Movie Stunts On Public Streets

          Several past articles have discussed the use and importance of streets and highways in accessing real estate.  It’s clear that most of the time streets and roads are used for the purpose of actually going somewhere to a destination point, or for the purpose of getting to a point on the map.

However, occasionally streets and roads are used for other purposes.  Sometimes these “other uses” can end up in court.

Several years ago, a California case addressed one of these alternate uses for streets.  This case involved a movie stunt that didn’t turn out as expected.  In that case, the streets weren’t used to actually go somewhere.  Instead, they were used for filming.  The case went to trial, and then to an appeal.  In its opinion, the court of appeal wrote the following.

“Motion pictures remain one of the premier forms of entertainment in today’s world.  Movies frequently entertain through flights of fantastic adventure, heavily laden with excitement and danger.  Motion picture producers and directors are often able to achieve such results by employing tricks of the trade (e.g., animation, trick photography, special effects, and clever splicing and editing). Some producers and directors, on the other hand, resort to photographing adventuresome activities which are nearly as dangerous as they appear on screen and which sometimes imperil those in front of and behind the camera.”

“The motion picture industry has long employed seemingly fearless and hardy stuntpersons to perform activities too hazardous for professional actors to undertake.  Frequently, these stuntpersons achieve spectacular results without injury.  Other times, as here, adventure becomes misadventure.”

It seems that a stuntwoman, who was also a ski instructor and aspiring actress, was hired to do stunt work in the filming of “Cannonball Run.” This stuntwoman was to be a passenger in a 1962 Aston-Martin sports car, which itself was a double for another Aston-Martin sports car used elsewhere in the film. Filming began in Los Angeles, then moved to Florida and Georgia, and then to Las Vegas.  The Aston-Martin that was used in the film was a vintage car, and had no seat belts.  (The other Aston-Martin car, for which the stunt car was a double, is referred to in the Court’s opinion as the “original James Bond car” which was used in filming “James Bond” movies, and was equipped with special features such as machine guns – along with seat belts).

When the stunt car was delivered to the set, it was found to have defective steering, bald tires, and a malfunctioning clutch.  It wouldn’t go more than eight miles an hour.  It was repaired – but no seat belts were installed.

In the stunt, the Aston-Martin was driven by a stunt car driver southbound on a highway where it encountered five northbound vehicles also being driven by stunt drivers.  There were two takes made of the stunt.  In the first take, the Aston-Martin cut across the front of opposing traffic and onto the opposite shoulder, passed the oncoming cars, and then returned to the highway.  The camera operators used their lenses to make it look like the vehicles were passing closer together than they actually were.  This stunt went smoothly, and the stuntwoman thought the car performed perfectly.

After the first take, the director told the stunt drivers to pick up the pace and drive faster.  The director wanted the Aston-Martin to weave in and out of the oncoming cars in serpentine fashion.  Nobody told the passenger stuntwoman that the second “take” was to be different than the first.  Unfortunately, during the second take the Aston-Martin collided with a Ford van, and both the driver and the stuntwoman were hospitalized, with the stuntwoman suffering catastrophic injuries.

The stuntwoman sued for her injuries because there were no seat belts in the car, and at trial her expert testified that if she had worn a lap-shoulder seatbelt, she would at most have suffered fractured ribs.  The evidence showed that seat belts were available on the movie set and could have been installed in 20 minutes.

At trial, the jury awarded the stuntwoman damages of seven million dollars, but found her partially at fault in the amount of 35%.  The trial judge therefore reduced her award by 35%, and due to settlements previously received from other parties which served as an offset, the trial judge entered an award in favor of the stuntwoman of $0.00.  The Court of Appeal affirmed this judgment. The case is reported as Von Beltz v. Stuntman, Inc. (1989) 207 Cal. App. 3d 1467.

Issues of negligence, liability, offsets, and personal injuries involve complex issues of fact and law.  Persons considering such questions or issues should seek the advice of competent legal counsel.

Buried Treasure?

          “A treasure is a thing hidden or buried in the earth, . . . which no one can prove his property, and which is discovered by chance.”

This definition of “Treasure” is quoted from the laws of the State of Louisiana. The definition has its origins in the Napoleonic code upon which Louisiana law is based. Louisiana law also provides that “The ownership of a treasure belongs to the person who finds it.”

I remember as a young boy running across the book Treasure Island by Robert Louis Stevenson.  This book describes pirates, mutinies, sailing ships, ocean journeys and buried treasure.  Thoughts of buried treasure usually call up movies like Pirates of the Caribbean.  But treasure really sometimes does exist, and sometimes in the most unlikely places.

Lucian Sebastian Baron was a wealthy resident of Lousiana who died in 1928.  At the time of his death, he was being taken care of by his daughter Emily.  After her father’s death, Emily moved in with her brother at a home near New Orleans, and she bought a mattress.  When the family moved, Emily took the mattress with her.

Emily eventually built a separate home for herself next to her brother’s home.  She had customary locks on the doors on her home, and a special lock on the door of her bedroom.

Emily seldom left her home. She allowed nobody to enter her bedroom unless she was present.  She ordered her clothes by catalog.  By the time of her death at age 82 in 1957, she was completely blind. At the time of her death, she left no will.

Emily’s mattress remained locked up in her room for a year after she died.

Emily’s heirs inherited all of her property.  They sold her mattress for $2.50.  The mattress was taken to a mattress works where it was dismantled. The interior cotton was processed through a chopping machine.  The cotton was then placed into another box where air was blasted through it.  When all of the air stopped blowing, there was $22,500 in gold certificates that had been stored in the mattress.  That’s a fair amount of money in 1957.

