California Appellate Lawyer Blog

There are times when real estate brokers will claim entitlement to a commission, even though the sale of the real property in question has not been completed. One such case is presented in RealPro, Inc. v. Smith Residual Company LLC (filed February 28, 201) 2012 DJDAR 2655.

Defendant listed its vacant land for sale with its listing broker on the following terms: $17 million cash or such other price and terms acceptable to defendant and additional standard terms; a cooperative broker may enforce the listing agreement as a third party beneficiary (4% total commission). Within the listing period, plaintiff broker submitted to the listing broker a written offer to purchase the property for the full price of $17 million, all cash. About one month later, defendant responded with a counteroffer of an increased listing price of $19.5 million. The counteroffer was not accepted. Plaintiff eventually demanded its 2 percent brokerage fee and sued defendant for refusing to pay.

In Riverside Superior Court proceedings, defendant demurred on numerous grounds including condition precedent: that the listing price was alternatively such other price and terms acceptable to owner and escrow must close prior to payment of any commission. The trial court sustained the demurrer without leave to amend. The Court of Appeal, 4th Appellate District, Division Two, affirmed, concluding that the allegations of plaintiff's action established as a matter of law that there was no enforceable written contract entitling plaintiff to a commission.

Continue reading "Full price offer does not invoke offering real estate broker's contractual right to commission" »

In 2002, hoping to reduce construction litigation and the impact on housing costs, the California Legislature enacted Civil Code sections 895-945.5 that included a nonadversarial prelitigation procedure requiring home purchasers, who believe their home may be defective, to give the builder notice of the claimed defects and an opportunity to investigate and repair the defects prior to the homeowner being allowed to bring a lawsuit. Section 914, subdivision (a), allows the builder to provide in the home purchase contract an alternative procedure to that provided by statute so long as the alternative procedure is "fair and enforceable."

In Anders v. Superior Court (filed February 7, 2011) 2011 DJDAR 2137, the homeowner petitioners, owners of 54 homes built by real party Meritage Homes, filed their lawsuit for alleged defects without exhausting the prelitigation procedure. Meritage moved in the trial court to require the procedure it had prescribed in its home sale contracts. The Stanislaus County trial court found the particular procedure set out in the contracts unconscionable and unenforceable; however the court found it appropriate to require the homeowners to comply with the statutory prelitigation procedures. The homeowners petitioned the California Court of Appeal, Fifth Appellate District, to be relieved of this prelitigation requirement claiming the unenforceability of the builder's contractual procedure exempted them from having to comply with the statutory procedure. The appellate court agreed with the homeowners, with the exception of two homeowners whose contractual provision contained an election to use the statutory procedure.

The Court of Appeal points to the plain language of the statute that stated the builder's election was binding regardless of the success or unenforceability of the builders own contractual provision; that the builder waives the statutory provision by so electing. The trial court tried to take a practical approach, in the appellate court's view, by thinking the statutory procedure "would not harm them (the homeowners) and might be beneficial." But the problem with that thought, as is correctly noted by the appellate court, is the statute absolutely precludes such recourse.

Continue reading "Home Construction Defect Case Prelitigation Procedure Under California Civil Code Section 914 Backfires on Homebuilder Drafting Its Own Contract Provision" »

In the last posting concerning the Villa Vicenza case, I discussed how the appellate court there refused to enforce a CC&R, asserted under Civil Code section 1354. In this posting, I discuss Monterey/Santa Cruz County Building and Construction Trades Council v. Cypress Marina Heights LP (filed January 10, 2011) 2011 DJDAR 1324, in which the 6th District enforces a CC&R provision, recorded by a prior landowner/developer, against a developer who later acquires the property (not the immediate successor) and who, among other defenses, claims its contract to develop the property does not require compliance with the "prevailing wage" term of the CC&R's.

The Fort Ord military base was closed and being redeveloped into a residential community. The City of Marina's Redevelopment Agency worked with the Fort Ord Reuse Authority (FORA) to acquire the property for nominal consideration. FORA adopted a master resolution (that was incorporated into an implementation agreement with City) that had a chapter entitled "Public Works Contracts" that included a provision that required any developer entering into an agreement with FORA to develop the property to pay prevailing wages to construction workers. When FORA gratuitously transferred ownership to City, this prevailing-wage requirement was among the restrictions recorded as "running with the land." City later conveyed the property to Cypress Marina Heights (CMH) for market-value consideration for CMH to develop; this purchase agreement did not require payment of the prevailing wage. Plaintiffs, representatives of local construction workers, sued CMH for declaratory and injunctive relief requiring CMH to pay prevailing wage on this project. Trial court granted plaintiffs summary adjudication and the appellate court affirmed.

Among its contentions on appeal, CMH argued that the FORA/City deeds did not actually bind successors-in-interest (as the covenant appears to be directed only at those directly contracting with FORA) and that City did not put the prevailing wage requirement into its contract with CMH. The appellate court disagreed, finding that the recorded deed language was not susceptible to CMH's interpretation, that the covenant stated it "ran with the land in perpetuity" and that the city's covenant in the deeds expressly stated that it covenanted "for its successors," as well as itself; the covenants thus facially complied with Civil Code section 1468 (the "double covenants" section of the code that parallels with section 1354).

As a former California Court of Appeal Justice, I don't quarrel with this reasoning that the recorded covenant was binding as complying with the statute. What is interesting is the contrasting policy and interpretive views taken here in comparison with Villa Vicenza. There it appeared the court side-stepped Civil Code section 1354, or at least determined that to enforce the covenant under that statute was "unreasonable," in finding the legislature could not have possibly meant to allow developers to have the continuing and irrevocable right to enforce an arbitration covenant against homeowners with whom they did not directly contract. It sounds like a developer gets the short end of the stick whether it is the party asserting or denying that the covenant should be enforced because, as a matter of policy, a developer should know better.