Are You Underwater on Your House/Property? Inform Yourself of Alternatives/Consequences of: short sale, foreclosure, deed in lieu of foreclosure etc.

Preliminarily, neither this blog post nor any potential consultation services you may retain Bustarde Law for are intended or comprise loan modification services. Bustarde Law does not provide loan modification help, and consumers are expressly advised to be careful in retaining anyone for such help.

That disclaimer aside, homeowners, property owners, and any tenants of any property owners should make themselves aware of the law and their options when a property they may have an interest in is too expensive for the owner to keep.

Foreclosure is not the only potential conclusion where someone cannot make payments. Certainly a loan modification is an option but one must be aware that seeking a loan modification does not necessarily stop the foreclosure and thereafter eviction process.

If a property is worth more than the amount of debt then a Deed in Lieu of foreclosure may be available.

A short sale might be another reasonable alternative and with the new anti-deficiency law regarding short sales in California, that option becomes more attractive.

The rights of tenants are generally controlled by their leases, however other statutory considerations come into play if a tenant's leasehold interest is affected by a sale of the property. The amount of time a tenant has resided on the property may entitle the tenant to a greater notice period before they must vacate. Also, whether a sale occurs at a foreclosure sale or as a result of a owner initiated short-sale will affect the landlord/owner and tenant's respective rights.

Call Darwin Bustarde or visit Bustardelaw.com to learn about what options and considerations are implicated regarding your property or home.

Did you contract with an unlicensed contractor? Get your money back!!!

If you believe your (potential) contractor is unlicensed contact an experienced attorney to determine what rights you may have and visit the Contractor's State Licensing Board's website.

California's Contractor's State License Law is a comprehensive statutory scheme governing the construction business. It is codified in statute at Business & Professions Code section 7000 et seq. The State License Law provides "no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required...." (California Business & Professions Code Section 7031.)

There are a couple of exceptions to that law. But basically, if the person who is performing work on your home or building is unlicensed and you refuse to pay them, the person cannot file a claim against you even if the work meets the standard of care (not deficient).

You should also know that if you do sue an unlicensed contractor, the unlicensed contractor cannot claim an "offset" for the work that he performed. (White v. Cridlebaugh (2009) 178 Cal.App.4th 506.)

California has set up a statutory scheme that is intended to help consumers. Contact Darwin Bustarde to discuss your options and to obtain substantive legal advice and representation. The general information described above provided to help prompt you to analyze whether you need to conduct further research or hire an attorney, and is not intended to be relied upon for you to take definitive legal action that may affect your rights.

Why Fight a Traffic Ticket and If I Do Why Hire an Attorney?

To win, or more accurately, to minimize your liability for penalties or points on your driving record.

First, it is entirely possible for you, by yourself, to review the law (Vehicle Code section) that you were ticketed and alleged to have violated, and prepare a defense to present at the traffic court hearing/trial. However, consider the time it will take for you to review the vehicle code (in addition to the time it takes to even find one to review, like at a law library), analyze what you are alleged to have violated, prepare a defense, and appear in court. Darwin Bustarde, Esq. of Bustarde Law can lessen or eliminate the time and effort you would have otherwise have to personally dedicate to present a competent defense.

Moreover, it is important to obtain a reasoned analysis of the alleged violation. California's Vehicle Code is long and complicated, and the individual provisions in it can be too. This actually can help you in your defense. The more complicated the statute the more legal "elements" that have to be proved to establish your alleged guilt.

For example, if you have been cited for a speeding violation under Vehicle Code 22350 (the "Basic Speed Law") you can potentially establish your innocence by relying on the provision that requires the state (ticketing officer generally) to prove that your speed was "greater than is reasonable or prudent" or endangered "the safety of persons or property."

In other words, establishing that even though you may in fact drove faster than the posted speed limit may not be enough for the state to prevail. Your driving may still be "legally" reasonable.

To establish this you could testify to this fact yourself (which would be the case regardless of whether you hire an attorney or not) but also get the state/prosecuting agency to prove your point too. This can be done by some artful questioning and review of the officer's notes or the ticket itself.

Police officers are trained to testify to establish the necessary elements to prove a violation occurred, and they will likely leave out the rest. Good questioning can establish that when you were ticketed on Mission Boulevard that traffic was light when you were allegedly speeding, visibility was good, other traffic was in fact moving at the same pace as you, etc.

