SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
DEPARTMENT NO. 322 HON. RICHARD MONTES, JUDGE
DAVID D. JENNINGS, )
)
Plaintiff/Cross-defendants, )
)
vs. ) No. BC 013745
)
MICHAEL K. SCHMIER, JEANNE B. )
SCHMIER; CITY OF LOS ANGELES; and )
Does 1 through 100, inclusive, )
)
Defendants/Cross-complainants. )
______)
)
AND OTHER RELATED ACTIONS. )
______)
TRANSCRIPT OF PROCEEDINGS
January 6, 1994
January 7, 1994
APPEARANCES:
For the Plaintiff: Hart & Watters
By: THOMAS L. WATTERS
12400 Wilshire Boulevard, Suite 450
Los Angeles, California 90048
Telephone: (310) 826-5202
For Defendant Law Offices of Paul A. Schelly
Jennings: By: PAUL A. SCHELLY
3255 Wilshire Boulevard, Suite 616
Los Angeles, California 90010
Telephone: (213) 387-1585
Court Transcriber: ELEANOR R. HALL TRANSCRIBING
3100 - 19th Street, Suite 22
Bakersfield, California 93301
Telephone: (805) 322-8337
Los Angeles Telephone: (213) 351-8532
Eleanor R. Hall Transcribing
LOS ANGELES, CALIFORNIA, THURSDAY, JANUARY 6, 1994
DEPARTMENT NO. 322 HON. RICHARD MONTES, JUDGE
APPEARANCES: (See title page)
(Electronic Recording)
THE COURT: Good morning.
ALL: Good morning, your Honor.
THE COURT: This morning we would start by ruling on Mr. Arthur's motion on behalf of First is it First Professional? Why do we all have trouble with this thing? First Professional Bank.
MR. WATTERS: Correct.
MR. ARTHUR: Yes, your Honor.
THE COURT: On the third and fourth causes of action, is there anything further before I rule?
MR. WATTERS: Your Honor, I would like to make one additional comment. Mr. Arthur has painted Mr.Jennings as trying to deceive somebody because the agreement was to be recorded or at least was not recorded, and I think looking at the agreement, there was certainly no intent to deceive anybody. It was Mr.Jennings' intent to certainly provide whatever parking was necessary during the pendency of the agreement, and the agreement provided for the removal of the covenants from his lot, and it was the obligation of the Schmiers to provide parking for their own building and relocate the covenants or build a parking structure on their own lot.
So from the standpoint of unclean hands or any intent to deceive, I clearly don't believe that there's any evidence of that. It wasn't like he was making a secret deal and really wasn't going to provide the parking that he agreed to and the covenant at the time the covenant was recorded.
THE COURT: Thank you.
Anything further?
MR. ARTHUR: No, your Honor.
(Pause on record)
THE COURT: Starting first with the fifth cause of action which alleges trespass against the First Professional Bank, there is nothing there's been no evidence adduced and none of the elements of trespass have been proven against First Professional Bank, and therefore, the Court grants the motion for nonsuit with respect to that element, for that cause of action. I'm sorry.
Turning to the third cause of action, the action to quiet title, there are several issues. First of all, the bank had no knowledge of this easement at the time that the loan was made, that the title report seems to substantiate that, and the testimony of Mr.Derry and Ms.McIntyre indicate that the bank was unaware of the covenant itself on lot 23. However, at the time that the loan was made, it was a covenant that existed on lot 23, and it ran for the benefit of lot 10. It meets all of the requirements of Civil Code Section 1468. The land is particularly described; that is, both the servient tenement and the tenement to be benefitted.
The owners of both parcels expressed in the instrument setting forth the covenant, their expression to be bound by the granting of the covenant. The act that or the limitation or restrictions that are set forth in the covenant are for the benefit of the dominant tenement and sets forth the purpose of the covenant, and lastly, the instrument was recorded, so it meets all of those conditions set forth in 1468.
And there's no reason to believe that even if the bank had actual notice of that covenant, that they would have had to have gone beyond the mere conveyance and the mere wording of the covenant itself to try to ferret out whether there was an agreement or what kind of purchase agreement accompanied the conveyance.
