The Top Ten Real Property Cases of 2018

JurisdictionCalifornia,United States
AuthorStar Lightner
Publication year2019
CitationVol. 37 No. 1
The Top Ten Real Property Cases of 2018

Star Lightner

Star Lightner is senior counsel with Miller Starr Regalia. She is senior editor of Miller & Starr, California Real Estate 4th, and a contributing author of Chapter 11, "Holding Title," Chapter 19, "Landowners' Liability," Chapter 31, "Construction Law and Contracting," Chapter 32, "Mechanics Liens," Chapter 33, "Defective Construction," and Chapter 38, "Discrimination." She also is the senior editor and principal author of the bi-monthly Miller & Starr Real Estate Newsalert, published by Thomson-West.

I. OVERVIEW

It is always challenging to select the top ten real estate cases for our annual overview. The past year saw a noticeable decrease in real estate decisions compared to other types of decisions, although the California Supreme Court did assist with a couple of late-December entries. Nevertheless, while there may have been fewer Supreme Court decisions and fewer decisions overall, the variety of real estate cases and diversity of facts therein always make the selection difficult. Thus, as in the past, several "related cases" as well as "honorable mentions" are included here.

2018 Supreme Court cases included opinions concerning the meaning of "perfecting title" after a foreclosure sale in the context of a subsequent unlawful detainer, the legality of a referendum petition challenging an ordinance that attempts to align a parcel's zoning with the parcel's general plan land use designation, and the legal sufficiency of an environmental impact report's discussion of environmental impacts and mitigation measures under CEQA.

California court of appeal decisions addressed such "bread and butter" topics as the necessary elements of adverse possession and the implications of less-than-clearly drafted contractual provisions, the potential tort liability of landowners to guests injured by insects or to workers hired by unlicensed contractors, and the narrow but important issue of the authority of homeowners associations to act on behalf of their homeowners in a variety of contexts. In addition is a case representing another piece of the CEQA puzzle (one of many that could have been selected from the continuing torrent of reported decisions construing this almost 50-year-old statute), and an "honorable mention" case involving the public trust doctrine as it applies to groundwater extraction.

While selecting cases for inclusion is inevitably a subjective affair, the cases addressed below, including several "honorable mentions," met our standard for inclusion: widespread impact on the practice of real property law in California. Thus, we offer the following as the most significant real estate cases of 2018.1

II. TOP TEN CASES OF 2018
1. City of Morgan Hill v. Bushey2 A referendum petition may challenge a zoning ordinance so long as the zoning for the parcel can be made consistent with the general plan within a reasonable time.

This case examines the legitimacy and ramifications of allowing a referendum that repeals a zoning ordinance that conforms with the general plan land use, when such repeal would result in a continuing inconsistency between the zoning and general plan.

In 2014, the city of Morgan Hill amended its general plan to change the land use designation for a vacant parcel from "Industrial" to "Commercial" in order to accommodate plans to build a new hotel on the site. Concurrently, the city council approved Ordinance no. O-2131 to change the zoning from "ML-Light Industrial" to "CG-General Commercial." A coalition of other hotel owners timely submitted a referendum petition challenging O-2131 with the stated purpose of preventing development of a hotel on the site. The City agreed to submit the referendum to the voters, but at the same time filed a petition for writ of mandate seeking to have the referendum removed from the June 2016 ballot.

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Relying on deBottari v. City Council,3 the trial court granted the City's petition, ordering that the referendum be removed from the ballot and O-2131 be certified "as duly adopted and effective immediately" on the grounds that allowing the referendum could result in the zoning ordinance being inconsistent with the general plan. The court of appeal rejected deBottari and reversed, concluding that because a referendum does not seek to enact anything, and a referendum that rejects an ordinance simply maintains the status quo,4 Gov. Code, §65860 (which prohibits the enactment of a zoning ordinance that is inconsistent with a city or county general plan) did not preclude the electorate from rejecting the zoning selected by the City.5

