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1 The Lawyer The Marin Lawyer An Official Publication of the County Bar Association An Official Publication of the Marin County Bar Association July 2007 Volume 38, Issue 7 Past President Matt White tunes up his swing! (Photo from last year.) Todd Hedin, Deborah Breiner, and Past Presidents Matt White and Peter Mitchell get ready for the big game! (Photo from last year.) In This Issue President s Message... 2 Feduniak v. California...3 Legal Aid of Marin... 4 Law Day Event in the News - Again... 5 Allocating Risk... 6 Doing Something to Prevent Teen DUI s. 7 Spotlight on Elizabeth Brekhus... 8 The Hidden Lesson of Drybread... 9 Jury Verdicts Inflation Increases 2007 Income Limits..11 Calendar Details New Members/Change of Scene The Marketplace Jordan A. Lavinsky was guest editor of this issue of The Marin Lawyer. Philip R. Diamond is Series Editor for GENERAL MEMBERSHIP MEETING THE MCBA AND THE FAMILY LAW SECTION CELEBRATE SUMMER TOGETHER Join us For Food, Softball and Fun! Have you been biding your time all year, waiting to find yourself in a setting in which it is appropriate to throw something at the lawyer on the other side of your case? Now is your chance! For our July general membership meeting we will be celebrating summer with music by our local attorney talent and playing softball at Piper Park in Larkspur on SUNDAY, July 15. There will be good company, great food, burgers veggie and beef, hot dogs, salads, and all of the fixings, and plenty of refreshments, including beer and wine. This free event is co-sponsored by the MCBA and the family law section. The festivities start at 12:30 and will go until 4:00 P.M. Please RSVP so we have enough food, see page 2. The MCBA softball game and picnic was a very fun event last year; you definitely don t want to miss this one! (Continued on page 13.) Calendar of Events July 15th Look for details each month in The Marin Lawyer TENANT BANKRUPTCIES: A Few Things Landlords Should Know By Jordan A. Lavinsky, Esq.* Landlords have special issues when tenants file for bankruptcy, and also special rights. Understanding the basics of how a tenant bankruptcy affects a landlord s rights under a lease can help protect vital real estate interests, and obtain the protections the law has provided for landlords. The Automatic Stay The automatic stay takes effect upon the filing of a bankruptcy petition to freeze the status quo as of that date. The scope of the stay is very broad; it Annual Picnic/Softball Game Piper Park, Larkspur 12:30 4 pm July 18th Probate & Estate Planning Section Meeting 12 1:30 pm July 19th Real Property Section Meeting 12 1:30 pm July 23rd Probate & Trusts Mentor Group 12-1:30 pm

2 PRESIDENT S MESSAGE The Kaizen of the MCBA By Jeffrey H. Lerman You cannot improve what you do not measure Anonymous Are we there yet? Every child who ever lived Within the last couple of months, an astonishing piece of news was reported: Toyota has finally overtaken General Motors as the world s largest vehicle manufacturer. What does that have to do with MCBA? Over 50 years ago, in the aftermath of World War II, Toyota was struggling, as was most of Japanese industry. At that same time, American W. Edwards Deming happened to be working in Japan with the U.S. Government on a project. While he was there, Deming s expertise in quality control techniques, combined with his involvement in Japanese society, led to his receiving an invitation to work as part of the Japanese industry s rebuilding effort. His profound, innovative concepts are generally credited with sparking Toyota s remarkable rise to its present-day success. The Japanese gave Deming s quality-control strategies a name: Kaizen. Strictly interpreted, it means change for the better or improvement. The English translation is continuous improvement or continual improvement. Of course, to improve continually is a basic human drive. Famous psychologist Abraham Maslow called it selfactualization or the instinctual need of humans to make the most of their abilities and to strive to be the best they can. As I sat on the Board of Directors year after year, and went to annual retreat after annual retreat, I often wondered How do we know if we re successful? How do we know if we re getting better? How is Kaizen being applied in MCBA? Are we, as an association, striving to be the best we can? Or, as every child s pure curiosity articulates it most eloquently: Are we there yet? And so, when we embarked at this last annual retreat upon our ambitious project to create a 3-year strategic plan for MCBA, I knew the hardest part was not going to be coming up with great ideas. Every Board I have participated in at every annual retreat has done that and then some. The challenge, I knew, would be to implement as many of those good ideas in as organized and strategic a fashion as possible to achieve meaningful progress for MCBA. The answer to that challenge, in part, is benchmarking. What is benchmarking? Benchmarking for nonprofits is generally and simply defined as a process for measuring and improving performance. Accordingly, the next-to-final and perhaps most important component of creating MCBA s strategic plan is this benchmarking process to determine by what yardstick we want to measure our performance in future years. How do we know if we are successful? How do we define success for MCBA? How do we quantify success? What do we measure? What is our baseline measurement? What is a reasonable goal for improvement and over what period of time? Those simple, yet powerful, questions have been the focus of hours of thoughtful discussion and debate among the MCBA Strategic Planning Committee over the past few months. We have challenged each other to derive meaningful answers for each of the five goals that drive our strategic plan: (i) to preserve and expand MCBA membership; (ii) to foster connection and a sense of community among MCBA members; (iii) to enhance MCBA s service and visibility in the Marin community; (iv) to strengthen the bench-bar relationship, and (v) to build the Board s governance capacity and implementing the strategic plan. We are on the verge of completing this process and finalizing the benchmarking barometers by which we will be measuring our success for years to come. Before we do, I solicit your input. How would you measure whether MCBA has been successful in its ongoing effort to achieve each or any of the above five strategic planning goals? Please send your thoughts to: RESERVATION FORM General Membership Picnic Number of adults attending, Number of kids and ages Piper Park, 250 Doherty Drive, Larkspur, on Sunday, July 15, 2006: 12:30-4 p.m. Name or Firm Name: Phone: 2 Please, we must have RSVP s by July 12, 2007 Mail to: MCBA, 30 North San Pedro Road, Ste. 140, San Rafael

