California Supreme Court Rules Employers Not Obligated To Police Meal Breaks

On April 12, 2012, the California Supreme Court finally issued a long awaited decision in the seminal case of Brinker Restaurant v. Sup. Ct. (Hohnbaum), (Cal. Sup. Ct., April 12, 2012) (Case No. S166350) 2012 Cal. LEXIS 3149 and ruled that while California workers have a legal right to take their rest and meal breaks on the job, employers are “not obligated to police meal breaks and ensure no work thereafter is performed.” Brinker 2012 Cal. LEXIS 3149 *59-64.

Brinker was decided at the appellate level on July 22, 2008, and has been pending before the Supreme Court for nearly four years. Among other issues, the Court finally answered the question of whether employers, in accordance with Labor Code Section 512, need to “ensure” that employees who work at least five hours MUST take their full 30 minute meal breaks, or whether employers may merely make the meal breaks available to those employees.

The Supreme Court ultimately ruled that an employer satisfies its obligation under California law if “it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.” Brinker 2012 Cal. LEXIS 3149 *64.

Contrary to the position taken by many plaintiffs’ attorneys in years past, the Supreme Court similarly clarified that the Labor Code and applicable IWC Wage Orders do not dictate in what sequential order meal and rest periods must be taken, nor do they prohibit an employer from scheduling meal periods early within the shift. Thus, while the first meal break must be made available within the first five hours, the Supreme Court held “we cannot agree that the current version of Wage Order No. 5 limits to five hours the amount of work after a meal.” That means that an employee may take their meal break and then work another six hours after, and the employer would still be in compliance.

This highly anticipated decision provides much needed clarity and relief on an issue that has plagued the California courts with countless frivolous lawsuits and caused operational nightmares for restaurants and other employers throughout the state.

In Brinker, the plaintiff-employee claimed that an employer has a duty to ensure that employees do not do work during the meal period. In contrast, the employer argued that it was only required to make meal periods available to employees. The California Supreme Court agreed with the employer, finding no textual support in the statute for such a duty and reasoning that requiring such a duty is inconsistent with the employer’s obligation to relinquish control over the employee during the meal period. The court clarified that an employer is required to provide an uninterrupted 30-minute meal period to employees, and it satisfies this obligation if it relieves employees of all their duties, relinquishes control over their activities, and does not discourage or prevent them from taking the meal period. The court did not, however, provide guidance as to when an employer has satisfied its meal period obligation, explaining that what will suffice may vary based on the industry. In a clear win for employers, the court stated that employers are not required to police meal breaks to ensure that no work is performed.

The timing of meal periods also has been the focus of litigation and the court provided valuable guidance to employers on this issue as well. Absent waiver, employers are required to provide a first meal period no later than the end of an employee’s fifth hour of work. In addition, employers must provide a second meal period no later than the end of an employee’s tenth hour of work.

The court also addressed an employer’s obligations to provide rest periods to employees. Specifically, an employee is entitled to 10 minutes of rest for shifts ranging from three and one-half hours to six hours, 20 minutes for shifts ranging from more than six hours to 10 hours, and 30 minutes for shifts ranging from more than 10 hours up to 14 hours. Contrary to the plaintiff’s claim, the court held that employees are not required to take a rest period before a meal period. The only timing constraint is that, insofar as practicable, rest breaks must fall in the middle of the work period. An employer must make a good faith effort to permit rest breaks in the middle of the work period, but the court acknowledged that it could deviate from that schedule where practical considerations rendered it infeasible.

Impact of Brinker on Employers

Brinker provided much-needed clarification to California employers regarding their obligations to provide meal and rest periods.  In the past, employers would be liable for premium pay when employees did not take a meal period, or took a shorter meal period. Brinker provides that an employer will not be liable for premium pay in this situation (however, an employer will be required to pay for such time if it knew or reasonably should have known that the employee was working during the meal period).

