January 7

A Home Improvement Contractor’s Peril

We were recently retained by a homeowner who had obtained an estimate for paving work on her driveway. In the weeks following the estimate, there were further discussions between the paver and the homeowner in which the paver sought to persuade the homeowner to allow him to perform the work since he had some open dates in his schedule. Although the homeowner had never expressly commissioned the paver to perform the work, the discussions were of a nature that the paver concluded that the homeowner had agreed to have him perform the work. The paver never created a written contract, however, containing the terms of any such agreement.

While the homeowner was away from her home for an extended time, the paver performed the paving work on the driveway and invoiced the homeowner. Upon receiving the paver’s invoice, the homeowner contacted the paver and complained that she had never agreed with the paver to have him perform the work. Further, upon returning home and inspecting the work, she pointed out to the paver that the work was not performed in a workmanlike manner, nor was it performed according to her expectations which she had discussed with the paver’s representative when provided with the estimate. As a result, she declined to pay the paver’s invoice.

A Lawsuit Is Filed

The paver sued the homeowner claiming that he and the homeowner had reached an agreement that authorized him to perform the work and that he was owed the invoice amount.

At trial, we contended on the homeowner’s behalf that there had never been any agreement actually reached between the parties despite the fact that the paver had proceeded to perform the paving work and, further, that the work had not been performed in a workmanlike manner. We also contended that the paver had violated Business & Professions Code Section 7159 by performing home improvement work without a signed written contract. (Note: All references are to the California Business & Professions Code.)

The Requirement Of A Written Contract

Section 7159 requires that a contractor have a written “home improvement contract”, signed by both parties, for any work of home improvement where the cost of the contractor’s labor, services, and materials will exceed $500.

Section 7151 defines “home improvement” to include “the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property and shall include, but not be limited to, the construction, erection, replacement, or improvement of driveways, swimming pools, including spas and hot tubs, terraces, patios, awnings, storm windows, landscaping, fences, porches, garages, fallout shelters, basements, and other improvements of the structures or land which is adjacent to a dwelling house.” “Home improvement” also includes the installation of home improvement goods or the furnishing of home improvement services.

The law requires that the written contract contain important disclosures to the homeowner, including the homeowner’s right to cancel the contract within three days, a warning to the homeowner that the contractor may enforce his or her rights to payment with a mechanic’s lien, and notices regarding the contractor’s general liability insurance and worker’s compensation insurance coverages. The contract also must contain a notice to the homeowner regarding how changes to the scope of work of the contract are to be handled, and a notice regarding the homeowner’s right to file a complaint against the contractor with the Contractor’s State License Board.

And, of great importance for the contractor to note, Section 7159.5 makes it a misdemeanor for a home improvement contractor to not have a signed written contract for a home improvement project.

The Written Contract Is Required To Protect The Homeowner

The Legislature adopted Section 7159 to protect homeowners from the abusive actions of unscrupulous contractors in taking advantage of homeowners. Calwood Structures, Inc. v. Herskovic (1980) 105 Cal. App.3d 519, 164 Cal. Rptr. 463. While the horror stories that one typically hears about abusive home improvement contractors seem to deal with swimming pool contractors or siding installation contractors, the scope of the statute is much broader than just these specific trades. It includes any repairs, or remodeling of a residential property.

The Exception To Every Rule

Appellate courts have carved out some limited exceptions to this rule of Section 7159 requiring a written contract, most often in those cases where the homeowner is not within the class of individuals whom the statute is designed to protect. Asdourian v. Araj (1985) 38 Cal.3d 276, 211 Cal.Rptr. 703. The courts have often considered the level of sophistication of the property owner, the scope or complexity of the project, the homeowner’s prior contracting experience, whether someone was assisting the homeowner in the negotiations with the contractor, such as an attorney or architect, the prior relationship between the contractor and owner as friends, and whether the homeowner subsequently ratified the contractor’s work.

The Decision

In our case, the court sided with our homeowner client finding that the paver had failed to comply with Section 7159 because he had failed to use a signed written contract for his home improvement services. The homeowner was not required to pay the paver’s invoice even though the paver had contributed labor, services, and materials to the paving job.