In most of these cases when there's a sale of land or a sale of a covenant, there is no agreement, so I don't see how we can impose upon the bank a duty to go beyond the deed itself or the not the deed, but the recorded instrument itself. Therefore, I find that the bank is a bonafide purchaser or a bona fide encumbrancer of the property in question; that is, lot 10, and of the covenants for parking easements.
I'm going to grant judgment in favor of the bank with respect to both causes of action. It's the third cause of action and the fifth cause of action. I'm going to ask Mr. Arthur to prepare a judgment incorporating that and incorporating the nonsuit of the City as well.
This does not mean that the bank and the Schmiers are in an identical position. The rights that and the position of the bank are distinct from the Schmiers, and we have yet to receive all of the evidence with respect to the Schmiers or from the Schmiers, so I'm not making any ruling with respect to the Schmiers, visavis, Mr.Jennings.
Is there anything to be heard from Mr.Arthur or the bank?
MR. ARTHUR: No, your Honor. Thank you very much.
MR. WATTERS: Your Honor, may I have a I don't have -- a moment? I don't have a copy of Section 1468 before me, but I would like to have just a moment. I believe I have it in my papers here someplace.
THE COURT: You want to look at it for a second?
MR. WATTERS: If you have it available, yes, please. Thank you.
THE COURT: You want a few moments to look at it?
MR. WATTERS: Yes, your Honor.
THE COURT: All right.
(Off the record)
MR. WATTERS: Your Honor, may I be heard on the
THE COURT: Yes.
MR. WATTERS: -- applicability of Section 1468 of the Civil Code?
THE COURT: Yes.
MR. WATTERS: I don't believe that section is applicable in this situation. Section 1468 states that it applies to each covenant made by an owner of land with the owner of other land. In this case, the covenant marked as Exhibit2 was made by David Jennings and runs to the City. It is not made with the Schmiers, the Schmiers are not signatories to that covenant and are not a party to the covenant.
There is an agreement regarding the covenant, the Exhibit1, which is between the Schmiers and the Jennings; however, Section 1468 is not applicable to that agreement either because the section requires that the covenant be recorded, and it's clear that Exhibit1, which is the agreement between the Schmiers and Mr.Jennings was not recorded.
Further, with respect to the bank, the last section, or last I believe it's the last sentence of Section 1468 expressly provides: (Reading)
"This section shall apply to the mortgagee, trustee or beneficiary of a mortgage of deed of trust upon such land or any part therefore while, but only while he is in such capacity in possession of the land."
And in this case the bank has not proceeded with its foreclosure proceedings, the bank is not in possession of the land, and the Schmiers are still in possession, so I don't believe that Section 1468 applies or that a judgment could be rendered based upon that section.
THE COURT: Well, first of all, it's the covenant starts out saying: (Reading)
"The undersigned hereby certify that we are the owners of the hereinafter legally described property located in the city of LosAngeles, state of California, lot 23, etcetera."
MR. WATTERS: Yes, your Honor, that's Mr.Jennings's lot.
THE COURT: And you're saying that he is not the owner?
MR. WATTERS: No. I'm saying that Section 1468 applies only to covenants made by an owner with the owner of the other parcel, both the both of the owners of both of the parcels have to be parties to the covenant, and the Schmiers are not parties, they're not even mentioned in the covenant marked as Exhibit2.
THE COURT: Well, the I don't think they have to be in the recorded instrument. It has to be a covenant that runs from the owner of one to the owner of the other, and it's an easy thing to determine who the owner of the property was on the date in question. I mean, there's evidence, we've received evidence in this trial.
With respect to your other point, what was your other point?
MR. WATTERS: That well, the agreement which does exist, which is Exhibit1 between the Schmiers and the Jennings is not recorded. Section 1468 expressly requires that that's in subparagraph (d), requires that the instrument between the two parties granting the covenant be recorded. That document is not recorded, Exhibit Number 1.
THE COURT: No, I don't think that's relevant. And your other point?
MR. WATTERS: The last paragraph of Section 1648 which states that: (Reading)
"This section shall apply to the mortgagee, trustee or beneficiary of a mortgage of deed of trust upon such land or any part thereof, but only while he in such capacity is in possession thereof."
