Top 10 California Legal News Stories of 2010

California always generates some of the biggest legal news headlines throughout the year, and 2010 was no exception.  From celebrity trials to landmark constitutional rulings, California’s courts and lawyers got plenty of national and local media coverage.

Here is a list of what we thought were the most interesting, most fascinating, most significant, and most bizarre California legal news stories of 2010:

Vaughn Walker10.  Prop. 8 Ruling. In August, Judge Vaughn Walker ruled that Proposition 8 — the California ballot initiative which passed in November 2008 banning same-sex marriage — was unconstitutional. The federal judge made his ruling in a lawsuit filed by two gay couples who had argued that the voter-approved ballot initiative violated their civil rights.   Read the full ruling here.

Judge Walker stated that:

Proposition 8 fails to advance any rational basis in singling out gay men and lesbians for denial of a marriage license. Indeed, the evidence shows Proposition 8 does nothing more than enshrine in the California Constitution the notion that opposite sex couples are superior to same-sex couples. Because California has no interest in discriminating against gay men and lesbians, and because Proposition 8 prevents California from fulfilling its constitutional obligation to provide marriages on an equal basis, the court concludes that Proposition 8 is unconstitutional.

You can read more about Judge Walker’s ruling here.

Jessica's Law9.  Judge Enjoins Enforcement of Jessica’s Law. In November, a Los Angeles judge ruled that “Jessica’s Law” — which restricted how close registered sex offenders could live from parks or schools — violated sex offenders’ constitutional rights. In his ruling, Judge Peter Espinoza wrote that “[t]he court is not a ‘potted plant’ and need not sit idly by in the face of immediate, ongoing and significant violations of parolee constitutional rights.”

Proposition 83, which was more commonly called “Jessica’s Law,” passed in 2006, and imposes strict residency requirements on sex offenders, including forbidding registered sex offenders from living within 2,000 feet of any public or private school or park where children regularly gather.  Opponents of the law argued that the 2,000 foot requirement made it nearly impossible for sex offenders to live in densely populated cities.  You can read more about Jessica’s Law here.

Don't Ask, Don't Tell8.  California Judge Stays Enforcement of Don’t Ask, Don’t Tell. In September, Riverside-based U.S. District Court Judge Virginia A. Phillips struck down the U.S. Military’s “Don’t Ask, Don’t Tell” policy towards gay members of the military.

The following month, a three-judge panel of the Ninth Circuit Court of Appeals froze Judge Phillips’ order pending the court’s hearing the case on its merits. The move shifted attention to the Obama administration which has been working to persuade the U.S. Senate to repeal the law before a new Republican-led Congress is sworn in.

Jerry Brown7.  California’s Gubernatorial Election.  The election of a new Governor easily makes this list, as new Governor Jerry Brown will undoubtedly have a major impact on California law over the next four years.  The election of Brown also marks a shift from a Republican to a Democratic Governor, which combined with the passage of Proposition 25 (lowering the margin to pass a budget from 2/3rds to a simple majority vote in the Legislature) could mean major change in Sacramento.

Hare Krishna6.  California Supreme Court Upholds Ban on Hare Krishna Solicitation at Airports.  In March, the California Supreme Court upheld a 1997 Los Angeles City ordinance prohibiting individuals and organizations from soliciting and receiving charitable donations at Los Angeles International Airport (LAX). The ordinance was passed by the L.A. City Council in 1997, in response to complaints from passengers and airport visitors about solicitation at the airport. The International Society for Krishna Consciousness of California, Inc. (commonly known as the “Hare Krishnas”) sued to enjoin the airport from enforcing the law, which eventually led to the Supreme Court ruling.

5.  U.S. Supreme Court Sides With California Law School On Student Groups.  In June, the U.S. Supreme Court upheld the policy of San Francisco’s U.C. Hastings law school that student groups do not have the right to restrict its membership to practicing Christians.  The case received national attention as Christian groups argued that the law school’s policy forced it to allow those engaging in a “sexually immoral lifestyle” to become members or leaders. The majority decision, authored by Justice Ruth Bader Ginsburg, ruled that the UC Hastings College of Law’s decision was a fair application of its anti-discrimination policy.

Death Penalty4.  Judge Blocks Resumption of Executions.  In late August, Marin County Superior Court Judge Verna A. Adams blocked California officials from resuming capital punishment in California, which has been on hold since a 2007 injunction against executions.  Judge Adams ruled that the injunction would remain in effect unless and until the court approves newly revised lethal injection procedures.

The ruling comes close on the heels of a ruling by a Riverside County judge setting an execution date of September 29, 2010 for death row inmate Albert Greenwood Brown, who was convicted of raping and murdering a 15-year-old girl in 1980.

Bell City Officials Accused of Corruption3.  Eight City Officials Accused of Corruption. A working class suburb of Los Angeles, tiny Bell, California, received national attention during the summer over oversized city salaries for city council members and city staff.  In July, the Los Angeles Times revealed that City Manager Robert Rizzo — who later resigned and was charged with corruption — earned $787,637.  The pay was almost twice President Obama’s salary and the the highest municipal salary in California.  City Councilmembers earned over $100,000 for part time work, in a city of 36,000 where the median annual income is less than $35,000.

