Wrongful Foreclosure – There may be remedies against a trustee for a wrongful foreclosure sale if not inconsistent with California Foreclosure Policies
CALIFORNIA GOLF CASE LEAVES DOOR OPEN FOR HOLE IN ONE!
This is the Golf Case – California Golf, L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053. Without going into details on the facts, suffice it to say a party wanted to hold a trustee liable for wrongful foreclosure. The Defendants argue there is no remedy available to the Plaintiff because the non-judicial foreclosure statutes in California do not permit such remedies. To this point the Court stated:
“Respondents rely on statements in three cases which, they argue, indicate that the Legislature intended to occupy the field of nonjudicial foreclosure sales and permit no further remedies. (I. E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 285; Residential Capital v. Cal-Western Reconveyance Corp., supra, 108 Cal.App.4th at p. 821; Moeller v. Lien (1994) 25 Cal.App.4th 822, 834.) Before addressing the cases on which respondents rely, a brief overview of the purposes of the statutes governing nonjudicial foreclosure is appropriate. [163 Cal.App.4th 1070].
This case analysis is just this authors opinion and is not legal advice or a substitute for legal advice. If you are facing foreclosure or bankruptcy you need a competent lawyer who understands foreclosure law.
Civil Code sections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.‘ This comprehensive statutory scheme has three purposes: ‘ “(1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1249-1250.)
The Court then went on to discuss whether this is in fact a comprehensive statutory scheme for non-judicial foreclosure sale in California and whether or not any remedies may exist for a party who is claimed to be injured by a wrongful foreclosure sale (in this case the borrower was seeking certain remedies under the Uniform Commercial Code – UCC).
“In each of the cases on which respondents rely, the court did not conclude that no remedies outside those provided by the nonjudicial foreclosure statutes are available simply because the Legislature intended to occupy the field. Instead, the court also considered the policies advanced by the statutory scheme, and whether those policies would be frustrated by the allowance of the additional remedy. (I. E. Associates v. Safeco Title Ins. Co., supra, 39 Cal.3d at pp. 288-289 concluding that expanding the notice obligations of the trustee would not be supported by policy; Residential Capital v. Cal-Western Reconveyance Corp., supra, 108 Cal.App.4th at pp. 827, 829 declining to “graft a tort remedy onto a comprehensive statutory scheme in the absence of a compelling justification for doing so,” and concluding that the addition of the proposed remedy would not fit within the comprehensive statutory scheme; (Moeller v. Lien, supra, 25 Cal.App.4th at p. 834 (concluding that “it would be inconsistent with the comprehensive and exhaustive statutory scheme regulating nonjudicial foreclosures to incorporate another unrelated cure provision into statutory nonjudicial foreclosure proceedings”). It is clear, then, that the mere existence of a comprehensive statutory scheme does not necessarily eliminate all further remedies without the consideration of the relevant policy concerns. Indeed, California courts have repeatedly allowed parties to pursue additional remedies for misconduct arising out of a nonjudicial foreclosure sale when not inconsistent with the policies behind the statutes. In Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1231, our Supreme Court concluded that a lender who obtained the property with a full credit bid at a foreclosure sale was not precluded from suing a third party who had fraudulently induced it to make the loan. The court concluded that ” ‘the antideficiency laws were not intended to immunize wrongdoers from the consequences of their fraudulent acts’ ” and that, if the court applies a proper measure of damages, ” ‘fraud suits do not frustrate the antideficiency policies because there should be no double recovery for the beneficiary.’ ” (Id. at p. 1238.) In South Bay Building Enterprises, Inc. v. Riviera Lend-Lease, Inc. [163 Cal.App.4th 1071] (1999) 72 Cal.App.4th 1111, 1121, the court held that a junior lienor retains the right to recover damages from the trustee and the beneficiary of the foreclosing lien if there have been material irregularities in the conduct of the foreclosure sale. (See also Melendrez v. D & I Investment, Inc., supra, 127 Cal.App.4th at pp. 1257-1258; Lo v. Jensen (2001) 88 Cal.App.4th 1093, 1095 (a trustee’s sale tainted by fraud may be set aside.)
The Golf case then keeps open the possibility that as long as a Plaintiff is not seeking a remedy inconsistent with the California Foreclosure Laws, that they Court should see fit to permit such a remedy and this case the Court recognized the UCC remedy. The Court said:
“Considering the policy interests advanced by the statutory scheme governing nonjudicial foreclosure sales, and the policy interests advanced by Commercial Code section 3312.”
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