Developments of Interest

New Cases of Interest - February 6, 2012

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Frittelli, Inc. v. 350 North Canon Drive, LP (2011) 202 Cal.App.4th 35.  A tenant brought an action against a landlord for breach of a commercial lease on various theories and was met by a lease clause which greatly limited the lessor’s liability and provided that insurance was the sole remedy of the tenant.  The tenant attacked this clause as being in violation of the public policy disfavoring exculpatory agreements (Civil Code §1668).  Another clause in the lease also precluded damages arising out of any remodeling of the shopping center in which the tenant’s premises were located providing only for an abatement of a portion of the rent.  The tenant also contended that it had lost business as a result of the renovation and again sought to recover actual damages.

The court upheld the limitation of damage provisions contained in the lease.  The court noted that the exemptions were sufficiently visible and while the landlord had an enforceable obligation to complete work in a reasonable and efficient manner, the remedies provided to tenant in the lease were deemed to be sufficient.

Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89.  A homeowner’s residence was sold at a nonjudicial foreclosure sale, and the homeowner sought to set aside the trustee’s sale after the sale had taken place claiming that the homeowner was a victim of predatory lending practices.  The homeowner contended that the underlying transaction was invalid because the loan broker had ignored the obvious inability of the homeowner to repay the loan, and the homeowner further had limited English fluency, little education and very modest income and did not understand many of the details of the transaction.  While the trial court granted summary judgment to the lender and the loan servicer, the Court of Appeal reversed.  There was sufficient evidence of unequal bargaining power, oppression or surprise to raise a triable issue of fact regarding procedural unconscionability.  The extreme disparity between the amount of the monthly loan payments and the homeowner’s income also created an issue as to whether the loans were overly harsh and one-sided, and thus also substantively unconscionable.

Service Employees International Union, Local 1021 v. County of San Joaquin (2011) 202 Cal.App.4th 449.  A union brought a petition to compel arbitration under CCP §1281.2 with respect to a represented employee who had contended that the county had wrongfully terminated the employee.  The trial court denied the petition to compel arbitration, but the Court of Appeal reversed.  The Court of Appeal found that the memorandum of understanding between the union and the County clearly showed that the parties had agreed to allow union employees to elect binding arbitration with respect to disciplinary actions of the type involved here.  The right to arbitrate was contractual, even though the memorandum of understanding between the parties incorporated procedures from civil service rules.

Portico Management Group, LLC v. Harrison (2011) 202 Cal.App.4th 464.  The trial court found that an arbitration award entered against a trust was unenforceable and denied the judgment creditor’s motion to add the trustee to the judgment and found that the trustee was the prevailing party in the litigation.  The judgment creditor had entered into a contract to purchase an apartment building which was owned by the trustees of a family trust.  When the sale was not completed, the creditor brought an action for specific performance and damages.  An award was entered against the trust.  The Court of Appeal determined the trial court erred in not adding the trustee to the judgment.  The court also found that the trust was not a proper judgment debtor because it was not a person.  Because a trust is not an entity separate from its trustees, it cannot sue or be sued and it cannot hold title to property.  Any judgment against trust assets must be made against the trustees in their representative capacity pursuant to Probate Code 18004. 

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