Short-Sighted on Short Sales

Today in Coker v. JPMorgan Chase Bank (S213137 Jan. 21, 2016) the California Supreme Court affirmed a Court of Appeal ruling  that California’s anti-deficiency statute, CCP 580b, precludes a deficiency judgment against a home loan borrower not only when the bank initiates a foreclosure sale, but also when the borrower initiates a short sale.  After approving the short sale and receiving those sale proceeds, Chase sent Ms. Coker a demand letter for the $116,686.89 balance remaining on her loan.  She then filed a declaratory relief action, to which Chase demurred, which demurrer was sustained by the trial court.  The Court of Appeal reversed, and our Supreme Court agreed with the Court of Appeal.

What is remarkable about Coker is that, apparently, some mid-level manager at Chase actually authorized the demand letter after approving the short sale.  In a spectacularly-bad-for-PR turn of events, there is now a published case documenting this.  Not only that, but if the tactic had succeeded, what would have been the outcome?  Short sales would have ground to a halt.  Then what would have been the result of that?  Borrowers would have sat in properties for months, often over a year, while the lender went through all the machinations required to foreclose and then evict the former homeowner, all the while the property deteriorates, losing even more value.  Chase should consider itself lucky its ill-conceived gambit did not succeed.

read the opinion here:


Nice Work if You Can Get It

The recent unpublished case of In re Marriage of Scott (B263480 Jan. 15, 2016) not only provides a glimpse into the finances of Byron Scott, “the head coach of the Los Angeles Lakers,” but also some hints into briefing mechanics and trial court evaluation of fee requests.  As for the personal details, Mr. Scott earns a whopping $312,500 per month, plus “$26,661.86 biweekly from his former position as head coach of the Cleveland Cavaliers. . . .”  What is perhaps more interesting than the income is the recitation “the marital estate was worth $6 million to $7 million,” leading to the rhetorical question of how someone with that level of income can have a net worth less than double one’s annual income.  But that is not a legal question so will not be the focus here.

The legal point on which Anita Scott succeeded was the trial court erred in including her portion of the Cavaliers’ payment (community property) in the temporary support award, something to watch for.  The briefing mechanics point is Byron included “a comparison chart” in his brief which the Court found helpful, not to his ultimate benefit however.  So that is worth considering.

As for the fee request, the trial court had ordered Byron to pay Anita’s counsel $75,000 in fees “in order to ‘create a level playing field.'”  However, the court had noted the parties had “spent an inordinate amount of time and money on preliminary matters that might best have been resolved through negotiation between counsel.”  In particular, it pointed to “many instances of inter-office conferences and multiple-attorney involvement in meetings which are not all within the Court’s perception of reasonability of fees,” warning it would scrutinize future fee requests.

I, for one,  welcome such scrutiny.  In many cases I have reviewed, trial judges — perhaps they do not have the time to scrutinize bills or maybe they just have become accustomed to over-billing —  routinely approve attorney fee requests which seem clearly “pumped.”  $100 per hour for secretarial time to do filing, “block billing” of 8 or 10 hours in a day with no specificity, 2 or 3 attorneys on one side billing for appearing for a motion at which no testimony had been taken, office conferences which appear to be nothing more than passing remarks in a hallway, and several days of time billed for drafting points and authorities on routine motions all are approved without inquiry.  If a party wants to pay a law firm $200,000 for a $50,000 case, that is between the party and the law firm.  However, the opposing party should not be ordered to pay those excessive fees.  Perhaps if trial judges took the time to scrutinize fee requests a bit more and then issue written rulings pointing out why counsel’s fees were unreasonable, this would curb the practice of excessive fees, at least a bit.  A few such rulings — or appellate opinions — posted on the internet certainly would be bad for business and a strong disincentive to run up excessive legal fees just because counsel and the client know they can stick the other side with the bill.  Wishful thinking, I know, but one can dream.