An attorney knowledgeable in the nuances of the law and burden of proof can present a defense even where the violation appears clear cut. Additionally, an attorney's input can identify other "defenses" that you may not have considered. Look out for upcoming posts for additional information.

If you have been ticketed for a traffic infraction call or email Darwin Bustarde to begin discussing your options. He offers reasonable flat rates for his services. For matters to be heard at the Vista Courthouse in north San Diego County he can represent you for a flat rate of $100.00.

Bustarde Law Now Offers Traffic Violation Related Legal Services

Darwin Bustarde, Esq. is pleased to offer low-cost reasonable representation and consultation for your alleged traffic/vehicle violations.

If you have been ticketed for speeding, running a red-light, a non-moving/parking violation, fix-it-ticket or other traffic infraction call Bustarde Law.

While in many cases traffic infractions cannot be defeated, many people needlessly fail to present any kind of defense or fight the ticket at all. Additionally, many people do not realize, for example, that what you are ticketed for may not be the most appropriate characterization of the actual violation that may have occurred. More specifically, some violations carry greater/different penalties than others. You should consult with an attorney to learn your rights and potentially fight your ticket.

Retaining an attorney will help ensure that you've done everything you can to fight your ticket, and minimize your liability (avoid a point on your record potentially, get extraneous charges dropped, minimize discretionary monetary penalties) and potentially also save time out of your busy day by having an attorney appear on your behalf in court if a trial is necessary in traffic court.

So You Want to Dissolve Your Corporation...

Numerous factors come into play when considering whether to dissolve a corporation that you are a shareholder or director in. The first is whether you can even do so, and under what method (judicial action or non-judicial action).

For example, an involuntary dissolution action can be filed with the court to dissolve the corporation in instances where those in control of the corporation have committed fraud or there is a deadlock among the shareholders. (California Civil Code Section 1800 et seq.)

There is also the option of seeking voluntary dissolution. For a more detailed discussion of voluntary dissolution, please click here.

In either situation, there is the potential for the corporation or the remaining shareholders to buy-out the party(ies) seeking dissolution.

Reviewing your options with an attorney and financial advisor will help ensure you make the most informed decision possible.

Dangers of Social Media: Watch what you post, tweet, or blog about!

Nowadays, everyone has a website, blog or account with social media sites like Twitter, Facebook or Myspace. The great thing about those resources is the ability for a person to immediately voice their opinions or keep others up to date about what you are doing. The bad thing is that people tend to publish on social media without considering the legal ramifications of their social network activities.

Comments and information that you publish online can be discovered in a subsequent litigation (assuming of course the information sought is discoverable/relevant pursuant to civil litigation rules).

For example, a resident of Escondido who submits a worker's compensation claim for disability, who later tweets about going hiking on Cowels Mountain in Mission Trails during the supposed period of disability, probably just created great evidence to fight his or her claim.

That same person might also blog about his experience and later realize that his blog post about his hiking trip contradicts his claim for disability. He or she might then try to delete the post. Be aware there are websites that crawl the internet and archive snapshots of other websites for archiving purposes. So just because you modified your webpage to remove information that you later realized should not be published, does not mean that there aren't other ways to reaquire that information.

One general rule of thumb is to stop before you publish, and ask yourself: "Is this something that I may not want someone to see in the future?" If the answer is yes, then you may not want to publish it.

The dangers of using social media also extend to businesses. A business must be careful not to unwittingly create liability for itself using social media. A business that uses social media to correspond with potential clients could unwittingly cause the potential client to believe he is an actual client, or that a comment made informally in a tweet is a "guarantee." To address issues like this, businesses should review their on-line presence from a risk management perspective. For example, an attorney can help you determine whether something like a Terms & Conditions or Disclaimer (see the blog post on this topic by clicking here) should be used, and how.

Plan Ahead! Considerations for Doing Business On-Line

You may just have set up your business' website, or maybe you are considering transacting business with a company with an on-line presence. In either case, you should perform an objective risk management analysis to determine your potential liabilities and conversely what your potential avenues of remedy might be if a dispute arises. A couple of questions that you want to ask include:

Is There A Terms & Conditions Or Disclaimer Provision On The Website?
Most small businesses look to the internet to help generate business. However, without adequate control your marketing plan or potential client intake procedures could create unforeseen liability.

