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 San Jose Business & Commercial Law Blog

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SAN JOSE BUSINESS & COMMERCIAL LAW BLOG

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Insurance for Small Businesses During the COVID-19 Crisis and Government Shutdowns

Insurance for Small Businesses During the COVID 19 Crisis and Government ShutdownsBusinesses of all kinds will be forced to keep their doors closed in the coming weeks in the face of COVID-19 and the orders from Governor Newsom [1] and the Santa Clara County Health Officer. [2] Business owners should be turning to their insurance policies to consider what help they will be able to obtain. Each business will have different results depending on the kind of coverage they have. This article outlines a few of the common insurance issues that will be relevant in the current crisis.

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FAQ - Can I Use the "Act of God" clause to excuse contract performance due to COVID-19?

Can I Use the Act of God clause to excuse contract performance due to COVID 19 Co-author Josue Uribe Fonseca

We are getting a lot of questions about contract enforcement during this state of emergency. Many people need to be excused from contract performance for reasons entirely out of their control. That means we are throwing around terms like "force majeure" to address whether performance is excused due to COVID-19's' effects such as the State of Emergency and California's Executive Orders, and the various counties' shelter-in-place orders.

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Palo Alto Bans Residential Evictions, Will Consider Commercial Evictions As Well

Depositphotos 34016249 s 2019Palo Alto City Council voted last night to adopt the Urgency Ordinance to halt residential evictions for COVID-19 related hardship. 

The city's moratorium on evictions will remain in effect until the city's state of emergency expires. After that, residents would have 120 days to make full payment of the back rent.

Looking at the Agenda for the Palo Alto meeting reveals that the council is also evaluating to extend the eviction moratorium to small businesses, non-profits and commercial tenants also impacted by the State of Emergency. Agenda found here.

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San Jose Imposes Moratorium on Residential Evictions

San Jose Imposes Moratorium on Residential EvictionsThe San José City Council has enacted a temporary eviction moratorium in response to the COVID-19 pandemic. The moratorium is in effect through April 17, and the City Council may extend it.

The new ordinance is effective immediately.

The moratorium applies to all residential properties in San José, including single-family homes, rooms rented in single-family homes, duplexes, condominiums, income-restricted apartments (i.e., affordable housing), rent-stabilized apartments, market-rate apartments, and mobilehomes.

Please note the moratorium only applies to residential evictions for nonpayment of rent due to impacts of the COVID-19 outbreak. There is no moratorium on lawful evictions for other just causes.

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Misplaced Fences and Parked Cars are Ongoing Trespasses

Misplaced Fences and Parked Cars are Ongoing TrespassesNeighbor disputes are expensive, time consuming, and there is no attorneys’ fees provision. The recent case of Madani v. Rabinowitz is one where the misplaced fence was moved, and the wronged neighbor received no damages.

The Facts:

Mr. Madani sued his neighbor for trespass and nuisance after he had a survey done and learned that the shared fence encroached on his side of the property and that Mr. Rabinowitz was parking cars on his property.

In California, the statute of limitations for bringing a trespass claim is three years. (Code Civ. Proc., § 338, subd. (b).) The same three-year statute of limitations applies to private nuisance claims.

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One Toke Over the Line

Marijuana Law Attorneys Diemer and Wei San Jose CAAs the legalized marijuana at the state level continues to thrive, bankruptcy courts flirt with marijuana’s place within the Bankruptcy Code. One principle begins to emerge: while presence of marijuana does not automatically call for dismissal, if the court and trustee have to participate in or condone the illegal conduct in any way, the case will be dismissed.

Background:

Since the legalization of marijuana has occurred in several states over the past several years, multiple courts have ruled that the continued illegality of marijuana on a federal level prevents debtors entrenched in the marijuana industry from garnering the benefits of bankruptcy protection. See In re Rent Rite Super Kegs W. Ltd., 484 B.R. 799 (Bankr. D. Colo. 2012) (A debtor whose plan relied on roughly 25% of its income from renting property to marijuana growing operation was “cause” to dismiss case under 11 U.S.C 1112(b), constituted gross mismanagement of the estate, and debtor was not operating with “clean hands.”); In re Arenas, 514 B.R. 887 (Bankr. D. Colo. 2014) (prohibition against marijuana related activities extended to cases under Chapter 7 and Chapter 13).

