HIGHLIGHTS
MILLER & STARR
REAL ESTATE NEWSALERT
83
Volume 20, Number 2 November 2009
40723027
ARTICLE: POLICY CONSIDERATIONS TRUMP STATUTORY CONSTRUCTION, GIVING
STOP NOTICE CLAIMANTS A BIG ADVANTAGE OVER CONSTRUCTION LENDERS
By Lewis J. Soffer
NEW FEDERAL LAW / POST-FORECLOSURE EVICTION
The Protecting Tenants at Foreclosure Act, Pub. Law 111-22, §§701 to 704 (11th Cong.
1st. Sess.), effective May 20, 2009
New federal law restricts post-foreclosure eviction of residential tenants.
TITLE INSURANCE
First American Title Ins. Co. v. XWarehouse Lending Corp., 177 Cal. App. 4th 106, 98 Cal.
Rptr. 3d 801 (1st Dist. 2009)
Title insurer had no duty to defend or indemnify a mortgage broker’s loan
facilitator because the loan facilitator did not fit within the definition of “insured”
under the broker’s loan policies.
COVENANTS, CONDITIONS, AND RESTRICTIONS
Starlight Ridge South Homeowners Ass’n v. Hunter-Bloor, 177 Cal. App. 4th 440, 99 Cal.
Rptr. 3d 20 (4th Dist. 2009)
Common interest development association’s practice of requiring homeowners
to repair storm water drainage channel crossing over individual lots tended
to show that the homeowner, not the association, was responsible for such
maintenance even though a contrary interpretation of the CC&Rs was plausible.
ALTERNATIVE DISPUTE RESOLUTION
Burlage v. Superior Court, 177 Cal. App. 4th 166, 99 Cal. Rptr. 3d 142 (2d Dist. 2009)
Contractual arbitration award had to be vacated where the arbitrator excluded
material evidence, resulting in substantial prejudice to one of the parties.
BROKER’S COMPENSATION
RC Royal Development and Realty Corp. v. Standard Pacific Corp., 2009 WL 3087251
(Cal. App. 2d Dist. 2009)
For purposes of entitlement to a real estate commission, it did not matter that
the deal never closed because, pursuant to the terms of the parties’ agreement,
the broker earned the commission when the buyer entered into the contract.
CEQA
Las Lomas Land Co., LLC v. City of Los Angeles, 177 Cal. App. 4th 837, 99 Cal. Rptr. 3d
503 (2d Dist. 2009)
California Environmental Quality Act does not require a public agency to
complete and consider an environmental impact report commenced before it
disapproves a project.
Volume 20, Number 2 u November 2009 MILLER & STARR REAL ESTATE NEWSALERT
84 © 2009 Thomson Reuters
Miller & Starr Real Estate Newsalert
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© 2009 Thomson Reuters
MILLER STARR
REGALIA
In This Issue
ARTICLE: Policy Considerations Trump
Statutory Construction, Giving Stop
Notice Claimants A Big Advantage
Over Construction Lenders ............. 85
NEW LAWS ..........................................97
Landlord and Tenant .........................97
NEW CASES .........................................98
Alternative Dispute Resolution ..........98
Broker’s Compensation ................... 106
CEQA .............................................108
Common Interest Developments ..... 117
Construction Contracts ...................118
Contracts ........................................120
Covenants, Conditions,
and Restrictions ..............................121
Deeds ............................................. 123
Deeds of Trust .................................123
Defective Construction ...................124
Discrimination ................................129
Escheat ...........................................134
Holding Title ................................... 135
Homesteads....................................139
Judicial Remedies ...........................140
Landlord and Tenant .......................142
Landowners’ Liability ......................144
Lenders’ Liability ............................. 147
Mobilehomes..................................147
Receivers ........................................147
Recording and Priorities ..................148
Regulation of The Real
Estate Industry ................................148
Subdivisions, Land Use Planning,
and Approvals ................................. 150
Title Insurance ................................152
Usury ..............................................158
PROPERTY TAX DEVELOPMENTS .......162
TABLE OF CASES ................................ 167
SUBJECT MATTER INDEX ...................170
CROSS-REFERENCES TO MILLER
& STARR, CALIFORNIA
REAL ESTATE 3D.................................174
MILLER & STARR REAL ESTATE NEWSALERT Volume 20, Number 2 u November 2009
© 2009 Thomson Reuters 85
* Lewis J. Soffer is a shareholder of Miller Starr Regalia, Litigation Department, Walnut
Creek office.
ARTICLE
POLICY CONSIDERATIONS TRUMP STATUTORY
CONSTRUCTION, GIVING STOP NOTICE CLAIMANTS A
BIG ADVANTAGE OVER CONSTRUCTION LENDERS
By Lewis J. Soffer*
A development project stalls, and the construction lender forecloses,
“wiping out” all junior liens, including mechanic’s liens recorded by un-
paid subcontractors and material suppliers. Some of those “mechanics,”
however, also had served bonded stop notices, and others do so after the
foreclosure, but within the time allowed after cessation of work. The lend-
er responds that there is no more money left in the till, the entire construc-
tion loan fund having been exhausted before the lender received the stop
notices. If the stop notice claimants are on their toes, they may still be able
to force the bank to pay them.
In a 1989 court of appeal decision that has never since been cited in a
published case, the Fourth District Court of Appeal afforded stop notice
claimants the ability to “draw back” into the construction loan, as funds
available to satisfy their claims, all payments and disbursements made by
the construction lender for its own benefit, including earned fees and
points, and interest from pre-allocated funds in an interest reserve, even
though (a) those disbursements were entirely consistent with, and re-
quired by the loan documents, and (b) the disbursements occurred before
service of any bonded stop notice. As a result, the bank had to pay to the
stop notice claimant money that the bank considered was coming “out of
its own pocket,” in that it consisted of “preallocated loan expenses includ-
ing interest, loan fees, document preparation fees, and general adminis-
trative expenses” that the bank had earned and disbursed to itself before
receiving the stop notice.
The published portion of Familian Corp. v. Imperial Bank (“Famil-
ian”),1 begins with a short paragraph referring to Civil Code section 3166
as “the focus of this appeal,” and ends with a short paragraph referring to
that statute. Between those bookends is a lengthy exposition on the public
policies favoring mechanic’s lien and stop notice claimants, with citations
to numerous cases, none of which holds that section 3166 allows a stop