For example, a small local San Marcos, California business’ website is viewable anywhere. Without a Disclaimer or Terms & Conditions provision, that small business owner might be opening him or herself to be sued by someone in New York or other place the person never thought he or she would ever do business. If a small business decides to use a website, it should take care and perform a risk management assessment on itself. A website that clearly delineates its target audience, and if appropriate explains that nothing in it is to be taken as a guarantee (unless you actually intend to make a guarantee) can help avoid confusion and unjustified reliance in the future.

Businesses want to establish a connection with their potential client by inviting an on-line inquiry/application. Businesses should take care to analyze the potential risks in doing so, by asking questions like:
- Is your invitation for an application intended to create a formal contractual relationship?
- Are you guaranteeing that services will be provided?

A properly worded Terms & Conditions or Disclaimer can help you control your risk in the future.

From the consumer's standpoint, reviewing a company's Terms & Conditions or Disclaimer can help give you a sense of how the company treats disputes with its customers.

Is There a Forum Selection Clause in the Contract/Website?
Probably included in the Terms & Conditions or Disclaimer is a Forum or Venue Selection Clause.

A contract that specifies what law is to be applied and what jurisdiction any future potential legal dispute should be litigated or arbitrated in can predetermine whether an action even gets filed. A forum selection clause will specify that any legal action has to be filed in a particular jurisdiction. Frequently, the state law to be applied will be the same state where jurisdiction is agreed to by the parties. However, it is possible to specify a particular jurisdiction as the venue but also another state’s laws will be applied. This type of clause will not stop someone from filing a lawsuit in contravention of the contract (in another state for example). However, it will help control how and where a matter is determined.

Other important considerations should be considered that might affect what law and jurisdiction applies: did you actively solicit or do business in another state, does your business implicate federal statutes, etc. While a forum/venue selection clause could help you mitigate your risk, you should consult with an attorney for more specific direction or advice concerning your business dealings.

Again, from a consumer's standpoint a forum or venue selection clause should be analyzed from a risk management prospective. For instance, if you foresee the possibility of a dispute arising between you and the business, transacting with that potential out-of-state business may not be advisable.

Business and contract attorney Darwin Bustarde can help you analyze your contracts and websites from a legal/risk management perspective. As a solo-practitioner and small business owner himself, he knows first hand the important considerations in marketing and conducting business on-line. Contact him for reasonable hourly rate, flat-fee, or maximum fee legal services to help you control your costs in order to make your business more efficient from a business and legal standpoint.

Is the Warranty of Habitability/Tenability Waivable?

In California, the answer is a qualified "no."

In summary, sections in California's Civil Code generally prohibit such waivers. See section 1942.1 et seq. for example.

For a more detailed post on the subject, visit Bustarde Law's Legal Blog on Real Property, Landlord-Tenant, HOA and other Real Estate Law matters by clicking here, or the title above.

Attorney Darwin Bustarde can provide landlords and tenants inexpensive consultation, litigation and other services to help you understand your rights.

Recording a Phone Conversation is Likely Illegal in California, But....

Recording a telephone conversation without the other party(ies)'s consent is a violation of the Penal Code. See California Penal Code Section 632 et seq.

Under California law, recording a conversation without consent carries with it potential monetary penalties and imprisonment.

Additionally, a person "injured" by the recording can bring a civil action to recover, the greater of, $5,000.00 per violation (recording), or three times actual damages, if any, suffered. Notably, there is not a prerequisite showing that a person actually suffered actual damages in order to recover the $5,000.00 penalty.

However, not all recordings are illegal, for example, a recording to obtain evidence related to a commision by one of the parties to the communication a crime like extortion, kidnapping or bribery. Calif. Civil Code Section 633.5. Also, while there is a general prohibition on the use of illegal recordings at a court proceeding, California has created certain exceptions to this rule (for example, potentially for impeachment purposes, or to use to discover other admissible evidence).

One other general point to consider is that not all states treat surreptitious recordings the same as California. In New York, for example, only one party's consent is needed to record a conversation.

The question arises whether an unauthorized recording with an out-of-state person is illegal. Here in California it is. The case, Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal 4th 95 dealt with a situation where the conversations between California residents/clients were recorded by a company's Georgia office without their consent. In Georgia, that type of recording was lawful. The Californians sued for invasion of privacy. The California Cour of Appeal determined that even though the recording was lawful in Georgia, that application of section 630 et seq. was proper.

