laurie Murphy

This question was answered in a recent case decided by the court of appeals.  When clauses are so one sided or unfair, the courts can decline to enforce them if they are found to be both procedurally and substantively unconscionable. 

Procedural unconscionability is found when there is unequal bargaining power and the contracts are foisted on the unsuspecting with no explanation and/or when their terms conflict with oral representations, are buried in the fine print and/or required as a "take it or leave it" proposition. 

Substantive unconscionability is where the complained of provision is overly harsh and one-sided.  In Vasquez v. Greene Motors Inc. 2013 DJDAR 4087 the appellate court overturned a trial court's finding that an arbitration clause in a used car sales contract was unconscionable. 

The appellate court found that though the sales contract was procedurally unconscionable because it was offered on a take it or leave it basis, there was not a high degree of procedural unconscionability.  And, the court further found that the complained of clause requiring the parties to arbitrate their dispute was not necessarily substantively unconscionable because there was no evidence that the cost to arbitrate would have been so significant to the plaintiff so as to prevent him from arbitrating and/or that arbitration necessarily favors the defendant dealership. 

Because there was not a high degree of procedural unconscionability and essentially no evidence of substantive unconscionability the court reversed the trial court effectively ordering the parties to arbitrate their dispute.

Contact Laurie Murphy

Another Case Just Came Down Involving The Issues Of When A Contract Is Unconscionable

By Laurie Murphy

Laurie Murphy

An employee sued her employer for sexual harassment and other claims.  The employer sought to compel arbitration pursuant to the provisions of its employment handbook.  The employee contended (and the trial court agreed) that because the handbook permitted the employer to change its provisions at the employer's sole discretion, the arbitration policy was illusory and therefore unconscionable.   

The court of appeals found the fact that the provisions of a contract can be modified does not alone render a contract unconscionable because the authority to change the provisions of a contract is limited by the covenant of good faith and fair dealing.  Moreover, the court found that unconscionability requires a finding that a contract is both procedurally and substantively unconscionable.  Here, even if the employment handbook was substantively unconscionable, there were no facts justifying a finding that it was also procedurally unconscionable (i.e. no surprise or oppression).  Serpa v. California Surety Investigations Inc. 2013 DJDAR 5124.

Contact Laurie Murphy

When Are Boilerplate Unfair and One-sided Provisions in Consumer Agreements Unenforceable?

By Laurie Murphy

Laurie Murphy

This question was answered in a recent case decided by the court of appeals.  When clauses are so one sided or unfair, the courts can decline to enforce them if they are found to be both procedurally and substantively unconscionable.  

Procedural unconscionability is found when there is unequal bargaining power and the contracts are foisted on the unsuspecting with no explanation and/or when their terms conflict with oral representations, are buried in the fine print and/or required as a "take it or leave it" proposition.  Substantive unconscionability is where the complained of provision is overly harsh and one-sided.  In Vasquez v. Greene Motors Inc. 2013 DJDAR 4087 the appellate court overturned a trial court's finding that an arbitration clause in a used car sales contract was unconscionable.  

The appellate court found that though the sales contract was procedurally unconscionable because it was offered on a take it or leave it basis, there was not a high degree of procedural unconscionability.  And, the court further found that the complained of clause requiring the parties to arbitrate their dispute was not necessarily substantively unconscionable because there was no evidence that the cost to arbitrate would have been so significant to the plaintiff so as to prevent him from arbitrating and/or that arbitration necessarily favors the defendant dealership.  Because there was not a high degree of procedural unconscionability and essentially no evidence of substantive unconscionability the court reversed the trial court effectively ordering the parties to arbitrate their dispute.

Contact Laurie Murphy

More leave may be required for disabled employees than that which is called for in the Pregnancy Disability Leave Law

By Laurie Murphy

Laurie Murphy

The Court of Appeals recently held that an employer is not free to fire a disabled (in this case pregnant) employee after providing her the maximum allotted pregnancy disability leave of four months. 

The employer argued that the four months pregnancy disability leave was the sole remedy for an employee seeking a reasonable accommodation of her pregnancy-related disability. 

The court disagreed finding under FEHA (Fair Employment and Housing Act) an employer must make a reasonable accommodation for a disabled worker.  That accommodation does not end with the four month pregnancy leave if the accommodation (here, further leave)  can be made without hardship to the employer.

Contact Laurie Murphy

NON-LICENSED "CONTRACTORS" BEWARE

By Laurie Murphy

Laurie Murphy

The Court of Appeals just held that an arbitration award which favored an unlicensed contractor which award was entered as a judgment by the trial court must be set aside.  Grounds for setting aside an arbitration award are very limited in California.  One of the grounds is that the award violates the public policy of the State. 

