Published on:

by

I commonly hear from clients that they were told by their loan servicer that they would not be considered for a loan modification because they were current on payments. They were either told, or it was implied, that they needed to miss a payment in order to be considered for a loan modification. I never advise a client to skip a payment, as that is their own decision- once it happens, the foreclosure freight train starts downhill and does not stop. Anyone thinking of skipping should consult with an experienced Sacramento and Yolo real estate lawyer to be advised as the full range of options & risks. A recent decision out of Southern California involved a borrower who said she was told to skip a payment, which created a triable issue as to whether the lender induced her to miss a payment, wrongfully placing her loan in default. But that’s not all- there was evidence that her loan documents had forged signatures.

lender foreclosure.jpg In Ragland v. U.S. Bank, the homeowner refinanced through Downey Savings in 2002. (Downey was later taken over by the FDIC, who turned over the loans to US Bank.) She got an adjustable, but claims she thought she was getting a fixed rate. One month later she told the lender that her signature had been forged on the estimated closing statement, escrow instructions, and statement of assets and liabilities. The forgery was confirmed by a handwriting expert.

By 2008 the rate had adjusted up to 7%. She spoke with a lender rep who said they would work with her to modify the loan, and told her not to make the April payment because the worse that would happen is that she would have a late fee. On the last day to make the April payment, she called the lender again, and was told that if there was anything forged, she would not owe anything. They put the loan in “legal” and told her they could not collect while the investigation continued. Later she was told they could not do a modification during the investigation.

Continue reading
Published on:

by

Inevitably, a property or business owner has a problem when someone injures themself at their premises. The ordinary slip and fall involves a dangerous condition which causes someone to fall and hurt themselves. Usually, the property owner must have actual or constructive knowledge of the dangerous condition before they can be held liable for the injury. Sacramento business and real estate attorneys advise their clients that “Constructive knowledge” is what the prudent property owner should have known. The owner may not have knowledge of everything about the property, but a Sacramento business owner was recently surprised by a dangerous condition that may have been created by an employee.

property owner liability.jpgIn Getchell v Rogers Jewelry, the plaintiff was a jewelry repairman who worked as an independent contractor at the defendant jewelry store in Arden Fair Mall. (This made the repairman a “business invitee” as opposed to an employee or customer). He was in the break room of the store (for employees and business invitees only) and slipped and fell when he stepped on a puddle of jewelry cleaning solution. The solution was kept in a five gallon bucket. There was no evidence that the bucket leaked. The only people with access to the cleaning solution and who could or would have used it were the store’s employees. The defendant business and its employees had exclusive control over the break room and the bucket of solution.

premises liability.jpgThe trial court ruled on summary judgment for the defendant jewelry store, finding that the plaintiff had established that the store owner had actual or constructive notice of a dangerous condition. The court of appeals disagreed. It noted that this was not a ordinary slip and fall- the answer turns on whether the dangerous condition was created by the negligence of an employee of the store. Such cases are governed by the doctrine of respondeat superior- the employer answers for the actions of employees, and is presumed to have notice of what the employees know. Here, the evidence shows that a reasonable inference can be drawn that the condition was created by employees of the defendant, and that the defendant is then held to know what the employee knows about the dangerous condition. If the employee was acting within the scope of their employment (doing their job) the owner cannot claim that he had no notice of the dangerous condition.

Continue reading
Published on:

by

My last post was about a California loan modification, where the borrower signed the modification documents and returned them to the lender, but the lender foreclosed anyway. The court decided that the there was a binding contract once the borrower signed and returned the modification agreement, even though the lender said it did not happen until after the lender returned a copy signed by them. This is a good result, as otherwise the borrower would be in limbo, making payments, while wondering why they lender did not send back the documents. Finding that a contract was created helped the borrower another way- in her claim for wrongful foreclosure.

WRONGFUL FORECLOSURE.jpgIt is a general rule in California law that a lawsuit to set aside a trustee’s sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of the debt for which the property was security. This is known as the tender rule. I think that the tender may be made on filing the lawsuit, but some courts may differ.

However, in our case, there is no claim of irregularities in sale notice or procedure. The claim is that the lender offered a modification, the borrower accepted, and they had a deal. The court noted that the power of sale, which gives the trustee the right to foreclose, is a creature of contract, not statute. If, after a default, the borrower and lender enter into an agreement to cure the default and reinstate the loan, no contractual basis remains for exercising the power of sale. Thus, under the terms of the modification agreement, there was no default, but they foreclosed anyway. The borrower had made a claim for wrongful foreclosure, and there was no need to allege tender of the balance of the loan.

