[U] Residential Capital, LLC v. Premier Trust Deed Services

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

May 14, 2003

RESIDENTIAL CAPITAL, LLC, PLAINTIFF AND APPELLANT,

v.

PREMIER TRUST DEED SERVICES, INC., ET AL., DEFENDANTS AND RESPONDENTS.

APPEAL from a judgment of the Superior Court of San Diego County, Judge John S. Meyer. Affirmed. (Super. Ct. No. GIC763168)

The opinion of the court was delivered by: Huffman, Acting P. J.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

This action arises out of a non-judicial foreclosure sale conducted under the power of sale in a trust deed encumbering residential real property (property). Plaintiff Residential Capital, LLC (Residential Capital) submitted the high bid at the sale. However, defendant Premier Trust Deed Service (Premier), the trustee under the trust deed, did not deliver to Residential Capital a trustee’s deed to the property because it learned after the bidding that the trustor (Justuses) and beneficiary (Option One) under the trust deed had agreed to postpone the sale (Civ. Code, § 2924g, subd. (c)(2).) *fn1 Residential Capital sued Premier and Option One (together defendants) for damages, alleging causes of action for breach of contract and negligence. The trial court granted defendants’ motion for summary judgment and entered judgment for the defendants. Residential Capital timely appealed the judgment.

Residential Capital contends that by making the high bid at the foreclosure sale it entered into a binding contract with Premier and its principal Option One to purchase the property, and that it is entitled to breach of contract damages under section 3306. It argues the postponement of the trustee’s sale by agreement between the beneficiary Option One and the trustor Justuses made before the bidding did not result in a void sale contract. We conclude that the trial court properly applied the law to the undisputed facts and affirm the judgment in favor of Premier and Option One. (Code Civ. Proc., § 437c.)

FACTUAL AND PROCEDURAL BACKGROUND

Justuses borrowed $160,000 from Option One to purchase the property. The loan was secured by a trust deed encumbering the property. Justuses defaulted on the loan in 2000 and Option One began non-judicial foreclosure proceedings. (§ 2924.) Pursuant to Option One’s instructions, Premier as trustee recorded a notice of default and a notice of sale to be conducted on February 15, 2001. Premier made the proper mailings and postings for the foreclosure process. (§ 2924 et seq.)

On February 15, 2001, the trustee’s sale was conducted by Premier. Residential Capital was the highest bidder, with a bid of $172,599.10. Residential Capital tendered the full purchase price in the form of a cashier’s check.

However, after the sale, Premier notified Residential Capital that it would not issue a deed because it had learned that Option One had agreed with Justuses to postpone the sale, due to a forbearance agreement and payment plan. (§ 2924g(c)(2): “The trustee shall postpone the sale . . . where stayed . . . by the mutual agreement, whether oral or in writing, of any trustor and any beneficiary or any mortgagor and any mortgagee.”)

Premier then returned all funds tendered to Residential Capital. Residential Capital accepted the refund without waiving its right to sue.

On March 1, 2001, Residential Capital sued Option One and Premier on theories of breach of contract and breach of the implied covenant of good faith and fair dealing. *fn2 Residential Capital seeks to hold Option One and Premier equally liable as agents of one another in the conducting of the foreclosure sale proceedings. It alleged benefit of the bargain damages had been incurred in the amount of $34,150.90. The property was valued at $205,000.

The defendants brought a motion for summary judgment or adjudication of issues, and Residential Capital brought a cross-motion for summary adjudication. (Code Civ. Proc., § 437c.) The defendants took the position that no contract had been formed between Residential Capital and themselves. They argued that because of the suspension of Premier’s authorization to conduct the sale that arose from the agreement between Option One and Justuses to postpone the foreclosure sale the foreclosure sale was void. They argued Residential Capital had sustained no damages because all the funds tendered had been returned. They argued the trustee was entitled to rescind the sale as void as to all parties, including a third party purchaser such as Residential Capital. In turn, Residential Capital sought summary adjudication that it should prevail on its breach of contract claim, and that defendants owed it a duty to exercise due diligence in the foreclosure sale proceedings.

The trial court issued its ruling, addressing the contractual claims as follows. The court noted that defendants were contending there was a procedural defect or irregularity in the trustee’s sale which justified setting aside the sale, while plaintiff contended defendant breached the sales contract. The court found the case of Little v. Cfs Service Corp. (1987) 188 Cal.App.3d 1354 (Little), to be factually similar “in that the property was sold at a foreclosure sale, the buyer tendered the purchase price, and then the trustee refused to issue the deed. In Little, the trustee refused to issue the deed because it had discovered that there was no notice of the sale to other interested parties. The appellate court found that ‘the sales contract is void because of substantial and prejudicial defective notice. A void contract cannot be given any effect whatever.’”

The court also relied on the case of Angell v. Superior Court (1999) 73 Cal.App.4th 691, 695 (Angell), as reciting the same facts, summarized as follows: “Property sold, buyer tendered purchase price, and trustee refused to issue the deed. In Angell, the notice of default and the notice of sale were in error. A notice of default stated that the amount owed was $14,850.52 and that the debt is due to one note in the sum of $350,000. A notice of sale stated that the amount due was $377,011.75. The actual reinstatement amount was $124,429.93, and the actual unpaid balance was $2,938,542.21. The appellate court held that ‘a material mistake which is discovered after the acceptance of a bid but before issuance of a trustee’s deed justifies the trustee’s refusal to complete the sale.’”

The court then granted the defendants’ motion for summary adjudication of the breach of contract and breach of the covenant of good faith and fair dealing, finding that it was undisputed that defendants returned all the consideration paid by plaintiff, plus interest. This finding is not challenged on appeal. Since that was the only relief to which Residential Capital was entitled, there were no disputed material facts regarding plaintiff’s contractual claims. Once the negligence claims were dismissed, judgment was entered accordingly and Residential Capital appeals. *fn3

DISCUSSION

We review the trial court’s grant of the summary judgment motion filed by defendants Premier and Option One under an independent review standard. (Buss v. Superior Court (1997) 16 Cal.4th 35, 60.) Since the facts are generally undisputed, only legal issues are presented. (Angell, supra, 73 Cal.App.4th 691, 699.)

I. BREACH OF CONTRACT

Residential Capital argues that under hornbook contract law, the foreclosure sale conducted after the postponement agreement was not void but merely illegal. (§ 2924g, subd. (c)(2).) Under this theory, it argues, the illegal contract is voidable or unenforceable as to the trustor Justuses, precluding specific performance to enforce transfer of the property, but nevertheless was subject to ratification by Residential Capital, permitting breach of contract damages against the trustee, Premier, and the beneficiary, Option One. Residential Capital contends the defendants have created conflicting contractual obligations. First, it argues that defendants were obligated to Justuses to reinstate the loan and trust deed and postpone the sale, and second, to Residential Capital, to pay damages for its breach of contract. Defendants argue the foreclosure sale was void. We consider these contractual theories in the context of the leading cases of Moeller v. Lien (1994) 25 Cal.App.4th 822 (Moeller) and Little, supra, 188 Cal.App.3d 1354. *fn4

A. Secondary Authorities

Residential Capital argues the facts in this case justify a reexamination of the law, based in part on the acknowledgement in Little, supra, 188 Cal.App.3d 1354, that in the case law, the terms “void, voidable, and invalid appear to be used interchangeably.” (Id. at p. 1358.) The Little court referred to the “general rule” on voidness or voidability of a trust deed foreclosure sale, as set out in a treatise: “‘[D]efects and irregularities in a sale under a power render it merely voidable and not void . . . . However, substantially defective sales have been held void where the defect lay in a particular as to which the statutory provision was regarded as mandatory . . .’ [Citation.] ‘A sale under a power in a mortgage without reasonable notice will be set aside.’ [Citation.]” (Ibid.)

Residential Capital argues the foreclosure sale contract in this case should not be considered to be a void contract, because void contracts have no legal effect and cannot become enforceable, even if subsequently affirmed or ratified. (1 Corbin on Contracts (Rev. Ed. 2002) § 1.7 (Corbin); see also 1 Williston on Contracts (4th ed. 1990) Definition of Terms, § 1:20, p. 49 (Williston).) Residential Capital argues it should be allowed to affirm or ratify the sale contract here and the contract should therefore be characterized as voidable or otherwise unenforceable, rather than void. It argues the sale contract should be so characterized because section 2924g, subdivision (c)(2), does not identify the consequence of noncompliance with its procedures. *fn5

Unless a statute expressly deprives the parties of their right to sue on a contract made in violation of that statute, the right to recover on the contract will not be denied, if denial of recovery would be out of proportion to the demands of public policy. (6 Williston, supra, Illegal Agreements, § 12:4, pp. 47-51.) “Thus, unless no other conclusion is possible from the words of a statute, it should not be held to make agreements contravening it totally void.” (Ibid.) Residential Capital contends that no consequence is stated in section 2924g, subdivision (c)(2) for noncompliance and the sale contract it entered into at the foreclosure sale by making the highest bid should not be considered void. In contrast to section 2924g, subdivision (c)(2), Residential Capital refers to section 2934a, a provision dealing with the substitution of a trustee under a trust deed encumbering real property given to secure an obligation to pay money and conferring duties on the trustee that are incidental to the exercise of a power of sale, which expressly provides that if notice of sale does not contain information about a substituted trustee, “any sale conducted by the substituted trustee shall be void.” (§ 2934a, subd. (c).) Thus, Residential Capital argues, the Legislature knows how to specify the consequences of statutory violations if it so intends that consequence.

Accordingly, Residential Capital argues that the sale contract here was not void, but rather contains the characteristics of a voidable contract, which are summarized in 1 Corbin, supra, section 1.6 as follows:

“‘Voidable contract’ is not a simple and uniform concept; detailed analysis of voidable contracts will show important differences. In every case, however, it will be found that one of the parties has the legal power, either of avoidance or of ratification, or of both. If the party having a power of avoidance–the infant, the lunatic, the defrauded party, the party affected by mistake–exercises it, such rights and duties as the transaction has created are terminated including those of the other party. The exercise of the power to ratify will in some cases create a duty that did not before exist and will always terminate a power of avoidance.”