Many times in business, real property or any other transaction, for whatever reason, one party might feel compelled to secretly record a conversation. Even though California law provides for potentially substantial recoverable civil penalties in favor of the victim, it should be noted that discrete exceptions in the law exist that might allow the introduction of the statements into evidence despite their illegal origin. Conversely, though a party may be willing to risk that civil penalty and secretly record a conversation to develop evidence, generally such evidence may likely be subject to exclusion.

Whether you are a victim of a secret recording or you have secretly recorded a conversation in order to develop some kind of claim of your own despite the potential for a counter-claim against you, good investigation, analysis, law and motion, and discovery by an experienced attorney can aid you in determining what the legal ramifications might be of a potential illegal recording.

Identify and Protect Your Business' Trade Secret Confidential Information

Does your business have important confidential information that it wants to protect from others?

If so, you may have a Trade Secret.

California Civil Code Section 3426.1 defines a trade secret as:
"information, including a formula, pattern, compilation, program, device, method,
technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally
known to the public or to other persons who can obtain economic value from its disclosure
or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy."

As you can tell, the definition is very broad. A trade secret can comprise many things from the tangible or intangible like a software program/source code, recipe, or a compilation of even publicly client or customer list. A customer list is a simple example of what any business might have that could constitute its trade secret. Some of the characteristics that establish that a customer list is a trade secret include where the list might include:
• Customer information that is not “readily ascertainable” to competitors;
• Customers’ particular requirements/preferences;
• Customers particular habits; and
• Key contacts of the client (if an entity).

Many businesses or persons might have a trade secret without evening knowing it. However, merely something calling a trade secret is not sufficient, though it is a starting point. Businesses must identify its potential trade secrets and then examine what if anything it has done, does or should do to make sure it remains a secret. A business should also examine how it has treated and potentially distributed the trade secret material in the past. Frequently, a business will disclose its trade secret as a necessary part of providing its services, or as a marketing tool. That type of disclosure could destroy its status of a trade secret if done improperly.

Businesses should therefore take care in how they treat their confidential materials. Some points to consider include the following.
• Identify important materials that you believe to be your trade secret.
• Analyze the value of the material and whether it is valuable because it is secret.
• Have you disclosed the material that is potentially a trade secret to others who are not
under an obligation to keep its secrecy? For example, have you disclosed to employees
without a effective employee agreement; clients without a client agreement; on the web or in
marketing materials, etc.? If so, it might not qualify as a trade secret.
• Potential trade secrets that have been disclosed in a piecemeal fashion may not qualify as a
trade secret.
• What have you done to try to keep the information secret?
- Implement and enforce confidentiality agreements with clients, employees, etc.
- Keep the material under physical lock and key.
- Limit access to the material to just those who need to know it.
- Inform employees what materials are trade secret so that everyone in your business
knows to help protect the materials’ secrecy.


Businesses should work to protect its valuable information. It is advisable to consult with an attorney to help determine whether you have a trade secret, whether the business has taken adequate steps to protect its secret information, and whether its confidential secret information has been stolen. If you have a trade secret, call Darwin Bustarde to speak with an attorney extremely knowledgeable in trade secret/misappropriation law to help you protect your trade secrets or to help prosecute your rights if someone has stolen or is threatening to improperly use your trade secret, i.e. a former employee at his or her new employer/competitor.

Unlawful Detainer/Evictions: The Three (3) Day Notice, The Landlord's Concerns

A Three (3) Day Notice is required to initiate a Unlawful Detainer (Eviction) action as described in California Civil Code Section 1161, including:

• tenant's failure to pay rent;
• tenant's failure to abide by the lease terms;
• nuisance by the tenant;
• waste by the tenant;
• unlawful use of the property by the tenant; and
• the property has been sold pursuant to a sale under execution, mortgage or trust deed.

Depending on what acts or omissions the tenant has committed, a 3-Day Notice to Pay or Quit, and a 3-Day Notice to Cure or Quit (also may be termed something like-3-Day Notice to Perform Covenants or Quit) may be served on the tenant together. For example, if the tenant has failed to pay rent and is committing a nuisance on the property, both notices may be proper.

The landlord must take care when filling out the required information on the notice(s). If the notice is incomplete, incorrect or contains extra information or allegations that are not allowed by law, then the notice may be defective. A defective notice may cause the landlord to lose his unlawful detainer case.