Emily’s heirs claimed that the gold certificates were “lost property” and that as Emily’s heirs they were entitled to keep the certificates.  The mattress buyers, however, claimed that they had paid good money for the mattress and everything in it, so the certificates belonged to them.  The mattress buyers also claimed that the gold certificates were “in fact a treasure trove, and that, since the treasure was found in their property, it belonged to them.”  This case is reported at United States v. Peter (1959) 178 F. Supp. 854.

You be the judge.  Who wins?  The heirs of the wealthy 82-year-old woman who lives alone and stuffs her mattress with money?  Or the fortunate purchasers of the mattress who find a treasure trove in their mattress?

After discussing both English Law and the Napoleonic Code on the subject of treasure, the Court made short work of the arguments by the mattress purchasers. The court awarded the money to Emily’s heirs.  If the true owners of the money couldn’t be found, then the mattress purchasers would have made a good claim to the money.  But since the money clearly belonged to Emily, her heirs were entitled to it.

So much for buried treasure.  Any modern-day Long John Silvers should remember that if they find a treasure chest, the owner has the right to the treasure.  And if the true owner files a lawsuit for return of the treasure, then the successful treasure hunter will probably just be out of luck.

Top Ten Ways to Get Rid of Property

There’s no doubt about it.  Sometimes it’s just necessary for a homeowner to let their property go.  There are generally 10 ways to get rid of a property.

1)  Conventional sale.  This is a sale where the homeowner has equity in the property.  In this situation, the sales price is higher than the amount of the loans secured against the property.  The lenders are paid off in full and the owner keeps all of the sales proceeds in excess of the amounts needed to pay off the lenders and the closing costs.

2)  Short sale.  This is a sale for less than the amounts due on the loans secured by the property.  The lenders must agree to this kind of a sale because the lenders usually won’t be paid off in full.

3)  Foreclosure.  Foreclosure occurs when a borrower defaults on a loan and the lender causes the property to be sold and the sales proceeds are applied to the loan.

4)  Deed in Lieu of Foreclosure.  This is used when the buyer signs a Deed in favor of the lender.  The use of the device avoids the necessity of a foreclosure sale.  The lender must agree to this in order for it to work.  This is done in part to the fact that a deed is only effective if it is accepted.  If the lender refuses to accept a deed, then this approach most likely won’t work.

5)  Tax sale.  If a homeowner doesn’t pay their county property taxes, then the county will eventually hold a tax sale where the property is sold to pay the unpaid taxes.

6)  Gift.  It’s usually possible to give a property away by signing an appropriate deed.

7)  Creditor sale.  A creditor with a judgment against a borrower can sometimes cause a property to be sold in order to pay a judgment.

8)  Adverse possession.  If an owner doesn’t use their property for several years, and if a stranger uses the property as though they owned it and if such stranger pays property taxes, then such a stranger may actually acquire ownership of the property.

9)  Bankruptcy.  A homeowner in bankruptcy may be discharged from personal liability for one or more loans that are secured by the property.  In some situations, a borrower who declares bankruptcy may save a significant amount of taxes that may otherwise need to be paid.  Real Property can also be sold or foreclosed on in conjunction with a bankruptcy.

10)  Inheritance.  When a homeowner dies, the title to their property will typically pass to someone else.  Deceased people can’t own property.  But the property previously owned by a deceased person will usually remain subject to the lien of the deeds of trust that encumbered the property prior to death.

A homeowner who needs to get rid of their home will often have several options for doing so.  But the method chosen by such homeowners can have profound tax and legal consequences.  Many complex considerations are involved in connection with the sale or loss of property. Most homeowners aren’t aware of the potentially significant consequences that can attend the sale or transfer of real property.  Making an appropriate decision as to how to dispose of real property requires specialized training, skill and/or knowledge.  Homeowners who are considering disposing of their home should obtain competent, qualified tax and legal advice.

Unexpected Results Can Occur

There’s a lot of law that goes on “below the radar.”

lot of law goes on “behind the scenes” where it’s completely invisible to the general public.  It’s just never thought about – and that’s because everything seems to work seamlessly.  The only time most people ever think about such law is where there’s a problem.

Take, for example, the circus.  No, really, the circus.  Last summer  my grandson came to visit – and out by Dublin, along Interstate 580, we saw a big, striped tent.  It had big blue and gold stripes.  I don’t remember seeing much of a sign.  But how much sign do you need?  A big-top striped tent of those proportions usually only means one things – a circus.

So – we did what doting grandparents do. We bought tickets.

It was a great day.  Where else can you see a grown man balance a full-sized shopping cart on his chin?  And where else can you see a couple of people ride full size motorcycles around a caged globe – without hitting each other while doing full vertical and horizontal loops at the same time?  There were skilled trapeze artists, a circus master – the whole nine yards.

But I’ll bet most of the circus-goers didn’t stop to think about all of the legal arrangements involved in that event.  For example, the big-top circus tent didn’t just get setup in the middle of nowhere.  It had to be setup on land that belonged to someone.  So that means the circus had to get some kind of permissions – and probably had to pay some kind of a fee – in order to be able to set up their tent on vacant land next to the freeway.  Such an arrangement has all of the makings of a contract for the use of real property – and we usually call this a lease.  Even though the circus was only there for a short period of time, all of the necessary legal arrangements would most likely have to be made in advance, including leases and other legal arrangements.

