Rockwell publishing real estate law chapter 2

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© 2009 Rockwell Institute

California Real Estate Law

Lesson 2:
Resolving Legal
Disputes

© Copyright 2007 Rockwell Publishing, Inc.

Introduction

This lesson will discuss:
l alternative dispute resolution
l phases of litigation
l enforcing judgments
l appeal


Alternative Dispute Resolution
Negotiated settlement
Negotiated settlement: parties might compromise
l Parties meet, present initial positions
l Negotiations, rounds of offers and
counteroffers
l If parties reach agreement, lawyer drafts
settlement agreement
l Quick, final, cheap


1

Mediation
If negotiations ? compromise, then parties may try
mediation or arbitration.

Mediation: negotiation with help of neutral third
party
l Mediator helps negotiations move along
l Not binding


Mediation costs
Costs usually split by parties.

l Volunteer mediators = free or cheap
l Complex disputes need specialized mediators
that cost more.


Arbitration
Arbitration: formal hearing of case, lawyers on both
sides
l Like a mini-trial w/o jury
l Voluntary or involuntary
l Arbitrators more conservative than juries in
awarding damages


2

Arbitration
Involuntary arbitration
Involuntary arbitration:
l required by statute or court order
l nonbinding, parties can appeal


Arbitration
Voluntary arbitration
Voluntary arbitration:
l agreed upon in contracts
l also called mandatory arbitration
l binding, can’t appeal unless misconduct


Arbitration
Arbitrator misconduct
Court overturns binding arbitrations if arbitrator’s
decision caused by:
l fraud
l corruption
l other misconduct

Complaining party must show misconduct affected
arbitration award.


3

Summary

l Negotiation
l Mediation
l Arbitration


Litigation

Different phases of litigation:
l determining jurisdiction
l beginning the lawsuit
l discovery
l motions
l trial
l enforcement
l appeal


Litigation: Pre-trial
Jurisdiction
Jurisdiction: court’s authority to make legally valid
judgments on cases it hears.

To hear a case, a court needs both personal and
subject matter jurisdiction.


4

Personal jurisdiction
Personal jurisdiction: court’s right to force defendant
into court

Court has personal jurisdiction only if defendant:
l committed some act in the state, or
l has some connection with the state


Subject matter jurisdiction
Subject matter jurisdiction: court’s right to issue
judgment over the type of case

Courts have either:
l general jurisdiction
l limited jurisdiction


General and limited jurisdiction
General jurisdiction: court can hear all types of
cases
l Example: Trial court hears civil and criminal
cases

Limited jurisdiction: court can hear only certain type
of case
l Example: U.S. Tax Court


5

Federal court jurisdiction
Plaintiff’s choice between state or federal courts.

Federal courts à subject matter jurisdiction if:
l U.S. government is a party
l question of federal law
l diversity of citizenship


Federal court jurisdiction
U.S. government is a party
l Example: prosecution of federal crime

Question of federal law
l Example: claim made under U.S. Constitution

Diversity of citizenship
l Example: plaintiffs/defendants from diff. states

Small claims court
Small claims court:
l Plaintiff’s claim < $7,500 (unless business)
l No jury
l Simplified procedure
l No lawyers present
l Quicker, cheaper


6

Beginning a lawsuit
l Complaint: document from plaintiff outlining
case against defendant
l Filing: plaintiff files complaint with clerk of the
court
l Service: plaintiff has copy of complaint served
on defendant by nonparty

Complaint, answer, and other similar documents
are called pleadings .

Beginning a lawsuit
Defendant must answer plaintiff’s complaint.
l Often a denial of plaintiff’s assertions
l In CA, defendant 30 days to answer

No answer à default judgment for plaintiff


Beginning a Lawsuit
Answer
Defendant’s answer is sometimes more than denial:
l affirmative defenses: such as lack or
jurisdiction, or the statute of limitations
l counterclaims : defendant’s claims against
plaintiff


7

Beginning a Lawsuit
Statute of limitations
Statute of limitations:
l limited time to bring lawsuit
l too much time à hard for witnesses to
remember what happened
l delayed discovery rule: statute of limitations
starts running after reasonable chance to
discover injury
l limit can be set in contract also


Beginning a Lawsuit
Jury demand
l Jury demand: both sides have limited time to
request jury
l If no jury, then bench trial (judge decides)


Beginning a Lawsuit
Lis pendens
Lis pendens:
l plaintiff’s lawyer files notice warning that
property involved in lawsuit
l possible judgment may affect new buyer of that
property
l red flag scares off buyers


8

Beginning a Lawsuit
Remedies
Plaintiff asks for remedies in complaint.

Most commonly requested remedy:
l compensatory damages


Remedies
Compensatory damages
Compensatory damages reimburse for actual
financial losses from other party’s actions.

