Real Estate Litigation: New Developments

Wagenseller=20 Law Firm

Results-Oriented Real Estate=20 = Litigation

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Recent=20 Developments In Real Estate=20 Litigation

The=20 California Court of Appeals issued three new = opinions=20 this summer relating to real estate = litigation.=20

ANTI-SLAPP: =20 WANG V.=20 WAL-MART

In = Wang=20 v. Wal-Mart Real Estate Business Trust = (July 25,=20 2007) the Court of Appeals held that a trial = court had=20 erred in applying the anti-SLAPP (Strategic = Lawsuit=20 Against Public Participation) statute to a = suit=20 resulting from a private real estate transaction = because=20 the alleged petitioning activity--applying for = and=20 receiving development permits from the city--was = merely=20 incidental.

Analysis: =20 The Anti-SLAPP = statute (Code=20 Civ. Proc. section 425.16) is intended to curb = lawsuits=20 which are brought against parties for exercising = their=20 rights to public participation.

In this = case the=20 defendants brought an anti-SLAPP motion asking = that the=20 case be dismissed because, they allege, the = allegations=20 of the plaintiff arose from defendants' = "protected=20 governmental petitioning activity", namely = applying for=20 development permits from the city.=20

The = plaintiffs opposed=20 the motion, claiming that their complaint was = based on=20 ordinary breach of contract and fraud=20 allegations.

In this case the court framed the issue as = whether=20 the allegations referring to arguably = unprotected=20 activity are only incidental or collateral to a = cause of=20 action based essentially on protected = activity. =20

The court=20 discussed what constitutes 'protected activity' = but also=20 noted that section 425.16 "does not accord = anti-SLAPP=20 protection to suits arising from any act having = any=20 connection, however remote, with an official = proceeding"=20 (i.e., 'the ministerial event of a Sheriff's = sale or=20 auction).=20

The court = concluded=20 that Wal-Mart's activities, including "its = conduct in=20 carrying out its contractual duties, seeking to = extend=20 escrow, requesting the execution of documents, = and other=20 practices within the scope of the parties' = contractual=20 relationship," formed the gravamen of the = complaint's=20 allegations, not simply their application for=20 development permits.

"The = overall thrust=20 of the complaint challenges the manner in which = the=20 parties privately dealt with one another, on = both=20 contractual and tort theories, and does not = principally=20 challenge the collateral activity of pursuing=20 governmental approvals." The trial court's = decision was reversed.

SPECIFIC=20 PERFORMANCE: PATEL = V.=20 LIEBERMENSCH

The court in=20 Patel v. Liebermensch (Aug. 21, 2007) = held that=20 it was error for a trial court to order specific = performance where the purported option agreement = failed=20 to specify such essential terms as length of = escrow and=20 the evidence did not support a conclusion that = the=20 parties would have agreed to the addditional = terms added=20 by the trial court as = reasonable.

Analysis: As a general rule, an option = contract must=20 contain all of the essential terms so that the = court=20 knows what to enforce. =20

However,=20 courts often imply missing terms based on custom = or the=20 context of the contract. For example, when = the=20 term of escrow is missing a court will infer a=20 'reasonable time'.

In this case = the trial=20 court inferred a 60 day escrow period. The = appellate court, noting that the seller wanted = to=20 perform a section 1031 exchange, held that, = because of=20 the potential adverse tax consequences, an = escrow period=20 could not be inferred.

The = dissent noted=20 that no court had ever held an agreement to sell = real=20 estate invalid for lack of a specified time of = payment=20 because the law specifies a reasonable = time. =20 Furthermore, the parties never discussed, prior = to=20 entering into the deal, a section 1031 exchange = or=20 stated that taxes were an issue.

I would = add that=20 all sales of real property have tax consequences = so it=20 strikes me as odd that the appellate court would = use=20 this as an excuse for ignoring well established=20 precedent.

RESULTING=20 TRUST: HERNANDEZ V.=20 RUELAS

A husband and = wife, whose=20 home was in their daughter's name because of = their poor=20 credit, were entitled to a resulting trust after = a=20 transfer of real property was made to one person = but the=20 consideration was paid by another. = A trust is presumed to result in = favor of=20 the person by or for whom such payment is=20 made. Hernandez v. Ruelas (August = 20,=20 2007).=20

Analysis: =20 When a transfer of = real=20 property is made to one person, and the = consideration is=20 paid by or for another, a trust is presume to = result in=20 favor of the person by or for whom such payment = is=20 made--a 'resulting trust.'

"A=20 resulting trust differs from an express trust = chiefly in=20 that (1) it arises by operation of law, without = an=20 expressed intent, and (2) the resulting trustee=20 ordinarily has no duty other than to transfer = the=20 property to the person=20 entitled."

In this = case a=20 daughter put her name on title to a condominium = (as her=20 separate property) which her parenths then lived = in. Her parents put money into the bank to = pay the=20 mortgage. When the daughter went through a = divorce, the husband claimed the condominium as=20 community property.

The trial = court=20 quieted title in the name of the parents, = finding a=20 resulting trust. The appellate court = affirmed,=20 holding that this situation was "close to a = paradigm of=20 a resulting=20 = trust."

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