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What Can Employers Learn from Uber’s Challenge of California’s New Employment Law AB-5?

What Can Employers Learn from Ubers Challenge of Californias New Employment Law AB 5            On December 30, 2019, Uber and Postmates filed a lawsuit to stop enforcement of AB-5, California’s new legislation that makes it more difficult to classify workers as independent contractors.

            Obviously Uber and Postmates’ entire business model relies on having “gig” workers who drive for them. Other industries, such as trucking, have also filed suit to enjoin the enforcement of AB5.

            Prior to California enacting AB5 to expand the definition of employee, California businesses needed to meet the ABC test laid out in the Dynamex case in order to classify an worker as an independent contractor. Those factors were:

  1. Worker is not controlled by the company in performing work; and
  2. Worker has work outside the company’s usual course of business; and
  3. Worker is engaged in an independently established trade, occupation, or business of the same type of work performed for the company (perhaps certified or licensed).
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Self-Insured Employer Cannot Direct Which Excess Insurer Will Bear Responsibility Even With Claimant’s Consent

Self Insured Employer Cannot Direct Which Excess Insurer Will Bear Responsibility Even With ClaimantEmployees in California are protected by the Workers’ Compensation Act (WCA) which governs “compensation given to California employees for injuries incurred in the course and scope of their employment.” Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24 Cal.4th 800, 810. All employers except the state must secure the payments of compensation by either carrying workers’ compensation insurance or self-insuring. In a recent case, the San Mountain Empire School District was self-insured, but had also contracted for excess policy insurance. In the case of the Mountain Empire School District, its excess insurer ran out of money.

California law also provides for protection to both “insured and the public” through a system called the California Insurance Guarantee Association (CIGA). Fireman’s Fund Ins. Co. v. Workers Comp. Appeals Bd. (2010) 189 Cal.App.4th 101, 111-112. CIGA pays only: 1) covered claims and 2) claims for which neither a solvent insurer or self-insured employer is jointly and severally liable.

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What Must A California Landlord Disclose to Tenants?

 By: Julia M. Wei and Josue Uribe Fonseca

What Must A California Landlord Disclose to TenantsIn a purchase and sale context, California law requires the seller of residential real estate to disclose material facts affecting the value or desirability of the property, “if it is known that such facts are not known to or within the reach of the diligent attention and observation of a buyer.” Calemine v. Samuelson, 171 Cal. App. 4th 153, 161-62 (2009). A fact is material if it has an effect on the value or desirability of the property. Alfaro v. Cmty. Hous. Improvement Sys. & Planning Ass'n, Inc., 171 Cal. App. 4th 1356, 1382 (2009).

However, as a residential landlord, the disclosure requirements to tenants are less broad and largely controlled by state law with mandated disclosures such as the Mold Addendum and the Bedbug Addendum.

There is very little law on point for landlord’s duties to disclose in a residential leasing context. This is likely due to the fact that the California Civil Code provides numerous protections for the residential tenant, such as their right to repair and deduct.

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California Landlords: Do you know the difference between a “Service Animal” and an “Emotional Support Animal”?

Depositphotos 158124112 xl 2015Recently in the news we have seen articles about people traveling with their miniature horses or their pigs. Perhaps you may be wondering why is the airline permitting the miniature horse on the plane? The answer breaks down like this: if it is a miniature horse, it is likely a service animal and if it is a pig, it is likely an emotional support animal.

Here is what the ADA says about Miniature Horses:

“In addition to the provisions about service dogs, the Department’s revised ADA regulations have a new, separate provision about miniature horses that have been individually trained to do work or perform tasks for people with disabilities. (Miniature horses generally range in height from 24 inches to 34 inches measured to the shoulders and generally weigh between 70 and 100 pounds.) Entities covered by the ADA must modify their policies to permit miniature horses where reasonable. The regulations set out four assessment factors to assist entities in determining whether miniature horses can be accommodated in their facility. The assessment factors are (1) whether the miniature horse is housebroken; (2) whether the miniature horse is under the owner’s control; (3) whether the facility can accommodate the miniature horse’s type, size, and weight; and (4) whether the miniature horse’s presence will not compromise legitimate safety requirements necessary for safe operation of the facility.”

