California Trial Court recognizes defective notice of default in reinstatement case
Muralles v. Max Capital Investments – Los Angeles Superior Court (2013). Case#BC459723 In my practice involving mortgage foreclosure defense I have occasion to perform legal research into the latest foreclosure litigation cases. Here is a mortgage reinstatement case that I recently came across that was filed in Los Angeles Superior Court. It is a case involving a borrower that had taken out a $2,000,000 mortgage loan was lender Sachen. Several payments were made and then it appears there was a default. It also appeared that the borrower had a easement in escrow (valued at $329,000). The case involved the typical assignment of deed of trust from one lender to another (Max Capital Investments, LLC) in this case and the borrower sought to reinstate the loan.
The main problem was the lender had “accelerated the loan” (calling all payments due) and the Notice of Default stated that the amount to cure the default was $1.972 million. The borrower of course did not have this amount (who would) and tried to find out the exact amount he needed to reinstate his mortgage pursuant to California Civil Code section 2924. There appeared to be a run-around as to what was exactly owed, with the new lender eventually saying that $75,000 was the amount. On closer examination, it appeared this was nowhere near the amount that was actually required to reinstate the loan. Following the foreclosure sale, the lender sought to foreclose and then filed an unlawful detainer (eviction action). Of course this raised the legal dispute. The borrower then filed a civil lawsuit to set aside the foreclosure for failing to allow him his reinstatement rights. The court, after hearing the evidence, issued a decision on February 2013.
The court found in favor of the borrower in the unlawful detainer action, and found the foreclosure to be unlawful and VOID. There was no noted discussion about tendering the loan balance. Key to the decision appeared to be that there is a legal right to reinstate and that the borrower actually had the means to reinstate his loan. We have seen this many times with banks literally “forcing the default”. The court held that putting $1.972 million (being due as arrearages to cure the default) in the notice of default, was a substantial defect voiding the foreclosure sale.
This is fairly significant for borrowers, especially where the notice of default is completely out of whack or padded with charges that are not justified by the terms of the promissory note and deed of trust. Click to get a copy of the foreclosure mortgage reinstate case Murrales v Max Capital Investments LLC Reinstatement California Law 2924
I will be posting a video brief of the case at our real estate law channel in the next few days.
Take care all! – Attorney Steve –