Scott Rothstein2.  California Attorney Convicted of $1 Billion Ponzi Scheme. I’m actually surprised this news story didn’t merit greater attention, but I suppose in a post-Madoff era a billion-dollar Ponzi scheme just isn’t the same. In June, former member of the California  State Bar and disbarred Florida lawyer Scott Rothstein was sentenced to 50 years in prison for operating a $1.2 billion Ponzi scheme using faked legal settlements. Rothstein actually got off easy, considering U.S. District Judge James I. Cohn could have imposed a 100-year sentence for Rothstein’s five felony convictions, even though the sentence was 10 years more than prosecutors suggested.

Before his downfall, Rothstein was known for his taste in fancy Italian sports cars, an 87-foot custom yacht, glittering watches and big cigars.

In laying down the sentence, the federal judge noted he was particularly disturbed by the fact that the former attorney used the judicial system for his scams, even forging signatures of at least three federal judges.  You know you aren’t going to get off easy when a judge is sentencing you and you used the judicial system for your own scam.

Randy Quaid

Cousin Eddie

1.  Randy Quaid’s Canadian Vacation.  This story may not be the most legally significant, but it sure is bizarre. On September 18, Randy Quaid and his wife Evi were arrested at a guest house located in Montecito, California, where they had allegedly caused $5,000 in damages to the property.  The Quaids argued they owned the home but the current owner later provided documentation that he had purchased the property in 2007 from a man who had in turn purchased it from the Quaids.

In later interviews, the Quaids said they believed people were singling out celebrities to either steal their fortunes, or kill them. They said that actors David Carradine — who was found hanged in a Bangkok hotel room — and Heath Ledger — who died of a drug overdose — were victims of the same murderous conspiracy.

“I believe these actors were whacked,” Quaid said. “… We believe there to be a malignant tumor of star whackers in Hollywood.”

Quaid and his wife are currently seeking asylum in Canada, which apparently is star whacker-free.

Did we miss any can’t-miss California legal news stories of 2010?  If so, let us hear it in the comments!

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What Is A Strategic Default?

This article is an excerpt from the ebook “The Foreclosure Legal Guide.”  You can download a free sample chapter here.

A strategic default is a technique where a homeowner who can afford to make the mortgage payment on their home decides to stop making payments and allow the property to go into foreclosure.  In many cases, the homeowner can afford to make the mortgage payments but has determined that their property has dropped so far in value that it would take years for the homeowner to recoup their investment, leading them to decide to walk away.

In other cases, the homeowner is falling further and further behind and stops paying their mortgage only after they’ve cut back in every other way possible.

The Foreclosure Legal Guide

The strategic default technique has become more popular as real estate values have continued to decline or stagnate across much of the U.S.  Strategic defaults are becoming so popular in fact that 60 Minutes broadcast a story on the practice.  You can view the story here.

The story focuses on Arizona and Nevada, but strategic defaults are becoming just as common in California, where lenders have been extremely reluctant to agree to grant loan modifications or short sales.

Anyone who is thinking about doing a strategic default in California needs to be extremely careful. Under California law, banks may in certain circumstances be able to pursue a defaulting borrower. If a borrower has refinanced their loan, then they generally may be vulnerable to suit by their bank.

In addition, the bank may have up to four years to file a lawsuit against the borrower for the difference between the money loaned out and the amount recouped at the trustee sale.  If the lender files a lawsuit for the deficiency, then the borrower could be forced to spend a lot of money to hire a California real estate lawyer to defend them or to file bankruptcy, even years after “walking away” from the home.

A homeowner who has not refinanced their original “purchase money” mortgage generally is safe from suit, as their loans are non-recourse.

This does not mean that it is a good idea to file bankruptcy immediately after doing a strategic default.  A bank would have up to four years to file a lawsuit for the deficiency, but that does not mean that they will. If the bank does not file a lawsuit within four years, then the statute of limitations expires and the bank has lost its ability to sue you, the borrower.  Assuming you do not have additional debts which necessitate filing bankruptcy, you are “in the clear”.

The next question is whether banks will file lawsuits against the thousands of former borrowers who did strategic defaults. Right now, it is not known what the banks will do.  If the large banks decide to pursue the thousands of their former borrowers, they will need to hire thousands of attorneys to file thousands of lawsuits.  It would clog the courts immediately.

The more likely scenario is that the banks are going to make case-by-case determinations whether to sue their former borrowers. They may decide to write off all loans during a specific time period or in a particular low-income area, or they may do asset searches on all former borrowers to help them determine whether to file suit.

Think About the Short Sale Alternative

If you are thinking about doing a strategic default, but you refinanced your loan(s) at some point after purchasing the property and you are not comfortable with the prospect of waiting four years holding your breath to see if you’ll be sued, then you may want to pursue a short sale.