3 Feduniak v. California Coastal Commission: The Coastal Commission Gets A Mulligan On Its Longstanding Failure To Enforce Violations Of Permit Conditions By Thomas B. Brown* Introduction Imagine the following nightmare scenario: You buy a beautiful beachfront home along the famous 17 Mile Drive in the Asilomar Dunes area of Pebble Beach in Monterey County. Not only does the property enjoy a stunning ocean view, it also has a challenging three-hole pitch-and-putt golf course surrounding the house that was installed by the folks who sold you the property years before you bought it. You are in heaven. You are, that is, until a representative from the California Coastal Commission comes to the door and informs you that your golf course is illegal because when the Commission gave the previous owners a permit to rebuild the house 19 years earlier, it did so upon the condition that they restore the surrounding dune areas with native dune vegetation. Even though you did not install the course or personally violate the condition, the Commission nevertheless orders you to remove the course and restore the dune habitat. Your beachfront heaven has become a Kafka-esque administrative hell. Broad Public Interests May Not Be Defeated By An Agency s Failure To Enforce Those Laws Over Time. The Court of Appeal held that the Feduniaks could not establish the three elements essential to the application of equitable estoppel against the commission: First, the Commission neither knew nor should have known that the golf course violated the permit conditions before the owners purchased the property. The Commission's regulatory inaction for years in the face of a prominently located golf course did not, by itself, constitute constructive knowledge of the violation. Second, the evidence also did not show that the Commission intended for the owners to rely on its failure to enforce the restrictions over the years, or that the owners reasonably could have believed that the Commission intended its regulatory inaction. Finally, the injustice to the owners was of insufficient dimension to justify the effect upon public interest if estoppel were applied. The owners' individual loss of enjoyment could not outweigh the public's strong interest in: (1) eliminating ongoing unpermitted development; (2) restoring the area to its natural state and native vegetation; and (3) protecting the Commission's ability to enforce (Continued on page 14.) That is exactly what befell the Feduniaks, the plaintiffs in a recent decision by the Sixth District Court of Appeal. Feduniak v. California Coastal Commission (2007) 148 Cal.App.4th Faced with the prospect of complying with an expensive cease-and-desist order by the Coastal Commission, the attendant loss of a favorite amenity, and a sharp reduction in the value of their property, the Feduniaks sued. Their legal theory, though framed in terms of the somewhat esoteric doctrine of equitable estoppel, was simple. They argued that the Commission should be estopped from enforcing the condition imposed on their predecessors because for some 17 years it ignored the violation the golf course even though it was open, notorious and obvious to the world. Although the Superior Court agreed, the Court of Appeal reversed. The Court s Decision: Land Use Laws Affecting 3

4 LEGAL AID OF MARIN STARTS GOLDEN YEAR By Paul Cohen, Executive Director, Legal Aid of Marin The annual fundraising event hosted by the Marin County Bar Association and Legal Aid of Marin at the Pickleweed Community Center on May 4, 2007, was a success. The event was created to express appreciation to the dozens of pro bono attorneys and non-attorneys that actively offer their time and skills to assist many of the underserved residents of Marin. Sixteen of the volunteers were honored with the Wiley W. Manuel Award issued by the State Bar of California. The Award recognizes a contribution of 50 or more hours to the community. In fact, the sixteen recipients donated a total of 2,307 hours through Legal Aid of Marin in 2006 for an average of over 144 hours per volunteer. All of Legal Aid s multiple volunteers provided in-kind services in 2006 in an amount over $1,000,000. Jean Bordon, who just won her 13th consecutive Wiley award, and her husband, S.F. attorney David Bordon. California Supreme Court Justice Carol Corrigan was the guest speaker. She inspired the crowd of more than 225 guests to give back to the community as much and as often as possible because of our profession s position of privilege. Dr. Marisol Muñoz-Kiehne, radio host of Childhood Matters, provided continuity and grace to the evening s festivities. Special recognitions were given to Andrew Giacomini (Legal Aid s Board President), Kerry Pierson (a Trustee of the Marin Community Foundation and former Legal Aid Board Member) and the firm of Cotchett, Pitre & McCarthy for a very generous Cy Pres Award given in Legal Aid of Marin emphasized its desire to connect to the community in new ways. Here are some of Legal Aid s recent program highlights: Project Homeless Connect Imagine 11 tables lined up in the St. Vincent De Paul s Dining Hall in San Rafael with two volunteers on one side and a homeless individual or couple on the other engaged in spirited conversation. This was the scene on January 31, 2007, when free legal services were offered to over 30 participants in the Marin County Homeless Count. LAM set the stage, recruited the volunteers (both attorneys and non-attorneys) and provided follow-up on those cases that were appropriate to refer to our attention. Participants needed family law assistance, general legal guidance or the resolution of multiple unrelated issues. Everyone that walked through the door was treated with dignity and was listened to, and immediate help was generally provided. The Marin County Public Defender s Office adopted nine of the participants and their matters for resolution of outstanding issues in Marin, various parts of California and in other states. This first attempt to provide legal services to the homeless population in a single venue was, by all accounts, a success. We hope this effort will develop into the legal component of a Marin Project Homeless Connect where a great variety of services are offered to the homeless in a single venue. Marin County has the vision to create its own version of this San Francisco-based phenomenon as long as it keeps the focus of serving the homeless with dignity. Medical-Legal Partnership LAM launched this new collaboration with the Marin Community Clinic on February 21, We are providing office hours at both the Greenbrae and Novato clinics two hours each week to address the legal needs of the clinic s patients that are generally referred by the clinic s physicians. Most patients that become our clients would have never thought of seeking legal assistance. One of the primary goals of the partnership is providing enhanced access to justice. Says Dr. Georgianna Farren, Medical Director of Marin Community Clinic, Unresolved legal concerns add to the difficult challenges experienced by our patients, who are struggling to raise young children and are in jobs without health insurance. We welcome the opportunity to enhance our on-site patient services with no-cost legal advice from Legal Aid of Marin. (Continued on page 15.) 4

