California real estate and deed of trust disputes | courtroom war stories and lessons learned

Court Permission Required for a Second Lis Pendens

A recorded lis pendens notifies prospective purchasers, encumbrancers, and transferees that there is litigation pending that affects the property.  To curb abuses of the lis pendens process, the Legislature enacted amendments to the statutes in 1992.

Under Code of Civil Procedure section 405.30, a party can file a motion to expunge a lis pendens, which will be granted if the underlying claim does not affect the property or if the claim is unlikely to succeed.  And under section 405.36, “Once a notice of pending action has been expunged, the claimant may not record another notice of pending action as to the affected property without leave of the court in which the action is pending.”

What if a party records a second lis pendens on the same property, but in a different action?  An opinion recently filed in California’s First Appellate District — De Martini v. Superior Court — addresses this question.

Facts: two lawsuits; first lis pendens expunged; another one recorded without court permission

In January 2020, Loring De Martini agreed to sell Puja Gupta commercial real property in Belmont for $6 million.  Within months, the parties litigated in arbitration regarding disputes about the timing of Gupta’s obligation to pay an additional $850,000 deposit.  The arbitrator determined the timing issues in Gupta’s favor, holding that the additional deposit obligation was contingent on a final determination by the City that the existing building on the property (a restaurant) was not a historical structure and could be demolished.

Gupta filed a petition in the trial court to confirm the arbitration award and recorded a first lis pendens against the property.  The trial court confirmed the award and issued a judgment.  De Martini filed a motion to expunge the lis pendens.  The trial court granted the motion because Gupta’s lawsuit was solely a petition to confirm the arbitration award addressing the timing of deposits, and did not involve a claim affecting title to or possession of real property.

Later, Gupta filed another lawsuit in the trial court in which she requested an order requiring De Martini to execute the development application documents to allow the City to complete its historical review process and requiring De Martini to complete the other terms of the purchase agreement.  Without requesting court permission under section 405.36, Gupta recorded a second lis pendens.

Trial court’s ruling: court permission not required for second lis pendens because it was recorded in a different action

De Martini filed a motion to expunge the second lis pendens.  The trial court denied the motion, holding that court permission was not required for the second lis pendens because it was recorded in a different action — Gupta’s second lawsuit.

De Martini appealed.

Court of Appeal: reversed; court permission required for second lis pendens on the same property, even if in a different action

The Court of Appeal reversed the trial court’s order, and held that Gupta’s second lis pendens must be expunged because it was recorded without court permission under section 405.36.

The court looked to the “plain language” of section 405.36, as quoted above.  Under the statute, two conditions must exist for the “court permission” requirement to apply.  First, a claimant’s initial lis pendens on a property must have been expunged.  Second, the same claimant must desire to record a second lis pendens on the same property.  Both conditions were satisfied here.  The court found no statutory language imposing the “same action” requirement proposed by Gupta and the trial court.

As a result, the court held: “Allowing Gupta to record, at will, a second notice of lis pendens after the first had been expunged would simply invite more of the abuse which the statute was intended to cure.”  Gupta’s position, as adopted by the trial court, “would allow a plaintiff to sue, record a notice of pendency of action, voluntarily dismiss the claim without prejudice, and strategically burden their adversary with a new claim and new notice at will — the very abuse section 405.36 was intended to remedy.”

Lesson

Under the De Martini opinion, court permission is required for a second lis pendens to be recorded by the same party against the same property, even if the second lis pendens arises from a separate action.