Residential Capital also refers to the usual rule that only an innocent party may avoid a voidable contract, and it as the innocent party does not wish to do so. It contends none of the circumstances that require the contract be avoided, including a grossly inadequate buying price, is present here. (6A Corbin, supra, § 1538; see Crofoot v. Tarman (1957) 147 Cal.App.2d 443, 447.)

In a further argument, Residential Capital contends that the balancing approach of the Restatement Second of Contracts should be employed here. This approach, which represents a change from the first Restatement of Contracts, is described in 6 Williston, supra, Illegal Agreements, section 12:4, pages 7 through 13, as follows:

“The Restatement (Second) no longer speaks in terms of illegal bargains, preferring instead to focus on whether a promise or term in an agreement is unenforceable on grounds of public policy. However, in making that determination . . . the courts [will] consider the importance of any policy as reflected in legislation or judicial decision and the probability that the policy will be furthered by declaring a term unenforceable, as well as the extent to which the parties engaged in misconduct, its seriousness and deliberateness, and the degree of connection between the misconduct and the particular term at issue. These factors are then explicitly required to be balanced against the expectation of the parties, whether a forfeiture will result from a declaration of unenforceability, and finally, the public interest, if any, in enforcing that term.”

Based on these secondary authorities, Residential Capital argues that because the defendants did not comply with the postponement provision of section 2924g, subdivision (c)(2), the contract was illegal and unenforceable by them, but on public policy grounds, Residential Capital as the high bidder at the sale should not be precluded from claiming damages arising from the contract it wishes to ratify. The public policies asserted are apparently the certainty that is desired in real property sales and the rule that a mistaken party should bear the consequences of the mistake. (See 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. (2001) 85 Cal.App.4th 1279, 1288 (6 Angels): Where an alleged error in price was within a party’s discretion and control, that party should be solely responsible for it.) Residential Capital complains that the inadequate procedures and communications used here by Premier and Option One resulted in the errors, and they should bear the consequences.

Residential Capital further refers to legislative history of a 1999 bill promoted by the California Trustee’s Association, making proposed changes to the duties and liabilities of a trustee in trust deed non-judicial foreclosure proceedings. (Sen. Rules Com., Rep. on Assem. Bill No. 431 (1999-2000 Reg. Sess.).) This bill would have expanded the limited immunity granted to trustees for good faith reliance on information provided in good faith by the beneficiary. The cited bill was not passed. Residential Capital infers from its nonpassage that Premier should not be entitled to immunity for its acts that allegedly caused damage to Residential Capital. However, the nonpassage of the bill is of limited persuasive value in this context. (See 58 Cal.Jur.3d (1980 & 2003 supp.) Statutes, § 112, p. 110; Lewis C. Nelson & Sons, Inc. v. Clovis Unified School Dist. (2001) 90 Cal.App.4th 64, 72-73.)

B. California Case Law

Residential Capital contends the trial court misinterpreted the leading cases of Little, supra, 188 Cal.App.3d 1354 and Moeller, supra, 25 Cal.App.4th 822, on which it relied. Both these cases arose in the context of successful bidders at trust deed foreclosure sales, whose rights were unclear because of a defect in the notice, or other alleged problems in the foreclosure proceedings.

In Little, supra, 188 Cal.App.3d 1354, the required notice of the trust deed non-judicial foreclosure sale was not given to the trustor, junior lienor, or judgment creditor, all of whom had substantial potential claims to the real property encumbered by the trust deed. Because of the “substantial and prejudicial defective notice,” the sale to the high bidder was held void. (Id. at p. 1362.) Little held that a refund of the bid amount with interest was a sufficient remedy for not completing the sale. (Id. at pp. 1361-1362.) The court’s reasoning was based in part on a finding that the conclusive statutory presumption of section 2924 regarding the giving of proper notice did not arise, because the trustee’s deed was never prepared, executed and delivered to the high bidder. (Little, supra, 188 Cal.App.3d at pp. 1360-1362.) Residential Capital argues Little is an exception to the usual rules regarding void and voidable contracts, and should be restricted to the situation in which the trustor was not given the required foreclosure sale notice.

In Moeller, supra, 25 Cal.App.4th 822, a trust deed non-judicial foreclosure sale was held although the defaulting trustor was then attempting to arrange refinancing. The sale was held and a trustee’s deed was delivered to the high bidders. The court ruled the sale had been conducted properly, and it was not dispositive or an irregularity of sale that the trustor was unaware of the statutory right of a trustor to postpone the sale. (Id. at pp. 832-833.) After the trustee’s deed was duly delivered to the high bidder, there was a conclusive presumption of validity under section 2924. (Moeller, supra, at p. 831.) Even though the high bid at the foreclosure sale was lower than the value of the real property encumbered by the trust deed, the court held there was no basis to set aside the sale. (Id. at p. 833.) The court explained the manner in which the conclusive presumption of validity of the sale arises on delivery of a trustee’s deed under section 2924:

“Although a non-judicial foreclosure sale is generally complete upon acceptance of a bid by the trustee, the conclusive presumption does not apply until a trustee’s deed is delivered. Thus, if there is a defect in the procedure which is discovered after the bid is accepted, but prior to delivery of the trustee’s deed, the trustee may abort a sale to a bona fide purchaser, return the purchase price and restart the foreclosure process. [Citations.] [¶] . . . [A]n irregularity in the non-judicial foreclosure sale coupled with a gross inadequacy of price may be sufficient to set aside the sale, where the conclusive presumption does not come into effect because the trust deed has not yet been delivered. [Citation.]” (Moeller, supra, 25 Cal.App.4th at p. 832.)

Residential Capital interprets Moeller, supra, 25 Cal.App.4th 822 to allow ratification of a sale by the issuance of the trustee’s deed, which means the sale was voidable but not void, and Moeller is therefore inconsistent with Little. However, in Moeller the trustor did not request a postponement of the foreclosure sale, there were no delinquencies or improprieties or irregularities in the foreclosure proceedings, and the trustor made an untimely tender of the reinstatement amount. (Id. at p. 833.) The result in Moeller is not inconsistent with the result in Little, because in Little there were “substantial and prejudicial defective notice” defects (Little, supra, 188 Cal.App.3d at p. 1362) that justified the non-delivery of the trustee’s deed following the foreclosure sale.

As relied on by the trial court, two additional cases are relevant to our discussion. In Angell, supra, 73 Cal.App.4th 691, the notice of the non-judicial trust deed foreclosure sale omitted one of the obligations secured by the trust deed. (Id. at p. 695.) This defect in notice was discovered after the foreclosure sale was held but before the trustee’s deed was delivered to the high bidder. (Id. at p. 699.) The court relied on a commentator’s analysis to hold that even though a foreclosure sale is completed for most purposes affecting the rights of the trustor when the final bid is accepted, this rule does not apply if a defect in the foreclosure procedure is discovered before the trustee’s deed is delivered to the high bidder (citing 4 Miller & Starr, Cal. Real Estate (2d ed. 1989) § 9:151, pp. 499-500). In that situation, there is no deed to create the section 2924 conclusive presumption of validity of the foreclosure sale in favor of a bona fide purchaser: “‘Therefore, if a defect in the foreclosure process is discovered after the trustee has accepted a bid, but prior to the delivery of the trustee’s sale [sic], the trustee can abort the sale, return any funds received to the purchaser, plus interest, and process another foreclosure.’ [Citation.]” (Angell, supra, 73 Cal.App.4th at p. 701.)

The Angell court adhered to the view expressed in Little, supra, 188 Cal.App.3d 1354, 1362, that although generally the real property is sold in a foreclosure at the moment the bid is accepted, and the execution of the trustee’s deed to show that transfer of title is merely ministerial in nature, “‘the general rule is not applicable when a notice defect renders the sale void.’” (Angell, supra, 73 Cal.App.4th at p. 701.) There was a notice defect in Angell, and no transfer of title was completed. (Id. at p. 702.) Therefore, the sale was aborted and the consideration paid by the successful bidder, plus interest, was returned. (Ibid.)

In 6 Angels, supra, 85 Cal.App.4th 1279, 1284-1285, the successful bidder at a trust deed foreclosure sale filed a quiet title action against the trustee after the trustee declined to deliver the trustee’s deed to the real property encumbered by the trust deed because of a mistake in price at which the sale bidding was opened. The court stated that “‘[a] successful challenge to the sale requires evidence of a failure to comply with the procedural requirements for the foreclosure sale that caused prejudice to the person attacking the sale.’ [Citation.]” (Ibid.) Unless there is a significant procedural error, a “mere inadequacy of price, absent some procedural irregularity that contributed to the inadequacy of price or otherwise injured the trustor, is insufficient to set aside a non-judicial foreclosure sale.” (Ibid.) In 6 Angels, the trust deed beneficiary intended to set the opening bid at the sale at $100,000, but through a clerical error, the trustee was mistakenly instructed to open the bidding at $10,000, and the plaintiff made a successful bid of $10,000.01. The court granted summary judgment in favor of the bidder and entered a judgment of quiet title in the bidder’s favor. The court found no significant procedural irregularity to justify setting aside the sale to the successful bidder. The clerical error in the amount of the opening bid was insufficient to invalidate the sale, because “this error, which was wholly under [the beneficiary's loan servicer's] control and arose solely from [the beneficiary's loan servicer's] own negligence, falls outside the procedural requirements for foreclosure sales described in the statutory scheme, and, like the secretary’s error in Crofoot, is ‘dehors the sale proceedings’ [citing Crofoot v. Tarman, supra, 147 Cal.App.2d at p. 447, dealing with an erroneous postponement sale date given to a corporation allied with the debtor by the prospective new buyer in foreclosure, through that buyer's attorney's office]. Because there is no procedural error here independent of the inadequacy of price, we conclude that summary adjudication was properly granted.” (6 Angels, supra, 85 Cal.App.4th at p. 1285.)