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View Restrictions in Planned Communities Struck Down As Inapplicable to Remodeling

Depositphotos 5785967 l 2015In California, a landowner has no enforceable property rights to an unobstructed view. That means, you can’t force your downhill neighbor to trim their trees. However, I have seen the occasional CC&R’s from planned communities that restrict heights of trees, plantings, and structures to ensure that the homeowners can enjoy their view.In those circumstances, the restrictive covenants are strictly construed against the person seeking to enforce them. American jurisprudence favors alienability and free use of land so that will be the default legal view.

In the recent case of Eisen v. Tavangarian, the appellate court evaluated the CC&R language governing lots in the posh Marquez Knolls area in Pacific Palisades, California. The properties are nestled in the hills in this exclusive community overlooking Los Angeles and the Pacific Ocean. The homes are likely valued in excess of $4 million and accordingly the view of the ocean no doubt has some impact on the high property values.

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Judgment Creditor Successfully Amends Judgment to Include General Partner of Judgment Debtor After Foreclosure of the Property.

Depositphotos 23227370 xl 2015In a recent opinion, the California Court of Appeal found that after foreclosure, all of the borrower’s leases (and its waivers) were assigned to the lender, and therefore unavailable as a defense to the former owner against a creditor. Therefore, the judgment creditor was successfully able to add two new parties to the judgment as the limitation the lease no longer shielded them.

Yolanda’s Inc. owns and operates restaurants. Yolanda entered into a lease to operate a restaurant at the Seabridge shopping center in Oxnard, California. The landlord K&G and Rocklin and its real estate broker KGCRE failed to inform the tenant that they were in negotiations to lease another space in the shopping center to the gym. The gym’s customers used all the parking spaces, resulting in loss of business for Yolanda’s. Yolanda’s prevailed in its lawsuit against the landlord, alleging among other causes of action, fraud and breach of lease. Yolanda obtained a judgment in the amount of almost 2 million dollars, plus another nearly half a million dollars in attorneys’ fees and costs.

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What happens if the easement does not describe the type of access granted?

What happens if the easement does not describe the type of access grantedIn the recent case of Southern California Edison Company v. Severns, the written easement described a 4 foot wide easement for the placement of five electrical power poles. The instrument went on further to provide that the grantee should have “free access” to maintain the electrical equipment. This created dispute between the grantor and the utility company because of the unspecified routes the utility company would take on the grantor’s property to access the easement. The court determined that the easement was in fact a “floating easement”.

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What Is The Broker’s Duty To Disclose Information Learned Regarding a Neighboring Property?

What Is The Brokers Duty To Disclose Information Learned Regarding a Neighboring PropertyCalifornia’s Fourth Appellate District came down with an unsurprising opinion that because a real estate broker has a duty to their principal to share information he or she possesses that will adversely affect the value of her property, an expert opinion is not required to establish breach of that duty.

The Ryans listed their La Jolla California property with Sotheby’s. During one of the open houses, the listing agent learned from the neighbor that a major remodel was planned on the neighboring property that would obstruct the Ryan’s ocean view. The Ryan’s agent failed to inform the Ryans and subsequently when the Ryan’s sold the property the listing agent failed to inform the buyers. When the buyers learned that the $3.86 million home that they had just purchased was about to lose its ocean view and be subject to two years of construction next door, they unsurprisingly sought rescission of the purchase. 

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Does a Foreclosing Trustee Have a Duty to Verify That the Lender Has Received a Valid Assignment of the Loan (deed of trust)?

San jose foreclosure lawyersContinuing the trend in California caselaw, an appellate court concluded that no, the trustee does not have duties beyond the deed of trust itself and the governing statutes.

California property developer citrus El Dorado LLC owed its lenders over $20 million in late 2014. Unsurprisingly, its lender Stearns Bank instructed the trustee, Chicago Title Company, to conduct a nonjudicial foreclosure sale of the real property secured by the deed of trust.

