Winter 2007 Newsletter

Volume 3, Issue 1

Victory! Summary Judgment Granted.

One week before trial, the judge granted our Motion for Summary Judgment and granted our client specific performance.

After a year of litigation, a judge of the Los Angeles Superior Court granted our client, a prominent international clothing designer and manufacturer, summary judgment on our complaint for specific performance and breach of contract to convey a warehouse in Vernon.

The final judgment will order the defendant to convey the property to our client. Pursuant to the Purchase Agreement, our client will also be entitled to collect all of the attorneys fees it spent in prosecuting this lawsuit.

The Lawsuit: Our client, a warehouse tenant with an option to purchase in its lease, attempted to purchase the warehouse. The owner, recognizing the rising value of the property, disrupted and delayed escrow, eventually canceling and refusing to sell the property. We sued for specific performance and breach of contract.

The Motion: Both parties brought motions for summary judgment, in which the parties agreed that the facts were undisputed but disagreed about the legal effects of those facts. After oral arguments in mid-January, the court took the matter under submission while it considered the arguments.

The Arguments: The defendant argued that the original option had been breached when escrow failed to close within 60 days, when the initial deposit was late, when our client attempted to assign the purchase and when the ultimate funding was late. We countered that, while defendant may have been able to cancel the agreement earlier in the relationship, all of defendant’s arguments were legally irrelevant once defendant accepted the revised purchase agreement (whose terms overrode the original option). The terms of that agreement provided for a five business day cure period and our client performed everything, including funding, within five business days of defendant’s purported cancellation.

We are pleased to have won this victory for our client.

Real Estate 101: What is Specific Performance?

What is Specific Performance?

A claim for specific performance asks the court to force the opposing party to actually perform the contract at issue (rather than a claim for damages arising from the breach of a contract).

What Are the Elements of Specific Performance?

A complaint for specific performance must allege: (a) The making of a specifically enforceable type of contract, sufficiently certain in its terms; (b) Adequate consideration, and a just and reasonable contract; © Plaintiff’s performance, tender, or excuse for nonperformance; (d) Defendant’s breach; and (e) Inadequacy of the remedy at law. Witkin, California Procedure 4th ed., Ch. V. Pleading §741; See also, Tamarind Lithography Workshop, Inc. v. Sanders (1983) 143 Cal.App.3d 571, 575.

Real Estate Is Unique

There is a presumption in the law that the breach of an agreement to transfer real property cannot be adequately relieved by monetary compensation and therefore a breach of contract action is an inadequate remedy at law. See, Civ. C. §3387. We therefore sought specific performance so that our client could compel the sale of the building along the terms originally agreed to over two years ago. The huge run-up in property prices for industrial properties in the area made this an especially important result.

Defendant argued, among other things, that we were not entitled to summary judgment since incidental damages could not be ascertained with certainty.

An Equitable Accounting: Net Rents and Profits

The Supreme Court in Ellis v. Mihelis (1963) 60 Cal.2d 206 resolved this issue over forty years ago by holding that “the following general rules are applicable where damages are awarded incident to a decree of specific performance: A party to a contract for the purchase or exchange of land who is entitled to a decree of specific performance is also ordinarily entitled to a judgment for the rents and profits from the time he was entitled to a conveyance.” Id. at p. 219. “The complainant affirms the contract as being still in force and asks that it be performed. If the court orders it to be performed, the decree should as nearly as possible require performance in accordance with its terms.” “The result is more like an accounting between the parties than like an assessment of damages.” Id.

“The concept of this monetary award to the buyer is not to give the buyer damages for the seller’s breach of contract. Rather, it is designed to relate the performance back to the contract date of performance and to adjust the equities between the parties because of the delayed performance by the seller.” (Miller & Starr, Current Law of Cal. Real Estate (1982 supp.) vol. 1, pt. 2, §5:18, p. 52, italics in original.) Stratton v. Tejani (1982) 139 Cal.App.3d 204, 212.