For all employers, including those outside of California, Brinker serves as a reminder that an employer’s best defense is to have proper employment policies and practices in place. Accordingly, employers should review their meal and rest break policies and make sure the language is compliant with state law. Additionally, employers must make sure they are not discouraging or preventing employees from taking required meal, or rest breaks and must train both employees and supervisors on such policies and practices. Taking such steps can help reduce an employer’s liability.

The Mellor Law Firm provides leading business lawyers in Riverside. Call 951.222.2100 for more information.

Adapted in part from Jason C. Kim Lexology, California Supreme Court rules on employer’s meal break requirements, April 23, 2012.

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Congress Takes Up Attempt To Speed Up The Short Sale Process

Senator Sherrod Brown (D-Ohio) has introduced legislation to address the lengthy process of completing real estate short sales. The process of short sales continues to frustrate all parties involved and frequently results in offers being withdrawn and sales falling through. A short sale is one in which the lender agrees to accept less than the balance on its mortgage in order to expedite the sale of the home to a private buyer.

Last week Senator Brown introduced the Prompt Notification of Short Sale Act which will require banks to respond in a timely manner when a prospective buyer is attempting to buy one of these underwater homes. The proposed legislation requires the bank to provide a written response of an acceptance, rejection, counter offer, or the need for an extension of time, within 75 days of a request from a homeowner-thereby providing both buyers and sellers of short sale properties with predictability and a time frame during a real estate transaction.

In introducing his legislation Senator Brown stated, “For most buyers, short sales are anything but. The seemingly endless waiting game associated with short sales represents a dangerous drag on our housing market. If we’re going to recover from the housing crisis, we need to make it easier for qualified candidates to purchase homes. This commonsense legislation helps prospective home buyers and distressed homeowners alike, while helping to rebuild our neighborhoods and to foster long-term economic growth.”

Anyone involved in the real estate industry can tell you that it can take many months to get any kind of response from banks or other loan servicers to short sale offers. We hear all of the time about buyers, sellers, real estate agents, and loan officers complaining about the process which often requires multiple signatures to get the initial offer approved. Any additional adjustments to the purchase offer, such as, following the appraisal, or a housing inspection, can set the process almost back to the start, with more signatures and paperwork required. Quite often, during the short sale process there is a break in communication between the loan servicers and the prospective buyer, and as a result, buyers are not being kept informed about the status of their sale.

Perhaps if this passes we may see a change in the industry.

The Mellor Law Firm handles short sales in Riverside county and surrounding areas. Contact Attorney, Mark Mellor today for a consultation.

*The content for this article was adapted from Jann Swanson, Ohio Senator Attempts to Speed the Short Sale Process, Mortgage News Daily (Apr 9,  2012, 12:37PM),

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Mortgage Cram Downs California in Chapter 13 Bankruptcy

You may be able to reduce your mortgage principal on investment or rental property.  It does not apply to a home you use as your principal residence.

A mortgage cram down allows you to reduce the principal balance of the mortgage to the value of the property.  You can use a Chapter 13 bankruptcy for this purpose.

A Chapter 13 cram down may help you.  If you owe for example, $500,000 on the investment property and its value is $250,000, through the Chapter 13 plan you pay to the mortgage lender the $250,000 rather than the $500,000.  The remaining $250,000 becomes unsecured debt and you will likely pay a small portion of that part through the plan and the rest will be discharged at the completion of the plan.

The drawback is that the courts will require the payoff of the balance of the crammed down mortgage during the Chapter 13 repayment period, typically three (3) to five (5) years, unless a refinance is achieved within two (2) years to pay off the mortgage at the crammed value.

Looking to file for Chapter 13? Contact Riverside bankruptcy attorney, Allen Sanders at the Mellor Law Firm.

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Chapter 13 Bankruptcy in Riverside, CA

A Chapter 13 Bankruptcy is also called a wage earner’s plan.  Debtor(s) propose a repayment plan to make installment payments to creditors over a period of three to five years.  If debtor’s current monthly income is less than the applicable state median, the plan is for three years.  If current monthly income is above the applicable state median, the plan is for five years.

Most significantly, Chapter 13 offers debtor(s) the opportunity to save their home from foreclosure and cure delinquent mortgage payment over time.  Debtor(s) must also pay postpetition mortgage payments outside the plan directly to the mortgage holder.

