Nacimiento Water Company, Inc. v. International Fidelity Insurance Co. et al
Filing
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ORDER GRANTING Cross-Defendant Oak Shores SPE, LLC MOTION TO EXPUNGE LIS PENDENS 54 . Oak Shores request for attorney fees is DENIED by Judge Dean D. Pregerson. (lc). Modified on 11/4/2014. (lc).
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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NACIMIENTO WATER COMPANY,
INC.,
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Plaintiff,
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v.
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INTERNATIONAL FIDELITY
INSURANCE CO. A New Jersey
Corporation,
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Defendant.
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Case No. CV 13-07959 DDP (MRWx)
ORDER GRANTING MOTION TO EXPUNGE
LIS PENDENS
[Dkt. 54]
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Presently before the court is Cross-Defendant Oak Shores SPE,
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LLC’s Motion to Expunge Lis Pendens.
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submissions of the parties and heard oral argument, the court
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grants the motion and adopts the following order.
Having considered the
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I.
Background1
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In 2003, Jonatkim Enterprises, the developer of a residential
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subdivision in San Luis Obispo County, entered into a contract with
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Plaintiff Nacimiento Water Company (“the Water Company”).
Under
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The facts herein are drawn from the Complaint and from the
Second Amended Counterclaim and Cross Complaint.
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the contract (the “Water Contract”), the Water Company agreed to
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provide water service to the residential lots in exchange for
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payment of $5,000 per lot, to be paid within four years of the
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recordation of the subdivision’s final tract map.
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also required the issuance of a $500,000 performance bond, which
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was issued by International Fidelity Insurance Company (“IFIC”) on
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the developer’s behalf.
The contract
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Developer Jonatkim made a partial payment to the Water
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Company, but then transferred its interest in the subdivision to
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John and Carol King (“the Kings”).
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Jonatkim’s obligations under the Water Contract, and obtained a
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surety bond from IFIC similar to that originally issued to
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Jonatkim.
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connected to the bond and agreed to assign to IFIC, in the event of
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a breach, all of their rights in the Water Contract.
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lender eventually foreclosed on the property, which was then
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obtained at a foreclosure sale by Movant Oak Shores SPE, LLC (“Oak
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Shores”).2
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The Kings also assumed
The Kings also agreed to indemnify IFIC for any losses
The mortgage
In 2010, the Water Company notified IFIC that Jontakim and its
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successors had defaulted on the Water Contract.
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therefore demanded $305,000 pursuant to the IFIC performance bond.
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IFIC did not pay the Water Company, which then filed the instant
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suit to recover under the bond.3
The Water Company
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Oak Shores did not acquire the property until December 2013,
after the filing of the Water Company’s Complaint and IFIC’s CrossClaim.
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IFIC alleges that the amount at issue is $310,000.
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IFIC filed a counterclaim and cross claim against the Water
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Company, Jonatkim, the Kings, and Oak Shores.
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subrogation rights to collect the $5,000 per lot, also filed a
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notice of lis pendens regarding the subdivision.4
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moves to expunge the lis pendens.
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II.
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IFIC, claiming
Oak Shores now
Legal Standard
Lis pendens matters are governed by state law.
28 U.S.C. §
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1964.
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real property claim may record a notice of pendency of action in
Under California law, “[a] party to an action who asserts a
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which that real property claim is alleged.”
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405.20.
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the property’s transfer until the litigation is resolved or the lis
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pendens is expunged.”
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Cal.App. 4th 952, 967 (1999).
Cal. Code Civ. P. §
A lis pendens “clouds the title and effectively prevents
BGC Assocs. LLC v. Superior Court, 75
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Any party to an action, or nonparty with an interest in the
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real property affected by the lis pendens, may move to expunge a
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lis pendens.
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motion to expunge if (1) “the pleading on which the notice is based
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does not contain a real property claim,” or (2) “the claimant has
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not established by a preponderance of the evidence the probable
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validity of the real property claim.”
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405.32..
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Cal. Code Civ. P. § 405.30.
The court must grant a
Cal. Code Civ. P. §§ 405.31,
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IFIC’s Second Amended Counterclaim and Crossclaim alleges
that IFIC shall have the right to recover under the water contract
if it makes any payment to the Water Company. IFIC does not allege
that it has made any such payment.
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III. Discussion
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A.
Expungement
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Oak Shores contends that IFIC has not brought any real
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property claims.
It is IFIC’s burden, as the party opposing the
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motion to expunge, to show the existence of a real property claim.
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Kirkeby, 33 Cal.4th 642, 647 (2004).
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Procedure defines a “real property claim” as “the cause or causes
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of action in a pleading which would, if meritorious, affect (a)
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title to, or the right to possession of, specific real property or
The California Code of Civil
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(b) the use of an easement identified in the pleading, other than
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an easement obtained pursuant to statute by any regulated public
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utility.”
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Cal. Code. Civ. P. § 405.4.
IFIC argues, conclusorily, that “[i]t is plain that the IFIC’s
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claim affects real property.”
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that because the Water Contract allows the Water Company to refuse
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to provide water to the subdivision, and that refusal would
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“impos[] restrictions on the use and subdivision of the real
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property in issue,” IFIC has brought a “real property claim.”
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is unclear to the court, however, how a service contract such as
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the Water Contract has any bearing on title to the property or the
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right to possession of the property.
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would likely reduce the value of the property, lack of water in and
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of itself does not affect title to or right to possession of a
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property.
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(Opposition at 10:1.)
IFIC suggests
It
While lack of water service
The cases cited by IFIC are inapposite.
Cornbleth v. Allen,
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in which a notice of lis pendens was not at issue, held that an
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agreement limiting the uses of a property and providing for a
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reversionary interest was an instrument affecting title.
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Cornbleth
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v. Allen, 80 Cal.App. 459, 463 (1926).
In Barbieri v. Ongaro,
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another case not involving a lis pendens, the court held that a
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restrictive covenant running with the land affected real title, and
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was recordable.
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(1962); See also Alfaro v. Cmty. Hous. Improvement Sys. & Planning
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Ass’n, Inc., 171 Cal.App.4th 1356, 1372-3 (2009).
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appears to suggest that lack of water service would limit the uses
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of the property at issue here, that practical limitation is not
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analogous to the restrictive covenants at issue in the cases IFIC
Barbieri v. Ongardo, 208 Cal.App.2d 753, 757
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cites.
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While IFIC
pendens must be expunged.5
Because IFIC has not brought a real property claim, the lis
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B.
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The court must award reasonable attorney’s fees and costs
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related to a motion to expunge a lis pendens to the prevailing
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party, unless the other “acted with substantial justification or .
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. . other circumstances make the imposition of attorney’s fees and
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costs unjust.”
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disagrees with IFIC’s contentions, is lis pendens does not appear
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to have been filed frivolously or in bad faith.
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request for fees is, therefore, DENIED.
Attorney’s Fees
Cal. Code Civ. P. § 405.38.
Though this court
Oak Shores’
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Having so concluded, the court need not reach Oak Shores’
additional arguments.
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IV.
Conclusion
For the reasons stated above, Oak Shores’ Motion to Expunge
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Lis Pendens is GRANTED.
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The request for attorney’s fees is DENIED.
IT IS SO ORDERED.
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Dated: November 4, 2014
HON. DEAN D. PREGERSON
United States District Judge
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