5 LAW DAY EVENT IN THE NEWS AGAIN At the risk of breaking our arms patting ourselves on the back, we wanted to share yet one more great article on May's MCBA Law Day event. This one was an Editorial in the Marin Independent Journal. We are most proud of this coverage not only for the Editor's gracious and nice compliments, but also because the Editor of the largest newspaper in Marin was enthusiastic enough about the event to run this editorial even after running President Lerman's Marin Voice piece and the front page news article reporting on the event. As "educating the community" is an express and important component of MCBA's mission statement, and "community outreach" is one of the President's two themes this year, we are grateful the Marin community embraced this event so warmly and all of us, as MCBA members, should know and be proud that MCBA's profile in the community has been elevated and enhanced. Enjoy the article. From the Marin Independent Journal, 5/28/07 (reprinted with permission): What parents and teens should know Staff Report Chernus, the Marin Superior Court commissioner. Teens found out it is illegal for two 16 year olds to have sex together. They and their parents - also heard about how a 16-year-old boy could wind up paying child support until he was more than twice that age if he got a girl pregnant. Sobering topics, to be sure, especially considering that Marin has rates of teen drinking and drug use that are well above the rest of California. Other leading lawyers talked about what can happen when a case goes to court- and how much it can cost. The parents in the crowd also got an education regarding the new social host ordinances that have been passed by the county, Novato, Tiburon and San Anselmo. Parents and other adults who allow teens to drink can face large fines. The adults were reminded of the importance of being good role models. We commend the panelists for taking the time to make sure the presentation was relevant to the kids in the crowd and not just a lecture about things they shouldn't do. Jeffrey Lerman, president of the bar association and a father of teens, says the evening could become an annual event. We hope it does. There is no shortage of painful consequences for teens who run afoul of our legal system. Knowing the truth certainly can't hurt. THE STRAIGHT-TALK session could have been called "Truth and Consequences." Nearly 200 parents and teenagers, and even some younger kids, attended "Parents, Teens and the Law," a free forum sponsored by the Marin County Bar Association and the county's district attorney and courts last week. The goal was to let teens and their parents know what the legal consequences can be of drinking and driving, drug use and having underage sex. The tenor of the frank presentation was as impressive as the turnout for a Wednesday night airing of issues that many parents find difficult to discuss with their teens. These certainly are issues that teens - and their parents - should be thinking and talking about. And with each other - not just with other parents or with fellow teens. There is a lot at stake, especially during prom and graduation season, when kids are more likely to engage in risky behavior. In a perfect world, every teen and every parent in the county would have been in the room. Panelists discussing hypothetical situations involving teen sex included District Attorney Ed Berberian and Roy 5

6 ALLOCATING RISK IN THE SALE OF A BUSINESS By David C. Longinotti* Allocating risk in an asset sale transaction is the single most important deal point other than price. The interests of the seller and buyer are always opposed on this issue: the seller wants to walk away free and clear with its profits, and the buyer wants to assure recourse for undisclosed liabilities and misrepresentations. The following is a brief discussion of this risk allocation issue and the legal techniques used to address it. Liability Caps. There will be no cap on liability at all unless one is expressly negotiated into the purchase agreement. A sophisticated buyer, then, will require the seller to assume all pre-closing liabilities without limit, but will make no mention of a cap in the purchase agreement. The buyer will also seek an indemnity from the seller for pre-closing operating liabilities and breaches of representations and warranties made in the purchase agreement. Many less sophisticated sellers will accept this proposal especially if the indemnification is bilateral i.e., if the buyer provides an indemnification for post-closing liabilities to the seller. But other sellers will seek to impose a cap on liability and resist the proposed indemnification requirement. There is a great debate as to what the market is for liability cap arrangements, but in the end resolution of this issue comes down to negotiating leverage. Just as an example, in the past year or so we have negotiated caps ranging from seller s net proceeds from the sale, to 20% of the net proceeds, to 2% of the net proceeds, to a flat amount like 1 million dollars, to no recourse at all. Pre-Closing Third Party Liabilities. Most reasonable parties can agree that there should be no cap on liabilities arising from the seller s operation of a facility prior to closing, including wrongful death claims. Practically speaking, the seller is in the best position to bear these risks because the seller should have business insurance for most types of pre-closing operating risks. Assuming this insurance is in place, what the seller is really exposed to is uninsured risks including the gross negligence and willful misconduct of seller s employees. We typically counsel our selling clients to obtain tail coverage for their insurance for a period of time after closing to provide additional protection. All this being said, we have been in negotiations where sellers have sought an absolute cap, even against these pre-closing third party claims, whether or not there is insurance available to protect its interests. Claw-Backs. A claw-back is the right of a buyer to make claims against the seller for breaches of representations and warranties in the purchase agreement. The sophisticated seller will insist that the buyer rely on its own investigation of the business being acquired and also insist on a waiver or release of claims or a monetary cap of its liability. The sophisticated seller will also limit the duration of its representations and warranties, insist on express disclaimers of liability, and will require the buyer to covenant as to its sophistication and the thoroughness of its due diligence investigation. Holdbacks. Claw-backs can be structured using any number of techniques, including holdbacks, thresholds and deductibles. A holdback is a portion of the sales proceeds that is retained by the seller or more typically placed into escrow for a period of time after closing. The holdback amount acts as security to fund any claim of loss by the buyer for a breach of representation and warranty under the purchase agreements. A holdback is most appropriate when there is a specific claim or potential loss that the parties have identified and the holdback is set aside to provide for that contingency. But on occasion a seller may agree to a more general holdback especially if it limits the seller s risk i.e., the held back amount serves as a cap. Thresholds. Apart from setting the monetary cap, there are certain other ways to allocate risk, including the negotiation of liability thresholds. A threshold is an amount of loss below which a buyer may not make a claim. So for instance, assuming a $100,000 threshold per occurrence is negotiated, a buyer would have no recourse against the seller for a loss that is determined to be $99,000. If the loss is determined to be $101,000, the seller would be fully responsible from the first dollar. (Continued on page 15.) 6

