Rockwell publishing real estate law chapter 1

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© 2009 Rockwell Institute

1

California Real Estate Law

© Copyright 2007 Rockwell Publishing, Inc.

Lesson 1:Introduction to Law and the Legal System


Introduction

This lesson will discuss:

l role of law

l roots of U.S. law

l criminal and civil law

l sources of law


The Role of Law

Provides society with benefits, such as:

l standards of acceptable behavior

l punishment for unacceptable behavior

l method for settling disputes

lway to preserve natural resources

l protection for minorities

l predictability in business

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The Role of Law

In countries where law is unsettled, commerce suffers.

In countries where law is developed, business benefits.

l common language

l some certainty of outcome


The Roots of U.S. Law

In general, two systems of law:

l common law

l civil law



Common law:

l judges follow rules or decisions made in earlier cases

l brought from England

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Civil law:

l legislatures create laws

l judges follow statutes

Examples: France, Germany, Mexico, Japan



United States follows common law system.

l Results in strange vocabulary, especially real estate

Examples: metes, appurtenances, seisin, etc.


The Roots of U.S. LawSpanish influence in California

California also influenced by Spanish law.

Land that is now California:

l first occupied by Spanish in 1769

l taken over by Mexico in 1822

l taken over by U.S. in 1848, after Mexican-American War 1848

U.S. law replaced Spanish-based law, but traces remain (example: community property).

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Summary


The Role and Roots of U.S. Law

l Common law

l Civil law

l Spanish influence


Criminal and Civil Law

Criminal law : decided by legislature, contained in California’s Penal Code

Civil law : any legal matter not involving criminal law

Criminal law and civil law have different penalties and procedures.



Penalties:

l Criminal law: fines, restitution, incarceration

l Civil law: limited to fines, revocation of licenses

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Procedures:

l Criminal law: only government can prosecute

l Civil law: government or private person can bring case



Most disputes involve civil law.

l government or private person brings claim for damages

Damages: compensation for financial losses caused by defendant’s wrongful conduct.


Criminal and Civil LawTypes of civil law

Most civil matters involve:

l contract law

l tort law

l property law

Civil matter may involve one area or all three.

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Types of Civil LawContract law

Contract: each party makes promise to other party

l exchange of promises = binding contract

Lawsuits result when:

l one party fails to do as promised

l other party sues over financial loss

Legislatures generally leave contract law to courts.


Types of Civil LawTort law

Tort law : imposes a duty to take reasonable care to avoid injuring people or damaging property

Contract is voluntary duty; tort is involuntary duty.



Negligence: failure to use reasonable care

l Unintentional tort: causing injury through negligence

l Intentional tort: intending to cause injury to person or property

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Intentional torts in real estate:

l trespass, fraud, etc.

l many have counterparts in criminal code

Example: broker takes client’s money

l civil law: tort of “conversion”

l criminal law: theft


Types of Civil LawProperty law

Property law : governs ownership of both real property and personal property

Personal property: any property that isn’t real estate or permanently attached to real estate


Criminal and Civil LawStandards of proof

Standard of proof: proof necessary for jury to find person guilty (criminal case) or liable (civil case)

Criminal: “beyond a reasonable doubt”

Civil: “more likely than not”

Person can be found “not guilty” in criminal case, but still liable in civil case.

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Summary


Criminal Law and Civil Law

l Criminal law

l Civil law

l Contract law

l Tort law

l Property law

l Negligence

l Standard of proof


Sources of Law

Federal, state, local governments each have laws.

Different sources of law include:

l constitutions

l legislatures

l courts

l administrative agencies


Sources of Law

Separation of powers:

l each branch of government has unique power

l “checks and balances”

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Constitutions

Constitution is a plan for government:

l creates branches of government

l lists powers

l limits powers

l provides operating instructions (Example: who is eligible to vote)


ConstitutionsThe U.S. Constitution

U.S. Constitution is highest legal authority

l adopted 1789

l applies to federal government

l applies to all 50 states

Supremacy Clause: “This Constitution…shall be the supreme Law of the Land.”

l any conflicting law unconstitutional and void


The U.S. ConstitutionFederal and state lawmaking

Federal government has sole power over:

l wars and military

l interstate commerce

l copyrights and patents

l currency

Promotes unified states for military; removes trade barriers between states for commerce.

