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Tuesday
May012012

Another Blow for Property Owners Challenging Foreclosure

Business LitigationSan Fernando Valley Business Litigation Lawyer

Nicholas Kanter
818.907.3289

When challenging a foreclosure sale, property owners look to defects or irregularities in the foreclosure process, which is strictly regulated by California’s Civil Code, to have the sale enjoined or rescinded.  Recently, one section of the Civil Code has received a lot of attention.

Civil Code Section 2932.5 requires the assignee of a mortgage to record the assignment prior to exercising a power to sell real property.  Parties have relied on this section to challenge foreclosure sales where a deed of trust is assigned, but not recorded, until after the sale. 

California case law, dating back to 1908, established that the predecessor statute to section 2932.5 (section 858) applies only to mortgages, not deeds of trust (Stockwell v. Barnum). 

However, federal and state courts have recently disagreed over the application of Section 2932.5 to deeds of trust.  On the federal side, e.g., Tamburri v. Suntrust Mortgage, Inc., (2011), and In re Cruz (2011), courts have applied Section 2932.5 to deeds of trust.  On the state side, the court in Calvo v. HSBC Bank USA, N.A. (2011), followed the Stockwell decision.

In support of Stockwell and Calvo, the Court of Appeal in Haynes v. EMC Mortgage Corp., (filed April 9, 2012, publication ordered April 24, 2012) found that Section 2932.5 does not apply to deeds of trust.  The Haynes court rejected Haynes’ reliance on the federal decisions finding:

We of course, are not bound by federal decisions on matters of state law…While our Supreme Court has noted in passing on issues other than the interpretation of section 2932.5, that “a deed of trust is tantamount to a mortgage with a power of sale” [citation], the court has not addressed section 2932.5 and the statute, by its plain terms, does not apply to deeds of trust.  

The court also explained why section 2932.5 applies to mortgages but not deeds of trust:

Section 2932.5 requires the recorded assignment of a mortgage so that prospective purchaser knows that the mortgagee has the authority to exercise the power of sale.  This is not necessary when a deed of trust is involved, as the trustee conducts the sale and transfers title. 

The Haynes decision, along with the holding in Calvo, reinforces long-standing California case law that Civil Code Section 2932.5 does not apply to deeds of trust, thus all but taking away a party’s ability to challenge a non-judicial foreclosure sale based on an unrecorded assignment.  

Nicholas Kanter is a Business Litigation Attorney in our Real Estate Practice Group. Contact him via e-mail: nkanter@lewitthackman.com.




 
Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

Thursday
Jan052012

Mechanics Liens — Smart Tools of Construction Industry Professionals, and Bane of Property Owners

Business Litigation AttorneyConstruction Litigation

by Paul C. Bauducco

(818) 907-3245

 

In 1791, Thomas Jefferson and James Madison proposed the first mechanics liens legislation in order to promote development in Washington.

The Maryland Assembly (which governed Washington at that time) passed the proposed legislation. Since then, all 50 states have enacted mechanics lien legislation to encourage development and protect those involved in the construction industry, according to John G. Cameron’s “A Practitioner’s Guide to Construction Law.”

Mechanics liens” encourage “mechanics,” which include members of the construction industry as well as those providing materials and labor in construction, to engage in construction projects by giving them a process to secure payment for the labor and materials they provide to a project. This security allows homeowners and smaller companies to hire contractors who might not otherwise be willing to take on smaller projects.

In today’s economy, mechanics liens can be an essential collection tool for contractors and material providers in construction projects, allowing them to look to the property for payment if the general contractor or owner fails to pay for work and materials going into the property. They provide a bit of insurance for contractors and sub-contractors.

Conversely, mechanics’ liens can pose a real problem for property owners who pay their general contractors without receiving proper lien releases. If the general contractor fails to pay subcontractors or material providers sums they are owed out of an owner’s payment, the subcontractors and material providers may lien the owner’s property, forcing him to pay for the labor and materials twice.

Mechanics liens laws are strictly enforced and contractors and material providers must give timely and proper notice of their claims and file their liens and enforcements actions within the time frames specified by the applicable statute. If they fail to do so, they may waive their mechanics lien rights and be left without recourse against the property. Whether you are a property owner, contractor or material provider, there are some important things to know about recording and enforcing mechanics’ liens.