Because a party is entitled to the net rents and profits between the date of performance provided for in the contract and the date of the execution of the judgment (Stratton, supra., (1982) 139 Cal.App.3d 204, 213), the prevailing party cannot be expected to establish in its summary judgment motion the exact amount of the incidental damages. Once the court determines that the party is entitled to specific performance of the contract, the court retains jurisdiction to perform the requisite equitable accounting.

LEGAL UPDATE

A New Case From The Fourth District.

Where sellers reneged on contract for sale of property, trial court properly ordered specific performance and awarded buyers attorney fees pursuant to contract, but erred in allowing buyers to deduct the attorney fees from the purchase price , effectively giving attorney a preference over priority lien holders.

??Behniwal v. Mix, filed February 7, 2007, Fourth Dist., Div. 1 (2007 SOS 736) ??

12 Core Wealth Beliefs: We Live In An Abundant World.

One: Accept full and complete responsibility for your life and everything in it.

Two: Recognize that wealth is a state of mind—a sense of abundance, gratitude, and peace of mind.

Three: Enduring financial wealth is a result. Its cause is our internal feelings of wealth and the specific actions that we consistently get ourselves to take in building financial wealth.

Four: Money is important, but it is a blessing only when combined with the state of mind known as wealth. Money without wealth doesn’t fulfill or enrich someone, although neither does the lack of money ever enrich someone.

Five: Money is a form of stored/potential energy that magnifies the person we are in the world. If we are generally happy, joyous, generous, and honest, money will allow us to do more with this part of ourselves. If we are generally negative, fearful, closed, and angry, then money will heighten these parts of us. Money itself is neutral. It is the person we are that determines the way the money is used. Money doesn’t make the person; money reveals the person.

Six: We can literally attract money and wealth into our lives by the thoughts we think and the person we are.

Seven: We live in an abundant world. There is no fixed sum of wealth. We can always expand the sum total of the wealth available through our creative powers and imagination.

Eight: We each have a responsibility to grow to become the best person we can be. Don’t become rich for the money, become rich for the person you will become as you stretch yourself. You can never separate the end of having wealth from the means you used to create that wealth.

Nine: Don’t feed the emotions of jealousy or envy. Celebrate the success of others, and in so doing subconsciously give themselves permission to celebrate their own successes too.

Ten: To be wealthy, you must grow your comfort level with doing things that scare you. Consistently do the things you are afraid to do and learn to take action in the presence of your fears.

Eleven: The fastest, easiest way to wealth is to create a peer group of wealthy people. Over time, the social lens of how other people see us, and the infectious nature of character and beliefs within our social networks, are the easiest ways to reprogram ourselves for wealth.

Twelve: In order to be truly wealthy, you need to build your financial income streams in such a way that they are passive, residual streams of income that yield cash flow year after year.

Adapted: The Maui Millionaires, David Finkel & Diane Kennedy 2007.

Message from Laine Wagenseller…

I recently began a program called “Rainmaker U”, which is aimed at helping its participants build and implement a powerful strategic growth plan and an equally powerful personal brand.

Our first task in the program was to step back from the day to day operations of our business and craft a compelling vision statement that would guide everything we do in building our business.

My personal vision statement is: To lead the preeminent boutique real estate law firm in Los Angeles.

As a part of my quest to implement this vision, I publish articles on real estate law, speak at seminars, serve as a temporary judge, attend industry events, and invest in real estate.

But it is the results we achieve for our clients which are the most important milestones we use to measure our progress. Our latest victory—chronicled on the first page of this newsletter—is another step toward realizing this vision.

Knowing that it takes a team to reach so high, I would like to hear from you how we can better serve you and reach our place at the top of real estate law firms in Los Angeles. And, of course, we are always here to help you with your real estate needs.