Also, in 6 Angels, supra, 85 Cal.App.4th 1279, the successful bidder was not required to be a bona fide purchaser to enforce the sale. The court reached this conclusion in accordance with its understanding of the applicable public policies underlying the statutory framework governing foreclosure sales, i.e., “a concern for swift, efficient, and final sales.” (Id. at p. 1287, citing Moeller, supra, 25 Cal.App.4th at pp. 830, 832.) “In our view . . . , granting relief under the circumstances present here would frustrate, rather than promote, this policy, by adding uncertainty to the finality of foreclosure sales.” (6 Angels, supra, at p. 1287.)

In addition to these cases, Residential Capital relies on language in Shaw v. Union Escrow & Realty Co. (1921) 53 Cal.App. 66, a case interpreting the damages rule of section 3306, finding that bad faith on the part of a seller in breaching a contract to sell real property was required for a damages award under that statute. A refusal to perform a contract without just cause gave rise to damages. (Shaw, supra, at p. 69.) *fn6 There, the court stated, “As we understand the law it is not necessary, . . . to establish bad faith within the meaning of section 3306 of the Civil Code, that the vendor be shown to have refused to go on with the transaction because of some gain which would accrue to him. It is sufficient if he refuses to convey, where through his own negligence he has put it out of his power to fulfill the obligations of his contract.” (Emphasis added.) (Shaw, supra, 53 Cal.App. at p. 69.) Residential Capital interprets this language as showing there must be some right of action, on a risk allocation basis, where there are conflicting contractual obligations. However, the court in Shaw was interpreting a contract cause of action and did not have any negligence claims before it, so we think this interpretation is not well thought out. There are no remaining negligence claims here, and this citation does not establish a risk allocation remedy in the contractual context.

C. Analysis

Residential Capital urges us to reconsider the analysis in Little, supra, 188 Cal.App.3d 1354, or at least to distinguish it, and to find that the foreclosure sale in this case was voidable or unenforceable but not void. Under Residential Capital’s theory, the foreclosure sale could be avoided by the trustor, because of the failure of the trustee Premier to postpone the sale, and the trustor was therefore entitled to retain title to the property. At the same time, Residential Capital, as an innocent party to the voidable foreclosure sale, was entitled to ratify the sale and obtain contract breach damages against the trustee and beneficiary measured by the difference between the amount of the accepted bid and the value of the property. Defendants urge that under Little, the foreclosure sale here was void; Residential Capital could therefore not ratify the sales contract and is entitled only to the return of money paid.

Both Residential Capital and defendants seek to apply common law contract principles of voidness, voidable, unenforceability, invalidity and illegality to the trust deed non-judicial foreclosure procedure. Their analyses exhibit the difficulties in this application. Residential Capital, for example, finds the sale avoidable by the trustor, who is not a party to the foreclosure sale, while at the same time finding it can ratify the sale, at least for purposes of monetary damages. Defendants, on the other hand, find the sale void, which if literally true would seem inconsistent with the conclusive presumption of validity set forth in section 2924; can a void contract of sale be revived by the issuance of a trustee’s deed containing the prescribed verbiage? Although Little, supra, 188 Cal.App.3d 1354 and Angell, supra, 73 Cal.App.4th 691, referred to the foreclosure sales as void, neither Moeller, supra, 25 Cal.App.4th 822 nor 6 Angels, supra, 85 Cal.App.4th 1279, referred to the foreclosure sales in the context of common law contract principles.

We are convinced that it is unhelpful to analyze trust deed non-judicial foreclosure sales issues in the context of common law contract principles. First, the foreclosure sale affects not only the two parties to the sale (the bidder and the trustee) but also the three parties to the trust deed (the trustor, trustee and beneficiary). It is difficult to apply two-party contract principles to a transaction involving the rights of parties to a trust deed foreclosure auction sale and different parties to the trust deed whose rights are affected by the sale. Second, trust deed non-judicial foreclosure sales are comprehensively regulated by the detailed statutory scheme set forth in section 2924 et seq., which is not based on common law contract principles. We therefore decline the suggestion of Residential Capital and the defendants to base our decision on common law contract principles of voidness and its corollaries of voidable, enforceability, invalidity and illegality. Rather, we conclude the case should be decided on principles of interpretation of the statutory scheme setting forth the rules of trust deed non-judicial foreclosure sales.

The purposes of the comprehensive statutory scheme regulating non-judicial foreclosure sales are summarized in Moeller, supra, 25 Cal.App.4th 822, as follows: “[T]he purposes of the non-judicial foreclosure sale statutes are to protect the trustor (debtor) from wrongful loss of the property and to provide a quick, inexpensive and efficient remedy for creditors of defaulting debtors. [Citation.] The debtor is protected by notice requirements, reinstatement and redemption periods and a right to postpone the sale. In addition to the statutory purpose of balancing the rights and interests of the creditor and debtor, the statutory scheme also evidences an intent that a properly conducted sale be a final adjudication of the rights of the creditor and debtor [citations] and the sanctity of title of a bona fide purchaser be protected.” (Id. at p. 832.) In general, in conducting statutory interpretation of portions of a statutory scheme, we seek to effectuate legislative intent. Statutes are not to be read in isolation, but rather must be construed with related statutes and considered in the context of the statutory framework as a whole. (Hicks v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 505.)

In Moeller, supra, 25 Cal.App.4th at page 830, the court rejected an attempt by the defaulting trustor to obtain through the application of section 3275, which allows relief from forfeiture between the parties to a contract, equitable relief from the foreclosure sale of his property. The court reiterated the rule that non-judicial foreclosure sales are controlled by a comprehensive statutory framework that is intended to be exhaustive. (§§ 2924-2924k.) This scheme “includes a myriad of rules relating to notice and right to cure. It would be inconsistent with the comprehensive and exhaustive statutory scheme regulating non-judicial foreclosures to incorporate another unrelated cure provision [i.e., sect. 3275] into statutory non-judicial foreclosure proceedings.” (Moeller, supra, 24 Cal.App.4th at p. 833.)

Although Residential Capital does not seek to incorporate unrelated statutory provisions into the statutory scheme, it does not consider the statutory scheme as a whole. Its main argument is that there was no notice defect here, and mandatory postponement of the sale by agreement between the beneficiary and the trustor pursuant to section 2924g, subdivision (c)(2) does not create an irregularity in the sale under Little, supra, 188 Cal.App.3d 1354. However, we do not read Little as so limited. The inquiry is whether, recognizing the purposes of the statutory scheme, there is a substantial defect in the statutory procedure that is prejudicial to the interests of the trustor and claimants. (Id. at p. 1362.) It seems inconsistent for Residential Capital to contend that although a postponement of the sale occurred and the trustor was not bound by the sale, a separate conflicting contractual sale obligation nevertheless came into existence on its behalf against the trustee and beneficiary.

The agreement to postpone the sale under section 2924g cannot be disregarded in evaluating whether the sale procedure was substantially defective. Only a properly conducted foreclosure sale, free of substantial defects in procedure, creates rights in the high bidder at the sale. Because the provisions of sections 2924-2924k comprise a well-coordinated statutory scheme, there is no need for an express statement in section 2924g that a violation of its sale postponement provision will insulate the trustor and beneficiary from liability. Defects in the notice requirements of the statutory scheme have been held to be those defects that substantially infringe on the rights of the trustor to protect his encumbered real property from loss by foreclosure. (Little, supra, 188 Cal.App.3d 1354; Angell, supra, 73 Cal.App.4th 691.) Therefore, if the notice’s defect is detected before the trustee’s deed is issued, the successful foreclosure sale bidder has not been seriously prejudiced and its remedy is limited to the return of the sale price plus interest. However, if the trustee’s deed with the appropriate recitations has been issued to a bona fide purchaser, the purpose of the statutory scheme to provide a prompt and efficient remedy for creditors is implemented by the section 2924 statutory presumption of finality. *fn7

The right of the trustor to postpone the foreclosure sale by agreement with the beneficiary is as important to the protection of the trustor’s property from wrongful foreclosure as are the notice requirements considered in Little, supra, 188 Cal.App.3d 1354 and Angell, supra, 73 Cal.App.4th 691. (§ 2924g, subd. (c)(2).) The notice requirements ensure a fair sale; the postponement right prevents a sale when there may be no default by the trustor. We see no meaningful distinction in the importance of the two sets of trustor rights. Furthermore, if the noncompliance with the postponement requirements is discovered before the trustee’s deed is issued, the successful bidder at the foreclosure sale has not been prejudiced any more than if the trustee’s deed has not issued because of discovery of notice defects. Therefore, we conclude the result should be the same in the event of violation of postponement rights as in the event of defects in the notice requirements. The result, although not the rationale, of Little and Angell should apply in this case.

We do not find persuasive Residential Capital’s argument that the statutory scheme provides a related remedy to the trustee for any damages proximately caused to it by a failure to deliver funds because of an error made by a high bidder on property. (§ 2924h, entitled “Bidders at sale; bid as irrevocable offer, etc.,” subd. (d).) Although Residential Capital correctly points out that for every legal wrong there is a remedy (§ 3523), the damages covered by section 2924h, subdivision (d) are of a different nature from the alleged damages here. The authorities hold that restitution is an adequate remedy when the foreclosure sale was not held in compliance with the statutory procedural requirements. (Little, supra, 188 Cal.App.3d at pp. 1361-1362; Angel, supra, 73 Cal.App.4th at pp. 701-702.)

We conclude that, as a matter of law, although Residential Capital’s bid was accepted at the non-judicial foreclosure sale, the discovery of the agreement to postpone the sale by the trustor and beneficiary before the trustee’s deed was issued, limits Residential Capital’s relief to restitution, in this case, return of the money paid. It might be a different case had the trustee’s deed been issued to Residential Capital, which might have entitled it to a similar status as a bona fide purchaser would have, entitled to the conclusive presumptions of title under section 2924. *fn8 However, the trustee’s deed was not issued, and Residential Capital has not brought itself within the intent of the statutory scheme that “the sanctity of title of a bona fide purchaser be protected.” (Moeller, supra, 25 Cal.App.4th at p. 832.) *fn9 Our conclusion is consistent with the purposes of the statutory scheme regulating trust deed non-judicial foreclosure sales. The trustor is protected from unauthorized foreclosure and loss of its property and the sanctity and finality of foreclosure sales is maintained without significant prejudice to the high bidder.

