Fonteno v. Wells Fargo Bank, N.A.
176 Cal. Rptr. 3d 676
Cal. Ct. App.2014Background
- Plaintiffs Leroy Fonteno and Jeanette Childs defaulted on an FHA-type mortgage; Wells Fargo caused a notice of default and First American conducted a nonjudicial trustee sale in June 2011, after which Wells Fargo obtained a trustee’s deed and evicted plaintiffs via unlawful detainer.
- Plaintiffs sued post-sale for wrongful trustee sale, quiet title, and FDCPA violations, alleging Wells Fargo breached paragraph 9 of the deed of trust by failing to comply with HUD/NHA pre-foreclosure requirements (e.g., face-to-face meeting, HUD approval) and improperly foreclosing.
- The trial court sustained demurrers: it dismissed quiet title and FDCPA claims without leave to amend (tender required and FDCPA inapplicable), but gave leave to amend the wrongful trustee sale claim; First American’s demurrers were sustained without leave to amend.
- Plaintiffs appealed; while on appeal a supersedeas stayed their eviction. The appellate court considered whether post-sale equitable relief to cancel a trustee’s deed is available when foreclosure violated deed-incorporated HUD/NHA conditions, and whether tender is required.
- The appellate court reversed in part: it held plaintiffs may seek equitable cancellation of the trustee’s deed without pleading tender when foreclosure proceeded despite failure to satisfy deed-incorporated HUD/NHA conditions; it affirmed dismissal of the FDCPA claims and other challenged points.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can plaintiffs bring a post-sale equitable action to cancel a trustee’s deed based on failure to comply with HUD/NHA requirements incorporated into the deed? | Plaintiffs: Yes — paragraph 9 conditions are conditions precedent; failure makes foreclosure unauthorized and deed void or voidable, so equitable cancellation is available post-sale. | Defendants: No — post-sale attack would improperly use the deed provisions as a sword and would cloud title; plaintiffs sued too late. | Held: Yes. Equitable cancellation is available post-sale where foreclosure proceeded without satisfying deed-incorporated HUD/NHA conditions. |
| Is tender of the full indebtedness required to challenge and set aside the trustee’s sale here? | Plaintiffs: Tender not required — requiring tender would defeat the HUD regulation purpose; alternatively, plaintiffs alleged sufficient tender. | Defendants: Tender is required for actions to set aside a completed foreclosure sale (or sale is voidable absent tender). | Held: Tender not required under these circumstances; equitable exceptions apply (including where requiring tender would be inequitable or sale is void). |
| Do Wells Fargo or First American qualify as "debt collectors" under the FDCPA based on foreclosure-related activities? | Plaintiffs: Yes — foreclosure and related notices are debt-collection activities; First American’s notice language and actions show debt-collector status. | Defendants: No — actions to foreclose under state law are not FDCPA debt-collection activity; the entities were not regular debt collectors. | Held: Dismissal of FDCPA claims affirmed; foreclosure activities here do not make defendants FDCPA "debt collectors." |
| Did First American lack authority to conduct the sale (defective substitution, trustee identity, or foreclosure commissioner issues)? | Plaintiffs: Various procedural defects (defective substitution signature, improper notice, required foreclosure commissioner not appointed) invalidated First American’s sale authority. | Defendants: Plaintiffs failed to plead these claims in their complaint and offer no persuasive legal support; signature block and substitution were adequate. | Held: Plaintiffs’ new arguments were unpersuasive and insufficiently argued; trial court rulings on these points are affirmed. |
Key Cases Cited
- Pfeifer v. Countrywide Home Loans, Inc., 211 Cal.App.4th 1250 (Cal. Ct. App. 2012) (HUD servicing regulations incorporated into deed can be conditions precedent to nonjudicial foreclosure; equitable relief available though damages not allowed)
- Mathews v. PHH Mortgage Corp., 724 S.E.2d 196 (Va. 2012) (trustee’s power to foreclose accrues only after HUD-regulation conditions are met)
- Dimock v. Emerald Properties, 81 Cal.App.4th 868 (Cal. Ct. App. 2000) (trustee sale may be void where sale conducted by party lacking authority; tender not required)
- Mabry v. Superior Court, 185 Cal.App.4th 208 (Cal. Ct. App. 2010) (tender not required to obtain relief when lender failed to comply with statutory pre-foreclosure contact requirements)
- Lona v. Citibank, N.A., 202 Cal.App.4th 89 (Cal. Ct. App. 2011) (equitable exceptions to tender rule; tender may be excused where inequitable)
- Schlegel v. Wells Fargo Bank, 720 F.3d 1204 (9th Cir. 2013) (borrowers’ allegations insufficient to show lender was a FDCPA debt collector based on foreclosure activity)
- Glazer v. Chase Home Finance LLC, 704 F.3d 453 (6th Cir. 2013) (holding mortgage foreclosure can be debt collection under FDCPA — discussed but not adopted)
- Squire v. Virginia Hous. Dev. Auth., 758 S.E.2d 55 (Va. 2014) (post-foreclosure contract-based claims permitted where lender failed to hold HUD-mandated face-to-face meeting)