7 DOING SOMETHING TO PREVENT TEENAGE DUI s By Roy O. Chernus, Commissioner, Marin County Superior Court It is no secret that the combination of under-age drinking and driving can be extremely tragic. The problem is bigger in Marin County than the national and state statistics. And those statistics are alarming. Consider this: 4 million people in the United States aged years old reported driving while under the influence of either alcohol or illicit drugs in the past year. Imagine what the true number actually was. Motor vehicle crashes were the leading cause of death among young people years old. In fact, 29 percent of juvenile drivers who were killed in crashes in 2002 had been drinking alcohol. Since 1999, California has witnessed a 32 percent increase in alcohol-related DUIs. Recidivism rates are inversely related to age, with higher re-offense rates associated with the youngest demographic group (16-25). The U.S. Department of Transportation estimates the economic cost of police-reported crashes involving ages was $40.8 billion in Approximately 42 percent of students ordered for expulsion are expelled for violations related to alcohol or drugs. A report by the National Highway Traffic Safety Administration asserts that young drivers are least responsive to arguments against drunk driving. So what can be done about this? And, more to the point of this article, what can attorneys do? Educational campaigns alone have not proven to be enough. Altering the attitudes of teen drivers is fundamental to changing their behavior. Some programs have proven effective. The peer court program model, used both in California and nationally, is one such program. Peer courts are a natural forum for juvenile DUI prevention programs because they provide an opportunity for early intervention in the lives of troubled juveniles and try to alter the pattern of self-destructive behavior through peer interaction and service to the community. Parental involvement is essential to the success of the DUI prevention program as parents or guardians are essential to shaping both their teens' driving and drinking habits. Teens with low parental monitoring are three times more likely to partake in high-risk driving behavior such as driving while intoxicated. The Marin County Superior Court, in collaboration with the Youth Court program of the YMCA, is taking up the challenge of preventing DUIs among our teen population. Our program will receive referrals from law enforcement and schools of cases involving teen drug and alcohol possession and use. The teens who have admitted guilt will go through youth-judge tribunal hearings supervised by adult attorney volunteers (yes, that s where you come in). The teens will be required to do community service and go through the DUI Prevention Program Training (6 hours, parents must participate for 2 hours). The teens also may be required to write letters of apology and essays, and get further counseling. Our goals are to alter at-risk juveniles' behavior as they reach driving age by making them aware of DUI consequences before rather than after a driving arrest, a crash, or a fatality; to influence teens who are making poor decisions in life and so are considered at risk for poor decision making while driving; and to proactively involve schools, our community, families, educators, law enforcement, and the court in a multifaceted approach to reducing DUI incidents. How can you help? We need volunteer attorneys to supervise the youth-judge tribunal hearings. We also need attorneys who are willing to be trained to present the DUI Prevention Training. A modest commitment of your time can save lives. Please help us. Contact: Tamara Nance, Program Coordinator, telephone: , FAX: ; 7

8 MEET YOUR DIRECTORS SPOTLIGHT ON ELIZABETH BREKHUS The Marin Lawyer decided that it would be a good idea to let the MCBA membership get to know a little more about the MCBA Directors whom they elected, and who give so much to make the MCBA a great, vibrant, organization. To that end, The Marin Lawyer will run a series of articles, each focusing on a different MCBA Director. This month, our spotlight is on MCBA Board member Elizabeth Brekhus. The Marin Lawyer: What is your practice area? Elizabeth Brekhus: Civil litigation, typically real property and business litigation. TML: Do you have a particular niche? EB: I handle a lot of real estate non-disclosure cases, adjoining neighbor and boundary disputes, municipal law, and construction matters. In business litigation, I handle contract disputes, including a fair amount of art law cases by virtue of some of the businesses I represent. TML: Why did you decide to become a lawyer? EB: My father, Peter Brekhus, is an attorney and has always been passionate about the practice of law. Law seemed like a known commodity to me. I like working with people and helping people. I like reasoning with people and persuading people. I like all of the elements that make up being an advocate. TML: Why do you live in Marin? EB: I love being outdoors and I love the weather and I like the small town feel. I like that there are Wicka ceremonies on Mt. Tam on most nights (although I ve never attended). TML: What do you love to do when you re not busy practicing law? EB: I have two small children and my husband and I try to keep it interesting for them and for us. I love going to Stinson Beach and to the City; unfortunately for the kids, I hate the park. But I love to cook, entertain and travel. TML: Tell us about your family. EB: My husband, Jordan Lavinsky, and I met in law school 14 years ago and have been married almost 9 years. Jordan practices real estate litigation at Hanson Bridgett. We have a 5 year old daughter, Olivia, and a 3 year old son, Hudson. They are great kids, although they are terrible sleepers. TML: If you could pursue any other career besides law, what would it be and why? EB: Perpetual student starting with journalism school. Then maybe I would study political science and philosophy. I think the list could be endless. TML: Why did you join MCBA? EB: The Seafood Peddler. I love having lunch at the Seafood Peddler. Seriously now, one of my favorite things about practicing law is the other attorneys I come up against. It is very enjoyable to have that sense of camaraderie with colleagues and MCBA provides me with the opportunity to see my colleagues in a different setting, usually at the Seafood Peddler. TML: Why did you become a Director? EB: I thought it would be interesting to be more involved in the Bar. I had served as Treasurer of the Marin Trial Lawyers Association and enjoyed that experience. Becoming a director of the MCBA has been a wonderful opportunity to meet attorneys who practice in other areas. TML: If you had to pick a single highlight of your career, what would it be? EB: No single event comes to mind. I have enjoyed trying cases even when I have lost them. I argued an appeal from a small claims case over a hearing aid on a pro bono case that gave me as much satisfaction as arguing to the Court of Appeals. While not as exhilarating as trial work, I love to research and write and get a lot of satisfaction from that aspect of the job. TML: What was the best/worst/strangest experience in your career? EB: I was a few years out of school and trying this case my father took on as a favor for his friend from law school. It was the classic dog case in the firm - every attorney had done something on it and nobody wanted it. They gave it to me for experience. It was a rear-end accident and the question was what, if any, damage resulted. My client had made so many insurance claims and been in so many accidents it was hard to keep track of them. I had to practice saying in the mirror, without laughing, that I thought the jury should award him $75,000 - the amount he insisted I ask be awarded. Needless to say, I suffered my first defense verdict. 8

