Winter 2009 Newsletter

Volume 5, Issue 1

Expunged! Victory for Our Developer Client

We were successful in expunging a plaintiff’s lis pendens on our client’s 57-unit townhome development in Los Angeles. The trial court granted our motion to remove the lis pendens from the property and ordered the other side to pay our attorneys fees in bringing the motion.

Background: Our client, a real estate developer building a townhome community in Los Angeles, was sued by a real estate company who sought to force the developer to sell the units to the company on favorable terms (even though it was not entitled to it). As a part of the lawsuit, the plaintiff filed a Notice of Pending Action (or lis pendens) with the County Recorder to tie up the property.

While a lis pendens was originally intended simply to notify others that a lawsuit over title or possession of the property was pending, it has become a de facto injunction which prevents a property owner from selling the property. A lis pendens effectively clouds the title until the lawsuit is resolved.

Our Strategy: The lis pendens prevented our client from selling the units to other potential buyers. As with all real estate developments (especially now), time is money. It was clearly plaintiff’s strategy to pressure our client in an effort to extract a favorable settlement. We immediately filed a motion to expunge the lis pendens, arguing that the plaintiff could not prove a claim to title or possession of the property. By getting the lis pendens released, we would be able to free up the property and allow sales of the units to other potential purchasers. We were also successful in getting the court to hear our motion on an expedited basis.

Our Analysis: Plaintiff’s verified complaint was premised on an original purchase and sale contract in which the plaintiff could purchase half of the units and, if an option was not exercised, purchase the remaining units as well. Plaintiff failed to disclose, however, that the parties had abandoned the original contract and later entered into a modified agreement. In the modified agreement, plaintiff would not take title to any units but would be entitled to a marketing fee for 23 units.

Nine of the units were actually sold to various individuals and the plaintiff received a marketing fee for each of those units. A claim for money, however, does not support a lis pendens—it must be a claim for title or possession to the property. We were able to show that plaintiff did not take title to any of the 9 units sold and did indeed only receive a fee.

Contradicting its verified complaint (filed under penalty of perjury), plaintiff then switched stories to argue that yes, the original contract was no longer the operative complaint, but that our client had instead agreed to pay plaintiff $4 million in damages. This, of course, was untrue but, even if true, would still be a claim for money rather than title to property.

The Ruling: The trial court read our briefs and listened to oral argument. The court then issued a written ruling which granted our motion to expunge the lis pendens, finding that the original purchase and sale agreement was modified by the parties so that plaintiff would receive a marketing fee rather than title. The court also awarded us our attorneys fees incurred in bringing the motion.

For more information on lis pendens and other real estate issues, visit the articles page on our website at www.wagensellerlaw.com/articles

2008: A Year of Accomplishments

At the end of every year, we look back to examine the past year and to plan for the upcoming year. 2008 was a busy and successful year for Wagenseller Law Firm.

On the leasing front, we were engaged by a number of companies to negotiate leases for industrial, office and retail space. Our clients included a start-up technology firm, a national public relations firm and several local restaurants. We were happy to see our clients outgrowing their old space and expanding into new space. We also helped one restaurant client negotiate a lease buy-out with a national retailer who wanted to take over the space. A non-profit organization hired us to help them negotiate an exterior advertising lease for their building along Wilshire Boulevard.

On the litigation front, we spent much of the year helping our clients fight lawsuits and resolve their business disputes. We represented our developer clients in boundary disp utes, partnership disputes, purchase and sale litigation, architectural disputes, and contractor nightmares. We fought off a quiet title action relating to a Pasadena housing development. We represented a general contractor on multi-family and home construction projects. We helped another developer negotiate with its lender when credit froze and its construction loan came due. We were able to get our real estate brokerage client dismissed from a lawsuit within days of being served.

Troublesome tenants kept us busy representing our property owner clients. Several industrial warehouse owners retained us to chase after deadbeat tenants who broke their leases, damaged the property and left in the middle of the night. We have been able to win quick judgments on several of these cases. On others we have settled for the full amount plus attorneys fees, secured by a stipulated judgment in case they fail to make their promised payments. One interesting tenant claimed to own our client’s shopping center, entered into a filming contract with NBC and then pocketed the $40,000 location fee before breaking the lease and leaving the state. We chased the tenant down and are now pursuing the case in the bankruptcy court.

In other business disputes, we represented several custom alloy wheel importers and distributors in fiercely contested actions by manufacturers in China and Korea. While one action settled on the eve of trial, three other lawsuits remain.

We are looking forward to the challenges and opportunities in 2009. How can we help you solve your business challenges?

SHOW ME THE MONEY! What Are Your Damages?

What are your damages when a tenant breaches his lease?

California law provides that the landlord may recover (1) the unpaid rent to the date of termination (i.e., past rent that is already owed), plus (2) any difference between the rent owed going forward less the rent from a new tenant (if that rent is less) (i.e., if the original lease was $10,000 per month but the new market rent is only $8,000, you can re-rent the property for the $8,000 and collect the difference [$2,000] from the former tenant). You can collect this difference for the remainder of the original lease term.

The law provides that the landlord must mitigate his or her damages. It is the obligation of the lessee to prove that all or a portion of the rent sought could have been “reasonably avoided.” This means that the landlord must make a reasonable effort to lessen his or her damages by marketing and re-leasing the space.