In Ahdout v. Hekmatjah, the court found that the arbitrator's award which awarded damages to an unlicensed contractor violated the public policy of the state under the Contractor's State Licensing Law which holds, in part, that parties who use the services of an unlicensed contractor are entitled to reimbursement for any compensation paid while the person was unlicensed and are also shielded from liability for claims by the unlicensed person for compensation.  This case reinforces prior court decisions that hold, in essence, that no matter how unfair it would be to deny compensation to someone who is unlicensed who did construction work on a project, that is the law in this state. 

Anyone who does construction work without a license is well advised to get a license or risk the very serious consequences of not having one.  By the same token, anyone who hires someone without a license has carte blanche to refuse to pay for the work.

Contact Laurie Murphy

California Supreme Court Overruled a Long Standing Parole Evidence Rule

by Laurie Murphy

The California Supreme Court has just overruled a long standing ruling in a seminal case (Bank of America v. Pendergrass (1935) 4 Cal.2d 258, 263. 

Under Pendergrass, evidence of alleged oral promises, which conflicted with the written terms of a fully integrated written contract, were barred – referred to as the parol evidence rule.  The effect of the Pendergrass rule was that a plaintiff could not argue that promises the defendant with whom he contracted made before or at the time of contracting that varied with the terms of a fully integrated written agreement, i.e. that the defendant would not take certain action if the Plaintiff defaulted on his payment obligations.  This rule has been a mainstay in the arsenal that lenders had to protect themselves against disgruntled borrowers. 

Under Riverisland Cold Storage v. Fresno-Madera Production Credit Association dated January 14, 2013, the Supreme Court examined the parol evidence statute (Code of Civil Procedure section 1856) and many of the cases decided under it both pre- and post-Pendergrass as well as case law from other jurisdictions and held that the fraud exception to the parol evidence rule as codified in CCP  §1856 basically holds that if the defendant defrauded the Plaintiff into signing a fully integrated agreement, the agreement itself is not valid and the courts can no longer bar evidence that goes to prove fraud, including promissory fraud, which Pendergrass had heretofore prohibited. 

It is expected that this will greatly increase lender's exposure to fraud claims by borrowers.  Indeed, all a borrower would have to allege is that the lender orally misstated the terms of the loan, promised that the lender would not foreclose if the borrower did not make timely payments, said that the interest rate would be lower than the loan actually provides, etc.  Up until now, the Pendergrass rule could be used at summary judgment or even demurrer. Under Riverisland these cases will be allowed to proceed to trial.

Contact Laurie Murphy

California Commercial Tenants Be Aware

 By Laurie Murphy

Laurie Murphy

Commercial tenants in California, unless the lease provides to the contrary, have no rights to offset from their rent payments, any amounts the landlord might otherwise owe the tenant for repairs for which the landlord was responsible but refused to make.

It has long been the law in this state and others that in residential tenancies, the landlord has the obligation to ensure that the premises are habitable when leased and to make any repairs that they are obligated to make to maintain the habitability of the premises.  If the landlord fails to do so, the tenant may, after giving notice to the landlord make the repairs himself and then deduct from the rent owed, the costs he incurred.  This is generally known as the "Repair and Deduct" rule.  (Civil Code section 1942).  Commercial tenants have no such rights. 

So, even if the landlord has the obligation under the lease to maintain the building and make necessary repairs, if the landlord fails to do so, no matter what harm befalls the tenant as a result of the landlord's refusal to repair or maintain, the tenant must still pay its rent.  If the tenant fails to do so and the landlord files an unlawful detainer action, the tenant will be evicted notwithstanding the fact that the landlord did not comply with its obligations under the lease.  The tenant's only recourse is to sue the landlord for breach of lease.   Unless the lease permits him to offset, he simply cannot do so without risking eviction. 


Contact Laurie Murphy

The Perils Of Terminating A Lease Early

by Laurie Murphy

Most businesses, unless they own the property in which they operate their business lease the premises they conduct their businesses out of.  A commercial lease can be quite daunting to a small business owner and can go on for pages.  Most people simply look at the basic terms (how much the rent is and when it is due) and simply sign what is put in front of them.  And most tenants do not really understand the extent of their liability to the landlord if they leave the premises early – say if the business fails.  Unless the lease provides otherwise (and they never do) a landlord whose tenant has left before the lease term has expired is permitted to sue the tenant for the amount of future rent the tenant was required to pay under the lease less whatever the landlord collects from new tenant for that same period less other expenses associated with reletting the premises. 