Moreover, we need not rely on the defendants’ subsidiary argument that equitable principles would demand that any completed foreclosure sale be set aside, in reliance on Tully v. World Savings & Loan Assn. (1997) 56 Cal.App.4th 654. In that case, the Court of Appeal found there were triable issues of fact about whether the lender and beneficiary had reached an alleged agreement to terminate a pending foreclosure. (Id. at p. 659.) The court relied on the rule that “in extreme cases,” a beneficiary may be estopped to foreclose upon property, if payments had been accepted from the trustor without objection, so as to mislead the trustor into believing the default was cured and the foreclosure terminated. (Ibid.) However, this case is factually distinguishable, and to resolve these issues, we need not turn to equitable principles, as pointed out in Moeller, supra, 25 Cal.App.4th at pp. 833-834.

Finally, we need not fully address the claim by Residential Capital that it is entitled to a benefit of the bargain measure of damages according to section 3306 (difference between the fair market value of the property at sale time and the bid amount, or $34,150.90). *fn10 We note, however, that the problem with this theory is that in light of the mandatory postponement under section 2924g, subdivision (c)(2), there is no entitlement to damages. Rather, the return of all funds paid, as received, was the only remedy to which Residential Capital was entitled. (Little, supra, 188 Cal.App.3d at pp. 1361-1362.)

DISPOSITION

The judgment is affirmed. WE CONCUR:

McDONALD, J.

McCONNELL, J.

Opinion Footnotes   *fn1 All further statutory references are to the Civil Code unless otherwise specified.

*fn2 Although Residential Capital also sought damages on the basis of negligence or negligent misrepresentation regarding the manner in which the sale was conducted, the judgment reflects that those causes of action have been dismissed.

*fn3 Although the negligence claims are no longer at issue here, the ruling stated that it was undisputed that Premier, as trustee, owed a duty to plaintiff, and Residential Capital’s motion for summary adjudication of the issue of duty as to Premier was granted and triable issues of material fact as to the issue of damages were deemed to exist. These issues are now mooted by the dismissal of the negligence causes of action.

*fn4 In a companion case, Residential Capital v. Cal- Western Reconveyance Corp. (May 2003, D039894) ___ Cal.App.4th ___, many of the same issues are presented and we are adopting here some of the analysis from that opinion.

*fn5 Section 2924g governs the conduct of a sale under the power of sale contained in any trust deed or mortgage, and the time and place and any sale postponements. Under subdivision (a), the sale shall commence at the time and location specified in the notice of sale, unless any postponement is announced at the time and location specified in the notice of sale for commencement of the sale, or pursuant to paragraph (1) of subdivision (c) (dealing with postponement of the sale proceedings at the discretion of the trustee or upon instruction by the beneficiary). Also, under subdivision (c) (2): “The trustee shall postpone the sale upon the order of any court of competent jurisdiction, or where stayed by operation of law, or by the mutual agreement, whether oral or in writing, of any trustor and any beneficiary or any mortgagor and any mortgagee.” (Emphasis added.)

*fn6 However, as explained in 1 Witkin, Summary of California Law (9th ed. 1990) Contracts, section 844, page 761, section 3306 was amended in 1983 to delete any requirement of bad faith for contract damages recovery.

*fn7 Section 2924 provides in part: “. . . A recital in the deed executed pursuant to the power of sale of compliance with all requirements of law regarding the mailing of copies of notices or the publication of a copy of the notice of default or the personal delivery of the copy of the notice of default or the posting of copies of the notice of sale or the publication of a copy thereof shall constitute prima facie evidence of compliance with these requirements and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value and without notice.”

*fn8 We need not decide whether the section 2924 conclusive presumption created by a trustee’s deed containing the requisite recitals applies to a defect in the statutory foreclosure proceedings other than a defect in giving the required notices. Although the statute refers to notice requirements, the Moeller opinion appears to apply the presumption to all significant procedural defects: “The purchaser at a foreclosure sale takes title by a trustee’s deed. If the trustee’s deed recites that all statutory notice requirements and procedures required by law for the conduct of the foreclosure have been satisfied, a rebuttable presumption arises that the sale has been conducted regularly and properly; this presumption is conclusive as to a bona fide purchaser.” (Moeller, supra, 25 Cal.App.4th 822, 831.)

*fn9 Some authorities have questioned whether a speculator who frequently purchases at foreclosure sales, who pays substantially less than the value of the property, should qualify as a bona fide purchaser. (6 Angels, supra, 85 Cal.App.4th at p. 1286; In re Estate of Yates (1994) 25 Cal.App.4th 511, 523; 4 Miller & Starr, Cal. Real Estate (3d ed. 2000) § 10:210, p. 642.) We need not decide this point, however, because no trustee’s deed was issued to Residential Capital.

*fn10 Section 3306 provides: “The detriment caused by the breach of an agreement to convey an estate in real property, is deemed to be the price paid, and the expenses properly incurred in examining the title and preparing the necessary papers, the difference between the price agreed to be paid and the value of the estate agreed to be conveyed at the time of the breach, the expenses properly incurred in preparing to enter upon the land, consequential damages according to proof, and interest.”

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX

September 27, 2007

GERSHON GABEL, PLAINTIFF AND APPELLANT,

v.

FIDELITY NATIONAL FORECLOSURE SOLUTIONS, DEFENDANT AND APPELLANT.

GERSHON GABEL, PLAINTIFF AND APPELLANT,

v.

FIDELITY NATIONIAL FORECLOSURE SOLUTIONS DEFENDANT AND RESPONDENT.

Superior Court County of Ventura (Super. Ct. No. CIV203170) (Ventura County) (Super. Ct. No. 203170 (Ventura County).

Susan Balistocky for Plaintiff and Appellant Gershon Gabel.

Edward D. Russell, Michael J. Gilligan; McCarthy & Holthus, Llp, Daniel J. Goulding for Defendant, Respondent and Appellant Fidelity National Foreclosure Solutions.

The opinion of the court was delivered by: Perren, J.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

We consider consolidated appeals arising from a non-judicial foreclosure sale of residential property. A jury found Fidelity National Foreclosure Solutions (FNFS) negligent for conducting a foreclosure sale of the residence of Gershon Gabel without providing him notice. The jury awarded compensatory damages to Gabel in the amount of $450,000, with 15 percent apportioned to FNFS.

On appeal, Gabel asserts the trial court erred in calculating damages by fixing the value of the property as of the date of the foreclosure sale rather than at its much-appreciated value at the time of trial.

In a separate appeal, Gabel contends the trial court erred in denying his request for attorney fees under Civil Code section 1717 and Code of Civil Procedure section 1021.

FNFS’s motions for judgment notwithstanding the verdict (JNOV) and new trial were denied. It filed an appeal asserting the jury erred in finding negligence because it had complied with all notice requirements imposed upon it by Civil Code sections 2924 et seq. in conducting the foreclosure sale.

We affirm the judgment for damages and the order denying Gabel’s motion for attorney fees. We affirm the orders denying FNFS’s motion for JNOV and new trial.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

In November 1996, Gabel purchased a residence in Bell Canyon, California, for $545,000. He executed a note and deed of trust in favor of World Savings and Loan Association (World Savings) in the amount of $400,000. An impound account for property taxes and insurance was maintained by World Savings and was part of Gabel’s monthly payment.

In January 1999, Gabel executed a note and deed of trust in favor of Alliance Funding Company, a division of Superior Bank, for $100,000. The trust deed granted Superior Bank a security interest in the Bell Canyon property junior to that of World Savings.

Gabel defaulted on the Superior Bank loan and the bank initiated non-judicial foreclosure proceedings, recording a notice of default on August 11, 2000. A trustee’s sale was then noticed for December 4, 2000. On November 17, 2000, a substitution of trustee was recorded naming FNFS as foreclosure trustee under the Superior Bank deed.

Gabel testified he did not receive the notice of default or the notice of sale. In November 2000, Gabel learned in a telephone conversation with someone from Superior Bank or FNFS that his house was to be sold at auction on December 4, 2000.

On November 28, 2000, Gabel and Superior Bank entered into a forbearance agreement (agreement) creating a payment plan to cure Gabel’s default. FNFS was not a party to the agreement, but there was evidence that FNFS prepared the agreement or had it prepared on behalf of Superior Bank.

The agreement states the total arrears as of November 28, 2000, was $16,176.34. Superior Bank agreed to postpone the December 4 sale if Gabel made a lump sum payment of $5,000 on or before November 30, 2000, and thereafter made 18 monthly payments of $1,629.96 on the 15th day of each month, commencing on December 15, 2000. The agreement also required Gabel to maintain insurance coverage on the property and pay property taxes. In addition, Gabel promised to keep payments current on the first trust deed held by World Savings.

The agreement also states: “Borrower admits and recognizes that any and all postponements of a Trustee’s Sale under this Agreement is done by mutual consent of the Borrower and Lender under California Civil Code § 2924g(c)(2) and that the sale may be postponed from time to time until the loan is fully reinstated or the foreclosure sale is consummated.”

After Gabel signed the agreement, Superior Bank directed FNFS to postpone the December 4 trustee’s sale to December 12, 2000, to give Superior Bank sufficient time to obtain a signature from its corporate office in Florida. On November 11, 2000, the agreement was completely executed, and the December 12 sale date was postponed to March 12, 2001. The sale was then postponed to March 21, 2001, and again to March 27, 2001. Gabel testified that he received no notice of the postponed sale dates after he signed the agreement.

In October 2000, Gabel sent Superior Bank a check for $5,004, which satisfied the initial payment requirement under the agreement. Gabel timely paid the December 15 installment. In January 200l, Superior Bank informed Gabel that it would no longer accept payments from him unless he could demonstrate that taxes and insurance on the property were current. Gabel informed Superior Bank that the taxes and insurance were being paid through the World Savings impound account and sent bank statements showing that the insurance and taxes were being paid. Gabel sent Superior Bank his January and February payments by a Western Union money transfer for $3,259, which was wired directly into Superior Bank’s account. Superior Bank did not return the payment.