—Laine

In The Works: What We Are Working On

  • We were retained by a company with an office lease to deal with a campaign of harassment (refusal to issue parking passes, multiple thirty day notices, repeated issuance of parking citations, etc.) by the landlord in an effort to either drive the tenant from the building or wring concessions in the form of a revised lease. The landlord, who wanted to position the building for sale, filed an unlawful detainer action. After our analysis of the issues, we demanded that the landlord dismiss the unlawful detainer action (which it did) and we are now seeking reimbursement of all of our client’s legal fees. Moreover, we have put an end to the harassment of the tenant.
  • Homeowner clients hired us to defend them against a mechanic’s lien claim for $18,000 by a contractor. We immediately filed a cross-complaint for over $30,000 based on the contractor’s shoddy work and are currently pursuing the case.
  • We were granted judgment in Orange County Superior Court in a case on behalf of a landlord against a prior tenant for unpaid rent and damage.
  • Our complaint for $250,000 in fees owed our clients by Ameriquest Mortgage Company is currently in the discovery phase. Ameriquest, a subprime mortgage lender who has been the target of numerous charges by various attorneys generals for their fraudulent business practices, does not dispute the debt but continues to fight.
  • We have been retained by several construction companies for help with contractual and client issues.
  • We continue to represent several clients with neighbor disputes involving fences, hedges and boundary lines.

Spring Break Reading

  • A Growing Concern by Nigel Broackes. Broackes, the chairman of Trafalgar House, lost money in several early businesses, only to parlay an investment in some London flats into a property development and construction empire. His empire included the Ritz London and Cunard Ship Lines. A great story. Note: Buy this British book from amazon.co.uk where it is much cheaper.
  • The Real Deal by Sandy Weill. Weill, the architect of Citigroup, chronicles his start in building a stock brokerage through his years of business acquisitions. An interesting insight into how he ran his businesses.
  • Murdoch by William Shawcross. Rupert Murdoch’s lack of self-doubt in building an empire from Australia, China, Europe to the U.S. is inspiring.
  • As The Crow Flies by Jeffrey Archer. Archer’s novel follows the life of Charlie Trumper as he builds the fictional equivalent of Harrods. Archer’s novels are thinly veiled fictionalized accounts of successful businessmen.
  • Tested In The Trenches by Carson and Sanduski. Written for financial professionals but useful as a guide to anyone building their own business. It outlines the business habits of top achievers.

News and Happenings…

  • Mr. Wagenseller’s article entitled “Mixed Use Developments: Building A Community” was published by the Los Angeles County Bar Association’s Real Property Section. All articles can be viewed on our web site.
  • Prior to Christmas, Mr. Wagenseller traveled to New York City to see Duke play Gonzaga at Madison Square Gardens. He returned to Los Angeles to see USC beat Michigan in the Rose Bowl.
  • On the eve of the November elections, the California Real Estate Journal published a guest editorial by Mr. Wagenseller entitled “Is ‘Affordable Housing’ The Right Thing To Do?”
  • Mr. Wagenseller has joined the Board of Directors of the Duke Club of Southern California and is currently organizing a business event with a real estate leader in the community.
  • “Dealing with Redevelopment Agencies” was a Los Angeles County Bar Association seminar which Mr. Wagenseller attended. Other recent seminars he has recently attended include “Top 10 Real Estate Cases of 2006” and “Changes to the AIR Lease.”
  • Mr. Wagenseller’s upcoming speaking engagements include seminars entitled “Real Estate Law A-Z” (Santa Ana), “Real Estate Development From Beginning to End” (Bakersfield) and “How To Structure A Real Estate Deal” (Santa Ana).
  • Mr. Wagenseller is headed to Colorado for (some well-deserved) skiing from March 1 through March 5.
  • “Real Estate Options to Purchase”, an article by Mr. Wagenseller, was published in Stewart Title’s Commercial Update for February 2007.
  • Mr. Wagenseller is currently looking for real estate or business investment opportunities.
  • You can access all of Mr. Wagenseller’s articles as well as past issues of this newsletter on our website at www.wagensellerlaw.com
  • Thank you to all of our friends and clients who are such an integral part of our success. We appreciate your business and referrals. We look forward to working with you on all of your real estate issues.

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Wagenseller Law Firm is a full-service business and real estate law firm. Materials contained in this newsletter are for general information purposes and to permit you to learn more about the services that Wagenseller Law Firm offers its clients. These materials are not intended to constitute legal advice relating to any specific matter and do not create an attorney-client relationship. Please consult Wagenseller Law Firm for legal advice regarding specific matters of concern.