Examples:
l lost wages
l damage to property
l medical bills


Remedies
Punitive damages
Very flagrant or severe acts by defendant à
punitive damages

Punitive damages:
l deter defendant and others from similar acts in
the future
l can be up to 10 times amount of compensatory
damages


9

Remedies
Specific performance
Specific performance: forces defendant to perform
contract
l when damages alone can’t satisfy plaintiff
l only for unique subjects, like real estate


Discovery
Discovery: learning about opposing party’s case by:
l interrogatories (written questions)
l depositions (oral questions)
l requests for production (document requests)


Discovery
Interrogatories
Interrogatories: written sets of questions
l parties send to each other
l gain useful information through written
answers
l parties answer as narrowly as possible


10

Discovery
Depositions
Depositions: scheduled meetings for parties to ask
questions in person
l under oath
l gauge personalities
l sometimes more info is revealed in person
than in written answers


Discovery
Requests for production
Requests for production: written request to other
side asking for copies of documents relevant to
case

Examples:
l medical bills
l pay stubs


Discovery
Each party required by law to respond to other’s
discovery requests.
l Each side has realistic view of likely outcome
l Encourages settlement


11

Motions
A party can make a motion: a formal request for a
particular order.
l Both sides present arguments about request

Most common: summary judgment motion
l Asking court to rule on validity of legal issue or
claim before trial


Summary judgment
Court won’t grant motion for summary judgment if
factual issues exist (unanswered questions about
the facts).

l Factual issues require trial (witness testimony)


Summary

l Jurisdiction
l Complaint
l Answer
l Remedies
l Discovery
l Motion


12

Litigation
Trial
Trial structure:
l jury selection (if not a bench trial)
l opening statements
l testimony
l closing arguments
l jury instructions
l verdict


Trial
Jury selection
Judge/lawyers ask potential jurors questions,
looking for any bias. Also called voir dire.
l Judge may dismiss jurors (for cause)
l Lawyers may dismiss limited number of jurors
without cause (peremptory challenge)


Trial
Opening statements
Opening statement: begins trial, plaintiff’s lawyer
describes argument intends to make

Defendant’s lawyer gives separate opening
statement against plaintiff’s statement.


13

Trial
Testimony
Witness on each side:
l fact witnesses testify on what they saw, can’t
offer opinion
l expert witnesses offer opinion based on
education or experience (doctors, engineers,
etc.)


Trial
Closing arguments
A lawyer’s closing argument:
l sums up the evidence
l emphasizes key points for the judge or jury to
consider during deliberation


Trial
Jury instructions
After closing arguments, judge instructs jury (if there
is one) about law relevant to case, such as degree
of proof necessary to reach verdict.


14

Trial
Verdict
Verdicts differ, depending what kind of case:
l CA civil cases need at least ¾ of jurors to
agree
l criminal cases need unanimous verdicts

Hung jury if the jurors can’t agree à forces new trial
with different jury


Summary
Litigation: Trial

l Jury selection
l Opening statements
l Testimony
l Closing statements
l Jury instructions
l Verdict


Enforcing Judgments

Winning judgment ? automatic money
l Plaintiff has 10 years to collect judgment

Most common enforcement methods:
l judgment liens (foreclosure)
l garnishment (wage withholding)


15

Enforcing Judgments
Judgment liens
Judgment creditor (plaintiff) can secure award with
lien on real property owned by judgment debtor
(defendant).
l Judgment creditor can foreclose on property
l Proceeds from sale satisfy judgment


Enforcing Judgments
Garnishment
Judgment creditor can collect judgment from
debtor’s pay.
l Earnings withholding order
l Employer withholds and passes to creditor
l Amount to survive can’t be garnished


Appeal

Unhappy litigant can appeal (within 30 days):
l first, to the appellate court
l next, to the supreme court

Appeals to supreme courts are typically
discretionary: court can refuse to hear appeal.


16

Appeal
Courts of review
Proper appellate court determined by geography
zone.
l Six appellate courts in CA
l CA appellate courts handle appeals from
superior courts in same district
l U.S. appellate courts called circuit court of
appeals: 11 federal appellate courts


Appeal
Process
Appellant: party filing appeal

Respondent: party arguing against appeal (also
called the appellee)

Appellate court reviews written arguments and trial
record (transcript of original trial). Lawyers for each
side also present oral arguments and answer
questions.

Appeal
Issues on appeal
Most appeals limited to trial court record. No new
evidence or legal issues introduced.

Rulings based on:
l questions of fact à usually not overturned
l questions of law à sometimes overturned


17

Appeal
Issues on appeal
Questions of law : involves interpreting a statute or
case law
l Example: Were the required elements of fraud
present?