The bank has not foreclosed on the property, and the bank is not in possession of the property in question, either piece of property in question.
Section 1468 is designed to apply to successive owners. The bank can't raise Section 1468 unless they have become the possessor of the land.
THE COURT: Do you wish to be heard, Mr. Arthur?
MR. ARTHUR: I think that argument is contrary to admissions that the plaintiffs have made in their pleadings. Paragraph 12 of the third amended complaint alleges that Jennings entered into the parking easement with the City, quote: (Reading)
"For the benefit of defendants which dedicated 14 parking spaces..."
And so on and so forth.
Paragraph 14 of the third amended complaint alleges that Jennings signed the parking easement, quote: (Reading)
"Allowing defendants the right to use parking spaces."
And so on and so forth, so they've taken a position in this lawsuit that the easement was entered into for the benefit of defendants which would include First Professional Bank as well as the Schmiers.
The important point is that that parking easement conferred a right not only on the Schmiers but anybody acquiring an interest in that property, which would include the bank, to use lot 23, and the plaintiffs have so admitted.
(Pause on record)
THE COURT: What about the portion of 1468 that says that the mortgagee, trustee or beneficiary of the mortgage or deed of trust it says: (Reading)
"This section shall apply to the mortgagee of the land or any part thereof while, but only while he is in such capacity is in possession thereof."
MR. ARTHUR: Well, frankly, I'm not sure. I'd have to go back and study that section. The theory of the bank's case, your Honor, is not necessarily that this is or is not a covenant running with the land. We are contending that whatever rights are conferred under the parking easement is a right that belongs to lot 10. We are asserting an interest in lot 10 as collateral for our loan, and as such, we are entitled to the benefits of that covenant.
The admissions in the pleading are that the covenant was entered into for the benefit of all the defendants, which would include the bank as well as the Schmiers.
It's a common-law easement that meets all the common-law principals, and we're entitled to the benefit of that easement.
THE COURT: Well, it's not an easement in the sense of a common-law easement, it's not an easement for ingress or egress, and it's not an easement acquired by adverse use, so it is a covenant, and it's a covenant which is enforceable or valid, if you wish, because of statutory authority, so we have to find some statutory authority to sustain the enforceability or validity of this covenant.
I think that 1468 does that, but I'm troubled by this last paragraph. If you want to take some time and look at it and then advise me as to what that means, I'd appreciate that.
MR. WATTERS: All right. Could I have a few minutes then?
THE COURT: Yes.
(Pause on record)
THE COURT: If you need any books from the library, we'll get them for you and bring them here, all right?
MR. WATTERS: All right.
THE COURT: We'll be in recess.
MR. WATTERS: Thank you, your Honor.
MR. ARTHUR: Thank you, your Honor.
MR. SCHELLY: Until what time, your Honor?
THE COURT: Well, let's just say
MR. SCHELLY: Ten?
THE COURT: Well, it's 10 minutes to 10:00 now. Let's say 10:15.
MR. SCHELLY: Thank you.
MR. ARTHUR: Thank you, your Honor.
(Recess taken)
THE COURT: Yes.
MR. WATTERS: Yes, your Honor.
THE COURT: Mr. Watters or Mr. Arthur?
MR. ARTHUR: I had a chance to look at the Civil Code section during the break, and I think that it's being misinterpreted by Mr.Watters. The way I read this section is that it applies to a lender, to the person who's making the covenant. In other words, this the whole purpose of this statute is dealing with the creation of the covenant, and it goes on to say that it could also apply to a lender but only if the lender has foreclosed under its deed of trust and is now in possession.
To flush that out a little bit, if a lender if let's say, Bank of America
THE COURT: Talk about this case.
MR. ARTHUR: This case. Let's say Bank of America had made a loan to Mr.Jennings. The covenant that's being created is a covenant affecting the Jennings' parcel. The bank could not make a covenant that would run with the land unless the bank had foreclosed and taken possession. At that point, it could make a covenant that would run with the land, and I think that that's the only way that this statute that that harmonizes the statute because 1468 is talking about how the covenant is created that will run with the land.