This may seem like a harsh result for the paver, who lost many thousands of dollars in the job, but the policy of Section 7159 is very strong in seeking to protect the homeowner. In adopting the statute, the Legislature concluded that the contractor, as the more sophisticated business person, should be able to easily comply with the requirement of a written contract and that, if he or she failed to use a written contract, then he or she should be the one to bear the financial loss.

Had the paver, at a minimum, have sent the homeowner an email confirming that the work had been authorized and setting forth the basic terms of the agreement (price, time for performance, payment terms, etc.), he would have been in a much better position to argue at trial that he shouldn’t have to bear the financial loss of the project. Nevertheless, the use of a written home improvement contract, containing all of the necessary disclosures required by law, is always the best approach for any contractor performing “home improvement” contracting services.

June 4

Romeo’s Legacy — Emotional Distress Damages For The Pet Owner

Many of us share our homes with four-legged creatures and, with their every act of affection and seemingly boundless joy, our pets have a way of burrowing themselves deep into our hearts. After just a short while, we can’t even imagine our lives without them in it.

So, what does the law say should happen to someone who intentionally interferes with our joys of pet ownership by harming or destroying our pet?

In February 2000, in a fit of road rage after having been bumped from the rear in traffic by another driver, Andrew Burnett angrily confronted the other driver and took the driver’s bichon frise dog, Leo, from her lap and hurled it into oncoming traffic on a busy road near the San Jose International Airport, where Leo died. Some nine years later (really? it had to take that long?), Burnett was convicted of felony animal cruelty and was given the maximum sentence available of three years in prison.

But, Burnett’s conviction did nothing to restore Leo to his owner or to ease her intense grief caused by Leo’s death. The dog’s owner had suffered a real emotional loss by Burnett’s conduct and his sentence did nothing to compensate her for it. Which then raises the question — Can a pet owner be compensated in civil monetary damages for the mental suffering experienced when a third party intentionally kills or harms the pet?

Let’s look at the case of Plotnik v. Meihaus (2012) 208 Cal.App.4th 1590 for the answer.

And So The Trouble Begins

The Plotniks and David Meihaus were adjoining property owners in Laguna Niguel, California. When the Plotniks bought their home, there was an existing three-foot fence on the property line. But, after experiencing problems with Meihaus, the Plotniks built a new six-foot fence to provide them greater insulation against those problems. Meihaus, however, sued the Plotniks and their homeowners association over the fence, which case was eventually settled with the entry of mutual restraining orders and an agreement by the Plotniks to move their fence back three feet from the property line. The agreement contained a standard attorney’s fees provision contained in most settlement agreements.

However, this was only the beginning of misery for the Plotniks. They claimed that Meihaus dumped his yard clippings in the three foot corridor between the Plotniks’ fence and the common boundary line, made obscene gestures to the Plotniks and their children, damaged their trees and the fence, and engaged in various acts of intimidation directed towards them and their family members.

One day, David Plotnik heard banging on the fence and he went out, with camera in hand, to investigate the noise and to photograph the offending yard clippings. While he did so, the Plotniks’ 12″ miniature pinscher, “Romeo”, escaped and made his way into Meihaus’s yard. When Plotnik had made his way around the house and over to the Meihaus residence, he arrived just in time to see Romeo roll across the yard, through a gate, and hit a tree in the Plotnik yard. Plotnik immediately entered Meihaus’s yard and saw Meihaus returning to his house with a baseball bat in hand. When Plotnik confronted Meihaus about why he had attacked Romeo, Meihaus denied having struck the dog and claimed that he had only used the bat to “guide” Romeo back to the Plotniks’ property.

The Trial

The Plotniks sued Meihaus under an assortment of legal theories, including trespass to personal property and negligence. The jury awarded the Plotniks monetary damages for their costs incurred for Romeo’s surgery and post-operative care, and for the emotional distress that each of them suffered as a result of the baseball bat incident.