Examples of defects/issues that the landlord should be aware of include:

• not stating the name of the actual tenants;
• not identifying the address/property;
• failure to state the exact amount of rent owed (or a reasonable calculation/approximation as may be allowed by law);
• overstating the amount (including claims for unpaid utilities, late fees, interest, etc.)
• including a claim of rent beyond a years time;
• failure to state that the tenant has 3 days to pay the amount at a particular day and time or the tenant must move out;
• say what the tenant did or failed to do to break the lease and alternatively state that the tenant has 3 days to fix the problem or move out;
• and simply sign and date the notice.

Landlords should carefully review the terms of the lease. For example, some leases might specify that a late fee is deemed to be "rent" under the lease, thereby creating the potential to claim the late fee as part of the rent owed in a 3-Day Notice to Pay or Quit.

Bustarde Law can help analyze your situation with your tenant to determine the correct notices to serve, the correct information to provide, and the correct procedure to serve the notices and thereafter file an eviction action. Oftentimes, an attempt to evict someone is delayed or fails unnecessarily because the notice contained a seemingly minor discrepancy.

An eviction action is a complicated process based on specific statutory requirements. The foundation of the action is the notice. If the notice is defective then the action will likely be too.

The California Court system provides a helpful website containing general information (including that summarized above) concerning unlawful detainer actions on its website, click here. Also, Mr. Bustarde offers extremely reasonable hourly and flat rate fees to help landlords, especially non-professional landlords, evict tenants to make their properties money generating resources again.

Contracts to Indemnify: The Duty to Defend May Arise Independent from the Duty to Indemnify

Contracts between parties frequently contain indemnification provisions. Potential indemnitors should carefully review indemnification provisions to understand when and for what they may be held liable for. UDC-Universal Development, L.P. v. CH2M Hill (2010) 181 Cal.App.4th 10 provides an example of how misunderstanding the effect of an indemnity agreement could lead to a serious miscalculation of a party's potential liability.

In UDC v CH2M Hill an engineering consultant contracted with a developer to provide professional services for a condominium developement. The HOA to thenew development sued the developer. The developer filed a cross-complaint against the consultant and others involved in the project.

The consultant agreed to indemnify the developer for losses connected with any negligent act or omission by the consultant. The provision went on to specify that the consultant agrees to defend any action (pay for the litigation and attorney fees) brought against the developer at the developer's written request.

The consultant refused to pay the developer's defense fees and successfully established at trial that it was not negligent. Based on that finding it argued that it should not be responsible for paying the developer's costs of defense. The court disagreed and found that the duty to defend arose when the developer cross-complained against the consultant. Again, this is despite the jury's finding that the consultant was not negligent.

Even though the consultant was ultimately not responsible for general indemnification of the damages paid for by the developer, as you may already know, the costs of litigation can frequently exceed the alleged actual damages in a case.

The message of this case is that contracting parties must avoid broad indemnity language whenever possible. The potential indemnitor should search for such broad language and at the very least address the danger of it by attempting to limit the scope of indmenification by cleary linking the duty to defend to an adjudication of liability or other finding acceptable to the potential indemnitor.

If you are presented with a contractual provision whose scope of affect is uncertain that you want reviewed, please feel free to contact Bustarde Law to speak to an attorney experienced in contract review, drafting, negotiation and litigation.

The Deferrence Given to HOA Maintenance Decisions is Not a Blanket Immunity

A homeowners association ("HOA") of a common interest community enjoys "judicial deference" concerning ordinary maintenance decisions. Individual owners who might believe their HOA caused or failed to prevent a problem, like a burst pipe in a common area, flooding, termite infestation, etc., should educate themselves and consult an attorney regarding the viability of the potential claim and anticipated defenses.

A court will defer to the ordinary maintenance decisions of an HOA, where the HOA selects from various means a method to maintain or repair a development's common areas. This deference is an affirmative defense that the HOA can assert to protect itself from liability. To do so, the HOA must show that it performed a reasonable investigation, in good faith and with regard for the best interests of the community and members, pursuant to its authority under the law and CCRs. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253.