Continue reading
Published on:

by

Loan modifications have been getting a bit more predictable recently, but several years ago it was a crap shoot of false hopes and unreliable loan servicers. Issues I often saw surrounded what happened when the borrower signed the loan modification documents, and make the trial payments, but was told that they didn’t qualify. Borrowers in the loan modification process should consult with an experienced Sacramento real estate attorney, who can advise them as to the meaning of the documents they have been presented. A recent decision covers such an agreement proposed in 2009. This post covers the impact of the borrower signed and returning the documents. Part 2 will cover her claim for wrongful foreclosure.

In Barroso v. Ocwen, the borrower bought her house in 2005 for $372,000. She got behind on payments, and a notice of default was recorded in 2009. Ocwen told her that she qualified for the HAMP program, and sent her agreements for her signature. They were:

a. Trial Period Plan; payments for three months;

Continue reading
Published on:

by

A California partition action is a legal procedure in which any co-owner can get a court order requiring the parties to split the property, buy each other out, or sell the property and split the proceeds. A statute allows the court to award payment of attorney fees incurred “for the common good” either by the percentage interests in the property, or based on equitable considerations. Experienced Sacramento and El Dorado real estate attorneys seldom do you see attorney fees awarded, but in a recent decision a party who claimed an 85% interest in the property did not impress the Judge and was surprised by the fee award.

california partition action.jpgIn Lin v Jen, Jane filed a partition action, claiming she owned 85% of a property and her brother Jack owned 15%, which was what the deed said. Five other siblings heard about it, and entered the case claiming equal interests in the property. Evidence Code section 662 raises a presumption that a deed is correct- to overcome it, you must present clear and convincing evidence. The other siblings presented letters from Jane showing that they all had an interest. The Judge found this to be clear and convincing evidence that Jane was being untruthful. That beat the presumption, and the judge ruled that each of the seven brothers and sisters owned one seventh interest in the property.

The five siblings made a motion for attorney fees, asking the Judge to require Jane to pay 85% of them, based her conduct in the lawsuit. The Judge said, no, each party would pay a proportion based on their interest in the property.

Continue reading
Published on:

by

Usually, residential lenders do not file judicial foreclosures. Rather, they prefer to hold a trustee’s sale to get the property back. This is a much faster, and streamlined, process which is governed by statute. In holding a trustee’s sale foreclosure however, the lender gives up any rights to a deficiency judgment. The borrower loses the house, but does not owe any money. Often the owner tries to stop the foreclosure by trustee’s sale by filing a lawsuit, alleging defects in the lender’s procedure, and seeking an injunction against proceeding. That is what happened in a recent San Diego case, but the wise lender surprised the borrower with a cross-complaint for judicial foreclosure.

judicial foreclosure.jpgIn Arabia v BAC Home Loans Servicing, L.P., Arabia refinanced his home. It was 2005, and he got an astronomical valuation- he took out a $2.8 million first, and a home equity loan of $1 million- probably lots of cash. He quit paying on the first loan in 2007. BAC began trustee sale proceedings. And Arabia sued. BAC filed a cross-complaint for judicial foreclosure. This was smart for the lender; since they were going to be tied up in a lawsuit, they might as well seek judicial foreclosure, with the resulting chance at a deficiency judgment. There was a lot of money at stake -($3.8 million total in the first and second loans. At the foreclosure the lender got the property back for a bid of $1.95 million, presumably the balance on the first). Maybe they felt that the borrower had assets, and a judgment against him could be collected.

The Servicer Can File Judicial Foreclosure

Continue reading
Published on:

by

There are many different types of interest is real property; outright ownership, easements, life estates, co-ownership, prescriptive rights, etc. Often there is a dispute between parties with conflicting claims as to property rights. Usually it is the case of someone with title and possession denying the rights of someone else who claims a right in the property. A quiet title action is brought to establish, or “quiet”, title or an interest in real estate between adverse parties. Quiet title actions have very specific statutory requirements regarding allegations, service, publication of notice, and procedure. Anyone contemplating such an action should contact an experienced Sacramento and Placer real estate attorney.

quiet title action.jpgAnyone can establish their legal or equitable right, title, estate, lien, or interest in property or cloud upon title against adverse parties. (CCP §760.010) An adverse party is anyone who claims an ownership interest, interferes with the plaintiff’s enjoyment of the property, decreases the value of the property, or renders the title uninsurable. A quiet title can be brought in addition to, and cumulative with other remedies, such as damages or for ejectment. The plaintiff has to hold a legal interest, as opposed to an equitable interest, but there are exceptions. The plaintiff’s interest in the land can be the title to the property, an easement, a license, a lease, or title by adverse possession.