Not every circus sets up under the big top.  It seems like a lot of circus performances these days take place indoors – like at big indoor arenas.  Same thing – most of these events may well be backed up by a lot of contracts.  Such contracts might take into account such things as the type of use that is to be made of any particular facility, and the times and dates when it will be available.  And lots of contracts contain terms that address things like potential accidents, incidents, or unforeseen circumstances.  Such contracts can spell out who’s going to assume the risk of certain kinds of accidents or loss.  Among other things, such contracts can provide for who’s going to pay for loss, injury, or damage from an event.

And don’t think it doesn’t happen.  A circus – or any other event – can experience an unforeseen event, where things might not go according to plan.  Here’s an example.

It seems that in 1958, the “Great Danbury State Fair, Inc.” was apparently hosting a fair. (The Wikipedia article on Danbury Fair indicates that this fair started in 1821 and that beginning in 1869 it ran for 10 days every October until 1981, when it closed).  There was apparently an incident of sorts that resulted in a lawsuit.  The reported opinion doesn’t give many details, but it does indicate that someone was injured and that the Great Danbury State Fair, Inc. was one of two named defendants (the other named defendant was “Steele’s Frontier Days”).

The court’s opinion is very short – it is only 6 paragraphs long (and two of those paragraphs are only 1 sentence long).  The court’s opinion refers to an “allegedly offending elephant” and notes that the complaint filed by the injured person describes the elephant as “an animal ferae nature, ” which in Latin means “wild animal.” No other details are given in the court’s opinion.

Reading between the lines, it seems clear that someone was injured at the Great Danbury State Fair, and that this person claimed that an elephant was the cause of the injury, and that they believed that Steele’s Frontier Days and the Great Danbury State Fair were responsible.  The case is reported as Becker v. Steele (1958) 139 A.2d 820.

(The court’s opinion is very brief – it doesn’t say what the accident was, or how it happened, or whether or not anybody was found liable.  It only indicates that an injury occurred, and that the injured person claimed that the injury was caused by an elephant.)

An elephant, no doubt, should be given a great deal of respect, and should also be given a wide berth, and only skilled and knowledgeable persons should handle an elephant.  But when something with an elephant goes wrong, then some of the law that frequently operates “below the radar” may be called upon to sort out the consequences.

Unusual Claims Can Be Made

You just never know what’s going to end up in court.  The following summary is from a reported decision from a genuine case filed in court.

Three men went to the zoo in the early morning hours.  They apparently weren’t satisfied with looking at the animals from ground level, so they climbed up into a very large and tall oak tree.  They started making a lot of noise, and their  “loud voices up in the tree were upsetting some of the animals in the zoo.”  The case opinion doesn’t say whether it was the giraffes, the elephants, the lemurs or some other kinds of animal that were getting upset.  Regardless, the zoo’s general curator, a groundskeeper and a park security policeman responded to the disturbance.  The policeman ordered the three friends to come down out of the tree.  However, the policeman didn’t tell them to be careful when they were coming down.

One of the friends fell out of the tree from a height between 25 and 45 feet.  That’s a significant fall – it’s the equivalent of falling from the top of a two to four story building. There wasn’t much to cushion his fall at the bottom – he fell on the tree roots and was seriously hurt.

The injured tree-climber filed suit against the park on three general grounds.  The first was that although the park had a rule against tree-climbing, the rule wasn’t posted.  The court asked a rhetorical question: “Should the Park post the rule prominently upon each tree?  Would the public stand for a park defaced by signs on every tree to warn of a danger of which everyone is already aware? The mere existence of the rule did not create a duty . . . to post it.”

The climber claimed that the park employees knew he had been drinking and that because of this knowledge the employees owed him a greater duty of care.  But the court rejected this claim, and found that “It is neither axiomatic nor knowledge common to all that men when drinking are utterly reckless of their safety or insensible to their duty to protect themselves.”

The climber also claimed that the policeman was under a duty to tell him to be careful climbing down.  The court responded: “We hardly see how a warning that ‘if you fall you might get hurt,’ which is so obvious and universally known, would have supplied plaintiff with any useful information he did not already possess. Above a certain age one should not have to be told not to leap out of windows etc., and there is no duty owed to inform plaintiff of what he already knew.”  The plaintiff claimed that the park employees breached their duty of care by ordering the men out of the tree.  But the court found that “A soft, gentle request to climb down addressed to three noisy men twenty-five to forth-five feet up in a tree undoubtedly would have gone unheard and unheeded.”

The court stated that it “would be doing violence to the environment and to society if we were to hold that the mere ownership of a tree created per se a hazardous condition or unreasonable risk such as would give rise to strict liability.  The benefits of trees to society far outweigh any attendant risks and any decision that would discourage the ownership of trees would be contrary to the public good.”

Though this was not a California case, it’s conceivable that a California court might reach a similar result.  The full case can be found at Henshaw v. Audubon Park Commission, 605 So.2d 640 (1992).

What is a “Vessel”?

Ever wonder what’s happening at the United States Supreme Court?  High profile Supreme Court cases regularly make front page news.  But when the Court’s proceedings aren’t in the limelight, there’s still a lot going on.

One of the Supreme Court’s primary purposes is to serve as the last word on the meaning of the many laws passed by the United States Congress.  The Supreme Court regularly issues legal opinions that interpret just exactly what Congress meant when it passed any given law.