9 THE HIDDEN LESSON OF DRYBREAD v. CHIPAIN CHIROPRACTIC CORPORATION By Jordan A. Lavinsky, Esq. Did you ever think that agreeing to a reciprocal attorneys fee provision was a no-brainer because any court would make a unilateral fee clause reciprocal under Civil Code 1717? Why not look like the good guy and concede a clause that you cannot enforce anyway? Read Drybread v. Chipain (June 6, 2007) 07 C.D.O.S and you might think twice before conceding this point so quickly. Drybread actually does not deal directly with the enforceability of a unilateral contractual fee provision. The Court in that case, however, confirms that section 1717, which imposes the reciprocity in attorney s fees clauses, may not apply in all cases dealing with contractual fee provisions. Rather, that section (and its rule of reciprocity) applies only to claims that sound in contract and not those that sound in tort. In Drybread, plaintiff filed an unlawful detainer action against defendant based on defendant s refusal to surrender possession of the premises following expiration of the term of the lease. Ultimately, plaintiff voluntarily dismissed the action after he no longer wanted possession of the premises for his own use. Then the defendant moved for attorneys fees under a reciprocal attorneys fee provision in the lease. The trial court ruled that: Given the legal issues presented by the parties, the unlawful detainer action in this case sounds more in contract than not. That being the case, Civil Code section 1717(b)(2) bars defendant from recovering attorneys fees. The appellate division of the superior court affirmed the trial court s order without explanation and defendant petitioned the Court of Appeal for review. specifically provides that the attorney s fees and costs, which are incurred to enforce that contact, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney s fees in addition to other costs. (b)(2) Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for the purposes of this section. In holding that the limitations of 1717 did not apply, the Court in Drybread relied on Sintisas v. Goodin (1998) 17 Cal.4 th 599, in which the Supreme Court explained that the limitation of Civil Code 1717(b)(2) precluding attorney s fees when a complaint is voluntarily dismissed applies only to contract claims. Id. at 622. Contractual attorney s fees provisions are generally enforceable in voluntary pre-trial dismissal cases except as barred by Civil Code Id. Section 1717 does not bar recovery of attorney s fees for noncontract claims voluntarily dismissed by the plaintiff, as long as the attorney s fees clause is broad enough to encompass noncontract claims. Thus, defendant would be entitled to attorney s fees unless such fees are barred by (Continued on page 16.) Defendant argued that Civil Code 1717 applies only to contract actions, and that the trial court improperly applied that status to this unlawful detainer action. Defendant argued that all unlawful detainer actions sound in tort and even if they do not necessarily sound in tort, this unlawful detainer action sounded in tort. The Court of Appeals agreed and held that this unlawful detainer action sounded in tort; the trial court s denial of defendant s motion for attorney s fees was therefore improper. Civil Code 1717 provides: (a) In any action on a contract, where the contract 9

10 MARIN COUNTY JURY VERDICTS Complete Title of Plaintiff: Sonnen Porsche Complete Title of Defendant: Niello Porsche Case Number: Insurance Carrier(s): None identified Plaintiff Attorney(s), PH#: Brooke P. Halsey, Jr.; Dennis Birkheimer; 415/ Defendant Attorney(s), PH#: Dennis Murphy; 916/ Plaintiff Doctor(s), Field, Address: None Defendant Doctor(s), Field, Address: None Plaintiff Expert(s), Field, Address: Brent Vance Defendant(s) Contention(s) as to Liability: There was no false representation and no breach of contract. Length of Jury Trial: 4 days Jury Deliberated: 15 minutes Plaintiff Attorney asked the Jury to Award: $16,000 Defendant Attorney asked the Jury to Award: $0 Specials/Damages: No $ amount provided. Settlement Talks: No information provided. Result: Unanimous verdict for defendant. Poll Result: None Verdict Date: January 11, 2007 NOTE: Above information provided solely by defendant s attorney; plaintiff attorney did not respond. Defendant Expert(s), Field, Address: None Judge: Hon. John A. Sutro Date & Time of Incident: April 8, 2003 Type of Action: Breach of Contract; Fraud Location of Accident/Incident: Sonnen Porsche in Marin County Facts of Case: Plaintiff, Sonnen Porsche, purchased a used Porsche from Niello Porsche on April 8, Approximately seven months later it demanded to return the car asserting it had undisclosed frame damage. Defendant asserted Plaintiff s knowledge of the car was identical to its knowledge and asserted Plaintiff had sold the car to a customer, and the customer was rescinding the transaction due to Plaintiff s false statements to the customer that the car was covered by warranty. Plaintiff(s) Contention(s) as to Liability: Contract; Fraud Breach of 10

11 INFLATION INCREASES 2007 INCOME LIMITS FOR DEDUCTIBLE CONTRIBUTIONS TO RETIREMENT PLANS By Rebecca A. Gardner* For the first time, modified adjusted gross income (MAGI) limits on making deductible contributions to a traditional IRAs by active plan participants, and for making any contributions to Roth IRAs, have been increased for inflation. The inflation adjustments which are effective for tax years 2007 and later were introduced by 833(b) of the Pension Protection Act of 2006 ( Act ). Limits on deductible contributions by active plan participants to traditional IRAs Generally, an individual who is not an active participant in certain employer-sponsored retirement plans, and whose spouse is not an active participant, may make an annual deductible cash contribution to an IRA up to the lesser of: (1) a statutory dollar limit (e.g., for 2006 or 2007, $4,000, increased to $5,000 for those age 50 or older), or (2) 100% of the compensation that is includible in his or her gross income for that year. If the individual or his or her spouse is an active plan participant, the deduction phases out over a specified dollar range of MAGI. In 2007, the allowable deductible contribution will be phased out ratably for MAGI between $83,000 and $103,000 (an increase from between $75,000 and $95,000 in 2006) for taxpayers filing joint returns. As mentioned above, this substantial increase results from a statutory increase and an inflation adjustment increase. In 2007, the otherwise allowable deductible contribution will be phased out ratably for MAGI between $52,000 and $62,000 (up from between $50,000 and $60,000 in 2006) for single taxpayers and heads of household. In addition, the allowable deductible contribution will continue to be phased out ratably for MAGI between $0 and $10,000 for married taxpayers filing separate returns. For a married taxpayer who is not an active plan participant but whose spouse is a participant, the allowable deductible contribution will be phased out ratably for MAGI between $156,000 and $166,000 (up from between $150,000 and $160,000 in 2006). Limits on contributions to Roth IRAs Individuals may make nondeductible contributions to a Roth IRA, subject to the overall limit on IRA contributions. Maximum annual contributions to a Roth IRA are phased out for taxpayers with MAGI over certain levels for the tax year. For taxpayers filing joint returns, the allowable contributions to a Roth IRA will be phased out ratably in 2007 for MAGI between $156,000 and $166,000 (up from between $150,000 and $160,000 in 2006). For single taxpayers and heads of household, the allowable contributions will be phased out ratably for MAGI between $99,000 and $114,000 (up from between $95,000 and $110,000 in 2006). For married taxpayers filing separate returns, the otherwise allowable contribution will continue to be phased out ratably for MAGI between $0 and $10,000. *Rebecca A. Gardner is an attorney in the Estate Planning and Administration Section at Hanson Bridgett Marcus Vlahos & Rudy LLP. Her practice focuses on estate planning and business entity formation and operation. In her estate planning practice, Rebecca assists clients in a wide range of matters, including drafting wills, trusts, and other estate planning documents with a focus on accomplishing clients' estate planning and tax goals. Rebecca also assists clients with business issues including the formation and operation of corporations, limited liability companies and limited partnerships. ALL GOLFERS (AND FRIENDS OF GOLFERS) SAVE THE DATE!! What: First (Hopefully) Annual MCBA Golf Tournament (This year to benefit Guide Dogs for the Blind) When: 1:00 Tee-off, Friday, October 19, 2007 Where: San Geronomo Golf Course, San Geronomo Format: Scramble (So that golfers of all levels may participate and have a great time!) For further information, contact Louis Franecke: Phone (415/ ): 11