To be eligible for Chapter 13, debtor’s unsecured debts must be less than $360,475 and secured debts less than $1,081,400.  There are no such limitations in a Chapter 7 Bankruptcy.

Retaining the services of a bankruptcy attorney is absolutely necessary for the successful commencement and completion of debtor’s Chapter 13 Bankruptcy.  Furthermore, retaining the services of an attorney is most important to guide the debtor(s) through the maze of paperwork that a Chapter 13 Bankruptcy entails and to determine if a Chapter 13 Bankruptcy is right for you.

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What is a Chapter 7 Bankruptcy?

A Chapter 7 Bankruptcy is also known as a “straight bankruptcy” and is the most common type of bankruptcy case.  Someone who files a Chapter 7 has little or no assets to pay creditors.

To qualify to file a Chapter 7 Bankruptcy you must pass a means test.  Means testing looks at a debtor’s income.  Usually a person must come within the state’s medium income based on the number of people in your household.  The more eligible people are in your household the higher the threshold for the median income amount.  For example if there is only one person in your household the medium income level is $47,683 per year.  If there are two people the median income level is $61,539 per year.  It keeps going up if there are more people in your household.

Generally, if you do not come within the median income you may not be eligible to file a Chapter 7 Bankruptcy.  A further calculation will be necessary if you are over the median income to determine eligibility.  Expenses such as mortgage/rent, living expenses for food, clothing, household supplies, transportation, vehicle ownership or lease expenses are taken into account.  If the 60 month disposable income is less than $7,025.00 you pass the means test.

If you are thinking about filing a Chapter 7 Bankruptcy, contact the highly qualified bankruptcy attorneys in Riverside at The Mellor Law Firm.

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Construction Litigation and City Zoning Restrictions News in California

For my second discussion in this series about recent cases dealing with real estate law in California decided by the California Court of Appeal I wanted to mention these two decisions from the Fourth District, Division Three, and Fifth District in California—one involving construction litigation and the other involving city zoning restrictions.

YOU SPOT ZONE IT, YOU BUY IT.  Here the City of San Clemente imposed an RVL, (residential, very low land restriction), on undeveloped property, which limited parcels to one dwelling per 20 acres.  At trial, the court determined the city engaged in spot zoning and issued a writ of mandate, giving the City the choice of either complying with the writ, or paying damages for the value of the property taken by the RVL restrictions.  The appellate court affirmed, stating the City’s actions were arbitrary and capricious.  Avenida San Juan Partnership v. City of San Clemente  (Cal. App. Fourth Dist., Div. 3;  December 14, 2011) 201 Cal.App.4th 1256.

MUST FOLLOW CONTRACTUAL ALTERNATIVE TO RIGHT TO REPAIR ACT.  Plaintiffs, owners of 32 homes built by a developer, brought a construction defect action.  Civil Code sections 895 through 945.5, the Right to Repair Act, prescribe non-adversarial pre-litigation procedures a homeowner must initiate prior to bringing a civil action against a builder for alleged construction deficiencies.  Plaintiffs contended the developer did not give the required notice under section 912.  The trial court ordered plaintiffs to observe certain contractual procedures.  The appellate court denied the plaintiff’s writ, finding the developer’s failure to comply with section 912 did not bar enforcement of its alternative contractual non-adversarial procedures.  Baeza v. Superior Court (Castle & Cooke California, Inc.) (Cal. App. Fifth Dist.;  December 14, 2011) 201 Cal.App.4th 1214.

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California Real Estate Law News

Recently, at the conclusion of last year, 2011, California courts issued a number of important rulings in the area of real estate litigation.  Let me briefly mention the first two here and next week I will provide a synopsis of the other two worthy of your consideration.  The first two I want to profile for you here deal with default judgments in quiet title actions and the improper granting of a motion for summary judgment based upon an unconscionable loan transaction.  Citations and links have been provided for ease of reference.