The laws passed by the United States Congress as generally known as “statutes” and most of them are organized in a “code” (a “code” is a set of laws which are organized in a logical manner).  The “United States Code” contains all of the laws passed by Congress over the last 200 years or so, and which have been put together in an organized set of books.  These “codified” statutes passed by Congress are organized into “Titles,” and each “Title” concerns a different area of federal law.

The very part of the very first “Title” in the United States Codes provides a lot of word definitions.  Some of these definitions seem obvious – others, not so much.  The third law in the entire United States Code defines “vessel.”  Ever wondered what a “vessel” is?  Probably not.  If you looked up the word “vessel” in Webster’s Dictionary, you’d find that there are several definitions.  According to Webster’s Dictionary, a “vessel” can be an “airship.”  Or it can be a “craft” that’s bigger than a rowboat that is “intended for navigation on water.” Or a “vessel” can be a anatomical “tube,” like a “blood vessel.”

So, according to federal law, what is a “vessel?”  The word “vessel” is defined at 1 U.S.C.A. section 3 as being any “watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water.”

That definition may seem to be straightforward.  But it’s not. If you reviewed the legal cases decided by several federal courts, as found at 1 U.S.C.A. section 3, you’d find the following:

– a rowboat less than 16 feet long, capable of carrying three persons, and propelled by a single oar at its stern, is not a “vessel”

– The ruins of a “vessel”, shown to be fit for nothing but scrap or junk, and towed into the United States for such is not a “vessel” (but is instead “imported merchandise”)

– Coal barges, which are mere open boxes, floated downstream, and usually sold for lumber at the end of the voyage, are not ships or vessels

– A seaplane flying through air is not a “vessel” (but a seaplane is a “vessel” for purposes of salvage)

– A semi-tractor trailer with wheels which drives over a frozen lake is not a “vessel” even if the load which it is towing breaks through the ice (this seems rather intuitive)

So if these items are not a “vessel,” then what is a “vessel?”

– A schooner tied to a wharf, and used for dining and dancing, but equipped for sailing and capable of being towed, is a “vessel”

– A stern wheel steamer licensed for the coasting trade, formerly a ferryboat, which is used for moving a floating house, in which an exhibition or circus show was conducted, is a vessel

– An old steam boat, from which the boilers, wheel, engines, and machinery had been removed, and which had been changed into a pleasure barge for the transportation of excursion parties, having no independent means of propulsion, but intended to be towed by a towboat, is a vessel

– A vessel which was engaged in the coastwise trade, struck a rock and sank, and after several unsuccessful attempts to raise her, was abandoned by her owners to the insurance underwriters, who sold her, and the purchaser succeeded in raising and refloating her about a year and a half after she had sunk B is a vessel

– A raft made of cross‑ties, used as a convenient mode of bringing them to market, manned by a pilot, crew, and cook, who lived and had shelter thereon during the voyage, which lasted many days, and propelled by the tides and by poles and large oars, is a vessel.

So the foregoing descriptions give some idea about what may constitute a vessel.

What about a floating home? Most homes are built on soil or rock.  But some homes (or “houseboats”) float on water.  Are those homes “vessels”?  It can make a difference whether or not they are.

Floating Home Destroyed

The laws passed by Congress are known as “statutes” and most of them are organized in a logical manner into something known as a “code.”  When a statute is placed into a “code” it is said to have been “codified.”  Not all statutes are organized into “codes,” but most of them are.

The United States Code is divided into different sections known as “Titles” and each “Title” concerns a different area of law.

The very first “Title” in the United States Code begins by defining a number of important words.  The third law in the first “Title” of the United States Code defines the word “Vessel” as any “watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water.”

Another article reviewed a number of federal cases concerning exactly what is a vessel.  Some of the cases are obvious, and others are not.  Some are humorous.  One of the cases

held that “A stern wheel steamer licensed for the coasting trade, formerly a ferryboat, which is used for moving a floating house, in which an exhibition or circus show was conducted, is a vessel.”  Another of the cases held that “A semi-tractor trailer (with wheels) which drives over a frozen lake is not a “vessel” even if the load which it is towing breaks through the ice.”

It’s not hard to imagine the kinds of arguments that could have been made in the case of the semi-tractor trailer.  One party may argue that a semi-tractor trailer provides a means of transportation.  When that semi drives over the top of a frozen lake, then that semi is in fact transporting people and things over water B even though that “water” is located under a sheet of ice.  When the ice breaks, then the whole thing ends up in the water – so the semi is, under this definition, a “vessel.”

In such a case, the other side could have argued that under that type of logic every car, truck, motorcycle or bicycle is a “vessel” when it crosses any bridge over water.

You have to give the attorney “style points” for trying to convince a federal court that “a semi-tractor trailer isn’t a truck, it’s a vessel – at least when it’s being driven on a frozen lake.  It’s a bit like trying to force a square peg into a round hole – but you never know for sure, sometimes those square pegs fit.

Whether or not an object is a “vessel” can make a difference.  There’s a whole body of federal law known as “admiralty” or “maritime” law, and this type of law has its own rules and procedures.  The outcome of any given case can be profoundly affected by whether or not a case is governed by “maritime” law.  So there can be real money at stake in determining whether or not any given object is a “vessel.”