12 MCBA GOES TO THE BALL GAME! When: Sunday August 1:05 Who: Oakland A s V. Angels Cost: $22 for Field Level seats (Normally $32) Party: Tailgate Party Starts at 10:00 (Call for location) Contact: Alan Charmatz, for more details Hope To See You There! Bring the Family. DIRECTORY UPDATE Marin County Superior Court Commissioners We have recently been advised that the telephone numbers listed at page 8 of the MCBA Directory for the Marin County Court Commissioners have changed since our directory was printed. There will be additional changes throughout the year. At this time the best contact number is the General Administrative Office for messages. We apologize for any inconvenience. 12

13 (Bankruptcy, continued from page 1.) applies to stop all litigation against the debtor or property of the estate. The stay also applies to ban notices, demands, or other actions that a creditor might take to pursue collection of pre-bankruptcy debts. Do not violate the stay. Actions in violation of stay are void or voidable. Intentional violations can be punished by sanctions or contempt. Landlords or creditors can ask the bankruptcy court for relief from the stay to allow some kinds of actions to proceed. If a tenant is in default and appears to be teetering on bankruptcy, then default the tenant and file an unlawful detainer action to terminate the lease before the bankruptcy petition is filed. By doing so, the landlord may argue that the lease was already terminated before the bankruptcy and the lease should therefore not be held up in the bankruptcy and subject to lengthy periods for assumption and assignment of leases (although the landlord s claim based on debtor s breach must still be filed in the bankruptcy). Right to Post-Petition Rent Even in bankruptcy, tenant/debtors cannot remain in possession of premises for free. Under 11 USC 365(d)(3) debtors must remain current on post-petition obligations until the lease is assumed or rejected. Hence, the Ninth Circuit has held that 11 USC 365(d)(3) gives landlords an administrative claim for the full amount of lease rent due for the post-petition, pre-rejection period. If a debtortenant fails to keep post-petition rent current, a request for payment of administrative expenses and, if necessary, a motion to compel payment should be made. In addition, if permitted under applicable state law, a landlord may claim attorney fees incurred in making the motion, which may be recoverable to compensate the landlord for actual pecuniary loss resulting from the debtor s failure to pay the post-petition rent as required under 11 USC 365(d)(3). Assumption and Assignment Generally, the assumption of a contract involves its reaffirmation by the debtor or trustee. The entire contract must be assumed or rejected. Its provisions cannot be cherry picked. Following assumption, it becomes a post-bankruptcy obligation that can be enforced against the bankruptcy estate and damages for breach are accorded priority status. To assume a lease, the debtor must: (i) cure or provide adequate assurance of a prompt cure; (ii) compensate, or provide adequate assurance of prompt compensation, for actual pecuniary loss" resulting from default; and (iii) provide adequate assurance of future performance. The entire lease must be assumed both burdensome and beneficial provisions unless agreed upon modification. If the debtor assumes a lease, the debtor is obligated to perform post-petition. Breach of the lease after assumption results in the lessor's administrative claim, meaning it would be paid in full before any general unsecured debt. Special Provisions for Shopping Center Leases With respect to assumption of a lease in a shopping center under 11 USC 365(b)(3), adequate assurance of future performance is specifically defined to mean that: (a) the source of rent and financial condition of the proposed assignee and its guarantors, if any, shall be similar to the financial condition and operating performance of the debtor and its guarantors, if any, when the debtor became the lessee; (b) the percentage rent due under the lease will not substantially decline; (c) assumption or assignment is subject to all the terms of the lease, including radius, use, location, and exclusivity provisions, and will not breach any such provisions; and (d) assumption or assignment will not disrupt the tenant mix or balance in the shopping center. Rejection of Unexpired Leases Rejection of an executory contract or unexpired lease terminates both parties obligations going forward, but does not result in an unraveling of the executed portion of the contract. Most courts follow a business judgment rule in deciding whether to permit rejection. The issue is whether the debtor s business judgment indicates rejection will benefit the bankruptcy estate. Rejection is a pre-petition breach, notwithstanding the rejection happens after the bankruptcy is filed. The landlord will have a pre-petition damage claim for breach. For rejection damages and all amounts owed before the bankruptcy, file a general unsecured claim. A post-rejection claim may include the sum of (1) amounts owed pre-petition (i.e., before the bankruptcy) and (2) the capped amount of rejection damages. The cap of Bankruptcy Code 502(b)(6) limits landlord claims for rejection damages to the greater of one years rent or 15% of the rent reserved, not to exceed three years rent. Time for Assumption and Rejection of Unexpired Leases Under Section 365(a) a debtor or a trustee may elect whether to assume or reject any unexpired lease. The election has to be made within 120 days or the lease is deemed rejected. The debtor s time to assume an unexpired lease is subject to one 90 day extension. After that, no extensions will be granted without the landlord s written consent. The debtor must perform its obligations under the lease until the lease is assumed or rejected. Proof of Claim To collect money in a bankruptcy proceeding, file a proof of claim before the claims bar date. In chapter 11, (Continued on page 14.) 13