Traditionally, if you perform a short sale, you could negotiate with the lender to give up its right to pursue a deficiency judgment against you. However, if the lender absolutely refused, then borrowers didn’t have much leverage.

However, a recent change in law has made it easier for borrowers to protect themselves from future lawsuits if they complete a short sale.

In 2010, Gov. Arnold Schwarzenegger signed SB 931, which prohibits a first mortgage lender from filing a lawsuit against you after that lender has agreed to a short sale.  In other words, if a first mortgage lender agrees to allow a homeowner to complete a short sale, the lender will not be able to turn around and later file a lawsuit against that former owner for the difference between the amount owed and the amount the property sold for.

The bill did not protect homeowners in short sales from second mortgage holders.  Even if the second mortgage lender was owed, for example, $100,000, and agreed to accept $50,000 during the short sale, that second mortgage lender can still file a lawsuit against the borrower up to four years after the short sale.

Nevertheless,the bill was a welcome relief to the many thousands of borrowers who have completed or are pursuing a short sale right now.

Want to know more about strategic defaults, short sales, foreclosures, and other options for distressed real estate?  You can read more in the ebook “The Foreclosure Legal Guide.” Be sure to download your free sample chapter.

If you need advice on your particular situation, you may want to take advantage of my firm’s $295 flat-fee 60-minute consultations in person or over the phone.

 

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How to Hire a Real Estate Attorney

If you need a real estate transaction performed or have a tricky land use problem, a real estate lawyer can answer your questions, draft any necessary documents, and save you a lot of money and headache in the long term. However, picking an attorney to represent you can seem daunting unless you know the right steps to take and questions to ask.

In order to help you identify what you need to do in order to interview and hire a real estate attorney, follow the below five steps:

The Five Steps to Choose A Real Estate Attorney

[Read more…]

How To Sell a Home Using A Short Sale

[UPDATED 10/7/2010]: Gov. Arnold Schwarzenegger has signed SB 931, which would prohibit a deficiency judgment under a note secured by a first deed of trust after a short sale. In other words, if a first mortgage lender agrees to allow a homeowner to complete a short sale, the lender will not be able to turn around and later file a lawsuit against that former owner for the difference between the amount owed and the amount the property sold for.  The bill did not protect homeowners engaging in short sales from attempts by second mortgage holders to seek a deficiency judgment.

For more information on SB 931, here is the text of the bill and a little analysis. ]

***

Just a few years ago, short sales were almost nonexistent. With a red-hot real estate market, homeowners who needed to sell their property for financial reasons were usually able to break even or make a small profit. As the real estate market declined, homeowners who hit a rough patch through a job loss or health problem became less likely to be able to break even, and were forced to sell their home using the short sale process.

A short sale occurs when a homeowner’s property is worth less than the amount owed on its mortgages, and the homeowner must sell the property for less than is owed. After deducting for sale costs and real estate agent commissions, there is not enough money to completely pay off the amounts owed to the lenders.

Currently, short sales are coming occurring across all price levels of the real estate market, with a surprising number of short sales occurring among properties valued at more than $1 million.

Because the lender must accept less than the amount owed, the home seller must [Read more…]

Local Government Enacts $1,000 per day Fines for Messy Foreclosed Home Lawns

You better keep your lawn mowed if you’re in DeKalb County, Georgia.  Or else.

According to the Foreclosure Blog, if you are the owner (meaning the bank/mortgage lender) of a foreclosed home located in DeKalb County, Georgia, and you don’t keep your yard clean, you could get hit with a $1,000 per day fine until you clean it up.

The new law is set to kick in on October 25, 2010.

Any chance this idea may spread to other parts of the country?  You better believe it.  Watch for local California cities and counties implementing hefty fines on foreclosed properties soon.  It’s a two-for-one: it raises revenue, and it punishes wrongdoing.  I can’t imagine that idea won’t take off.

Read the full story here.

Top 11 Biggest Foreclosure Mistakes

Foreclosure Sign, Mortgage Crisis

Image via Wikipedia

11.  Relying On Only The Making Home Affordable Program. The federal government’s Making Home Affordable Program and FHA Short Refi Program are just two options for relief if your house is underwater. I recommend homeowners contact their lender directly and convince their lender that the homeowner’s hardship situation merits relief. There is nothing stopping the lender from working with you outside of a government-sponsored program.

10.  Poorly Written Hardship Letter. You need to use a top of the line hardship letter which will convince your lender that you deserve help and that you’re not trying to take advantage of them.

9.  Trying to Get a Loan Modification Without Help. It’s extremely, extremely difficult to get a bank to grant a loan modification. Most lenders are very skeptical of such requests. You have to extremely detail-oriented, organized and follow up daily with your bank to make sure they’re processing your request.  On the other hand, under California law most lawyers won’t take on a loan modification because they cannot take an up front fee and there is no guarantee of being paid. My recommendation is to buy a book that will walk you through the process, or have a friend or relative help you. [Read more…]