In 2002, a person bought a 60-foot by 12-foot “floating home.”  The home consisted of a “house-like plywood structure with French doors on three sides.” It also contained “a sitting room, bedroom, closet, bathroom, and kitchen, along with a stairway leading to a second level with office space.”  There was an empty “bilge” space underneath the main floor that kept it afloat.  The home had no means of propulsion or steering. Instead, it only floated, and though it could be towed over water to different places, the home had no means of getting anywhere under its own power. The floating home was not a “houseboat” because under federal law a “houseboat” is a “motorized vessel . . . designed primarily for multi-purpose accommodation spaces with low freeboard and little or no foredeck or cockpit.”

After buying the “floating home” the new owner had it towed to a marina owned by a city in Florida.  The city unsuccessfully tried to evict the owner, and finally the city filed a lawsuit against the owner in federal court under maritime law.  The lawsuit sought to impose a lien for “dockage” fees and damages for trespass.  At trial, the owner claimed that the suit should be thrown out because the “floating home” was not a vessel, and so federal maritime law didn’t apply.

You be the judge.  Is a floating home like this a vessel – or not?  If you said “yes – it is a vessel” then you would have agreed with the trial court, which awarded the city $3,039.88 in “dockage” fees plus $1 for damages for trespass.

But if you said “no” then you would have agreed with the United States Supreme Court, who said that in order to be a “vessel” an object must be capable of being used “as a means of transportation on water.”  The Supreme Court found that the “floating home” itself was transported, but that it didn’t transport people or things, and so it was not a vessel.

The case is reported as Lozman v. The City of Riviera Beach, Florida (2013) 2013 DJDAR 617.

So what finally happened?  Before the case was heard by the Supreme Court, the “floating home” was sold to pay the judgment in favor of the city.  The city bought the home and destroyed it.  The case eventually went to the Supreme Court, where the decision of the trial court (and the other intermediate courts) was reversed.  So the owner won – but too late to save his “floating home.”  Apparently the owner was left with a claim against the city for money damages.

Legal considerations involving floating homes, and any determination about whether or not an object is a “vessel” or whether or not any case is subject to maritime law, involve complex legal considerations.  Persons with such questions should consult competent legal counsel.

Water Taken For Granted

           I recently received a letter from a United States Congresswoman with a suggestion that her constituents use less water.  Great idea.  The letter was accompanied by a small pamphlet filled with suggestions for using less water.

I don’t often get letters from members of Congress.  But this one was particularly useful.  I glanced over the pamphlet to see if there was much I could do to save water at home.  Most of the suggestions were based on common sense – suggestions like don’t leave your hose running, fix your leaky faucets, turn off the faucet while brushing your teeth — those types of things.  The pamphlet described the significant price of water – and highlighted a resource that most of the time seems invisible, which is domestic water use.

I’ve known people who own properties out in rural areas – out in the “country.”  These were farmers, or ranchers, or people who just like their privacy.  But you don’t have to talk to these people for very long before you realize that they are very, very attuned to water use – both domestic water use, as well as water disposal.  They’ll tell you they can’t just turn on a tap and use all the water they want – they have to rely on wells, and wells have limited “recharge” rates, so they often have holding tanks for water storage so that they can have more water available “on demand.”

The fact that water use is invisible to most of us is a tribute to the effectiveness of the work done by our public utilities and water resources boards.  If the water supply were limited or disrupted, we’d know it – in a hurry.  I know that some people keep a couple of 50 gallon barrels of water stored outside their homes  – just in case.  And in the event of a water supply disruption, most people would have a large water heater full of water, and many, many water heaters have a convenient drain spigot located right at the bottom of the tank – so that most people would have something like fifty gallons of water immediately available in the event of an emergency.

But overall – the municipal water supply systems work seamlessly, and invisibly.  As long as you can pay your bill, the water just keeps on flowing.

Most people probably don’t ever think much about the water boards that help oversee and develop the water distribution system.  For the most part, these boards work in the background.  But there was a recent case decided by the United States Supreme Court that arose out of some statements made by a water board member at a public meeting held by a water district board.

In 2007, a water board meeting was held where a new board member attended.  At the meeting, this new board member introduced himself as a retired marine with 25 years of service.  He claimed that he had received the Congressional Medal of Honor in 1987, and that had been wounded many times by the same person.  However, the Supreme Court found that none of these statements were true.  The statements weren’t made to obtain employment or financial benefits, nor to get privileges for those who had received the Congressional Medal of Honor.  Instead, the statements were just made by way of  “introduction.”

Unfortunately for this new board member, his statements violated a relatively new federal law known as the “Stolen Valor Act of 2005″ which makes it a crime to make such false statements.

This law makes it a federal crime for a person to falsely represent that he or she has been awarded any decoration or medal authorized by Congress for the Armed Forces of the United States.  Violators can be fined, or imprisoned for not more than six months, or both.  If the false representation concern the Congressional Medal of Honor, then the term of imprisonment could be as much as 1 year.

The water board member who made the false statements pleaded guilty to a violation of the federal Act, but he reserved his right to appeal his claim that the federal Stolen Valor Act violates the First Amendment right to free speech and is therefore unconstitutional under the United States Constitution.

The Ninth Circuit Court of Appeals found the Stolen Valor Act to be unconstitutional.  The United States Supreme Court granted review.