“A plaintiff cannot be compensated for damages which he [or she] could have avoided by reasonable effort or expenditures…. The doctrine does not require the injured party to take measures which are unreasonable or impracticable or which would involve expenditures disproportionate to the loss sought to be avoided or which may be beyond his [or her] financial means.” Lu v. Grewal (2005) 130 Cal.App.4th 841, 850.

Lastly, there are additional damages which can be pursued. The landlord is also entitled to any other damages caused by the breach. For example, to the extent the landlord would not have had to incur such expenses had respondents performed under the lease, the landlord is entitled to reasonable expenses in retaking possession of the property, in making repairs respondents were obligated to make, in preparing the property for reletting, and damages for breach of specific covenants of the lease—a promise to maintain or restore the premises upon termination of the lease.

Message from Laine Wagenseller…

You cannot avoid the depressing headlines and negative talk about the economy these days. It is on the news, it is at cocktail parties, it is in the emails from friends who have lost their jobs. Bad news and worry are all around. A friend of mine, though, told me that she is keeping a gratitude journal—a list of all of the things that are going right in her life.

I love the idea. Success in many respects starts with attitude. You can quickly change your attitude by focusing on the good things in your life. It is the old idea of “counting your blessings.”

The next step is to be determined. Tony Robbins tells the story of Colonel Sanders, who was rejected over a 1,000 times before someone liked his fried chicken recipe. Robbins asks how many of us would have kept going after 10 rejections? 100 rejections? He makes you look at it differently by phrasing the question this way: how many times do we let a baby try to walk before we let them give up? The answer, of course, is never. A baby will keep on trying until she walks.

Can you be that determined?
—Laine

In The Works: Case We Are Working On

LITIGATION

  • Our ex parte application to expedite hearing and our motion to expunge lis pendens were both granted on behalf of our real estate developer client. See article on page 1.
  • We have been busy preparing for trial in a business litigation case between our client, an American wheel distributor, and a Korean plaintiff. Trial was recently continued until May.
  • The court granted our petition to release an invalid mechanic’s lien against a car dealership’s new showroom.
  • When our shopping center client’s main tenant abandoned its space (and left the state), we pursued the tenant in court. The tenant then filed bankruptcy and we are now chasing down assets in the bankruptcy court.
  • Three different commercial warehouse landlords have retained us to pursue tenants who breached their leases and, in some cases, damaged the property. One tenant has already entered into a payment plan and stipulated judgment. We continue to pursue the others.

LEASES AND CONTRACTS

  • Our client has asked us to review and negotiate their lease for a new Benhihana restaurant.
  • We successfully negotiated an exterior building advertising lease for our office building owner on Wilshire Blvd. for an ad to cover the entire building.

It’s Not What You Say, It’s What People Hear

The Key to Successful Communication

“You can have the best message in the world, but the person on the receiving end will always understand it through the prism of his or her own emotions, preconceptions, prejudices, and preexisting beliefs. It’s not enough to be correct or reasonable or even brilliant. The key to successful communication is to take the imaginative leap of stuffing yourself right into your listener’s shoes to know what they are thinking and feeling in the deepest recesses of their mind and heart. How that person perceives what you say is even more real, at least in a practical sense, than how you perceive yourself.”

Speak Aspirationally

“The key to successful aspirational language…is to personalize and humanize the message to trigger an emotional remembrance. …[P]eople will forget what you say, but they will never forget how you made them feel. If the listener can apply the language to a general situation or human condition, you have achieved humanization. But if the listener can relate that language to his or her own life experiences, that’s personalization. When Martin Lither King, Jr. uttered the words ‘I have a dream,’ he was speaking to the individual hopes and dreams of all Americans— the desire to be accepted because of who we are… Frank Luntz, “Words That Work.”

News and Happenings…

  • “Defaulting Commercial Tenants” appeared in the December issue of Stewart Title’s Commercial Update. The article, written by Michelle Strassburg and Laine Wagenseller, dealt with proactive steps a landlord can take before entering into a lease to protect against future default by a tenant.
  • Laine Wagenseller attended a reception for Los Angeles City Council President Eric Garcetti at Gary Winnick’s home in Bel-Air in October.
  • Laine Wagenseller spoke on real estate litigation at the Lorman “Real Estate Development in California” seminar in Long Beach on September 23rd.
  • Blake Byrne graciously hosted a dinner at his home for visitors from Duke University’s Nasher Museum, which Mr. Wagenseller attended. Mr. Byrne is a prolific collector of contemporary art and a trustee of the Nasher Museum.
  • Michelle Strassburg vacationed in Thailand in November (only to be caught there during the protests that shut down the international airport and stranded thousands of tourists). Laine Wagenseller visited Buenos Aires, Argentina and Iguazu Falls for two weeks right before Thanksgiving.
  • Dartmouth University and Duke University (among others) sponsored the 4th Annual Real Estate Investor Panel at UCLA’s Anderson School of Business in early December, which Mr. Wagenseller attended.
  • Both Mr. Wagenseller and Ms. Strassburg attended the Los Angeles County Bar’s program entitled “The Power of the Pitch: How to Prepare and Present Openings And Closings In Court and With Clients” with communications expert Gary Hankins.

How can we help you with your real estate and business issues?

Wagenseller Law Firm specializes in real estate and business litigation.

We represent real estate developers, property and business owners, and investors in all of their legal needs.

We are committed to friendly, responsive and informative service for our clients.

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.