AN EVIDENTIARY HEARING IS REQUIRED BEFORE ENTERING DEFAULT JUDGMENT IN A QUIET TITLE ACTION.  CCP §764.010 provides that in actions to quiet title, the court shall not enter judgment by default but shall in all cases require evidence of plaintiff’s title and hear such evidence as may be offered respecting the claims of any of the defendants.  The appellate court found this obligated the trial court to hold an evidentiary hearing in open court “hearing the defendant’s evidence.”  The dissent states a defendant should not be permitted to participate in the hearing.  Harbour Vista LLC v. HSBC Mortgage Services Inc.  (Cal. App. Fourth Dist., Div. 3;  December 19, 2011) 201 Cal.App.4th 1496.

TRIABLE ISSUES EXIST AS TO WHETHER A FORECLOSURE SALE SHOULD BE SET ASIDE DUE TO THE UNCONSCIONABILITY OF THE LOAN TRANSACTION.  An action in which a homeowner sued a lender, a loan servicer and others to set aside a trustee’s sale claiming predatory lending, the trial court granted summary judgment against the homeowner.  In reviewing the transaction, the appellate court noted the refinance was for $1.5 million with a monthly payment of $12,381.36 and the homeowner had a monthly income of $3,333.  The Sixth District Court of Appeal reversed the grant of summary judgment finding there was sufficient evidence of triable issues of material fact regarding alleged unconscionability of the transactionLona v. Citibank, N.A. (Cal. App. Sixth Dist.;  December 21, 2011) 202 Cal.App.4th 89.

If you need help from a highly-qualified real estate lawyer in California, please contact Mark Mellor at 951.222.2100.

 

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New Real Estate Laws That Protect California Homeowners, Buyers and Tenants in 2012

Condo Rentals

Starting January 1, owners of units in a common-interest development, usually a condominium, must be allowed to rent or lease their units unless it was restricted before they took ownership. Senate Bill 150 was designed to counter new homeowner association (“HOA”) rules put in place to stem the tide of tenant-occupied properties. It does not apply to rental restrictions prior to January 1. Condo owners must provide to their HOA proof of their purchase date and contact information for their tenants. Certain changes of title, e.g. probate, spousal, parent-to-child, adding a joint tenant, and other transfers exempt from property tax reassessment, do not reset the date of ownership.

Need professional real estate law advice? Contact California real estate attorney, Mark Mellor, to get answers.

Excessive HOA Fees

Homeowners associations can only charge the actual cost to procure, prepare, reproduce and deliver HOA disclosures and governing documents when a home is being sold, according to Assembly Bill 771, which takes effect January 1. HOA’s routinely receive written requests for such documents in a real estate transaction, but, in the past few years, some HOAs have supercharged those fees and tacked on “junk” fees as well. The new law requires that HOAs give estimates of their fees up front, and it prohibits an HOA, or a third party, from tacking on other fees, fines, assessments, or nonessential documents, as a precondition of providing the HOA documents. The HOA also cannot charge extra fees for electronic delivery if the HOA maintains the information that way.

Tenant Smoking Ban

Landlords can now ban tobacco smoking in, or around, any residential property, including the outside common areas, as of January 1. Senate Bill 332 requires the new provision be in writing as part of the rental agreement or lease. For existing tenants, landlords must give written notice of a change in the terms of the tenancy, with at least 30 days’ notice, depending on the terms of the rental.

Foreclosure Sale

Senate Bill 4 requires that a notice of trustee sale, which lays out the date and location of a foreclosure auction, must provide more user­ friendly information about how to seek a postponement. The notices also must specify the risks for potential buyers of a foreclosure. The law, effective April 1, requires a bank, or their authorized agent, to provide timely information to anyone via the Internet, telephone recording, or other free services, about sale dates and postponements.

Conservation Plumbing Fixtures

Sellers must disclose to potential buyers whether their home has water-conservation plumbing fixtures. The change to the California Civil Code, effective January 1, edited the transfer disclosure statement to include a checkbox for such fixtures, Including low-flow toilets, shower heads and faucets. It also alerts home buyers about the following water-conservation requirements for single-family homes: As of January 1, 2017, homes built on or before January 1, 1994, must have water-conserving devices. Homes altered or improved on or after January 1, 2014 must include water-conserving plumbing fixtures as a condition of final permit approval.