Quiet title actions must be filed in the superior court where the real property, or any part of it, is located. The judgment binds all persons, known and unknown, claiming an interest in the property. (CCP §764.030) It binds non-parties to the lawsuit who have adverse claims in the property that was not of record at the time the suit was filed and lis pendens recorded. The plaintiff must search the county recorder’s records before filing to make sure that everyone is included, because it is not binding on non-parties whose claim is of record prior to the lawsuit.

Continue reading
Published on:

by

It is a given under California law that a seller financing a purchase money loan in the sale of real estate may not get a deficiency judgment against the borrower, but is only entitled to foreclose the property. CCP section 580b provides that, when the buyer purchases property, if buyer gives the seller a note for all or some of the price, “no deficiency judgment shall lie.”

anti deficiency 580b.jpgIn Weinstein v. Rocha, the plaintiffs bought a multi-unit property in L.A. They obtained primary financing of $820,000 from a lender, who held a first deed of trust, and the defendant / seller financed the balance with a loan secured by a second deed of trust. The buyer discovered that there were multiple housing code violations that were not disclosed. They sued the seller for failure to disclose.

The parties reached settlement, and entered a settlement agreement that reduced the balance of the debt buyer owed seller, but provided that if the buyer defaulted, the seller could accelerate the loan and demand payment of the original amount in full. If buyer did not immediately pay the balance, the seller could foreclose their second deed of trust.

Continue reading
Published on:

by

California has a number of statutory provisions that provide borrowers with protection from deficiency judgments- personal liability for the loan balance remaining after a foreclosure sale. There is protection if the seller takes back the note, or, in the case of a standard third party loan, if it is a residence, there is protection for the loan used to buy the property. Recent legislation provides for protection in a short sale. Also, if the lender who made the original purchase money loan refinanced the loan, there is protection. With enactment of SB 1069, beginning January 1, 2013, any lender who provides a refinance of the purchase money loan will also be prevented from obtaining a deficiency judgment against the borrower. Each borrower’s situation is different, and anyone in a default situation should consult an experienced Sacramento and Yolo real estate lawyer to determine their risk of personal liability.

california antideficiency and refinance loan.jpgThe change makes sense in light of the historic purpose of Civil Procedure section 580b. In the event of a depression of land values, it is to prevent aggravating the downturn that would result if defaulting purchasers lost the land PLUS had personal liability. It is based on the premise that the lender is in the best position to determine the true value of the security for its loan, which is the property. If the lender overvalues the property, the lender should bear the risk of not obtaining the balance of the loan value in a foreclosure sale.

But why should this be different in the case of a refinance of the original loan? This has been a problem for borrowers the past few years, as many people refinanced with different lenders. The new refinance lender should be in as good a position as the original to determine the value of the property. In fact, it has been lenders’ willingness to overvalue property that had contributed to price inflation.

Continue reading
Published on:

by

I wrote last about a Sacramento developer who demolished the building on a property to build a mixed-use development. But, the market crashed, the developer defaulted, and the property was foreclosed by trustee’s sale. The lender than sued; in the last post I discussed the claim for bad faith waste.

impairment of security.jpg In Fait v. New Faze Development, Inc., the lender also raised a claim for “intentional impairment of security”, meaning that the borrower intentionally reduced the value of the property which was security for the loan. The defendants again argued that there was no evidence that they acted with intent to harm the value of the real estate. However, the court noted that, in prior decisions, even though the defendants likely knew that their conduct would reduce the value of the property, the courts never required an “intent to harm.” This dies not need to be proven for intentional impairment of security.

Also, this lawsuit was against the corporate borrower plus individual employee defendants. The defendants claimed that the individuals could not be liable for impairment of security as innocent agents of New Faze. Again, the court ruled against them. A prior decision established that third parties could be liable for impairment of security. Civil Code section 1714 provides that everyone is liable for the result of his willful acts, and also for the want of ordinary care or skill in the management of his property or person. As third parties can generally be liable for negligent impairment of security, the defendants had to show that the individuals acted with ordinary care or skill with respect to the security interest in the property.

Continue reading