Superior Bank was not satisfied that the insurance and taxes were being paid and verbally informed Gabel that it would refuse to accept his March payment and would block the wire account to prevent him from sending another money wire.

On March 26, 2001, Superior Bank authorized FNFS to conduct the trustee’s sale on the property, based on the default of the March 15, 2001, payment under the agreement and failure to provide proof of property taxes being current and hazard insurance being in place. The trustee’s sale was held on March 27, 2001, and the property was sold at public auction for $111,934.60 to James Butler.

Gabel, relying on the language in the forbearance agreement that any sale date would be by mutual agreement of the parties, was out of town at the time of the trustee’s sale. He did not know his house had been sold until an eviction notice was posted on his property in April 2001.

Gabel filed a second amended complaint against Butler, Superior Bank and FNFS alleging breach of contract, negligence, civil conspiracy, and negligent and intentional interference with economic relations.

FNFS filed a demurrer.*fn1 The trial court sustained the demurrer without leave to amend as to the breach of contract claim and overruled the demurrer to the remaining claims. FNFS filed an answer and then filed a motion for summary judgment or, in the alternative, for summary adjudication. The trial court granted summary adjudication as to the conspiracy claim and claim for negligent interference with economic relations, leaving the claims of negligence and intentional interference with economic relations for trial.

A six-day jury trial ended with a verdict in favor of Gabel for $450,000 and damages of $127,500 apportioned to FNFS.

DISCUSSION

I. FNFS’s Appeal

A. Non-judicial Foreclosure Statutes

A comprehensive statutory scheme governs non-judicial foreclosure sales in California. The statutes have 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.’” (Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 440.)

Upon default by the trustor, the beneficiary may declare a default and proceed with a non-judicial foreclosure sale. The foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee. After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale. After the three-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale. (Civ. Code, § 2924 et seq.)

To be effective, a copy of the notice of trustee’s sale–at least 20 days prior to the sale–must be mailed by registered or certified mail, postage prepaid, to the trustor, sent to his or her last known address if different from the address listed on the deed of trust. (Civ. Code, § 2924b, subd. (b)(2).) The trustor need not receive actual notice of the trustee’s sale so long as notice is provided to the trustor that is in compliance with the statute. (Strutt v. Ontario Sav. & Loan Assn. (1970) 11 Cal.App.3d 547, 553-554.)

The statutes provide the trustor with opportunities to prevent foreclosure by curing the default. The trustor may make back payments to reinstate the loan up until five business days prior to the date of the sale, including any postponement. (Civ. Code, § 2924c, subd. (a)(1).) Additionally, the trustor has a right of redemption under which the trustor may pay all amounts due at any time prior to the sale to avoid loss of the property. (§§ 2903, 2905.)

B. The Foreclosure Sale

On appeal from the denial of a motion for JNOV, an appellate court must review the record de novo and make an independent determination whether there is any substantial evidence to support the jury’s findings. (Paykar Constructions, Inc. v. Spilat Construction Corp. (2001) 92 Cal.App.4th 488, 493-494; Tognazzini v. San Luis Coastal Unified School Dist. (2001) 86 Cal.App.4th 1053, 1057-1058.) The scope of our review is limited to determining whether there is any substantial evidence, contradicted or not, to support the jury’s verdict. (Begnal v. Canfield & Associates, Inc. (2000) 78 Cal.App.4th 66, 72.) The court must accept as true the evidence supporting the verdict, disregard conflicting evidence, and indulge every legitimate inference to support the verdict. (Ibid.) If sufficient evidence supports the verdict, a reviewing court must uphold the trial court’s denial of the JNOV motion. (Shapiro v. Prudential Property & Casualty Co. (1997) 52 Cal.App.4th 722, 730.)

A wrongful foreclosure claim may be based on a common law tort theory. (Munger v. Moore (1970) 11 Cal.App.3d 1, 7.) To recover on a negligence claim, the plaintiff must prove the existence of a legal duty, breach of that duty, causation, and damages or injury. (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 292-293.) Whether a duty of care exists is a question of law. (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 397.) The duty of a foreclosing trustee is to ensure the sale is fairly conducted, according to proper procedures, to achieve the highest possible price. This duty runs to both the beneficiary and the trustor. (Residential Capital v. Cal-Western Reconveyance Corp. (2003) 108 Cal.App.4th 807, 825.)

FNFS contends that it did all that it was required to do under the non-judicial foreclosure statutes. It claims that it had no duty to protect the property for Gabel’s benefit or to investigate the status of the loan before conveying title at the trustee’s sale. We disagree. In I.E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 287-288, our Supreme Court said, “The rights and powers of trustees in non-judicial foreclosure proceedings have long been regarded as strictly limited and defined by the contract of the parties and the statutes.” (Italics added.) In that case, the Supreme Court “expressly preserved a long line of cases imposing duties on a trustee in addition to those statutorily established.” (Karoutas v. HomeFed Bank (1991) 232 Cal.App.3d 767, 773; see also United States Cold Storage of California v. Great Western Savings & Loan Assn. (1985) 165 Cal.App.3d 1214, 1227 ["'the only requirements of notice are those expressly prescribed by the terms of the instrument and applicable statutes'" (italics added)].)

Breach of a promise to postpone a foreclosure sale may impose liability for damages. (E.g., Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 670-675.) As stated by the court in Residential Capital v. Cal-Western Reconveyance Corp., supra, 108 Cal.App.4th 807, 822-823: “The agreement to postpone the sale under section 2924g cannot be disregarded in evaluating whether the sale procedure was substantially defective. . . . [¶] The right of the trustor to postpone the foreclosure sale by agreement with the beneficiary is as important to the protection of the trustor’s property from wrongful foreclosure as are the notice [of sale] requirements . . . . The notice requirements ensure a fair sale; the postponement right prevents a sale when there may be no default by the trustor. We see no meaningful distinction in the importance of the two sets of trustor rights.”

These cases make clear that a trustee is bound not only by statutory notice provisions but also by the terms of any contract between the parties modifying those statutory provisions. (See Heritage Oaks Partners v. First American Title Ins. Co. (Sept. 19, 2007, B189537) __ Cal.App.4th __ [2007 D.A.R. 14599, 14601] ["California courts have refused to impose duties on the trustee other than those imposed by statute or specified in the deed of trust"].) This rule also disposes of FNFS’s argument that the forbearance agreement imposes no additional duties on it because it was not a signatory to the agreement.

FNFS’s remaining arguments that Gabel had notice of the postponed sale dates and that Gabel “self-created” his damages are contrary to Gabel’s testimony that he did not have notice of the postponed sale dates and that he attempted to make the March payment but was precluded from doing so by the bank. The evidence shows that Gabel did everything possible to uphold his end of the bargain. He made the December, January and February payments and Superior Bank accepted those payments. He attempted to make the March payment but Superior Bank refused to accept it.

The court in Bank of America v. LaJolla Group II (2005) 129 Cal.App.4th 706, 712, succinctly summarized the rights of a trustor and the duties of a trustee under a power of sale: “A power of sale in a deed of trust is a creature of contract, arising from the parties’ agreement. ‘The power of sale only exists if it is expressly granted by the trustor in the security documents.’ (4 Miller & Starr, Cal. Real Estate (3d ed. 2003) § 10:123, p. 381.) The statutory scheme governing non-judicial foreclosures does not expand the beneficiary’s sale remedy beyond the parties’ agreement, but instead provides additional protection to the trustor: ‘Statutory provisions regarding the exercise of the power of sale provide substantive rights to the trustor and limit the power of sale for the protection of the trustor.’ (Ibid.) As is typical, the deed of trust involved in this case allows the beneficiary to exercise its power of sale only if an “event of default” occurs. If, after a default, the trustor and beneficiary enter into an agreement to cure the default and reinstate the loan, no contractual basis remains for exercising the power of sale.”

After Gabel and Superior Bank entered into the forbearance agreement, the terms of that agreement governed the conduct of any foreclosure sale. FNFS breached its duty by holding the sale without obtaining Gabel’s consent.

II. Gabel’s Appeal

A. Valuation

The proper measure of damages for wrongful foreclosure is the fair market value of the property at the time of the foreclosure sale, minus all encumbrances and liens against the foreclosed property. (Munger v. Moore, supra, 11 Cal.App.3d 1, 11.)

Gabel asserts that the application of that rule here is unfair. He argues that because the foreclosure was wrongful, his damages should be measured by the value of the property at the time of trial. We disagree. The rule in Munger is an application of the venerable benefit of the bargain doctrine. “Under the benefit of the bargain doctrine we must consider the loss sustained by [plaintiff] rather than the value with which she parted.” (Pepitone v. Russo (1976) 64 Cal.App.3d 685, 689.)

Moreover, Gabel’s argument is irreconcilable with the clearly established legal principal that the trustee’s deed conveys to the purchaser the trustor’s interest as of the date that the deed was recorded. The purchaser’s title is free and clear of all rights of the trustor or anyone claiming under or through the trustor. (See Homestead Savings v. Darmiento (1991) 230 Cal.App.3d 424, 436 [court rejected contention that a bona fide purchaser for value must take the property subject to the trustor's interest in the property].)

B. Attorney Fees

In a separate appeal, Gabel contends the trial court erred in denying his request for attorney fees as a prevailing party under Civil Code section 1717 and Code of Civil Procedure section 1021. We agree with the trial court that neither of these statutes applies in this case.

Gabel relies on the attorney fee provision in paragraph 6(E) of the balloon note which states: “If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys’ fees.”

Gabel also relies on paragraph 7 of the trust deed which states: “If . . . there is a legal proceeding that may significantly affect Lender’s rights in the Property . . . , then Lender may do and pay for whatever is necessary to protect the value of the Property . . . includ[ing] . . . paying reasonable attorneys’ fees . . . .”

In addition, Gabel argues that the forbearance agreement contains an implicit attorney fee clause because he was charged foreclosure fees and costs (which included attorney fees) and the agreement states it ratifies the loan documents.