Small Claims Jump to $10,000

Judges can now award up to $10,000 in a small claims action. Prior to January 1, the limit was S7,500 in small claims jurisdictions for a claim brought by a “natural person.” Small claims for injuries in an auto accident do not increase until 2015, and a small claims action brought by a business entity remains at $5,000, according to Senate Bill 221.

Real Estate Agent Discipline

Several laws impact real estate licensees.

  • The Department of Real Estate requires all agents or brokers to report, within 30 days, any disciplinary action taken by another state or federal agency, felony indictments or charges, and convictions of any felony or misdemeanor.
  • Real estate brokerages who conduct their own escrow activities under a DRE license must provide a written annual report to the DRE with the number of escrows and dollar volume it handled.
  • Agents and brokers who fail to pay their taxes could have their licenses suspended. The State Board of Equalization and the Franchise Tax Board will periodically release a list of the 500 largest tax delinquencies of more than $100,000, and the DRE is required to suspend or refuse to renew a state license for anyone on either list.

Several other laws took effect this week. For details about those or any other California laws, visit www.leginfo.ca.gov.

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How to Know if You Have a Sexual Harassment Claim

Recently, two Courts of Appeal in California weighed in on the issue of sexual harassment—the Fourth District, Division Three and Second Division, Division Four—both deciding differently on the issue.  With a divided court, in the Fourth District matter, (Brennan v. Townsend & O’Leary   (Cal. App. Fourth Dist., Div. 3; October 18, 2011) 199 Cal.App.4th 1336) a female executive at an advertising agency, who prevailed at trial, lost on the appeal of her gender harassment claim.

In Brennan, the agency’s owner dressed as Santa at holiday parties and had women employees sit on his lap, he wore a Santa hat with “bitch” across the brow, talked with the plaintiff about her sex life using a certain hand gesture and asked her whether she “got any.”  One of the employees brought a plastic penis to the office and executives sometimes referred to women clients by a word that begins with a “c.”  One client was called “a demanding, unconstructive, counter-productive, mindless, shitty-ass bitch” in an agency email by an executive.  The same executive sent another email which called plaintiff “one big-titted mindless one.”

Plaintiff complained to her supervisor as well as the head of the agency.

The majority opinion concluded there was insufficient evidence that the harassing behavior was pervasive or severe enough to create a hostile work environment. The evidence was insufficient to show “severe” harassment based on gender because the employee was never assaulted, subjected to unwelcome physical contact or verbal abuse, threatened, propositioned, or subjected to explicit language directed at her or at anyone else in her presence. The evidence was also insufficient to show “pervasive” harassment based on gender. An e-mail referring to the employee was the only incident directed at her and was not intended to be shared publicly. The employee witnessed only three incidents of gender-based conduct involving coworkers over a span of several years. She did not present evidence that intrusive questions from her employer offended her. Other instances of sexual harassment that she discovered after she received the e-mail did not contribute to a hostile work environment because she did not have any knowledge or perception of them until she investigated. Finally, incidents of claimed retaliation were not acts of harassment based on gender.

The dissent disagreed with the majority opinion in “that the nonsexual acts of retaliation that took place could not be considered discrimination due to gender;” stating, “from the moment of her complaint, the atmosphere surrounding her job changed completely” and she became a marked woman, and that “the non-sexual acts of retaliation that took place” should be considered discrimination due to gender.  Brennan v. Townsend & O’Leary  199 Cal.App.4th at 1359-60.

In the Court of Appeal Second Division, Division Four matter, (Fuentes v. Autozone, Inc. (Cal. App. Second Dist., Div. 4; November 16, 2011) 200 Cal.App.4th 1221) during a five week period, when a store manager was on leave, a 21-year-old cashier was subjected to rumors she had a sexually transmitted disease and that she and a co-worker were having a sexual relationship and suggestions she could make more money as a stripper.  In one incident, she was turned around by the assistant manager who said to her:  “Show your butt to the customers and that way you can sell more.”