Meihaus appealed the verdict, arguing that he had lawfully exercised his right to self-defense. The Court of Appeal rejected that argument stating that the jury’s findings that he had not acted in self-defense could not be disturbed.

More importantly, Meihaus argued that a pet owner could not recover monetary damages for emotional distress suffered as a result of injuries caused to the pet. All pet owners will be pleased to know that the Court of Appeal disagreed.

The Court of Appeal’s Decision

The Court of Appeals denied recovery under a negligence theory. It ruled, however, that a dog is an item of personal property to its owner and that Romeo’s owner could clearly recover the economic, or out-of-pocket, losses attributable to the dog’s surgery and post-operative care under a trespass to chattels theory. The real question was whether emotional distress damages were also recoverable.

The Court found no California cases which stated that emotional distress damages were not recoverable and it agreed with published decisions from other states which awarded damages for a pet owner’s emotional distress. It quoted with approval from the case of LaPorte v. Associated Independents, Inc. (Fla. 1964) 163 So.2nd 267, 269: “The affection of a master for his dog is a very real thing and … the malicious destruction of the pet provides an element of damage for which the owner should recover, irrespective of the value of the animal…”

Quoting favorably from a very old California case (Johnson v. McConnell (1889) 80 Cal. 545, at 549), the Court noted: “While it has been said that [dogs] have nearly always been held ‘to be entitled to less regard and protection than more harmless domestic animals,’ it is equally true that there are no other domestic animals to which the owner or his family can become more strongly attached, or the loss of which will be more keenly felt.”

Meihaus’s Ultimate Comeuppance

In what to most pet-owning lawyers would seem to be the most ironic, yet deserving, comeuppance received by Meihuas for having applied his Louisville Slugger™ to Romeo’s hindquarters is that the Plotiniks were awarded $93,780 in attorney’s fees. The appellate court found that Meihaus’s conduct violated the terms of the restraining orders which were provided in the original settlement agreement. As such, on a breach of contract theory, the court found a basis to affirm the trial court’s award to the Plotniks of their attorney’s fees expense incurred during the trial.

What Does The Plotnik Decision Mean?

The Plotnik case now makes clear that, in California, a pet owner may recover monetary damages for the emotional distress which the owner suffers as a result of the intentional conduct of a third party in killing or injuring the pet. The decision is limited to cases involving intentionally wrongful conduct and does not apply to cases where the animal is injured through the mere negligence of the third party.

This is something that most pet owners would intrinsically seem to know in their hearts is right or fair; it only took a while for the courts in California to find a case with the right facts to allow the law to be firmly enunciated.

May 28

The Design Professional’s Most Powerful Weapon In Getting Paid

During a development project, one or more design professionals will be typically engaged by the developer early in the process. Those design professionals may assist in creating a topographical map, an exterior architectural design for the project, developing a drainage plan or a plan for the contouring of the land suitable for the project through a series of cuts and fills, or a landscaping plan.

In an era when development costs have skyrocketed, while development money is scarce and investors leery, the financial risks of the development process make it imperative that the design professional be cautious about allowing the development client to incur too large of an account receivable. And it behooves the design professional to become familiar with the design professional lien.

Which Design Professionals Have Lien Rights?

For over twenty years, California law has defined a “design professional” as an architect, an engineer, or a land surveyor. However, the Civil Code’s treatment of construction lien rights was overhauled effective July 1, 2012, and landscape architects were added to the class of design professionals who have lien rights. Civil Code Section 8014.

The design professional must have a written contract for his or her services, and that contract must be with the landowner. Importantly, the landowner with whom the contract is created must also be the landowner at the time that the design professional’s claim of lien is recorded. The contract has to be for the design, engineering, or planning of a work of improvement. General consulting services will not typically give rise to lien rights for the design professional.

In preparing the written services contract, the design professional should always check to see just who the landowner is. Often, it will be an entity, which entity could be different than the entity which is undertaking the development process. The contract should also specify the work of improvement for which the services are being provided.

