Money and Dirt: Reviewing 2015; Previewing 2016

By Kevin Brodehl, December 29, 2015

We’ll end 2015 with a quick look back at some of the important developments in California real estate and secured lending law covered in this blog, and a look forward to issues that will get attention in 2016.

Highlights from 2015

• The first published California Court of Appeal opinion to address the enforceability of commercial lease “co-tenancy” clauses provided some guidance, and made clear that the choice of remedies (e.g., termination, rent abatement, etc.) matters a lot.  See prior post: Commercial Lease “Co-Tenancy” Clauses: Unconscionable, Penalty, or Enforceable?
• An opinion from the Second District (Los Angeles) emphasized that “sold out” junior lienholders on purchase money loans can incur civil liability by continuing to pursue collection efforts.  See prior post:  Junior Lienholders: Know When To Admit Defeat
• One notable opinion addressed guarantor liability, emphasizing that the “sham guaranty” defense is a pretty tough sell.  See prior post:  Sham Guaranties Are Hard To Come By
• An opinion from the Fourth District (in Santa Ana) held that a debtor can recover for “wrongful foreclosure” even if the debtor was underwater on the loan.  See prior post:  Can a Foreclosure be “Wrongful” if the Debtor is Underwater?
• Debtors cannot rely on verbal forbearance agreements, according to an opinion from the Second District (Los Angeles).  See prior post:  Forbearance Agreements Must Be In Writing
• Addressing an issue of first impression, the Fifth District (in Fresno) held that a Notice of Default does not “disturb possession” sufficiently to start the clock running on the statute of limitations for a quiet title action.  See prior post:  A Notice of Default Does Not “Disturb Possession”
• In a couple of “dual tracking” cases under the California Homeowner Bill of Rights, courts held that borrowers don’t need to tender the loan balance before asserting a claim, and that a borrower who obtains a preliminary injunction at the outset of the case can recover attorney fees against the lender.  See prior posts:  Tender Not Required for a “Dual Tracking” Claim and Lenders Face Attorney Fee Liability for Preliminary Injunction Stopping “Dual Tracking”
• A couple of cases emphasized how important the remedies of rescission and reliance damages can be in real estate disputes.  See prior posts:  Respect the Remedy of Rescission in Real Estate Disputes and Mind Your Real Estate Partnership Agreement Even In Bad Times (or be prepared to pay “reliance damages”)
• An opinion from the Fifth District (in Fresno) addressed California’s complex statutory formula governing redemption by the borrower following a judicial foreclosure sale.  See prior post:  Judicial Foreclosure: Things That Can Go Sideways During The Redemption Period
• A couple of opinions addressed implied dedications of private property to the public and the impact of condemnation proceedings on subdivisions under the Subdivision Map Act.  See prior posts:  Implied Dedication of Private Property to the Public: the Law is Unsettled and Subdivision by Condemnation?
• An opinion from the Fourth District (in Santa Ana) emphasized how important it is to carefully draft the indemnity and integration sections of a purchase and sale agreement.  See prior post:  Draft Your Purchase and Sale Agreements Carefully — Integration and Indemnity Clauses are Not Simple “Boilerplate”

Coming in 2016

• The California Supreme Court will decide Yvanova v. New Century Mortgage Corp., where the central issue is whether, in a wrongful foreclosure case, a borrower has standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void.  Oral argument took place on December 2, 2015, so an opinion should issue soon.
• The California Supreme Court will decide Coker v. JP Morgan Chase Bank, a case involving the interplay between consensual short sales and the anti-deficiency protections in Code of Civil Procedure section 580b.  Oral argument in this case also occurred December 2, 2015.
• The California Supreme Court will either take up review, or leave standing, the Fifth District Court of Appeal’s opinion in First California Bank v. McDonald, which was initially published but then superseded by the California Supreme Court’s grant of review on a “grant and hold” basis on February 25, 2015.  The Court of Appeal’s opinion held that under Code of Civil Procedure section 726, a lender lost its right to pursue a deficiency judgment against co-borrower A when the lender agreed with only co-borrower B on the private short sale of real estate security property before the judicial foreclosure action was filed.  The Supreme Court will decide how it handles the McDonald case after it publishes an opinion in the Coker case.
• The California Legislature might consider the potential adoption of the proposed Uniform Commercial Real Estate Receivership Act.  Expect a blog post here soon addressing this legislation.
• Real estate crowdfunding — both for equity and debt — will continue to grow.  As the JOBS Act regulations finally get implemented, this area will present new legal questions and challenges.  Expect further exploration of this area in future posts here.

Happy New Year!