In Fuentes, the Second District Court of Appeal rejected defendant, Autozone’s claim that plaintiff’s testimony was inherently improbable and found that substantial evidence supported the jury’s verdict. Plaintiff’s testimony related several incidents of inappropriate behavior and comments by her supervisors. The evidence at trial established that all the incidents and comments about plaintiff, including a directive that she display her buttocks to customers to increase sales, rumors that plaintiff had sexually transmitted herpes, and profane speculation about a sexual relationship between plaintiff and a coworker, were focused on her gender.

Plaintiff was made the object of sexual humiliation and exploitation for the entertainment of managers, employees, and customers. When an acting manager was confronted by plaintiff about the herpes rumor, he threatened to fire her if she raised the issue again. While these events occurred over a compressed period of time, the court found substantial evidence that the harassment suffered by plaintiff was both pervasive and severe. The evidence established that plaintiff found the conduct of her supervisors offensive. The court concluded that a reasonable person would share that perception.

The Court of Appeal affirmed judgment in favor of the plaintiff, noting the workplace was “permeated with discriminatory intimidation, ridicule and insult.”  Fuentes v. Autozone, Inc. 200 Cal.App.4th at 1237.

Perhaps the best way to reconcile the two decisions is to first look at the pervasiveness and severity of the discriminatory behavior complained of.  First, consider the basis of the behavior and whether it is indeed “gender” based.  Also, whether the complaining person was aware (e.g. had knowledge) of the behavior at the time and was offended by it.  Finally, would a reasonable person be similarly offended by the same behavior(s).  Based upon these multiplicity of factors one can best evaluate if they have a sexual harassment claim, or if a business and/or its supervisors are being wrongfully accused of same.

Contact California business attorney, Mark Mellor if you are involved in a sexual harassment claim.

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TWO DEEDS OF TRUST; NEITHER WAS RECORDED FIRST—A PRIMER IN THE LAW OF PRIORITIES, OR CALIFORNIA’S “RACE-NOTICE” STATUTES.

Who is First In Right when two deeds of trust that secured the same real property, were simultaneously time-stamped for recording, but, indexed at different times?  In First Bank v. East West Bank   (October 17, 2011) 199 Cal.App.4th 1309, the Second District Court of Appeal Division Three concluded the lenders have equal priority.

In the First Bank case, the Court reviewed undisputed evidence that outlined the procedure with most recorders across the state, which allows title insurance companies to deliver trust deeds to the recorder’s office in batches before 8:00 a.m. when the office opens. As in First Bank, trust deeds are deposited with the recorder’s office before business hours and as is the case for all documents and instruments deposited with the recorder’s office, one of the examiners reviews the title insurance companies’ trust deeds to determine whether they meet the requirements for recording.[1]

The examiner then enters the instruments into the enterprise recording archive system and sends the documents to a cashier to determine the applicable fees. The recorder stamps them with the date and time of recording. The practice of most of the recorder’s offices across the state is to give all instruments deposited before the offices open for business an 8:00 a.m. time stamp. Instruments are indexed roughly two days later.  In this case, although both deeds were time stamped at 8:00 a.m., the recorder indexed East West Bank’s trust deed at 11:26 a.m. and First Bank’s trust deed at 3:08 p.m.[2]

Because of the different indexing times, therefore, the Second District Court of Appeal, Division Three, was faced with a quandary as to which Bank had priority under California’s recording statutes.  First Bank provides a great discussion and overview of California’s “Law of Priorities” in order to decide who has priority and when, which is worth our review.