The Prerequisites

In order to use the design professional lien, construction on the project may not have begun yet. On the other hand, a design professional lien may not be recorded unless the landowner has already obtained a building permit or other governmental approval in furtherance of the project. Civil Code Section 8302(c). Thus, if a permit or other governmental approval is not obtained by the developer-owner, then the design professional has no lien rights.

The lien is available for the amount of the fee which has been provided under the contract or the reasonable value of the services, whichever is less. Inevitably, in a fee dispute with an owner, this may lead to a critical examination of the reasonableness of the design professional’s fees. Thus, it is important that the design professional maintain detailed records on how their time was spent on the project so that the design fees may be justified.

The landowner must have actually defaulted in the payment of the professional fees required by the contract or must have refused to pay the design professional’s demand for fees owed under the contract. And, not less than ten days before the claim of lien is recorded, the design professional must give the landowner-client a written notice which demands payment and states that a default has occurred under the contract and the amount of that default. Civil Code Section 8304(c).

The design professional must record a lien within ninety days of knowing, or having reason to know, that the project will not be started. Civil Code Section 8312.

One important limitation exists on the use of a design professional lien: A design professional cannot obtain a lien for services provided for a work of improvement relating to a single-family, owner-occupied residence for which the expected construction cost is less than $100,000.

What Must Be Included In The Lien?

A construction lien, which has its origins in the California Constitution (Article XIV, Section 3), has long been viewed as an extraordinarily powerful remedy for the contractor, or, in this case, the design professional, because it provides a form of security for payment of the design fees. Therefore, the courts have required that the lien claimant comply with the statutory requirements.

The design professional’s claim of lien must contain the following information:

1. The name of the design professional.
2. The dollar amount of the claim.
3. The current owner of record of the project site.
4. The legal description of the site.
5. An identification of the building permit or other governmental approval given for the work of improvement.

The legal description often crops up at the last moment as something that the lien claimant has difficulty in locating. Many County Recorder’s offices have copies of deeds available online; however, if the design professional has a good working relationship with a title company, a copy of the deed can often be obtained with a quick telephone call.

Because of the frequency with which they use lien claims, some design professionals have office procedures in place to accurately gather the information needed to prepare the lien and they use a template to create the lien form itself. Yet, with the importance of complying with the statutory requirements for the claim of lien, it may also be worth considering having an attorney prepare the claim of lien.

How Long Does The Lien Remain Valid?

The act of recording the lien is what imposes the lien on the property. However, the lien is not indefinitely valid; it will automatically expire if either (1) the project construction begins or (2) a lawsuit seeking to enforce the lien is not filed within ninety (90) days of the date the lien was recorded.

The design professional is presented with a bit of a quandary if the lien is recorded shortly before construction is anticipated to begin. Lien claimants often like to record a lien and then negotiate with the landowner, hoping that the lien will exert pressure upon the landowner by complicating the process of obtaining the necessary construction financing. However, if construction is close to beginning, the financing is most likely already in place. The design professional can prevent the lien from expiring by filing a lawsuit to enforce the lien, but the lien claimant usually wants to avoid the legal fees and court costs associated with starting up a lawsuit.

So, what is the design professional to do under such circumstances? If the design professional lien has expired because construction of the project for which the professional provided services has already begun, then the design professional lien may be converted into a mechanic’s lien if all of the following requirements are met:

1. The design professional lien remains fully or partially unpaid.
2. Within thirty days after expiration of the design professional lien (only under Civil Code Section 8306(b)(1) where the lien has expired because construction of the project has begun), the design professional records a mechanic’s lien for the amount of the unpaid design professional lien.
3. The mechanic’s lien must state that it is a converted design professional lien but is recorded and is being enforced as a mechanic’s lien.

Where the design professional lien is converted to a mechanic’s lien, the design professional does not need to provide a preliminary notice to enforce the mechanic’s lien.

The design professional’s converted mechanic’s lien is effective as of the date of recording. It is given priority over a lien or other encumbrance on the property on which the project is situated which attaches after the work on the project is started (or was unrecorded at the beginning of the work on the project and of which the design professional had no notice).

