27 Cal.App.5th 516
Cal. Ct. App.2018Background
- Turner (sole borrower and deed holder) refinanced a home loan in 2006; she later married Zeleny and both paid loan installments during the marriage.
- After payment difficulties, Seterus became loan servicer in October 2011; a notice of default followed and a trustee’s sale was scheduled for October 23, 2012.
- On about October 13, 2012, Zeleny (authorized by Turner on the call) offered to pay $30,800 to cure the default; Seterus’s agent (“Stacey”) refused, saying Seterus would only accept reinstatement payments for borrowers in a loan-modification review.
- Turner filed Chapter 7 bankruptcy shortly before the sale; the property was sold at the trustee’s sale and purchased by Fannie Mae.
- Plaintiffs sued Seterus (among others). The trial court sustained Seterus’s demurrer to the third amended complaint without leave to amend; plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of Zeleny to sue | Community funds used to pay loan gave Zeleny community interest and standing for tort claims | Zeleny lacked standing because Turner alone held title and was sole borrower | Zeleny has standing for tort claims based on alleged loss of community interest in property |
| Applicability of tender rule to wrongful-foreclosure and related claims | Tender of full loan balance unnecessary where plaintiff timely offered to pay amount required by Civ. Code § 2924c to cure default and servicer refused | Tender of full indebtedness is required to challenge foreclosure sale | Tender rule does not bar claims here; timely offer to pay required cure amount under § 2924c was sufficient where servicer refused |
| Whether an offer (vs. actual payment) sufficed to invoke § 2924c rights | Offer to pay $30,800 to Seterus’s agent was an effective tender; servicer’s wrongful refusal cannot benefit servicer | Plaintiffs needed actually to submit payment; bankruptcy schedules show inability to pay | Offer (with authorization and intent to perform) was sufficient; actual payment not required where servicer refused acceptance and doctrine bars taking advantage of one’s own wrong |
| Misrepresentation, negligence, and UCL claims viability | Statements by Seterus agent that it would not accept reinstatement payment were false, material, induced reliance and breached statutory duty under § 2924c; negligence arises from statutory duty; UCL borrows these wrongs | Misrepresentation was nonactionable opinion/law, lacked specificity, causation (because no tender), and servicer owed no independent duty; UCL fails if predicates fail | Court reversed demurrer as to intentional and negligent misrepresentation, negligence (including negligence per se based on § 2924c), wrongful foreclosure, and UCL claims; demurrer overruled for those claims |
| Breach of contract and IIED claims | Plaintiffs sought to hold servicer liable for breaching loan obligations and for severe emotional distress from foreclosure | Seterus not a party to loan so cannot be liable for breach; foreclosure conduct not extreme enough and alleged distress not severe | Demurrer properly sustained (without leave to amend) as to breach of contract and intentional infliction of emotional distress |
Key Cases Cited
- Karlsen v. American Sav. & Loan Assn., 15 Cal.App.3d 112 (court summarized tender rule in redemption context)
- Arnolds Management Corp. v. Eischen, 158 Cal.App.3d 575 (foreclosure/redemption tender rule background)
- Chavez v. Indymac Mortgage Services, 219 Cal.App.4th 1052 (no tender required where enforceable modification contract eliminated default)
- Bank of America v. La Jolla Group II, 129 Cal.App.4th 706 (beneficiary’s agreement to cure can render subsequent sale invalid)
- Barroso v. Ocwen Loan Servicing LLC, 208 Cal.App.4th 1001 (borrower performing under modification need not tender because no default under modification)
- Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal.App.3d 1089 (general rule on lender’s duty; used for duty analysis)
- I. E. Associates v. Safeco Title Ins. Co., 39 Cal.3d 281 (legislative scheme covers nonjudicial foreclosure duties)