14 (Bankruptcy, continued from page 13.) debtors set deadlines (with court approval) for filing the claims. Claims not filed by the bar date are disallowed. In chapters 7 and 13, the deadline is statutory: 90 days from the date first set for the meeting of creditors. The Marin Lawyer (Feduniak, continued from page 3.) permit conditions. The third factor recognizes that those pressing estoppel claims against the government face daunting odds : Attorneys Fees A recent decision from the United States Supreme Court, originating in San Francisco, has made it easier to seek recovery of contractual attorney's fees incurred in bankruptcy litigation. In Travelers Casualty and Surety Company of America v. Pacific Gas & Electric Company (US Supreme Court, March 20, 2007), the Supreme Court held that contract-based attorneys' fees could be recovered in a bankruptcy case, even if the fees were incurred litigating issues under bankruptcy law. Before this decision, the law on recovery of fees was murky at best: some cases allowed recovery if the fees were incurred enforcing contract rights under state law and the contract provided for such recovery, while several cases, including a th Circuit decision noted that there was no federal right to attorneys' fees so fees incurred litigating "issues peculiar to federal bankruptcy law" could not be recovered. Monitor Developments in the Case Promptly file a request for notice and inclusion on the mailing/ list. Review everything at least briefly to identify issues that may affect your interests. Be sure to object on time to motions and proposed actions that you oppose. After filing a claim, monitor the case for any distributions under a plan, or to respond on time to any objection to your claim. Watch for omnibus objections where many claims are disallowed unless a timely response is filed. Scream or Die Finally, it is critical to understand the concept of Scream or Die. Bankruptcy is not two-party litigation it involves multiple constituencies. Debtors make motions that affect rights of whole groups of constituencies, not just one party. Parties are given a finite usually short time to object or the relief is granted hence: scream or die. A scream or die calendar means the motion is not even set for a hearing it will just be granted by default unless a party files a timely objection and asks for a hearing. *Jordan A. Lavinsky is an attorney in the Litigation Section of Hanson Bridgett Marcus Vlahos & Rudy LLP, specializing in commercial and real estate litigation. Jordan represents commercial creditors, shopping centers, real estate owners, managers, and developers. He has experience in trial and appellate litigation in state and federal courts and administrative forums in the areas of commercial, construction, real estate, and bankruptcy law. 14 [P]ublic policy may be adversely affected where estoppel can too easily replace established requirements for obtaining permits. Accordingly, estoppel can be invoked in the land use context in only the most extraordinary case where the injustice is great and the precedent set by the estoppel is narrow. Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 321; see also City of Long Beach v. Mansell (1970) 3 Cal.3d 462, 495 fn. 30. The Feduniaks claims against the Commission thus failed. The Court reinstated the Commission s order for the removal of the golf course and the restoration of the dunes. Conclusion Feduniak breathes new life into a doctrine that operates harshly on property owners. This principle rests on the assumption that it would be far harsher to allow inaction by an agency s staff to sacrifice the broader interests of the public in the consistent application of land-use laws. Feduniak also indicates the need for prospective purchasers of property (and their legal counsel) to (1) seek warranties from sellers that address this risk and (2) conduct their prepurchase investigations with greater diligence. Certainly lawyers representing buyers need to take heed. *Thomas B. Brown joined Hanson Bridgett Marcus Vlahos & Rudy after serving for 12 years as the City Attorney for the City of Napa. Prior to his tenure at the City of Napa, Tom served as Senior Deputy City Attorney for the City of Berkeley. Tom represents both public agency and private clients. His practice focuses on all aspects of municipal law. He has extensive experience advising clients and litigating in land use, zoning and planning, the California Environmental Quality Act ("CEQA"), real property entitlements, police power, municipal taxation, Brown Act, Public Records Act, code enforcement, intergovernmental relations, grand juries, elections, initiatives and referenda.

15 (Legal Aid, continued from page 4.) Financial Abuse Expert Team ( FAET ) Six months after convening the first team meeting, we have over twenty volunteer financial and legal experts that have been trained and are ready to be deployed to educate the community and serve as experts on appropriate cases. Two of the cases presented anonymously to the team involve an alleged predatory loan and allegations of a broker s misconduct in the sale of securities. The first client is in her early eighties and the second is in her nineties. Time is of the essence takes on a new meaning when trying to keep an elder in her home or to recoup a client s life savings. FAET meetings are confidential. Matters presented to the FAET are screened either by LAM, the District Attorney s Office or another contributing County agency. Many heartfelt thanks to Brooke Thacher and Horace de la Vega for their FAET coordination. The Marin Lawyer (Allocating Risk, continued from page 6.) Deductibles. A deductible is the same as the deductible on your car insurance policy; it is a portion of any claim that a buyer will be required to pay on a first dollar basis. The key issue in negotiating thresholds and deductibles apart from price is whether they will apply on a per occurrence or aggregate basis. Reps and Warranties Insurance. Finally, it is important for the sophisticated buyer to consider reps and warranties insurance. This is insurance that provides a buyer with coverage against losses arising from a seller s breach of a representation or warranty in the purchase agreement. A seller may offer reps and warranties insurance to a buyer in exchange for a full or significant cap on liability. This insurance is expensive and there is typically a large deductible associated with it. Accordingly, it is typically utilized only in complex large scale transactions. The parties will need to negotiate through issues that arise in obtaining this insurance. The insurer will need to conduct its own pre-closing due diligence to assess risk, and there are a number of issues in the policy itself that a buyer should take an active role in negotiating, including term and assignability. LAM Staff Attorney Brooke Thacher and first time Wiley Award Winner Alex Freeman. Golden Anniversary Project April 17, 2008 marks the 50th Anniversary of the incorporation of the Legal Aid Society of Marin County. The Golden Anniversary Project ( GAP ) will include interviews of LAM s surviving founders and incorporators, MCBA Presidents, former LAM Staff and Board members, current LAM Staff and Board members, former and current clients and anyone else in the community who contacts LAM in the next few months with a story or matter of interest from our history. The gathering of this information into Legal Aid of Marin: The First 50 Years will culminate in the filming of a documentary to be viewed at our 50th Anniversary celebration to be announced. We encourage everyone who cares about Legal Aid of Marin to offer contributions (anecdotes, pictures, and case success stories) to this important project. *David C. Longinotti is a partner in the Business Section at Hanson Bridgett Marcus Vlahos & Rudy LLP and is the leader of its Real Estate Practice Group. David is an experienced and effective transactional lawyer and an inventive problem solver. He offers particular expertise in complex real estate secured transactions and related debt and equity financing arrangements. David's recent credits include the acquisition of a portfolio of over thirty senior care facilities, the consolidation of fourteen real estate investment partnerships and the reorganization of two divisions of a publicly traded company. 15