The California Supreme Court granted review to resolve the question of "whether the people of a county or city may challenge by referendum a zoning ordinance amendment that would bring the ordinance into compliance with a change to the county's or city's general plan, even though such a referendum would temporarily leave in place a zoning ordinance that does not comply with the general plan." Noting first the courts' role to protect and "not improperly annul" the referendum and initiative power,6 the Court acknowledged that such power may be limited by preemption when the Legislature legislates on issues of "statewide concern"7 and gives a "clear showing" of its purpose to that effect.8 The Court also noted that zoning and general plans are subject to Gov. Code, §65860,9 which provides that "[c]ounty or city zoning ordinances shall be consistent with the general plan of the county or city...,"10 and must be amended "within a reasonable time so that it is consistent with the general plan as amended."11

The question was whether a referendum is the equivalent of an initiative to the extent that it causes a zoning ordinance to conflict with the general plan,12 or whether the referendum power does not conflict with §65860, subd. (a), where a local government could comply with the general plan through other zoning designations.13 The Court found the answer to be the latter: "Unlike an initiative, which acts as standalone legislation to repeal the already enacted zoning ordinance amendment, a referendum petition satisfying the statutory prerequisites suspends the effective date of the challenged zoning ordinance amendment until a majority of voters approve the amendment."14 Thus, "the referendum does not revive a superseded statute. Instead, it rejects a statutory alteration before it becomes law."15 Accordingly, the Court disapproved deBottari, declining to find the policies underlying general plans as outweighing the right to referendum.

Comment: The permissibility of allowing a referendum that results in inconsistency between zoning and the general plan turned here on whether the referendum "implements" law. The Court found that a referendum does not do so, and emphasized that important distinction between the referendum and initiative powers. However, the Court evidenced its pragmatism in encouraging simultaneous alteration of the general plan and zoning ordinances so as to minimize the likelihood of inconsistency between the two, while acknowledging that the "reasonable time" for bringing the two into alignment was not defined and might vary based on circumstances. The Court's decision also hinged, to some extent, on the availability of alternative zoning options. It observed that while 12 separate commercial zoning designations were available in the City, the factual issue of whether any of those could apply to the property here had not been adequately explored in the proceedings below. Thus, the case was remanded to the trial court "to determine whether existing alternative zoning designations would be viable for the property post referendum, and if not, what would prevent the City from creating a new zoning designation that would be consistent with both the general plan and a successful referendum."

2. Dr. Leevill, LLC v. Westlake Health Care Center16 Foreclosure purchaser's title must be "perfected" before serving a three-day notice to quit, even though unlawful detainer begins when the complaint is filed, not when the notice to quit is served.

This case addresses the issue of precisely what steps a purchaser in a nonjudicial foreclosure must take in order to perfect title under Code Civ. Proc., §1161a, subd. (b) as a prerequisite to pursuing an unlawful detainer action.

The tenant here, Westlake Health Care Center (Westlake Health), leased a skilled nursing facility under a lease with a 20-year term and an automatic and permissive subordination clause with a nondisturbance provision. After defaulting on a loan secured by a deed of trust on the facility, the property owner filed a petition in bankruptcy. The lender then sold the loan to Dr. Leevil, LLC, which obtained relief from the automatic stay, instituted a nonjudicial foreclosure, and purchased the facility at a trustee's sale. The day after the purchase, Dr. Leevil served Westlake Health with a notice to quit. It recorded its trustee's deed to the property five days later. When Westlake Health did not vacate, Dr. Leevil sued for unlawful detainer. Westlake Health alleged that its lease was senior to the deed of trust and that the notice to quit was invalid because it was served before Dr. Leevil recorded its deed. The trial court found the lease to be subordinate to the deed of trust and the notice to be valid. The court of appeal affirmed, finding that title need only be perfected before a tenant "may be removed" from the property, but not necessarily before service of the three-day notice.17

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On review, the California Supreme Court addressed whether, under Code Civ. Proc., §1161a, subd. (b), an owner that acquires title to property under a power of sale contained in a deed of trust must perfect title before it serves a three-day notice to quit on the possessor of the property. The Court first observed that §1161a(b) "has no operative effect" unless one of five enumerated situations is present: "Only when one of the cases is...

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