However, this issue of lien priority can pose a problem for the design professional if other liens have attached between the time that the design professional’s original lien was recorded and the date that the converted mechanic’s lien was recorded. The converted mechanic’s lien will be junior to such intervening liens. Perhaps the best advice for the design professional is, when it may be reasonably expected that other liens may attach to the property before the design professional’s converted mechanic’s lien can be recorded, to move forward with an action to enforce the original design professional lien while it is still viable.

It should be noted that, where a design professional lien has expired because the design professional failed to file an enforcement lawsuit within ninety days, that expired lien cannot be converted in this manner.

If the landowner satisfies or partially satisfies the lien, the design professional must then execute and record a document that demonstrates the partial or full satisfaction of the lien amount and releases so much of the lien as is appropriate.

Having A System Helps

The design professional has a very powerful weapon in the design professional lien for gaining payment from a defaulting developer. While the statutory requirements for asserting such a lien must be adhered to, they are not terribly complex and vigilance by the design professional will usually serve to protect the viability of the lien as an option for payment.

Often, where a landowner has stopped paying the design fees, the design professional withdraws from further service under the contract and may no longer be privy to the developer’s actions or plans for the project. In such an instance, the design professional should establish an office system which monitors when the landowner obtains a building permit or other approval for the project because that is the event which triggers the right of the design professional to record a lien. This might consist of having a staff member make a weekly call to the local building department, or, where the city or county maintains online information about issuing building permits, making frequent checks of the city’s or county’s website.

The design professional also should not delay for long in asserting his or her lien rights once the building permit has been issued because construction can begin with little prior fanfare. Asserting lien rights early in the development process will give the design professional priority over other subsequent lien claimants. If, however, the design professional lien has been lost due to the commencement of construction activities, the design professional should not lose heart as a mechanic’s lien will usually still be available to the professional under Civil Code Section 8400.

May 21

Wait, Wait, I Can’t Die — I Don’t Have A Will Yet! (Part Two)

(This is the second installment in a two-part series discussing the use of simple wills.)

If you have ultimately decided that you want to have a will, your next step is to make an appointment with an estate planning attorney to help you design an estate plan that is suitable for your needs and circumstances.

But, before you reach for the phone to make that call, a little planning of your own will make the meeting more efficient (and probably less costly).

A Little More Conversation

Having a frank discussion with your spouse about your overall estate planning objectives is a good idea. Spouses needn’t be in agreement on everything because each spouse can make different provisions in his or her separate will. However, having some basic understanding and agreement on the major concepts will make the job easier for all concerned.

Some fundamental questions should be considered before meeting with an attorney:

1. What is your basic desire for the distribution of your estate? Most clients intend to benefit their children, if they have any, but you can also consider making bequests to friends, other family members, charitable gifts, or a combination of any of them.

2. If you have children, do you wish for them to share equally in your estate or do you have reasons to treat them differently? You have no obligation to treat your children equally, although, more often than not, that is how parents choose to treat their children (often from the fear of appearing to favor one child over another). Yet, some children may have greater needs than others, particularly if they are grown and you already have been able to develop some sense as to the career or financial path on which each child’s life seems to be taking them. One child could have medical issues where he needs a greater portion of your estate to pay for their medical expenses. Or, where there is a disparity in age between the eldest and youngest, you may wish to have more funds available to pay for the youngest child’s education.

3. If your children are not old enough to inherit your estate yet, do you have someone whom you would like to manage those monies for their benefit until they are old enough to receive them? (Monies can be set aside in a trust or in a custodianship until the children reach an age where they can be responsible enough to manage their own money. Or, if not placed in a trust or custodianship, a guardian of the child’s estate can be appointed by the court to manage the inheritance until the child becomes an adult. Trusts, custodianships and guardianships are outside the scope of this post and will have to be the subject of a future article.) In any case, you will need to select someone who can manage those funds until the child(ren) is/are older. That person can be another family member, a friend, or a professional fiduciary.

4. If your children are adults with children of their own, do you wish to benefit your grandchildren with direct gifts to them? Or do you prefer to leave your estate to your children and allow them to make the decisions about how to benefit your grandchildren? The former approach makes certain that the grandchildren receive a specific gift whereas the latter approach builds in greater flexibility for your children, yet is reliant upon your children passing along some of their own inheritance to your grandchildren.