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The U.S. ConstitutionFederal and state lawmaking

If state law encroaches on subject reserved for federal law, state law will have no effect.

Federal: bankruptcy, patents

State: contracts, real property

Both: environmental laws, consumer protection

If one law is more strict, that law controls.


The U.S. ConstitutionState action

State action: an act by a government or government official

Only state action can violate someone’s constitutional rights.

l Examples: acts by police officers or public officials, discriminatory statutes


The U.S. ConstitutionState action

State action does not include private citizens.

However, other federal and state laws limit private action.

l Example: Civil Rights Act of 1964

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The U.S. ConstitutionConstitutional rights

Bill of Rights:

l added in 1791

l first 10 amendments to the Constitution

l contain bulk of constitutional protections



Fourteenth Amendment:

l added after Civil War

l expands Bill of Rights to include African-Americans

l requires state governments to honor protections contained in Bill of Rights



Together, Bill of Rights and Fourteenth Amendment require governments to provide:

l just compensation for property taken by government

l due process

l equal protection

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Constitutional RightsTakings Clause

Fifth Amendment: “No person shall…be deprived of life, liberty, or property; nor shall private property be taken for public use, without just compensation.”

l known as “Takings Clause”

l doesn’t prevent government from taking property; just requires government to compensate landowner


Takings ClauseCase example: Nollan v. CA Coastal Comm.

California Coastal Commission required homeowners to give easement across beach to public in exchange for permit to build.

Supreme Court ruled that government could not take easement without compensation.


Constitutional RightsDue Process Clause

Fifth and Fourteenth Amendments: No person shall be “deprived of life, liberty, or property without due process of law.”

Due process: judicial process in which individual has right to fair hearing before some kind of impartial judge

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Constitutional RightsEqual Protection Clause

Equal Protection Clause: found in Fourteenth Amendment

Prohibits governments from:

l adopting laws that unfairly discriminate between different groups

l applying acceptable laws in a discriminatory fashion


Constitutional RightsEqual Protection Clause

The clause doesn’t prohibit all discrimination, just unreasonable discrimination.

Government can treat groups differently when:

l it achieves reasonable state goal

l it does not single out individuals unfairly


ConstitutionsCalifornia State constitution

California constitution:

l adopted in 1879

l begins with “Declaration of Rights”

l in general, provides protection similar to federal constitution

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ConstitutionsCalifornia State constitution

Declaration of Rights:

l more detailed than Bill of Rights

l more topics covered

Summary


Sources of Law: Constitutions

l Separation of powers

l Supremacy Clause

l State action

l Bill of Rights

l Takings Clause

l Due Process Clause

l Equal Protection Clause


Legislatures

Both federal and state constitutions place primary lawmaking responsibility on legislative branch of government.

l legislatures do this by passing statutes

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Legislatures

Federal level has two “houses”:

l Senate

l House of Representatives

Two houses together known as Congress.


Legislatures

California legislature:

l Senate

l Assembly

Two houses together known as the legislature.


LegislaturesThe legislative process

Bill: a proposal to amend or create a new statute.

l usually proposed by legislators

l sometimes by president (or governor)

l voter request

l lobbyists

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Bill then analyzed or redrafted by committee in house where created.

Example from U.S. Congress for energy bills:

l House Committee on Energy and Commerce

l Senate Energy and Natural Resources Committee



If house where created passes bill, sent to other house for consideration.

Other house may:

l pass bill as written

l rewrite or amend bill

l vote bill down

l let bill die in committee



If second house passes different version of bill, two versions must be reconciled.

Conference committee: members from both houses appointed by legislature to work out compromise version

Compromise version must be passed by majority vote of both houses, or it dies.

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Even if bill passes both houses, it’s still not law until executive branch approves it.

President (or governor) has three choices:

l approve bill (by signing it)

l ignore bill (will still become law)

l veto bill (reject it)

Legislature can override veto with two-thirds majority vote from both houses (rare).


The Legislative ProcessLocal laws

Local governing bodies pass ordinances.

l Examples: city or county councils

Local laws usually cover areas not addressed by federal or state law.