Last month, the Court of Appeal, Fourth Appellate District, held that the judicial deference does not shield an association from liability for ignoring problems and explained it protects an HOA's good faith decisions to maintain and repair common areas. Affan v. Portofino Cove Homeowners Association, et al. (2010) 2010 DJDAR 16702. In Affan, owners in a condo complex complained of sewage backups over the years. The HOA discussed possibly hiring someone to clean the sewage lines but never actually took action. Eventually, it hired a pluber to clean the linem, however by that time the lines were so clogged that a special method of cleaning was required but was not used. As a result, after the cleaning, a serious "sewage eruption" occurred.

The Court of Appeal found that the HOA in responding to the sewer line issue did not make a "maintenance decision." Therefore, it could not avoid liability for the sewage problems under the judicial deference doctrine. As an aside, the Appellate Court also described that the HOA's managing agent could not rely on the judicial deference doctrine because it was not an HOA.

Affan v. Portofino provides an instructive example for HOA Board Members and owners, of the type of conduct an HOA will be expected to perform. If you are involved in an HOA or common interest development feel free to contact me and I would be happy to discuss the law and concerns that regard defects like that addressed above and other issues.

New Anti-Deficiency Protection for Short Sales in California

More homeowners are considering "short selling" their home in these hard economic times as an alternative to foreclosure. A "short sale" is where a home is sold for less than the homeowner owes to his or her lender or mortgage holder.

However, the mortgage holder/lender who received less than the full amount of the debt owed to it could still pursue the homeowner for the difference remaining on the indebtedness after the short sale. To address this, Governor Schwarzenegger signed Senate Bill no. 931 to provide anti-deficiency protection for borrowers. This protection applies to pre-existing, previously negotiated mortgage loan contracts subject to actions filed on or after June 1, 2011.

SB931 adds section 580e to California's Code of Civil Procedure. Pursuant to this new section: if the mortgage holder gives its written consent for the "short sale" then the mortgage holder must accept the proceeds of that sale as full payment and discharge any remaining claims it may have against its borrower for the remaining amount of indebtedness.

Homeowners should take care to note that section 580e is written with specific reference to a: "note secured by a first deed of trust or first mortgage." SB931 [setting forth the language of C.C.P. section 580e.]. Therefore, homeowners that have a second mortgage or HELOC, may not be able to completely rely on this new law to protect themselves from liability for amounts owed under other notes that are secured by their homes. Also, as indicated above, an anti-deficiency action filed before June 1, 2011, may not be precluded by this new law.

Before taking any action in reliance on this new law, homeowners should take care to consult with an attorney or perform their own legal research. California's leginfo.ca.gov is one helpful website to start with.

Beware: An Unlawful Detainer Following Foreclosure May Affect Your Claim for Ownership

A homeowner facing foreclosure and potential sale of his or her property by the mortgage holder may believe that the foreclosure or subsequent sale was conducted improperly. A homeowner may have a cause of action to dispute the validity of the foreclosure or sale. It is advisable for a homeowner to consult with an attorney to determine if a lawsuit may be appropriate to challenge the foreclosure.

This post regards the situation where a lender has sold a property under a foreclosure sale and has initiated an unlawful detainer proceeding to evict the borrower/homeowner. The borrower/homeowner may have a viable claim to attack the validity of the foreclosure sale. For example, if the statutory procedures for a foreclosure were not followed properly. The borrower/homeowner will therefore likely file its own lawsuit separate from the UD action.

An unlawful detainer proceeding is an expedited avenue to determine issues of possession. However, a judgment granting possession to the lender or purchaser in the UD proceeding could negatively affect the borrower's action to determine the underlying ownership and title issues. It could do this under a legal doctrine called collateral estoppel, or stated very simply- a litigant cannot relitigate any issue that was necessarily included in a prior final judgment.

An unlawful detainer proceeding is an expedited process intended to determine the issue of possession. Therefore, a judgment arising from a UD action is generally given limited res judicata or collateral estoppel affect. This means that generally the findings in a UD action cannot necessarily be used in a later action involving the same property/parties.

However, homeowners/borrowers should be aware of recent case law regarding the collateral estoppel effect that may be given to an unlawful detainer judgment in another proceedings, for example the borrower/homeowner's hypothetical action to oppose the underlying foreclosure.

In Malkoskie v. Option One Mortgage Corporation (2010) the Malkoskies' property was sold to a third party purchaser in a foreclosure sale. The Malkoskies remained on the property and the purchaser-Wells Fargo filed an unlawful detainer action to remove the borrowers from the property. The Malkoskies filed a separate quiet title action to set aside the foreclosure sale and eviction. The Malkoskies contended the sale was not properly conducted and therefore Wells Fargo did not properly obtain valid title to the property.