In its opinion, the Supreme Court acknowledged the government’s interest in preserving the honor associated with the Congressional Medal of Honor.  The Supreme Court noted that the Congressional Medal of Honor was established in 1861.  It is reserved for one who has distinguished himself or herself “conspicuously by gallantry and intrepidity at the risk of his life above and beyond the call of duty.”  The Supreme Court cited The White House Blog, as visited on June 12, 2012, for several instances where the Congressional Medal of Honor has been awarded. The Supreme Court’s opinion mentioned the situation of “Dakota Meyer who in 2009 drove five times into the midst of a Taliban ambush to save 36 lives.”  The Court’s opinion also noted the case of “Desmond Doss, who served as an army medic on Okinawa and who, on June 5, 1945, rescued 75 fellow soldiers, and who, after being wounded, gave up his own place on a stretcher so others could be taken to safety.”  The Court’s opinion described the case of “William Carney who sustained multiple gunshot wounds to the head, chest, legs, and arm, and yet carried the flag to ensure it did not touch the ground during the Union army’s assault on Fort Wagner in July of 1863.”  The Court wrote that “The rare acts of courage the Medal celebrates led President Truman to say he would ‘rather have that medal round my neck than . . . be president of the United States.’”

The Supreme Court’s opinion showed little sympathy for the water board member who had made the false statements. But the Court also noted that a law which outlaws false statements, with nothing more, can be an unreasonable restraint on the right of free speech.  The Court noted that government can usually outlaw false speech which is made to obtain a job or other benefits through fraud.  The Court also noted that the law can properly prevent a person from falsely claiming to speak on behalf of the government.  The law can also criminalize false statements under oath, which constitute perjury, and the law can criminalize false statements made to government officials.  But the Supreme Court held that where, as here, the law only seeks to criminalize false statements which are not made to obtain employment, or are not perjury, or which aren’t made to government officials, then in such cases the government may not be able to properly pass a law that makes such false statements a criminal act.  The Court stated that “The Nation well knows that one of the costs of the First Amendment is that it protects the speech we detest as well as the speech we embrace.  Though few might find [the water board member’s] statements anything but contemptible, his right to make those statements is protected by the Constitution’s guarantee of freedom of speech and expression.”  As a result, the Supreme Court upheld the judgment of the Court of Appeal, which had found the Stolen Valor Act is unconstitutional.  The case is reported as United States v. Alvarez (2012) DJDAR 8961.

Care should be used in considering the Supreme Court’s opinion in this matter.  Honesty truly is the best policy.  There are many laws which make it a crime to make false statements in certain situations (for example, in loan applications), and there are many, many other laws which provide for civil liability when false statements are made.  Those who make false statements do so at their peril, both civilly and criminally.  Viewed in its proper light, the Supreme Court’s opinion in the Alvarez case is not so much an endorsement of the right to make false statements as it is a decision which upholds the right to speak freely without unreasonable governmental intervention or restriction.  But the laws concerning free speech are complex, and any given situation can have a multitude of outcomes.  The complexity of this area of the law can be seen in the fact that two federal courts of appeal reached conflicting decisions on the very same issue of whether or not the Stolen Valor Act of 2005 is constitutional.  When truth is spoken, then the speaker need not ever have concern about the potential consequences of having spoken or written an untruth.  Of course, in legal matters even speaking the truth, or speaking at all, can have significant consequences, and that is one of the reasons why persons involved in any legal matter at all should consult legal counsel.

SURETY: An Important Ancient Principle

The concept of being a “surety” goes back nearly as far as recorded history.

Perhaps the first recorded instance of “surety” occurs in connection with the experience of Joseph as recorded in the Book of Genesis in the Bible.

As recorded in the Bible, Joseph had been sold as a slave by his brothers for 20 pieces of silver.  His new owners took him into Egypt, where he was sold to Potiphar, Captain of the Guard for the Egyptian Pharaoh.  Joseph was wrongfully accused by Potiphar’s wife, and he was sent to prison.   While still a prisoner, and by divine assistance, Joseph was elevated to a position of responsibility in the prison.

The Egyptian Pharaoh had a series of remarkable and vivid dreams.  He heard that Joseph could interpret dreams, and Pharaoh sent for him. When Joseph arrived, Pharoah described the dreams to Joseph, and Joseph interpreted them.  Joseph also warned Pharaoh about an upcoming famine that would be 7 years long, and Joseph recommended a food storage program be followed. Pharaoh was impressed, and he made Joseph the ruler over all of Egypt, second only to Pharaoh.

After the famine started, Joseph’s family back in the land of Canaan was suffering from the famine.  Joseph’s brothers came to Egypt to buy some of the food that Joseph had recommended be stored.  They met with Joseph, but they did not recognize him.  Joseph sold them food, but then asked them if they had yet another brother.  They said that they did, and Joseph told them that they were not to return to Egypt unless their last brother came with them. Joseph’s brothers then returned to their home in Canaan.

After a period of time, the brothers and their families needed more food.  The brothers told their father, Jacob, that they could not return to Egypt unless they took their last brother with them.  Their father resisted – he didn’t want to put his last son at risk.  As recorded in Genesis chapter 43, Judah made the following statement to his father: “Send the lad with me, and we will arise and go; that we may live, and not die, both we, and thou, and also our little ones.  I will be surety for him; of my hand shalt thou require him: if I bring him not unto thee, and set him before thee, then let me bear the blame for ever.”

Jacob relented, and let Benjamin, the youngest brother, go to Egypt with Judah and his brothers.  After several dramatic events, it looked like Benjamin was going to become a slave in Egypt and would not be allowed to return to his father Jacob.  In a very moving plea, as found in Genesis chapter 44, Judah explains to Joseph that Jacob’s life is “bound up in the lad’s life” and that it would literally kill Jacob if Benjamin did not return.  Judah then says to Joseph “For thy servant became surety for the lad unto my father, saying, If I bring him not unto thee, then I shall bear the blame to my father for ever.  Now therefore, I pray thee, let thy servant abide instead of the lad a bondman to my lord; and let the lad go up with his brethren.”  Because of his surety pledge to his father, Judah offered himself to become a slave or servant, in lieu of his brother Benjamin becoming a slave.