The Legislative ProcessLocal laws

If local laws conflict with federal or state, stricter rule applies.

l Examples: zoning, animal control, construction standards

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The Legislative ProcessReferenda and initiatives

Referendum: ballot measure that rejects or approves statute passed by legislature

Initiative: proposal to amend constitution or to modify or create new statute or ordinance

These give voters veto and lawmaking powers.

l Only available at state and local level (U.S. Constitution does not provide for either)


LegislaturesCalifornia’s codes

California’s statutory law grouped into 29 codes.

Codes affecting real estate:

l Civil Code

l Business and Professions Code

l Financial Code

l Corporations Code

Codes are available online.

Summary


Sources of Law: Legislaturesl Statutes

l Bill

l Conference committee

l Veto

l Ordinances

l Referendum

l Initiatives

l California Codes

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The Courts

Legislatures make new statutory law; courts make new case law.

Court’s ability to create new law limited:

l only regarding issues raised in particular lawsuit

l only interpreting statutes (statutory construction), not making new ones

l must follow decisions in earlier cases


The Courts

Statutory construction: process used by court to determine intent of legislature


The CourtsCourt opinions

Courts resolve disputes by applying relevant law to facts and reaching decision.

Trial courts usually just issue brief statement known as an order.

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The CourtsCourt opinions

Appeals courts may explain interpretation in written opinion.

l often quite detailed

l may also contain dissent

Dissent: a contrary opinion that appears after majority opinion


The CourtsStare decisis and precedent

Case law : rules found in judicial opinions

Doctrine of stare decisis: Once case has been decided it sets precedent; rules developed must be followed by judges in later cases.



Stare decisis is not a rigid doctrine.

Courts may abandon precedent based on changed social conditions.

Example: Brown vs. Board of Education

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Courts can also avoid stare decisis by distinguishing a case.

A court distinguishes a case by explaining in its written opinion that facts of earlier case are so different from present case that precedent doesn’t apply.



Note: only the court that established precedent can deviate from stare decisis—lower courts cannot.

l Example: California Supreme Court decisions are binding on all state’s lower courts.

Binding precedent: a written, published opinion from a higher court in the same jurisdiction


Stare Decisis and PrecedentHigher court

U.S. Supreme Court

l highest court in land

l binding on all federal appellate and trial courts

l binding on all state courts on matters of federal law

Example: California case dealing with government taking of property

l U.S. Supreme Court decisions on Takings Clause apply

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Stare Decisis and PrecedentJurisdiction

Jurisdiction: the authority higher courts have over courts below.

(Supreme Court)Highest Court

(Appellate Court)Intermediate Court

A

(Appellate Court)Intermediate Court

B

(Superior Courts)Lower Courts

B1 B2 B3

(Superior Courts)Lower Courts

A1 A2 A3


JurisdictionPersuasive authority

Case of first impression: involves issue with no existing binding precedent

Persuasive authority: opinions from other jurisdictions that are not binding but may be used to guide judges in cases of first impression


Binding PrecedentPublication

Court opinion must be published to be binding precedent.

Most appellate court opinions are published in hardbound volumes called case reporters.

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Summary


Sources of Law: Courts

l Statutory construction

l Stare decisis

l Binding precedent

l Jurisdiction

l Case of first impression

l Persuasive authority


Administrative Agencies

Sometimes considered a fourth branch of government.

Have hybrid powers:

l can make law like legislative body

l can decide cases like a court

Agencies exist because more regulation required than legislative and executive branches can handle.


Administrative Agencies Federal, state, and local agencies

Hundreds of agencies exist at federal level.

l Examples: IRS, Treasury Department, Environmental Protection Agency

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Many federal agencies have equivalent at state level.

l Example: California’s Environmental Protection Agency (Cal/EPA)

Department of Real Estate is California agency.



Local agencies administer:

l zoning

l parks and recreation

l waste disposal

l etc.


Administrative AgenciesRulemaking

Regulations: rules issued by agencies that have force of law

Code of Federal Regulations: federal agency rules

California Administrative Code: state agency rules

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Example: California Department of Real Estate

l almost 200 pages of regulations published

l covers licensing, discipline, etc.



Agency regulations:

l must be constitutional

l must fall within scope of agency’s authority


Administrative AgenciesAdjudication and enforcement

Process for dispute involving agency regulation:

l usually must appeal to agency itself

l agency holds administrative hearing

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Hearings are held before Administrative Law Judge (ALJ).