California Real Estate Law Regarding Mechanics Liens –
A Three Step Process

 

Contractors, subcontractors and suppliers must take the following three steps to ensure the proper filing of a mechanics’ lien:

1. Serve a Preliminary 20-Day Notice – Workers and suppliers must serve notice of services rendered or supplies delivered within 20 days after making improvements or delivering materials. The notice should be served to the:

▪ Property Owner
▪ General Contractor
▪ Lender or Financier

Contractors or suppliers who work directly with the property owner do not need to serve notice, since the purpose is to ensure the property owner knows who is working on the improvements or supplying the project if these subcontractors are working through a general contractor.

2. Record the Mechanics’ Lien – Claimants should record their liens within the county or counties in which the property is located within 90 days of:

▪ Completion of Work
▪ Excusal of Work (because of breach of contract by the property owner or the general contractor)
▪ Occupation and use of work of improvement by owner or agent
▪ Communicated acceptance of work of improvement by owner or agent
▪ Cessation of Labor for 60 days
▪ The Filing of a 30 Day Valid Notice of Completion or Cessation by the Property Owner (a general contractor has 60 days).

3. Enforce the Mechanics’ Lien – Here’s another deadline notice. A foreclosure suit must be filed within 90 days of the recordation of the lien, in the county or counties where the property is located. If a foreclosure suit isn’t filed in that time frame, the mechanics’ lien is voided.

Avoiding Construction Litigation Involving Mechanics Liens

 

It would be best for all parties concerned if mechanics’ liens and foreclosure suits aren’t filed at all. To avoid these situations, property owners should hire, and subcontractors should work with, properly qualified and licensed general contractors.

Both sides should keep track of the 20 Day Preliminary Notices served.

Finally, property owners and subcontractors should make sure proper payment procedures are in place which also provide waivers and releases of financial obligations when payments are made.

Paul C. Bauducco is a Los Angeles business litigation lawyer whose practice focus is on real estate and construction litigation. You can reach him via e-mail if you need more information: pbauducco@lewitthackman.com

 

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Sep072011

California Environmental Law – How Much Cleanup is Too Much?

Litigation Los AngelesEnvironmental Litigation  

 

Stephen T. Holzer
818.907.3299

 

Nearly 3,000 acres of land in Ventura County is destined for open space use. . .if it’s ever cleaned up.

That vision may be put on hold, if the current mood of all parties involved give any indication. U.S. District Judge John F. Walter overturned Senate Bill 990 at the end of April, which practically guarantees the Boeing Company and the California Department of Toxic Substances (DTSC) will be legally wrangling for quite a while.

Here’s some background:  

Santa Susana’s Historic Roots

The land in question is known as the Santa Susana Lab, home to North American Aviation’s rocket and nuclear research and development projects established in 1947. Due to a series of company splits and sales occurring over the decades, the land is currently owned by Boeing, NASA and the Department of Energy.

There was a partial nuclear meltdown in 1959. And aside from the radioactive materials, a lot of other toxic chemicals (such as dioxins, trichloroethylene, PCBs and perchlorate) infuse the soil and groundwater from years of rocket testing.

The Environmental Law Twist

We don’t even need to go into decades of federal and state environmental law history to illustrate the problems with Santa Susana.

Let’s just go back to 2007 when the now retired Senator Sheila Kuehl pushed SB 990 to reassure Ventura County residents that Santa Susana and the immediate vicinity would be scrubbed as clean as possible. The bill even outweighed federal standards on its goals for cleanliness and safety, and the DTSC was named chief overseer of the work.

So who got on board with the bill? The Department of Energy and NASA. But in 2009 Boeing filed suit, protesting DTSC’s supervisory role. Boeing claimed, among other things, that Kuehl’s S.B. 990 is preempted by the federal Atomic Energy Act, 42 U.S.C. §2011 et seq.

Judge Walters agreed, saying that a federal installation (or, as here, a private one under contract with the feds) is “shielded by the U.S. Constitution’s supremacy clause from direct state regulation unless Congress provides clear and unambiguous authorization for such regulation.”

The DTSC and the California Environmental Protection Agency are disappointed with this ruling, to put it mildly. And when Judge Walter delivered the ruling, he mentioned probable scrutiny by appellate courts, according to an April 27th article in the Los Angeles Daily News.

Which only means that Simi Valley residents may have to hold their breaths a long time before the Santa Susana Lab gets the cleanup it needs, whether it’s by federal or state standards.

Stephen T. Holzer is a Environmental Attorney, Shareholder and Chair of our Environmental Law Practice Group. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

 

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