Civil Code section 1717 provides for an award of attorney fees in any action “on a contract” where the contract provides for the recovery of attorney fees and costs incurred by the prevailing party to enforce the contracts. Section 1717 does not apply to tort claims. (Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 708.) Where non-contract claims are involved, it is the nature of the claims and the language of the attorney fee provision that determine whether an award is proper. (Id. at pp. 708-709.) “‘If a contractual attorney fee provision is phrased broadly enough, … it may support an award of attorney fees to the prevailing party in an action alleging both contract and tort claims: “[P]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract. “‘” (Id. at p. 708, quoting Santisas v. Goodin (1998) 17 Cal.4th 599, 608.) For example, a provision in a contract that states “in any ‘lawsuit or other legal proceeding’ to which ‘this Agreement gives rise’” has been held enough to encompass recovery of attorney fees for tort actions. (Xuereb v. Marcus & Millichamp, Inc. (1992) 3 Cal.App.4th 1338, 1342.)

The language in the loan documents is not broad enough to provide a basis for awarding attorney fees in a negligence action. The language in the balloon note and trust deed provide for attorney fees in very limited circumstances not present here.

Gabel nonetheless argues that he is entitled to fees because Civil Code section 1717 creates a reciprocal right to attorney fees where, as here, the contract provides only a unilateral right. (Santisas v. Goodin, supra, 17 Cal.4th 599, 611.) This argument is without merit. The right to reciprocity exists only in actions based on contract, not those based in tort. (Moallem v. Coldwell Banker Com. Group, Inc. (1994) 25 Cal.App.4th 1827, 1832.)

Gabel’s contention that he has a right to recover attorney fees as damages under Code of Civil Procedure section 1021 fares no better. Although section 1021 permits recovery of attorney fees by agreement between the parties, and does not limit recovery of fees to actions on the contract, to determine whether a prevailing party may recover attorney fees for non-contractual claims under section 1021, the court must look to the language of agreement. (In re Chen (N.D.Cal. 2006) 345 B.R. 197, 201.) As discussed above, the attorney fee provisions in the loan documents pertain only to a very limited set of circumstances not present here.

Gabel’s final contention is that the forbearance agreement gives him a right to recover attorney fees in this litigation because he was required to pay attorney fees for preparation of the agreement. Gabel cites no authority for this argument, and we need not consider it.

We affirm the judgment for damages and the order denying Gabel’s motion for attorney fees. We affirm the orders denying FNFS’s motion for JNOV and new trial. Each party is to bear its own costs.

We concur: GILBERT, P.J., YEGAN, J., Vincent O’Neill, Judge

Opinion Footnotes   *fn1 Superior Bank went into receivership and Butler was voluntarily dismissed from the action, leaving FNFS as the sole defendant.

I found civil cases, notes etc. from googling and just digging around the internet.  Even though I wasn’t sure if the context applied to my case, I kept all I found and took it all into consideration before deciding to pursue a legal course.

Legal action is very expensive, in my area, real estate attorneys do not take contingent cases, you must pay them hourly.  So make sure it isn’t all emotion or a sense of entitlement that is motivating you, but a case based on statutes and fact.

Some links:

http://www.msfraud.org/LAW/Lounge/defensestoforeclosure.doc.

NOTES TO MY ATTORNEY

Date:  xxxxxxx

To:  xxxxxxx

Fm:  xxxxxxxxxxxx

Some info I looked up.  I am not a legal person so not sure what applies and not sure if all the context is there.  The back up I cut and paste were mostly from appeals cases in the California data bank of this free legal website I found.   I read everything in all the cases that I searched and pulled relevant paragraphs. The entire document from the data bank I also provided so you can verify the context.

Request for Quiet Title and Set aside Foreclosure Sale

Can happen when fraud is proved or a significant defect in the foreclosure proceedings

Defective and Slanderous Title

• Title was cleared in XXX and Recorded XXXX prior to Foreclosure Sale.
  I believe this was done to provide a profitable and expedient sale for Loanstar’s client Wells Fargo. This is negligent at best and fraud at worst.  I believe they knew what I would run up against to try and convey this huge error.  And they were correct.
  1. Two lien holders with significant interest in the property were cleared and reconveyed 30 days before the auction.  The lien holders claim they did not receive any notice of default or notice of sale.
  2. XXXXXXXX  Lease Land owner was cleared 30 days before the auction.  Also claimed no notice of default or notice of sales was received. XXXX XXXX provided a letter showing I was the legal owner of the property. Buyer and judge both said there is no lease land.  Duh it wasn’t on the title, but I brought in a letter. I also brought in pages from the title that showed the property was on lease land until it was cleared before the auction.  It was cleared to make the property more attractive to buyers and get a higher price.  Lease land is scary to most.

All this was brought before my first attorney (the one that showed up at my door the day of the auction offering his help), and I took all this to the judge after my attorney left and was also given to XXXXXX. Who did not know the property was on lease land. All before the Deed of Trust was transferred.  I was basically ignored.

Fargo and Loanstar were given all this evidence and FACT and still chose not to set aside the sale. If I cannot appeal the initial ruling of the judge, I want them to be held accountable.  I think you did file an appeal.

Back Up to Support Quiet Title and Foreclosure set aside:

Little, supra, 188 Cal.App.3d 1354, that in the case law, the terms “void, voidable, and invalid appear to be used interchangeably.” (Id. at p. 1358.) The Little court referred to the “general rule” on voidness or voidability of a trust deed foreclosure sale, as set out in a treatise: “‘[D]efects and irregularities in a sale under a power render it merely voidable and not void . . . . However, substantially defective sales have been held void where the defect lay in a particular as to which the statutory provision was regarded as mandatory . . .’ [Citation.] ‘A sale under a power in a mortgage without reasonable notice will be set aside.’ [Citation.]” (Ibid.)

Little, supra, 188 Cal.App.3d 1354 and Moeller, supra, 25 Cal.App.4th 822, on which it relied. Both these cases arose in the context of successful bidders at trust deed foreclosure sales, whose rights were unclear because of a defect in the notice, or other alleged problems in the foreclosure proceedings.

In Little, supra, 188 Cal.App.3d 1354, the required notice of the trust deed non-judicial foreclosure sale was not given to the trustor, junior lienor, or judgment creditor, all of whom had substantial potential claims to the real property encumbered by the trust deed. Because of the “substantial and prejudicial defective notice,” the sale to the high bidder was held void. (Id. at p. 1362.)

In Angell, supra, 73 Cal.App.4th 691, the notice of the non-judicial trust deed foreclosure sale omitted one of the obligations secured by the trust deed. (Id. at p. 695.) This defect in notice was discovered after the foreclosure sale was held but before the trustee’s deed was delivered to the high bidder. (Id. at p. 699.) The court relied on a commentator’s analysis to hold that even though a foreclosure sale is completed for most purposes affecting the rights of the trustor when the final bid is accepted, this rule does not apply if a defect in the foreclosure procedure is discovered before the trustee’s deed is delivered to the high bidder (citing 4 Miller & Starr, Cal. Real Estate (2d ed. 1989) § 9:151, pp. 499-500). In that situation, there is no deed to create the section 2924 conclusive presumption of validity of the foreclosure sale in favor of a bona fide purchaser: “‘Therefore, if a defect in the foreclosure process is discovered after the trustee has accepted a bid, but prior to the delivery of the trustee’s sale [sic], the trustee can abort the sale, return any funds received to the purchaser, plus interest, and process another foreclosure.’ [Citation.]” (Angell, supra, 73 Cal.App.4th at p. 701.)

The agreement to postpone the sale under section 2924g cannot be disregarded in evaluating whether the sale procedure was substantially defective. Only a properly conducted foreclosure sale, free of substantial defects in procedure, creates rights in the high bidder at the sale. Because the provisions of sections 2924-2924k comprise a well-coordinated statutory scheme, there is no need for an express statement in section 2924g that a violation of its sale postponement provision will insulate the trustor and beneficiary from liability. Defects in the notice requirements of the statutory scheme have been held to be those defects that substantially infringe on the rights of the trustor to protect his encumbered real property from loss by foreclosure. (Little, supra, 188 Cal.App.3d 1354; Angell, supra, 73 Cal.App.4th 691.) Therefore, if the notice’s defect is detected before the trustee’s deed is issued, the successful foreclosure sale bidder has not been seriously prejudiced and its remedy is limited to the return of the sale price plus interest. However, if the trustee’s deed with the appropriate recitations has been issued to a bona fide purchaser, the purpose of the statutory scheme to provide a prompt and efficient remedy for creditors is implemented by the section 2924 statutory presumption of finality. *fn7

The right of the trustor to postpone the foreclosure sale by agreement with the beneficiary is as important to the protection of the trustor’s property from wrongful foreclosure as are the notice requirements considered in Little, supra, 188 Cal.App.3d 1354 and Angell, supra, 73 Cal.App.4th 691. (§ 2924g, subd. (c)(2).) The notice requirements ensure a fair sale; the postponement right prevents a sale when there may be no default by the trustor. We see no meaningful distinction in the importance of the two sets of trustor rights. Furthermore, if the noncompliance with the postponement requirements is discovered before the trustee’s deed is issued, the successful bidder at the foreclosure sale has not been prejudiced any more than if the trustee’s deed has not issued because of discovery of notice defects. Therefore, we conclude the result should be the same in the event of violation of postponement rights as in the event of defects in the notice requirements. The result, although not the rationale, of Little and Angell should apply in this case.

The right of the trustor to postpone the foreclosure sale by agreement with the beneficiary is as important to the protection of the trustor’s property from wrongful foreclosure as are the notice requirements considered in Little, supra, 188 Cal.App.3d 1354 and Angell, supra, 73 Cal.App.4th 691. (§ 2924g, subd. (c)(2).) The notice requirements ensure a fair sale; the postponement right prevents a sale when there may be no default by the trustor. We see no meaningful distinction in the importance of the two sets of trustor rights. Furthermore, if the noncompliance with the postponement requirements is discovered before the trustee’s deed is issued, the successful bidder at the foreclosure sale has not been prejudiced any more than if the trustee’s deed has not issued because of discovery of notice defects. Therefore, we conclude the result should be the same in the event of violation of postponement rights as in the event of defects in the notice requirements. The result, although not the rationale, of Little and Angell should apply in this case.