First Bank set forth the rule as follows: California starts with a “ ‘first in time, first in right’ system of lien priorities,” under which “a conveyance recorded first generally has priority over any later-recorded conveyance.” [3]  “An instrument is deemed to be recorded when, being duly acknowledged or proved and certified, it is deposited in the Recorder’s office, with the proper officer, for record.” [4]

This “ ‘first in time[,] first in right’ ” system is modified by the recording statutes, which allow subsequent purchasers to achieve priority under the “‘Race-Notice’ theory.” [5] Thereunder, “Every grant of an estate in real property is conclusive against the grantor, also against every one subsequently claiming under him, except a purchaser, or incumbrancer, who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded.” [6] Stating the rule differently, Civil Code section 1214 reads in relevant part, “Every conveyance of real property … is void as against any subsequent purchaser or mortgagee of the same property … in good faith and for a valuable consideration, whose conveyance is first duly recorded … .”

Under these “Race-Notice” rules, a subsequent purchaser obtains priority for a real property interest by (1) acquiring the interest as a bona fide purchaser for valuable consideration with neither actual knowledge nor constructive notice of (2) a previously created interest and (3) “first duly record[ing]” the interest, i.e., recording before the previously created interest is recorded.[7]

One may then ask, what is or what makes a “bona-fide purchaser?” ‘The elements of a bona fide purchase are (1) payment of value, (2) in good faith, and (3) without actual or constructive notice of another’s rights.’” “‘The absence of notice is an essential requirement in order that one may be regarded as a bona fide purchaser.’”[8]

Due to the “notice” requirement, the Court addressed the concept of one simply having knowledge of another’s right to real property, also referred to as “Constructive Notice.” First Bank, stated, however, that Constructive notice is a legal “‘fiction.’” “Constructive notice of an interest in real property is imparted by the recording and proper indexing of an instrument in the public records.[9]  Stated otherwise, the recording of a document does not impart constructive notice; “[t]he operative event [for purposes of constructive notice] is actually the indexing of the document …”[10]

Thus, the Court found that pursuant to Civ.Code §1170, both trust deeds were deemed recorded simultaneously. The Court reasoned that both trust deeds were executed on the same day and were deemed recorded simultaneously.  As such, neither bank was a subsequent purchaser for purposes of Civ.Code §§2897, 1107, 1214. The Court reasoned that it would have disrupted the statutory scheme to make priority turn on the random act of indexing, especially where banks and title insurers had no influence over when the recorder indexes trust deeds and the procedure was simply done to accommodate the sheer volume of title documents that enter the system on a daily basis.

[1] First Bank, 199 Cal.App.4th at 1312.

[2] Ibid.

[3] Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1099, [95 Cal.Rptr.2d 779];  see, Civ.Code §2897 [“Other things being equal, different liens upon the same property have priority according to the time of their creation … .”].

[4] First Bank, 199 Cal.App.4th at 1312;  citing, Civ.Code §1170.  

[5] 5 Miller & Starr, Cal. Real Estate (3d ed. 2009) §11:3, p. 11-18,19.

[6] Civ.Code §1107.

[7] First Bank, 199 Cal.App.4th at 1313;  citing, Civ.Code §§ 1107, 1213, 1214; see, 5 Miller & Starr, Cal. Real Estate, supra, § 11:3, p. 11-20; Hochstein v. Romero (1990) 219 Cal.App.3d 447, 451, [268 Cal.Rptr. 202] [bona fide purchaser who acquires interest in real property without notice of another's rights in the property, takes property free of such unknown rights].

[8] Citing, Gates Rubber Co. v. Ulman (1989) 214 Cal.App.3d 356, 364, [262 Cal. Rptr. 630] (citations omitted)..

[9] Civ.Code §1213; Dyer v. Martinez (2007) 147 Cal.App.4th 1240, 1243–1246, [54 Cal.Rptr.3d 907]; Watkins v. Wilhoit (1894) 104 Cal. 395, 399–400, [38 P. 53]; Cady v. Purser, supra, 131 Cal. 552, 557, [63 P. 844]; Hochstein v. Romero (1990) 219 Cal.App.3d 447, 452, [268 Cal.Rptr. 202]; First Fidelity Thrift & Loan Assn. v. Alliance Bank (1998) 60 Cal.App.4th 1433 [71 Cal.Rptr.2d 295].

[10] Lewis v. Superior Court (1994) 30 Cal.App.4th 1850, 1866, [37 Cal.Rptr.2d 63].

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