The landlord is required to mitigate his damages by taking commercially reasonable steps after his tenant leaves to locate a new tenant.  In a market where rents are rising, a landlord might end up leasing the premises for more than the prior tenant paid and under certain scenarios the prior tenant may not end up owing the landlord anything.  In a declining or stable market that is never the case.  In addition, commercial landlords often will require a personal guaranty from the principal(s)/owner(s) of entity tenants.  In those circumstances the landlord can pursue not only the entity but the person who guarantied the lease unpaid rent.

Contact Laurie Murphy

Negotiating Listing Agreements

By Laurie Murphy

Now that the worst of the recession seems to be abating and you are one of the sellers who has been waiting in the wings for the past few years but ready now to take the plunge, you've selected a broker to represent you but your work does not end there.

Brokers and agents throughout the state use standard California Association of Realtors forms for every major aspect of the purchase and sales transaction.  You, as the broker's client however, are not stuck with these forms which are created by lawyers whose sole purpose is to protect the brokers and agents. 

The first significant form you as the seller will be presented with is the Residential Listing Agreement.  This is the agreement that gives the broker the right to list your home for sale.  Most agents or brokers will present this to you as just another form which you must sign "as is" to get your house sold.  Don't fall for it.  Many of them will tell you that 6% commission is standard.  It is not.  Certainly for the higher priced homes, most brokers will take a listing for 4-5%.  Also, if the transaction is an "in house" one, where the same agent represents both the seller and the buyer, most brokers will agree to even a lower commission since the entire transaction will be handled by the same people. 

This standard listing agreement contains many other traps for the unwary seller.  Unless modified, the broker is entitled to a commission if the property is not sold but leased instead and they will take their full commission out of your first rent check.  If they bring you a buyer who does not perform and you end up having to sue the buyer, the standard listing agreement requires you to pay their commission out of the proceeds of any settlement reached with the buyer or judgment obtained.  And, if you happen to retain a second broker after the first one is not successful in securing a buyer and the initial broker gives you a list of people he showed the home to, that person looks at it again and decides to purchase it, and you don't exclude that sale from the second listing agreement you signed, you could find yourself owing both brokers a commission. 

Many deals go through without a hitch but if yours does not, you do not want to be on the bad end of an agreement designed solely to protect your broker and agent.  Demand appropriate revisions to these standard agreements up front.  Once the deal goes south it will be too late.

 Contact M. Laurie Murphy

What You Should Know About Title Insurance (Part 2)

By Laurie Murphy

In a prior blog, we introduced the two types of title insurance available in California to protect a buyer against claims related to title.   

The blog discussed the coverage provided and excluded by a standard CLTA policy.  A standard CLTA policy covers the property owner and the lender.  It does not cover a subsequent purchaser and it does not automatically cover a trust if the insured buyer transfers title to his or her family trust.  However, endorsements for such transfers are available.  Typically a title insurer is not liable to the insured if the property in question is smaller than stated in the policy so long as the boundary lines are properly described in the policy.  A standard CLTA policy insures the owner against any loss associated with the property not being vested in the name stated on the policy.  It also protects against any losses arising out of any recorded lien or encumbrance with the exception of those which were listed on the policy.  

An encumbrance refers to taxes, assessments, and all liens. Not all recorded documents, however, are encumbrances.  Thus, a CLTA policy will not cover a recorded notice by the department of building and safety of a violation of building code(s).  Such a violation affects the market value of the property, not the marketability of the property –i.e. title. The same holds true for environmental cleanup costs – title insurance does not cover the cost of removing hazardous waste material.  A CLTA policy covers losses suffered by an insured based upon the lack of a right of access to an open street or highway.  Thus, if the parcel in question is truly landlocked, the policy would cover the cost of obtaining physical access to an open street or highway.  However, that policy provision is not triggered unless the parcel is truly landlocked. If the parcel has access to an open street or highway which would be impractical, difficult or expensive to create, the coverage is not triggered since access must be entirely lacking.   

Standard CLTA policies expressly exclude coverage for laws, ordinances and governmental regulations (including building and zoning laws).  A recorded notice of a building code violation might be covered if it was not listed as an exclusion in the policy.  In addition, there is no coverage for losses resulting from title defects, liens or encumbrance created, assumed or agreed to by the insured, unrecorded but known to the insured at time of purchase and not disclosed in writing to the insurer, losses caused by title defects, liens or encumbrances created after the date of the policy or disclosed by the seller to the buyer such as unrecorded easements claimed by adjoining parcel owners which are not disclosed in the public records, nor are conflicts in boundaries or any such facts that a correct survey would disclose covered.  The insured can buy extended coverage (an ALTA policy) at generally twice the premium which will be discussed in a later blog.