Quiet Title and Slander of Title

Quiet title in the property as against each defendant, the foreclosure should be voided by virtue of Wells Fargo and Loanstar fraudulent conduct…and by reason of the defective Deeds of Trust.

Code Civ. Proc. § 761.020. A plaintiff is required to name the “specific adverse claims” that form the basis of the property dispute.

1. Sr and Jr lien holders with significant interest in the property were cleared a month before the auction
2. XXXXX Lease Land holder was also cleared.
3. Most importantly these facts were brought to the attention of Loanstar and Wells Fargo they chose to ignore it and deny a wrongful foreclosure took place. (I have letters from them to back this up)
   This leads me to believe it was not a clerical mistake but intentional so I believe it is FRAUD.

Slander of title is a “tortious injury to property resulting from unprivileged, false, malicious publication of disparaging statements regarding the title to property owned by plaintiff, to plaintiff’s damage.” Southcott v. Pioneer Title Co., 203 Cal.App.2d 673, 676.

(A disparaging statement is one intended to cast doubt the existence or extent of one’s interest in the property) (Stalberg v. Western Title Ins. Co. (1994) 27 Cal.App.4th 925, 929 [slander of title occurs when a person, without a privilege to do so, publishes a false statement that disparages title to property and causes pecuniary loss to the property owner].)

Wrongful Foreclosure and Breach of Contract

Wells Fargo did not honor “Special Forbearance Agreement”

I found a case that stated in older cases HUD policy was not always looked at as law, however, with recent cases, HUD policy is now considered law and the policy and procedures within their programs must be followed.

Wells Fargo did not follow HUD policy concerning “Special Forbearance Agreement”

Also I found the following:

• Negligent Misrepresentation
  1. The paragraphs below I cut a paste from a case that is similar.

(An action for negligent misrepresentation lies where one who supplies information for business purposes in the course of a business or profession misrepresents a past or existing material fact, without reasonable grounds for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented. In order to prevail, the plaintiff must prove that he was ignorant of the truth and that he justifiably relied on the misrepresentation and suffered damages as a result. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239, fn. 4; Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolap Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154-1155.) A justifiable decision to refrain from an action, based on the other party’s misrepresentation of a material fact, will satisfy the element of reliance. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 174.)

Here, it was undisputed that a representative of Wells Fargo told plaintiff, on January 23, 2003, that the earliest date the property would be sold was May 4, 2003, and that plaintiff therefore had time to “make arrangements,” i.e., to cure the default. However, the court found that plaintiff’s reliance on Wells Fargo’s representation as to the sale date was unreasonable because “[t]he ultimate responsibility for the conduct of the sale process itself laid [sic] in the hands of the trustee not the beneficiary. [Thus], [i]t seems that the most accurate information pertaining to such a sale date would best be known by the trustee and not Wells Fargo.”

Although the court cited no authority, it appears to have relied on Civil Code section 2924g: In their opposition to the motion to amend, defendants cited that section as authority that Loanstar, not Wells Fargo, was in control of the foreclosure sale process. The court’s conclusion is, however, incorrect. Civil Code section 2924g, subdivision (c)(1) provides that a foreclosure sale may be postponed upon instruction by the beneficiary to the trustee, and that a trustee must postpone the sale based upon an agreement between the beneficiary and the trustor. (Civ. Code, § 2924g, subd. (c)(1), (c)(1)(C).)*fn3 The beneficiary may also cancel the sale if it permits the borrower to cure the default, even beyond the statutory period during which the borrower may cure as of right. (Bank of America, N.A. v. La Jolla Group II (2005) 129 Cal.App.4th 706, 711-712.) Thus, although the trustee arranges for and conducts the sale, the statute does not delegate to the trustee exclusive control of whether the sale takes place or when it takes place. Here, the uncontradicted evidence shows that Wells Fargo, not Loanstar, controlled the foreclosure proceedings: Wells Fargo instructed Loanstar to initiate foreclosure proceedings and instructed it to suspend foreclosure proceedings based on the forbearance agreement. Thus, the court’s conclusion that plaintiff could not reasonably rely on information provided by Wells Fargo as to the sale date because Wells Fargo was not in control of the date of the sale is supported neither as a matter of law, as the court appeared to believe, nor by the undisputed facts of this case.

Plaintiff testified that he relied on Wells Fargo’s representation as to the sale date to his detriment. He testified that if he had known that the property would be sold on March 27, he would have acted promptly to obtain the necessary funds to cure the delinquency. He testified that he had a portion of the necessary amount and that he could have borrowed the rest from his friend George Moghadam. George Moghadam testified that he had the funds available and that he would have lent plaintiff the money if plaintiff had asked him. This evidence, if believed by the trial court, would support a judgment in favor of plaintiff on this claim. Therefore, the court’s erroneous conclusion that plaintiff’s reliance was unreasonable because Wells Fargo was not the entity in control of the date of the trustee’s sale is prejudicial. We will reverse the order denying the motion and remand with directions to grant the motion as to the negligent misrepresentation claim and to determine whether the evidence establishes that plaintiff justifiably relied on Wells Fargo’s misrepresentation of the sale date.

Defendants contend that plaintiff’s claim is necessarily defeated because notice of the sale was posted on the property and was mailed to him. They concede, however, that plaintiff did not receive actual notice. Defendants provide no authority that constructive notice will, as a matter of law, defeat a claim that the plaintiff justifiably relied on a negligent misrepresentation, and we have discovered no cases directly on point.*fn4

Whether a plaintiff’s own negligence, rather than that of the defendant, is the proximate cause of the plaintiff’s injury is a question of fact. (See 6 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 1300, p. 694.) This issue may be addressed upon remand as well.

FHA Regulations

A bank which issues or services mortgage loans insured by the FHA is required to follow loss mitigation regulations mandated by the HUD Secretary before initiating foreclosure. (Wells Fargo Home Mortgage, Inc. v. Neal (2007) 398 Md. 705, 719-720 [922 A.2d 538, 546-547]; 12 U.S.C. § 1709 et seq.; 24 C.F.R. § 203.500 et seq.) The regulations are published in the Federal Register and have the force of law. (Bankers Life Co. v. Denton (1983) 120 Ill.App.3d 576, 580-581 [458 N.E.2d 203, 206].) It is undisputed that plaintiff’s loan was insured by the FHA and that Wells Fargo was obligated to apply the mandatory loss mitigation procedures. The trial court held, however, that the regulations do not provide the borrower with a cause of action for damages or injunctive relief for foreclosure in violation of those regulations.*fn5

Although there does not appear to be any California case law on the subject, the weight of current authority in other jurisdictions holds that although the regulations do not provide for a private cause of action for damages, violations by lenders of the regulations pertaining to loss mitigation can be raised as an equitable defense in a foreclosure action. (See Wells Fargo Home Mortgage, Inc. v. Neal, supra, 922 A.2d at pp. 547-550; Federal Land Bank of St. Paul v. Overboe (N.D. 1987) 404 N.W.2d 445, 449; Fleet Real Estate Funding Corp. v. Smith (1987) 366 Pa.Super. 116, 123-124 [530 A.2d 919, 922-923]; Federal Nat. Mortg. Ass’n. v. Moore (N.D.Ill. 1985) 609 F.Supp. 194, 196; Bankers Life Co. v. Denton, supra, 458 N.E.2d at pp. 204-206; Associated East Mortgage Co. v. Young (1978) 163 N.J. Super. 315, 329-330 [394 A.2d 899, 906-907]; Brown v. Lynn (N.D.Ill. 1975) 392 F.Supp. 559, 562-563.)*fn6 Plaintiff points out that because non-judicial foreclosures are far more common than judicial foreclosures under California’s statutory scheme, in most instances a borrower whose loan is foreclosed in violation of the regulations has no opportunity to assert the violation as a defense; rather, the borrower can assert the violation only as the basis for an injunction or in an action for declaratory relief to preclude the sale or to set the sale aside. He contends that because such actions are essentially defensive in nature, a property owner should be permitted to assert regulatory violations by the lender to prevent or to void the sale.

In Wells Fargo Home Mortgage, Inc. v. Neal, supra, 922 A.2d 538, the Maryland appellate court addressed this issue under a statutory scheme which appears to be similar to California’s. Under Maryland’s statutes, the majority of foreclosures are non-judicial. However, property owners may seek an injunction or declaratory relief to prevent a foreclosure sale. (Id. at pp. 549-550.) The Maryland court held that because foreclosure is an equitable remedy, failure to engage in the loss mitigation procedures mandated by the federal regulations may preclude a foreclosure sale until the lender has complied with those regulations. (Id. at pp. 550-553.)

Similarly, in California, a trustee’s sale may be enjoined or set aside under some circumstances. (See, generally, Bernhardt, Cal. Mortgage and Deed of Trust Practice (Cont.Ed.Bar 3d ed. 2007) §§ 7.22-7.34, 7.63-7.66.) We see no reason that a property owner facing a non-judicial foreclosure should not be able to assert a lender’s failure to apply the mandatory loss mitigation procedures defensively, either to preclude or to set aside a foreclosure sale. Where no sale has taken place, a court may preclude the sale until the lender complies with the FHA’s loss mitigation procedures. Or, if the sale has taken place, the court may set the sale aside if the lender’s conduct is sufficiently egregious as to render the sale inequitable, unless the buyer is a bona fide purchaser who is entitled to the presumption that the sale was conducted regularly and properly.*fn7 (See Bank of America Etc. Assn. v. Reidy (1940) 15 Cal.2d 243, 248 [courts have the power to vacate a foreclosure sale "where there has been fraud in the procurement of the foreclosure decree or where the sale has been improperly, unfairly or unlawfully conducted, or is tainted by fraud, or where there has been such a mistake that to allow it to stand would be inequitable to purchaser and parties"].) Because the trial court concluded that the FHA guidelines did not afford plaintiff any remedy, it did not determine whether Wells Fargo failed to comply with the FHA guidelines or consider the equities as between Wells Fargo and plaintiff. We will remand with directions that the court do so.