5. If you want to benefit a charity with some or all of your assets, which charitable organization do you wish to benefit with that gift? Is your gift-giving faith based? Is it designed to fund medical research or some other work that will improve the world for future generations? Do you want to benefit a national charity, or do you prefer to be charitable closer to home in your own community? There are no right or wrong answers as most any charity would stand to benefit from a cash bequest. But, in selecting a charity, choose the one whose programs and ideals are most consistent with your own.

Just What Do You Own?

It is easy to think that, if asked, you can quickly list out all of the assets that you own. But, after a meeting with your attorney in which many new concepts may have been introduced to you, it can be easy to overlook an asset or two. So, while you have some free time before your meeting, pencil out a list of all of your assets. Be sure to include all real estate, any securities or other investments, any partnership or limited liability company interests, any business(es) which you may own, any promissory notes or other debts owed to you, bank accounts, cars, valuable antiques and jewelry, and cash.

It is important for the attorney to gain an understanding of the net value of your estate to determine what type of estate plan will be best suited for your needs. With the “fiscal cliff deal” reached between Congress, in 2013, each person can now transfer a combined total of $5.25 million during their lifetime (by gift) and at death. Therefore, knowing the amount of the equity (fair market value less any debt) in each of your assets will assist the attorney in assessing whether your estate needs a more sophisticated plan to avoid estate taxes, or, because your estate is small enough that it is unlikely to be taxed at your death, your estate’s gift-giving plan can be designed without any regard to taxes.

Be Well Represented

If your estate plan does not utilize a trust, it is quite possible that your estate will need to be probated. In the probate process, an individual (known as the “personal representative” or “executor”) is charged with the responsibility of managing that process. You should give thought to whom you would select for that task. Many clients nominate one of their children, but it can also be a trusted friend, or a professional fiduciary. Whomever you select, it should be someone who has reasonable arithmetic skills and who is accustomed to (or at least not intimidated by) working with an attorney.

If you have minor children, you should give thought to whom to nominate to serve as their guardian should you die before they become adults. There should be a guardian of their person and a guardian of their estate. The guardian of their person will most likely be the person with whom the children will live, while the guardian of their estate would be the person charged with managing their finances while they remain a minor. These positions can be filled by the same individual, or you can nominate different persons to serve in each capacity.

Burial Plans

You will assist your family by clearly stating any preferences which you may have regarding your desires for the disposition of your remains upon death. If you would like to be cremated, that should be stated in your will, along with any special instructions as to what you would like done with your ashes. If you have any prepaid burial arrangements, you should provide a copy of the contract to the lawyer.

What To Take With You To The Appointment

You will expedite the process of preparing your estate planning documents if you take the documents describing your assets to the initial meeting with your attorney. He or she will need to see how the assets are currently titled and verify the values of any financial assets. So, be certain to take copies of documents such as deeds and appraisals to any real property, the most recent mortgage statement showing the amount of the outstanding debt, the trust deeds securing that debt, the most recent statement for any brokerage, money market, or bank accounts, copies of any promissory notes owed to you and any trust deeds which might secure the notes, copies of any partnership agreements or limited liability company operating agreements, leases, and automobile certificates of title (“pink slips”). If you have any other loans, be certain to take the note or other loan documents.

Where There’s A Will

If you are still a part of the 55% of Americans who don’t have a will, and you are tired of waking up during the night and worrying about what kind of mess you will leave behind for your family if you die without one, take that simple step of contacting an attorney to have one prepared for you.

Having a will professionally prepared is generally not a terribly difficult process. If your attorney advises that you use a simple will, the cost will also be surprisingly affordable. Incorporating trusts and other more sophisticated forms of estate planning can increase the cost, but they can also make the lives of your loved ones much easier after you are gone, and they can often save your estate from substantial estate taxes or probate costs.

Please feel free to give us a call if we can assist you in completing this important estate planning process.