What You Should Know About Title Insurance (Part 1)

By Laurie Murphy

When you buy real property it is customary for the purchase agreement to require that a seller also provide  (as a condition for sale) a policy insuring title.  What exactly is covered however by the policy that the seller provides the buyer?  And, more importantly, why should you, the buyer care?  There are generally two kinds of policies that cover buyers of California real estate.  The first is called a California Land Title Association Policy (referred to as a CLTA Policy).  The second is an American Land Title Association Policy (referred to as an ALTA Policy).   

The CLTA policy is more restrictive than the ALTA policy which typically includes a survey of the property's boundaries, is more expensive and takes longer to obtain.  The basic difference between the two polities is that the CLTA policy primarily insures the buyer against title defects discoverable only through an examination of the public records.  

An ALTA on the other hand policy extends to certain off-record title defects.  These off-record title defects can include building permit violations, post–policy encroachments and forgeries.  Generally a title policy will insure against defects which affect the marketability of title.  Marketability of title coverage does not typically include defects which affect the market value of property.  Marketability of title and market value of property two distinct concepts which buyers must understand when acquiring title insurance.   In subsequent blogs, we will address these concepts as well as standard endorsements and exclusions in CLTA and ALTA policies.

Contact Laurie Murphy at mlm@vrmlaw.com

Renewing Judgments

By
Laurie Murphy

Don’t let time rob you of your right to enforce your judgment!

Money judgments in California are enforceable for a ten year period, during which time simple interest accrues at 10% per annum. However, unless you renew it, a judgment creditor cannot enforce a judgment after the ten year period has expired. This predicament can easily be avoided since renewing a judgment is very straightforward. The judgment creditor simply needs to fill out and file an application for renewal of the judgment and file it with the court. In that form, the judgment creditor lists the original judgment amount plus any costs incurred after the original judgment was entered plus the accrued interest.

The judgment creditor does not need to wait until the ten years is about to expire in order to review the judgment. In addition, if the case in which the judgment was entered provided for the recovery of attorney’s fees, the judgment creditor can recover the attorney’s fees incurred in enforcing the judgment as well and add them to the original judgment along with interest and other costs. Finally, unlike some other states, there is no limit to the number of times that a judgment can be renewed in California. Even if the judgment debtor moves out of state, most other states permit the judgment entered in California to be enforced in the new state. Similarly, in California, a judgment entered in another state can be enforced if the judgment debtor moves to California.

Five Valensi Rose Lawyers Designated 2011 Super Lawyers

Valensi Rose is pleased to announce that five of its attorneys were designated "Super Lawyers" among Southern California lawyers for 2011. Only 5 percent of the lawyers in the state are awarded this designation. Please join us in congratulating our attorneys on their achievement.

Philip S. Magaram
Estate Planning & Probate

Phil has been recognized as a Super Lawyer eight years in a row: 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011





Michael R. Morris
Tax

Michael has been recognized as a Super Lawyer for his sixth year: 2006, 2007, 2008, 2009, 2010, 2011.





M. Laurie Murphy
Business Litigation

Laurie has been recognized as a Super Lawyer in this practice area for 2011.






Bruce D. Sires
Estate Planning & Probate

Bruce has been recognized as a Super Lawyer for his fifth year: 2004, 2005, 2006, 2009, 2011.





Peggy Lennon
Estate Planning & Probate

Peggy has been recognized as a Super Lawyer for her sixth year: 2004, 2005, 2006, 2007, 2009, 2011.

Warning to California Employers

Posted By

Laurie Murphy

The federal courts have long held that "stray remarks which are defined as isolated discriminatory comments unrelated to the decision-making process were not admissible to prove employment discrimination. The California Supreme Court recently (in ruling against Google in an age discrimination case) held that stray remarks can be considered in the totality of the circumstances of the case. Bottom line, this will make it even harder for employers to defend employment discrimination cases prior to trial.

Attorneys Beware

By
Laurie Murphy

A recent California appellate decision holds that an attorney who entrusted a filing with a paralegal who did not get the papers filed timely did not adequately supervise his employee and was therefore not saved when the trial court found for the defendant because the opposition to the motion for summary judgment was not timely filed. The trial court did not buy plaintiff's counsel's argument that the late filing was the result of surprise, mistake or excusable neglect. The court of appeals agreed and found that it was inexcusable neglect for the attorney to entrust the preparing and filing of the opposition to a summary judgment motion to his paralegal who took the file on vacation with her and did not file it timely.