As shown in the story of Joseph, a surety is one who is responsible for another.  For Judah, being a “surety” meant that Judah agreed to be responsible for his youngest brother’s personal well-being, and if necessary he would offer his own self, his own life, or his own freedom instead of his brother’s life or freedom being lost.

In modern legal usage, a surety is usually a person or a company who agrees to answer, or be liable, for the debt of another.

It may seem odd that one person would agree to be responsible for the debts of someone else.  But this arrangement can be seen all the time in financial transactions where one family member agrees to be responsible for another family member.  The person who serves as surety is usually better positioned financially than the person being helped.  The surety often has an interest in the financial well being of the borrower – perhaps the surety wants to see that the borrower receives credit for some type of a purchase.  This type of surety is sometimes known as  a “Voluntary Surety.”

Some commercial bonding companies will even write bonds where these companies agree to serve as a surety for someone else.  These companies agree to serve as surety in exchange for a price or a fee – in other words, it is part of their business. This type of surety is sometimes known as a “Compensated Surety.”  Surety Companies, or Bonding Companies, write bonds and thereby become a surety in certain legal matters, when one person is required to provide a bond for the benefit of another.

For example, if a plaintiff wins a lawsuit and receives a money judgment, and if the defendant wants to appeal the judgment, then in many cases the plaintiff can go ahead and collect on the judgment while the appeal is being decided.  However, it may be impossible for the defendant to get its money back if the case is reverse on appeal.  If the defendant files an appeal bond, then the plaintiff may be stopped, or stayed, from collecting on the case until the appeal is concluded.  There are other legal proceedings where bonds are either required or preferred.

Bonds are common in contractor law, where the law generally requires a contractor to have a bond before the contractor can sign contracts and work as a contractor.  The concept is that if the contractor should become liable on a construction based claim, then the surety will be liable to pay the claim up to the limit of the bond amount if the contractor can’t or doesn’t pay.

Getting a bond from a bonding company can be expensive.  The law allows for private individuals to also serve as sureties in some situations.  However, such private individuals have to meet certain requirements.  For example, a court officers can’t serve as a surety – and a member of the State Bar of California can’t serve as a surety.  Also, a private surety must be a California resident, and must either own real property or be a householder.  Such a private surety must also have a net worth more than the amount of the bond, and this net worth must consist of real property or personal property located in California, minus the debts and obligations of the person.

A Surety is a person or a company who agrees to be responsible for the debt of another person.  A person can act as a “Surety” either on a voluntary basis, or in exchange for a fee.  Most bonding companies act as “Surety” in exchange for a fee.

Some homeowners may have questions about the consequences of a foreclosure.  Some homeowners are concerned that following foreclosure, a lender may be able to subtract deposits out of a depositor’s account without further notice.  Other homeowners are concerned about their credit and their ability to buy a new home in the future.  Others are concerned about whether or not they may be taxed on the forgiven amount of their loan.

These are all valid questions, a deserve careful evaluation in connection with planning a course of action.  For some borrowers, a short sale is the best approach to take.  Others may benefit more from a foreclosure.  Others may want to attempt to obtain a release of liability from their lender in exchange for a deed in lieu of foreclosure.  And still other may be better off in Bankruptcy.

The considerations involved in planning an optimal strategy involve complex issues, and the best strategy for any given individual often hinges on issues of lender liability, foreclosure law, lending law, tax law, bankruptcy law, and the likely credit effect of any given course of action.

In addition to all of these considerations, there is another area of great concern to some borrowers.  These considerations involve the use of a surety, or guarantor.

Borrowers sometimes have parents, friends, family members or others “co-sign” on a loan.  When these borrowers go into default on their loan, they are often very concerned about the effect of such a default on these “co-signers.”  Many times both the borrower and the co-signer want to know what will happen to the co-signer’s assets in the event of a foreclosure, short sale, or a deed in lieu of foreclosure. In addition, some co-signers want to know the likely effect on them if the borrower were to file a petition in bankruptcy.

The concept of Surety is an ancient one. In addition, Shakespeare based one of his plays on the concept of a Surety.  In the Merchant of Venice, Shylock is a moneylender.  Bassanio obtains a loan from Shylock, and Antonio agrees to serve as surety, which means he will be personally liable for the debt if Bassanio should not repay the money which was loaned.  Bassanio fails to repay the debt on time, and Antonio doesn’t have enough money to pay the debt.  As a result, Shylock lays a claim to the collateral – which is a pound of Antonio’s flesh.  In a dramatic turn of events, Shylock is told that he can have his pound of flesh – but not a drop of blood.

In present-day United States, the contract between Shylock and Antonio allowing Shylock to take a pound of Antonio’s flesh would never be enforced.  Antonio might remain liable for money, but he would not be required by a U.S. Court of law to give up his life or a portion of his body as provided by the contract.  However, even though the precise terms of the agreement between Shylock and Antonio would not be enforced, the concept of a surety is valid under U.S. law.

Some borrowers have used a surety to help them buy a home.  These sureties are often parents or other family members who have agreed to help another family member buy a their property.  In these situations, the buyer is often unable to qualify for the kind of loan that would be needed in order to buy a home.  The surety either has the good credit or the income that the borrower lacks.  As a result, parents or others often “co-sign” on a loan to other family members.

