April, 2011 browsing by month


Yours, Mine and Ours

Sunday, April 17th, 2011

Concerning duties of the homeowner in a common interest subdivision.

NEWPORT BEACH, CA–Dover Village is a 38-unit condominium complex, governed by the aptly named Dover Village homeowner association (“HOA”).

The Dover Village condominiums

One unit here was owned by Patrick Jennison when, in July 2007, Patrick noticed seepage coming up through the floor. It seemed to be from a sewer line.

Patrick contacted the HOA, and its property management company sent a contractor to investigate.

The contractor figured the seepage came from sewer pipe installed by the builder in 1965, so he ripped up the flooring and jackhammered the concrete slab foundation.

Finding a burst pipe two feet beneath the slab, the contractor determined it had to be replaced. So the contractor jackhammered and dug some more, finally clearing a trench about 50 feet in length through Patrick’s living room and into the front yard.

Patrick's unit, center

After the pipe was replaced and the slab repaired, Patrick replaced carpeting and floor tiles and sent a bill to the HOA for $2,235.

The HOA refused to pay and, on advice of its attorney, the Board of Directors sent Patrick a letter demanding reimbursement for repair work to the tune of $15,453. The Board said the sewer pipe “exclusively serviced” Patrick’s condo, so was his to maintain and repair.

The HOA and Patrick headed to court, where the judge ruled that the sewer pipe is common area to be maintained by the HOA. The judge also awarded Patrick $16,490 for attorneys’ fees and costs. The HOA appealed.

On appeal, the HOA referred to its governing CC&Rs (conditions, covenants and restrictions) which distinguish “common areas” within the condo complex from “exclusive use common areas” servicing a single unit. Patios and garage areas are, for example, exclusive use common areas. It’s the duty of the condo owner to maintain his (or her) exclusive use common areas and, the HOA said, a unit’s sewer pipe should be treated no differently than its patio or garage.

Patrick answered saying the CC&Rs also state that “pipes” and “other utility installations” are not part of the condo unit, unless “located within the physical boundaries of the unit.” Since the pipe was beneath the slab, Patrick argued it’s in common area and a responsibility of the HOA.

The California Court of Appeal, Fourth District, Division 3, at Santa Ana

The Court of Appeal affirmed the trial court, agreeing with Patrick and holding the sewer pipe is “common area.”

Referring to the CC&Rs, and to California’s common interest subdivision statutes, the Court said sewer pipes are interconnected  with main and lateral lines throughout a condo complex and, therefore, cannot reasonably be called “‘fixtures’ of any particular unit.”

Likewise, the Court said sewer pipes are not comparable to patio and garage areas, because it’s not reasonable to believe “individual unit owners somehow control sewer pipes beyond the boundaries of their unit.”

Moral: A key to understanding this decision is knowing how condo units are legally created and described.

Unlike a plot of land, legally described by metes and bounds or by reference to a lot on a recorded survey map, condo units are described as airspace with a fixed location in relation to land as shown by the condominium plan. The boundaries of the condo unit are its floor, walls and ceiling. Everything outside the airspace is common area, or other condo units.

And how, you may ask, did this dink-dollar case make it to the Court of Appeal? Here’s the real poop: Patrick’s legal defense was paid by his homeowners insurance carrier. The risk of a slab leak is commonly covered by homeowners insurance in California, and Patrick’s insurer saw this as a case they had to win.

The case is Dover Village Association v. Jennison, 191 Cal.App.4th 123 (Cal. App. 2010).

Mortgages and Deeds / A Contested Deed

Saturday, April 2nd, 2011

It comes to this: Is the deed void, or merely voidable?

LOS ANGELES, CA–Back in the day this two unit income property in South Los Angeles was owned by David and Florence Sims. The couple lived next door.

Back in the day: The Simses' income property

David and Florence did some estate planning and, in September 1991, they created the Sims Family Trust to hold title to their residence and income property. With the trust agreement, the Simses directed that upon their deaths the residence would be gifted to Florence’s daughter, Shirley, and the income property would go to David’s daughter, Yvonne.

David died and, as alleged in court filings, shortly after his death Florence began to show signs of dementia. She was then 86. As her condition deteriorated, Florence came to rely on her granddaughter, Sheron, to help her with medical decisions.

By December 2001, Florence was diagnosed with paranoia, hallucinations, and dementia. She signed a Power of Attorney giving Sheron authority over her health care decisions.

Florence died April 7, 2003.

Later, in November 2003, there were recorded two grant deeds purportedly signed by Florence conveying the residence and income property to Sheron. The deeds were dated and notarized as of January 2, 2002.

Sheron proceeded to refinance the properties, taking subsantial cash “out.” The income property was last refinanced in 2006, when Sheron gave Washington Mutual a deed of trust for $440,000.

By early 2008 Sheron was in default on her loans, and in April 2008 foreclosure notices were posted on both properties.

By this time David’s daughter, Yvonne, and her husband James had opened separate probates for the estates of David and Florence. They were in possession of the properties, and were surprised by the foreclosure notices. Apparently, Sheron had made payments without anyone knowing, until she ran out of money.

Yvonne and James filed complaints to invalidate the newly-discovered deeds of trust. As to the income property, they claimed the Washington Mutual deed of trust is invalid because (a) Sheron may have forged Florence’s signature on the deed giving the property to Sheron, (b) if Florence did in fact sign the deed, she lacked mental capacity to understand what she was doing, and/or (c) if Florence did sign, she lacked capacity to understand the nature and effect of the deed.

Washington Mutual (now known as J.P. Morgan) defended the deed of trust arguing the lender relied on the Florence-to-Sheron deed in good faith and, therefore, it is entitled to favored status as a bona fide encumbrancer.

The trial court ruled in favor of the lender, and dismissed the complaint. The court reasoned the deed may be voidable, but it could not be void because, at the time its loan was made, the deed appeared in county land records and the lender had no reason to question it. Plaintiffs Yvonne and James appealed.

The Ronald Reagan State Building at Los Angeles, home to the Court of Appeal

The Court of Appeal reversed, holding the deed would be void if any of the three grounds alleged by plaintiffs can be proven. “Generally,” the Court explained, “a deed is void if the grantor’s signature is forged or if the grantor is unaware of the nature of what he or she is signing. A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations.”

And, said the Court, a deed which is “wholly void” cannot ordinarily provide a foundation for good title even in the hands of a bona fide purchaser or encumbrancer.

With that, the case was remanded for trial of plaintiffs’ allegations.

Moral: This decision will not be published in the official reports, because it’s based on established law, but it shows how land records are viewed (void vs. voidable) in a deed contest.

The outcome here will likely turn on medical opinion and testimony of those around Florence in her final years.

The risk of forgery or a void instrument in the chain of title is commonly covered by title insurance.

The (unpublished) case is reported as Casonhua v. Washington Mutual Bank, 2010 WL 4193214 (Cal. App. 2 Dist.).