At the time of trial for the UD action, the Malkoskies and Wells Fargo agreed to a stipulated judgment to resolve the UD action. The case is silent as to the reasons why the Malkoskies agreed to a stipulated judgment, one reason might have been that in doing so Wells Fargo may have agreed not to pursue ancillary damages, costs or fees recoverable in a UD action.

Then, Wells Fargo challenged the Malkoskies' action to set aside the sale and eviction with a legal pleading called a demurrer. The court sustained the demurrer and judgment for Wells Fargo was entered. The court found that the stipulated judgment amounted to the Malkoskies conceding that the sale was "duly conducted and operated to transfer 'duly perfected' legal title to the property.'" The court referred to Code of Civil Procedure section 1161a, which regards UD actions and describes that a purchaser who brings a UD action following a trustee's sale must show that the property was sold in accordance with section 2924 of the Civil Code (regarding power of sale in a deed of trust). The UD action was based on whether the power of sale was proper. Since the borrowers stipulated to judgment that it was, the borrowers could not thereafter claim otherwise in their separate action to quiet title.

Malkoskie v. Option One Mortgage Corporation presents borrowers with difficult choices.

A UD action is generally not the ideal forum to litigate issues concerning title or whether a trustee sale was proper or not. Going forward with the UD action risks creation of the collateral estoppel issue that the Malkoskies faced. Surrending possession under terms that allow the issue of ownership to be determined later may be possible but by no means guaranteed and assuming the purchaser or lender agrees, that option will probably require the owner to leave the property.

One of the better alternatives is for the borrower to seek a stay of the UD action and request that the UD action be consolidated with the borrower's litigation to determine title. This last option means that the issues of possession and ownership are determined together in the borrower's hypothetical concurrent action to determine title. Of course, lenders or purchasers will likely oppose consolidation if it means that eviction is stayed. Additionally, a borrower must be very vigilant in protecting their rights by seeking consolidation as soon as possible, because if consolidation is denied and a stay is not granted on the UD action, the borrower will need to address the possibility that he or she will need to litigate the issue of ownership in the expedited UD proceeding.

Borrowers who believe the foreclosure process has proceeded improperly or that the sale somehow violated statute should take care to consult with an attorney regarding the issues addressed briefly in this post and other legal issues. Feel free to contact Bustarde Law regarding your real property, business or contract matter.

Oral Contracts for Home Improvement Work Can Be Enforced

Home owners that engage the services of a contractor for home improvement work are generally protected by the requirement that a home improvement contract be in writing and contain certain specific requirements. California Business & Professions Code section 7159.

Last month, the California Court of Appeal, Second District upheld enforcement of an oral contract for home improvement services. Hinerfeld-Ward Inc. v. Lipian (2010) 188 Cal.App.4th 86.

In Hinerfeld-Ward the Lipians retained an architect to design a major remodel to a single family home. They retained a contractor that left the job because of repeated design changes and replaced that contractor with Hinerfeld. No written contract was entered.

The Lipians terminated Hinerfeld, leaving an unpaid balance to him of $200,000.00. Hinerfeld sued the Lipians who counterclaimed, stating in part that Hinerfeld violated section 7159 making the oral contract void. The Court of Appeal upheld the jury's finding of a contract that Hinerfeld substantially complied with and affirmed the trial court's award of damages in favor of Hinerfeld in addition to attorneys fees.

The Appellate Court noted that enforcement of the contract was justified: to avoid unjust enrichment to the Lipians, and because the Lipians had the benefit of their architect to look out for their interests.

The Appellate Court also upheld an award of attorneys fees based on Civil Code section 3260 et al. That, and related sections, provide for a penalty to be assessed where one wrongfully withholds amounts owed to the contractor pursuant. The Appellate Court found that the penalty contemplated under the statutory scheme also includes an award of attorneys fees under 3260.1. Consequently, $200,000.00 in attorney's fees was awarded to Hinerfeld.

The opinion is silent whether the Lipians relied on advice of counsel to withheld payment or to support a belief they ultimately could avoid payment to Hinderfeld on an assertion that the oral contract was void. However, it is a helpful example of the importance of retaining legal advice before relying upon or taking definitive action where there is a potential dispute.