In most purchases of residential real estate, this “co-signing” occurs by having the surety act as a “co-borrower.”  This is different from a situation where the parents or other family members act as a “surety.”  California law has specific rules, protections, and defenses that apply to sureties.  When a family member acts as a “surety,” then these specific protections, rules and defenses would apply.  However, most residential home loans are set up so that the “surety” actually signs as a “co-borrower.”  In these situations, the family member actually goes on title as an owner, and signs the promissory note and deed of trust as a borrower, or “co-borrower.”  This means that the family member isn’t just guaranteeing payment by the borrower; instead, the family member is actually a borrower in the primary sense.  It means the family member has borrowed money at the same time as the buyer, and the borrowed money has been used to buy a property (or to refinance a loan secured against such a property).  This means that for liability purposes, the buyer and his or her family member will in most cases be treated the same, and the “co-signing” family member will not receive any special treatment nor any special protections or defenses.

If borrowers have “sureties,” “guarantors” or “co-signers”, then such borrowers often want to “look out” for their sureties, and they are often concerned about the consequences to the surety if the borrower cannot repay the loan as agreed.

The term “co-signer” is actually an informal term that is commonly used to refer either to a “Surety,” a “Guarantor” or a co-borrower.  California law has for the most part eliminated differences between a  “Surety” and a  “Guarantor.”  But the consequences for a “surety” and a “Co-borrower” may be different.

The California Civil Code provides a number of protections and defenses for sureties.  But these protections may not apply to a situation where a family member or friend acts as a “co-borrower” instead of as a guarantor or surety.  When a friend or family signs as a “co-borrower”, then that person is actually a borrower of the money.  In such situations, the “co-borrower” will generally sign the promissory note or other loan document, along with the deed of trust.  Many times the lender will require that the “co-borrower” actually become an owner of the property and that they go on title, even when the “co-borrower” is primarily acting as a surety or guarantor. In such situations, it is very likely that if the buyer/borrower defaults, that the “co-borrower” will be treated as a borrower for many, most, or all purposes.

For example, a default in loan payments can negatively affect a borrower’s credit rating.  Such a default may not negatively affect a surety’s or a guarantor’s credit rating, but such a default would almost certainly affect the credit rating of a “co-borrower.”   Some foreclosures and short sales can produce a negative tax consequence for a borrower.  Professional tax advice would need to be obtained as to whether a “co-borrower” would also experience negative tax consequences.  However, any potential negative consequences following a default may be different for a surety than for a co-borrower.  In some situations, a surety may be relieved of liability if a creditor changes the obligation of the borrower – but a “co-borrower” may not receive this benefit.

Suretyship, guarantor and co-borrower situations can be complex, and the legal principles, statutes, and cases that apply to such situations can also be complex.  Persons involved in suretyship, guarantor or co-borrower situations should consult competent legal counsel and should obtain professional tax advice.

Deal Points Can Be Critical

               So when is a deal not a deal?  The answer is, it depends.

Sometimes it seems like half of the law is tying down loose ends.  And sometimes it seems like the other half consists of getting written commitments so people don’t change their minds.

Here’s a good example.

A Seller sold a house to a Buyer.  After the sale was completed, the Buyer filed a lawsuit against the Seller, claiming breach of contract, misrepresentation, negligence and negligent misrepresentation by the Seller.

Both of the parties were represented by attorneys.  The attorneys agreed, with court approval, that the claims would be submitted to “binding arbitration.”

Binding arbitration is a substitute for trial.  In binding arbitration, an arbitrator makes a decision or renders an award in favor of one of the parties.  This arbitrator isn’t usually a judge.  It can be an attorney, but it’s not necessary that an arbitrator be an attorney.  The arbitrator can be anybody the parties agree to.

The matter was decided by an arbitrator at “binding arbitration” and the arbitrator rendered an award of $55,475 in favor of the Buyer.  The Buyer asked the Court to make the award enforceable, but the Seller objected.  The Seller claimed that he had never agreed to binding arbitration.  The Seller apparently may have agreed to non-binding arbitration, but not to binding arbitration.

The Court had to make a decision whether or not the binding arbitration award was valid and enforceable.  In order for the award to be valid, it was necessary that the parties have agreed to submit the matter to binding arbitration.   The Seller claimed that he had never agreed to binding arbitration, and the Buyer wasn’t able to provide the court with definite proof that the Seller had agreed to binding arbitration.  The Court held that an attorney’s agreement to binding arbitration is insufficient to commit the client to binding arbitration.  Because the Seller’s attorney had agreed to binding arbitration, but because there was no proof that the Seller himself had agreed, the Court found the arbitration award unenforceable. Giving up a right to trial is a substantial right, and the Court wasn’t satisfied that the Seller had ever actually given up his right to a trial.  The case is reported as Toal v. Tardif (2009) DJDAR 15540.

That’s a tough spot for the Buyer.  The Buyer had spent all of the time, money, and attorneys fees necessary to get through arbitration and receive an award, only to find out that the award was no good.  As far as the Buyer was concerned, this was a done deal. But due to an uncertainty, this Buyer lost his entire award.

Sometimes legal proceedings seem like a ponderous, complex, over-the-top process.  But it’s exactly these types of situations that cause lawyers to spend so much time confirming every arrangement, crossing every “t” and dotting every “i”.  It can be surprising, frustrating and disappointing to think that you’ve got a solid deal in place, only to later find out there’s an infirmity.