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Do California Property Owners Owe Third Parties An Affirmative Duty Of Care To Discover Criminal Acts Being Committed On The Property?

Do California Property Owners Owe Third Parties An Affirmative Duty Of Care To Discover Criminal ActIt is well-settled California law that land owners are required to maintain land in their possession and control in a reasonably safe condition. California courts look to what are called the “Rowland factors” to evaluate if a duty is owed beyond the principles of Civil Code section 1714:

  • the foreseeability of harm to the plaintiff
  • the degree of certainty that the plaintiff suffered injury
  • the closeness of the connection between the defendant’s conduct and injury suffered
  • the moral blame attached to the defendant’s conduct
  • the policy of preventing future harm
  • the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved.[1]

In the recent case of Williams v. Fremont Corners Inc., The Sixth Appellate District found that the defendant shopping center had no duty to take affirmative measures beyond those already found in the record to discover criminal activity on the premises.

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What Use Constitutes Adverse Use Sufficient to Establish Prescriptive Easement in California?

What Use Constitutes Adverse Use Sufficient to Establish Prescriptive Easement in CaliforniaIn the recent case of RANCH AT THE FALLS, LLC v. Keith O’Neal et al., a ranch owner tried to establish prescriptive or equitable easement rights along private roads to reach her ranch. Ms. Hart prevailed at the trial court level but was not so fortunate on appeal. California’s second Appellate District concluded that Ms. Hart had failed to meet the hostility requirement to establish prescriptive easement.

Ms. Hart use the private roads from 2002 until 2012. However because Ms. Hart also owned several properties within the homeowners associations named in the lawsuit, she was personally entitled to use the private streets of the communities. The court cited Witkin, noting “Prescription cannot be gained if the use is permissive.”

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Ninth Circuit Rules that Arbitration Clauses Can Cover Racial Discrimination Claims

Ninth Circuit Rules that Arbitration Clauses Can Cover Racial Discrimination ClaimsThe Ninth Circuit has expanded the scope of claims that are subject to arbitration clauses to include racial discrimination claims under 42 U.S.C. Section 1981. Lambert v. Tesla, 2019 U.S. App. LEXIS 14591.

In 2015, DeWitt Lambert, who is African American, began working as a production associate in Tesla’s Fremont, California factory. He claimed that during his employment other employees consistently harassed him and that he was not promoted because of his race. Lambert alleged that his complaints to human resources went nowhere.

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Under The Uniform Voidable Transfer Act, Judgment Creditors May Reach Debtor’s Spouse’s Property Despite a Premarital Agreement.

diemer wei san jose caIn a case of first impression, the Second Appellate District concluded that assuming fraudulent intent, the UVTA (formerly the Uniform Fraudulent Transfer Act) applies to premarital agreements which treat after marriage earnings and assets as separate property.

In 2005, Judgment Creditor Robert Strum obtained a $600k bankruptcy judgment against debtor Todd Moyer. The creditor renewed the judgment and conducted a number of debtor’s examinations. Upon an OEX in 2016, the creditor learned that the debtor married in 2014 and identified Sturm’s judgment as an exhibit to a premarital agreement.

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CALIFORNIA BORROWERS CANNOT WAIVE THE RIGHT OF REINSTATEMENT, EVEN IN A LOAN MODIFICATION.

Diemer Wei San Jose Real Estate LawyersWe are still seeing the effects of the subprime meltdown ripple through the appellate courts. In the case of Taniguchi v. Restoration Homes, what appears on first blush to be a straight forward analysis that under California law borrowers can stop a foreclosure sale by reinstating the loan had a twist.

The Taniguchis own a home in San Mateo County and in 2006, they borrowed $510k. They missed 4 loan payments in 2013, and normally to cure the default with the lender, the borrowers would simply need to reinstate the 4 missed payments and late charges under the promissory note.  Here's the twist back in 2009, the Taniguchis entered into a loan modification that adjusted the principal amount, reduced the interest rate and monthly payments, and deferred until the maturity of the approximately $116k (including accrued and unpaid interest and principal, fees, and foreclosure expenses).

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