Excellent question! This is a classic case of an owner's liability when conditions on his property cause damage to persons off his property. In the case of trees, you are responsible for actual damages to your neighbor's property caused by your tree roots, branches, and trunk. Your neighbor is entitled to cut the roots that enter onto his property if they cause damage. If he does so, however, he faces a claim by you that his action was excessive and unnecessarily damaged the tree or made it unstable. On the facts you've presented, I'd say you neighbor has the right to cut the roots, obtain compensation for the damage to his wall, and obtain an injunction against your allowing the tree to trespass (encroach) on his property. The fact that the tree preceded the pony wall is unavailing.
Excellent answer by Attorney Boyer!
You are liable for damages caused by your tree. Your neighbor, on the other hand, can cut some of the roots, but must be cognizant of the law in California, which is that one does not have the absolute right to cut or remove branches or roots from a neighbor's tree. In the case of Booska v. Patel (1994) 24 Cal. App. 4th 1786, the California Court of Appeal held that a neighbor does not have the absolute right to cut encroaching roots and branches so that they end at his or her property line. One must take into account the health of the tree before one starts trimming, cutting or chopping. One might be liable for reasonable costs of replacing destroyed tree with identical or substantially similar tree.
You will probably have to consult with an arborist to ascertain your options.
Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice for a particular case. This posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, consult with your own attorney.