Hearings satisfy due process requirements.



If claimant disagrees with ALJ decision:

l can appeal to superior court

l usually not successful

Summary


Administrative Agencies

l Code of Federal Regulations

l California Administrative Code

l ALJ

Legal Aspects of Real Estate Lesson 1 Cumulative Quiz

1. The person or entity who initiates a civil lawsuit by suing another party is a:

A. defendant B. plaintiff C. prosecutor D. respondent

2. In the _____ system, judges make decisions based on precedents established by previous generations of case law, thus creating a body of law separate from statutory law.

A. civil law B. common law C. criminal law D. substantive law

3. A defendant is found guilty and is sentenced to one year in prison. This outcome is possible in:

A. administrative law B. civil law C. criminal law D. property law

4. Max drives negligently and runs over Violet, injuring her. Violet sues Max for the cost of her medical expenses, plus an award for pain and suffering. This would be considered:

A. contract law B. criminal law C. property law D. tort law

5. Johnny shot a man in Reno just to watch him die. To convict him of first-degree murder, the prosecution must demonstrate his guilt:

A. beyond a reasonable doubt B. by a preponderance of the evidence C. by clear and convincing evidence D. by prima facie evidence

6. Both criminal law and tort law usually fall within the scope of:

A. county and/or city law B. federal law C. maritime law D. state law

© 2009 Rockwell Publishing 1

7. What part of the U.S. Constitution states that the constitution is the supreme law of the land and that no federal or state law may contradict it?

A. Full Faith and Credit Clause B. Preamble C. Privileges and Immunities Clause D. Supremacy Clause

8. The federal government has sole lawmaking power over all of these matters, except:

A. interstate commerce B. the currency C. the environment D. the military

9. A plaintiff who experienced discrimination based on disability has a choice of suing under either the federal Americans with Disabilities Act or the state Fair Employment and Housing Act. The state law offers greater protection. The plaintiff:

A. may sue under either law B. must sue simultaneously under both acts C. must sue under the Americans with Disabilities Act D. must sue under the Fair Employment and Housing Act

10. Which amendment to the U.S. Constitution states that private property cannot be taken for public use without just compensation?

A. First B. Fifth C. Eighth D. Fourteenth

11. The Fifth and Fourteenth Amendments both state that:

A. freedom of religion and the press shall be guaranteed B. no one shall be deprived of life, liberty, or property without due process of law C. property shall not be taken for a public use without just compensation D. unreasonable search and seizure is prohibited

12. The Declaration of Rights:

A. is found within the state constitution and offers greater protection than the Bill of Rights B. is found within the state constitution and offers lesser protection than the Bill of Rights C. is found within the U.S. Constitution and offers greater protection than the Bill of Rights D. is found within the U.S. Constitution and offers lesser protection than the Bill of Rights


13. The two houses of the California legislature are known as the:

A. Assembly and House of Representatives B. Senate and Assembly C. Senate and House of Delegates D. Senate and House of Representatives

14. If one house in a legislative body passes a bill, the other house may do all of the following EXCEPT:

A. amend the bill B. pass the bill as written C. veto the bill D. vote against the bill

15. The City Council decides that dogs must be on a leash in all city parks. This would take the form of a/an:

A. administrative rule B. bylaw C. ordinance D. statute

16. Which doctrine states that legal cases establish precedent, and that subsequent cases should follow that precedent?

A. Caveat emptor B. Res ipsa loquitur C. Stare decisis D. Sui generis

17. A California Supreme Court decision would be considered _____ in a superior court in San Francisco.

A. binding B. convincing C. irrelevant D. persuasive

18. An administrative agency:

A. is like a court, because it has adjudicative powers B. is like a legislative body, because it has rulemaking powers C. is not subject to judicial oversight D. Both A and B


19. A person who disputes a decision by an administrative agency will:

A. ask the legislature to pass a bill overturning the agency's decision B. file a lawsuit in the appropriate superior court C. have no legal recourse D. file a complaint with the agency and that complaint will be heard by an administrative law judge

20. A professional license cannot be revoked or suspended without:

A. a superior court trial B. an act of the legislature C. an administrative hearing D. an executive order of the governor


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Rockwell publishing real estate law chapter 1