Wells Fargo contends that the sale may not be set aside under any circumstances because there is no evidence that plaintiff tendered payment of all undisputed sums due and owing before the sale was completed. It contends that a pre-foreclosure tender is required in all cases. However, the tender requirement is a matter of equity, and tender may be excused under circumstances where it would be inequitable to require it. (See generally 4 Miller & Starr, Cal. Real Estate (3d ed. 2000) Deeds of Trust and Mortgages, § 10:212, pp. 685-686, and cases cited therein.) Here, the basis of plaintiff’s contention is that he was awaiting Wells Fargo’s action on his application for a forbearance agreement, and that he had been assured that he would have until a certain date to cure the delinquency if Wells Fargo declined a new agreement. The foreclosure sale took place before the “earliest” sale date as represented to plaintiff by Wells Fargo. Whether tender of the amount needed to cure the delinquency was required under these circumstances is an issue which can be addressed in the trial court.)

I want to get this out to folks who may search for help as my story may help someone else.  I am going to attempt to leave out my emotions during this time as I want this info to be clear and factual.  Although not sure how clear this is.

Two (of several) valid and significant reasons for foreclosure to be set aside.  These are the easist to prove with facts.

“Speical Forbearance Agreement” not adhered to by Wells Fargo/Loanstar

Defective Title (This affects the rights of any bona fide purchaser and allows for setting aside, void, etc foreclosure)

The story:

The following occurred in:

2007

After 17 years of payments, lots of equity, I found myself in a situation of not being able to make payments.  This was because of a short term medical issues.  Special Forbearance Agreement was offered and executed.

After reading about the Special Forbearance Agreement (SFA) on the HUD website, this appeared to the perfect solution to my dilemma.

I also realized the seriousness of my situation, so I reiterated with Wells Fargo that I had 401K money as well as a spouse equivalent and family that was willing to pay the entire default amount.  My exact words were “if I am hit by a truck and for any other reason you do not receive payments for the SFA, please put in writing within the SFA that you will give me the opportunity to pay all amounts in default and not sell my home in foreclosure”.    The SFA stated that I would be given the opportunity to pay in full if the SFA was broken.

2008

I attempted to make the first payment as required on the SFA at a local Wells Fargo Bank.  I was verbally told that I needed to make the first payment via Western Union to take my home out of foreclosure.  Thankfully I was in the bank 5 days before the payment was due so I was able to make the payment to Wells Fargo using Western Union the next day.  The SFA did not state this as a first payment requirement.

I then made the second payment on time using Western Union.   I noticed on my Wells Fargo statements that the payments were being posted a few days after the actual Western Union transaction.

The third payment I made through the mail and unbeknownst to me it was not received.  I now believe I sent it to the wrong Wells Fargo address. (I had two loans with Wells Fargo)

I received a letter from Wells Fargo about 5 days after the payment was due notifying me that they did not receive payment and that the special forbearance agreement was broken.  The letter also requested that I call them to make other arrangements, such as another SFA, etc.  I called immediately and at the same time I was tracing the lost payment.

Wells Fargo rep stated that there was nothing she could do as far as the lost payment or accepting a payment, but that she would take down info to begin another SFA request.  I told her there has to be something manually she can do as the two previous payments were posted after the due date, so I knew a “late” payment did not automatically trigger a broken agreement as the previous two payments were posted after the due date and they did not trigger a broken forbearance agreement.

So she took down all the info again to start the process.

Later the same day my home was sold at an auction by Loanstar.  I only found this out because I was served with a 3 day notice by the “new” owner.  He was also the one that told me he bought the home from Loanstar.  I had no idea who Loanstar was.

I called Wells Fargo back and they could not confirm the home was sold.

After a bunch of calls, I was able to confirm that the home was sold.  The “new” owner came over to the house and gave me foreclosure 101 and  printed the title so I could take a look.  I asked him for this as the amount he quoted as the minimum bid did not make sense to me.

I did tell the “new” owner that after investigating all this and I find that the facts are what they appear to be, that I will fight this foreclosure.

I felt doubtful because I knew I was in default (and my house was actually auction off) and it was difficult to imagined a bank making such a mistake with our agreement as well as this glaring problematic title.

I had thought at first that I must have agreed to something that I did not remember that caused this.  I mean why wouldn’t they unwind the foreclosure after receiving all my faxed documents.  This docs were not my opinion but were facts.  Going through this and trying to work things out created so much stress.

Long story longer, it was the fourth lien holder Wells Fargo/Loanstar that foreclosed on the home.  However when you look at the title report, it only showed the 4th lien.  All the other liens were cleared off my title.  Two of them were cleared as PIF in 2003 and the first lien holder – the Lease Land company was just completely missing without any reason.

However, they were not officially cleared off the title until one month before the auction.

I showed the “new” buyer the two legitimate loans that were senior to the one that foreclosed that I have been paying on with statements dating 2003 until current and asked him “who is suppose to pay these two off?”

He seemed a little concerned about the sr liens as he said he would have to pay them as they would foreclose on him.  He asked me for copies of the reconveyance officially filed with the clerk that showed both debts as PIF in 2003.  I made him copies.

I also told him about the property being on leased land and that was also missing off the title.  He didn’t seem to believe me.  I gave him the pay stubs for the lease land and the contact info and told him to investigate it for himself.  I also provided everyone with a letter from the lease land management (that was first place on the title)  that verified that I was still the owner of my property.

I wrote and faxed Wells Fargo and Loanstar all this info (as well as the SFA info) and asked them to rescind the sale or at the very minimum to put things on hold.  I told them it appears that some kind of fraud occurred on my title.

It is one thing to make a mistake and try to fix it, however it is another thing to completely ignore my faxed documents that show proof of the irregularities and to continue to ignore blatant issues that made this foreclosure terribly wrong.  It also adds to my lawsuit bad faith, emotional distress, etc..)

For a couple of months I tried on my own to get to the bottom of the problems with the foreclosure.  I was naive enough to think I could show them proof and they would fix it.  I was wrong.  I had no choice but to retain an attorney.

I had asked the investor to sell the home back to me at 5K over his  highest offer which he agreed. He asked me (my “spouse” who had been living with me the past 5 years) to get pre qualified with his loan person and with that approval he will sell it back.  My “spouse” qualified easily for the home loan with his loan guy, however  he went back on his word deceiving me and sold my house anyways.  I realized he was just trying to get me to drop my fight with the unlawful detainer.

Even though I could have continued to fight the UD while staying in the home, it was too nerve racking.  I had my “spouse”, all my animals as well as 17 years of possessions to think about.  I made the painful decision to move out the house.  I hired movers and had my family take my dogs and boarded the cats.  We moved into a hotel.

Within about 3 weeks we found another home 2 miles away from the orignal, made an offer and  was accepted and about 8 weeks later we were moved in.  We actually used the loan guy from the investor as we (my “spouse” more accurately) was pre approved.  We had no choice we needed to have someplace to live.

I was also advised that if the courts find in my favor and the foreclosure was improper, this home would have to be reimbursed as part of the damages.

There were also lots of other issues (notice, bad faith business practice, fraud, etc) with this foreclosure, but for now I am just going to blog about these two areas.

I feel that most that find and read my blog, the Special Forbearance Agreement issue may be similar for them.

1. Loanstar whose client is Wells Fargo did not adhere to the Special Forbearance Agreement

2. My title was defective

SPECIAL FORBEARANCE AGREEMENT

Wells Fargo/Loanstar did not adhere to the “Special Forbearance Agreement” (SFA) because of the following:

Special Forbearance Agreement is not like any other forbearance agreement.  This agreement is to be executed under the terms of HUD.

In my case, in order to qualify for SFA as the Wells Fargo employee told me correctly, my home would be taken out of foreclosure with the first western union payment.  You cannot be in foreclosure and given the SFA.  You can read this on HUD’s website along with the other requirements.  Please refer to HUDs webiste.

The questions below were cut and pasted from HUDs website.

Question 2: What is the definition of SFB Agreement failure?

Answer: Per Mortgagee Letter 2002-17, page 8, an SFB Agreement is considered failed when one of the following occur:

	The mortgagor abandons the property;
	The mortgagor advises the mortgagee that he/she will not follow through and fulfill the terms of the SFB Agreement; or,
	The mortgagor allows an installment to become due and unpaid for 60 consecutive days from the payment due date. See CFR 203.355(h)

Question 3: If the mortgagor has been performing under the SFB and then stops making payments, when does the 60-consecutive day failure begin?

Answer: The 60 consecutive days begin from the oldest unpaid SFB payment.

Question 4: If a mortgagor has executed their SFB Agreement, but then the SFB Agreement fails due to nonpayment, when must the mortgagee initiate foreclosure?

Answer: The mortgagee has 90 days from the last day of the 60th consecutive days of failure to initiate foreclosure.

They cannot initiate foreclosure proceedings until 90 days after 60 days from your SFA missed payment.  They (Loanstar) auctioned my home less than 10 days after the “missed” payment.   Loanstar seemed to be on its own schedule of foreclosure events.

Also just a note, I had no idea who Loanstar was until the home was sold at auction and the “new” owner gave me the info.

DEFECTIVE TITLE:

Can happen when fraud is proved or a significant defect in the foreclosure proceedings

Defective and Slanderous Title

• Title was cleared prior to Foreclosure Sale.
  I believe this was done to provide a profitable and expedient sale for Loanstar’s client Wells Fargo. This is negligent and fraud.  I believe they knew what I would run up against to try and convey this huge error.  And they were correct.
  1. Two lien holders with significant interest in the property were cleared and reconveyed 30 days before the auction.  The lien holders claim they did not receive any notice of default or notice of sale.
  2. Lease Land owner was cleared 30 days before the auction.  Also claimed no notice of default or notice of sale was received. Lease Land company  provided a letter showing I was the legal owner of the property. Buyer and UD judge both said there is no lease land.  Duh it wasn’t on the title, but I brought in a letter anyways. I also brought in pages from the title that showed the property was on lease land until it was cleared before the auction.  I learned a valuable lesson, never go to court without an attorney.  You just can’t walk in there with paperwork.
  3. It was cleared to make the property more attractive to buyers and get a higher price.  Lease land is scary to most.