16 (Drybread, continued from page 9.) So the question is whether the unlawful detainer action is an action on contract (to which 1717 applies) or a noncontract claim. To answer that question, the Court in Drybread relied on Fragomeno v. Insurance Co. of the West (1989) 207 Cal.App.3d 822, in which the Court said In order to determine whether this summary and statutory procedure [unlawful detainer] sounds in contract or in tort, the gravamen of the facts giving right to recovery must be examined. If the right to recover realty emanates from the breach of a lease provision occurring during an unexpired term of a lease, then the right to recover has its inception in a contractual arrangement between the parties. If the right to recover is based upon a civil wrong such as possession of property by a trespasser ab initio, or by a holdover tenant as a resulting trespasser, or by an encroacher then the right to recover possession of the property by way of the summary and statutory procedure of unlawful detainer has its inception in tortious conduct. Id. at In Drybread, the plaintiff s claim was that defendant was holding over after expiration of the lease a noncontract claim. Thus, the trial court erred in determining that the case sounded more in contract than in tort. Therefore, Civil Code 1717 (which bars attorney s fees where contract claims are voluntarily dismissed) did not apply. Rather, defendant was the prevailing party pursuant to Code of Civil Procedure 1032 (which provides that a prevailing party is entitled as a matter of right to recover costs, and prevailing party includes a defendant in whose favor a dismissal is entered ) and was entitled to attorney s fees pursuant to the provisions of the lease. So back to the original question posed by this case note: Should you think twice about automatically making an attorney s fee provision reciprocal? Based on the reasoning in Drybread, a one-sided attorney s fees clause puts a landlord in a much better position than a landlord with a reciprocal attorney s fees clause now found in most leases. If the clause is one-sided, in favor of the landlord, then the only way the tenant could make it reciprocal would be by saying it was governed by But if it was governed by 1717, there is no right to fees after voluntary dismissal. Thus, a one-sided attorney s fees clause favoring the landlord would be enforceable in a claim sounding in tort, entitling the prevailing landlord, but not a prevailing tenant, to fees on a tort claim, while allowing the landlord to avoid paying fees on a claim sounding in contract, when it voluntarily dismisses before trial. The Marin Lawyer CALENDAR DETAILS July 18th Probate & Estate Planning Section Meeting 12 1:30 Brown Bag Lunch The Tamalpais Room in the Corporate Center 750 Lindaro, Central San Rafael (off Second Street) The Tamalpais Room is on the ground floor off the lobby July 19th Real Property Section Meeting Seafood Peddler 12 1:30 July 23rd Probate & Trusts Mentor Group 802 B ST., San Rafael An informal forum to further discuss issues addressed at the monthly estate planning section meetings or any other issues. Bring your lunch and interesting estate planning/trust administration/probate issues to discuss, and snacks will be provided. Parking is available in the City of San Rafael parking lot on B Street south of 4th Street. Brown Bag Lunch 12-1:30 MARIN COUNTY LEGAL PROFESSIONALS ASSOCIATION A professional organization for legal assistants NEXT MEETING: Thursday, July 12, 6 pm, Café Arrivederci 11 G Street, San Rafael SPEAKER: David Campion, One Legal RSVP/INFO: Kristi L. Edwards, CCLS, , TIP OF THE MONTH: MCLPA will publish your job opening in our newsletter for free! 16

17 New Members change of scene G. Martin Velez Lafayette & Kumagai 100 Spear St, Suite 600 San Francisco, CA Phone: ADDITONS TO THE DIRECTORY: David Brown Marin County Public Defenders Office 3501 Civic Center Dr #139 San Rafael, CA Tel: Fax: Elaine Andrews 96 Newport Landing, Suite #105 Novato, CA Phone: Michael J. Cogen 100 Larkspur Landing Cir, Ste 110 Larkspur, CA Tel: Fax: Brian C. Pedersen Flynn/Williams LLP 1010 B Street, #200 San Rafael, CA Tel: Fax: David Whitridge 140 Buena Vista Ave Corte Madera, CA Tel: Fax: To increase sales, announce a new partner or advertise a new business: place your ad in The Marin Lawyer contact Pat Stone, Express Printing Phone: (707) Fax: (707)

18 THE MARKETPLACE Anyone wishing to advertise in the Marketplace should send their text ad to MCBA, 30 N. San Pedro Rd, Ste. 140, San Rafael, CA with payment of $25 per month, or you may to: The ad should be no longer than 25 words and paid in advance. LEGAL SECRETARY, seeks transcription work (in your office or from my home office). Also offers vacation fill-in, file/ofc/library organization. Over 20 yrs litigation experience. Debbie , PART-TIME LEGAL SECRETARY NEED- ED to job share for Marin family law solo practitioner. 2 days per week. Minimum 5 years legal secretary experience, preferably in family law. Word Perfect and Word proficient. Great work environment. Call Maggie (415) CLASS A BUILDING Attorney Offices luxurious offices, 999 Fifth Ave. SR. Will provide space in exchange for assistance with pending civil litigation. Call Francis Doherty Deadline for submission of articles, ads, inserts, and announcements is the 15th of each month. Thank you. Mission Statement of the Marin County Bar Association To involve, encourage, and support bar association members, to serve as a liaison to the Marin County courts, and to educate the community and enhance access to legal services. 18

19 Marin County Bar Association 30 North San Pedro Road, Ste. 140 San Rafael, CA published by The Marin County Bar Association Fax MCBA Officers Jeffrey H. Lerman President Edward S. Berberian President Elect Marlene P. Getchell Treasurer Beth S. Jordan Secretary Daniel S. Harris Past President Myron Greenberg 5 Year Past President Board of Directors Frederick W. Bradley Elizabeth Brekhus Renee Giacomini Brewer David I. Brown Otis Bruce Jr. Timothy J. Chambers Houman Chitsaz Albert Cordova Philip R. Diamond Louis S. Franecke Jordan A. Lavinsky Michelle C. Lerman Andrew C. McCullough Neil Sorensen Eric Sternberger Executive Director Robynn Gaspar Production Advertising Express Printing Pat Stone MCBA encourages submission of articles that may interest the legal community. Letters to the Editor are also welcome and may be published if space permits. Submissions will not be returned. The Editor reserves the right to publish, decline to publish, edit or otherwise modify any submission. Editorial material should be sent to the Marin County Bar Association at the above address. FIRST CLASS U.S.POSTAGE PAID permit #26 san rafael ca Dated Material 19

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