Questions of fact: no legal analysis involved
l Example: Did the defendant sign the contract?


Appeal
Prejudicial vs. harmless
Appellate court overturns only if lower court’s ruling
based on prejudicial error.

l Prejudicial error: affected trial’s outcome in
way that harmed appellant
l Harmless error: error that didn’t affect outcome


Appeal
Disposition of the appeal
If reviewing court finds reversible error, it can:
l issue new ruling/verdict
l remand case back to lower court
l order new trial


18

Summary
Enforcement and Appeal

l Judgment liens
l Garnishment
l Issues on appeal
l Prejudicial vs. harmless error


19

Legal Aspects of Real Estate
Lesson 2 Cumulative Quiz

1. Which of the following is the least expensive method of dispute resolution?

A. Arbitration
B. Mediation
C. Negotiation
D. Trial

2. A dispute resolution method in which a neutral third party facilitates discussion between parties, but
does not impose a decision, is:

A. arbitration
B. defenestration
C. mediation
D. negotiation

3. A contract requires the parties to use binding arbitration for any disputes that arise in connection with
the contract. This is known as:

A. involuntary arbitration
B. mandatory arbitration
C. voluntary arbitration
D. Both B and C

4. All of the following determine whether a court has jurisdiction, except:

A. the amount of money at issue
B. the type of claim at issue
C. what state the parties reside in
D. whether the parties want the case decided by a judge or jury

5. If a plaintiff brings suit in the federal court system, the case will first be heard in a:

A. Circuit Court
B. District Court
C. Superior Court
D. Supreme Court

6. A federal court always has jurisdiction over a case in all of these instances, except when:

A. the amount in controversy is $7,500 or less
B. the federal government is a party
C. there is a question of federal law
D. there is diversity of citizenship (and at least $75,000 at issue)

© 2009 Rockwell Publishing 1

7. The plaintiff initiates a lawsuit by filing a/an _____, which describes the cause of action and makes a
request for relief.

A. answer
B. complaint
C. deposition
D. lis pendens

8. A defendant in California superior court has this many days to file an answer to a complaint:

A. 15
B. 30
C. 60
D. 180

9. A patient finds out three years after having surgery that her complications were caused by the surgeon's
error. She would:

A. be barred from filing suit because of the statute of limitations
B. need to file suit within four years of finding out about the mistake
C. need to file suit within four years of the surgery
D. need to file suit within two years of finding out about the mistake

10. A document filed with the recorder's office that provides notice of a pending lawsuit that may affect
title to a particular property is a:

A. judgment lien
B. lis pendens
C. writ of attachment
D. writ of execution

11. A plaintiff incurs $10,000 in medical expenses because of the defendant's negligence. At trial, the
plaintiff is awarded $10,000. This would be considered:

A. a civil penalty
B. compensatory damages
C. punitive damages
D. specific performance

12. Once the complaint and answer have been filed, the parties will gather information during the _____
phase of the lawsuit.

A. appellate
B. discovery
C. preliminary
D. voir dire


13. A defendant's attorney interviews the plaintiff under oath prior to trial. This is a/an:

A. deposition
B. interrogatory
C. request for production
D. voir dire

14. A defendant moves that the judge rule, pre-trial, on one of the plaintiff's claims for which there is no
factual dispute. This is known as a motion for:

A. default judgment
B. deficiency judgment
C. judgment n.o.v.
D. summary judgment

15. Who of the following would be limited to acting as a fact witness, rather than an expert witness, in a
lawsuit concerning a real estate transaction?

A. Appraiser
B. Managing broker
C. Neighbor
D. Real estate lawyer

16. In California, which of the following is true?

A. Both civil and criminal verdicts must be unanimous
B. Both civil and criminal verdicts require three-fourths of the jurors to agree
C. Civil case verdicts must be unanimous; criminal case verdicts require three-fourths of the jurors
to agree
D. Civil case verdicts require three-fourths of the jurors to agree; criminal case verdicts must be
unanimous

17. A judgment creditor may do which of the following?

A. File a judgment lien against the debtor's real property
B. Garnish the debtor's bank account
C. Garnish the debtor's wages
D. All of the above

18. At an appellate hearing:

A. a jury is seated
B. evidence is heard
C. lawyers argue questions of law
D. witnesses are called


19. A plaintiff loses a case in U.S. District Court in San Diego. The plaintiff would appeal directly to the:

A. California Court of Appeal for the Fourth District
B. California Supreme Court
C. U.S. Ninth Circuit Court of Appeals
D. U.S. Supreme Court

20. If an appellate court finds prejudicial error, it may do all of the following, except:

A. hear additional evidence prior to issuing a different verdict
B. issue a new verdict
C. order a new trial
D. remand the case to the trial court for additional proceedings


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