Turner v. Seterus, Inc.
238 Cal. Rptr. 3d 528
Cal. Ct. App. 5th2018Background
- Turner bought the property in 2001 (sole titleholder); she married Zeleny in 2003. Turner alone signed the note and deed of trust, but both plaintiffs contributed to mortgage payments during the marriage.
- Turner refinanced in 2006; after job loss and payment problems, they obtained a 2010 modification but fell behind when servicer billing was inconsistent.
- Seterus became servicer in October 2011; a notice of default (Feb 2012) listed a cure amount and advised the trustor may reinstate by paying amounts due up to five business days before sale per Civ. Code §2924c.
- On about Oct 13, 2012 Zeleny (authorized by Turner) offered to pay the default amount; Seterus’s agent ("Stacey") refused to accept payment, stating plaintiffs were ineligible for a modification and Seterus would not accept payoff to cure. A trustee’s sale occurred and Fannie Mae purchased the property.
- Plaintiffs sued Seterus (among others). The trial court sustained a demurrer to plaintiff’s third amended complaint without leave to amend, finding failure to allege tender and, as to Zeleny, lack of standing. Plaintiffs appealed.
- The Court of Appeal reversed in part: it held Zeleny had standing as a community-interest holder, rejected application of the full-loan tender rule where a statutory §2924c reinstatement cure was timely offered and wrongfully refused, and reinstated multiple causes of action against Seterus (but affirmed dismissal of IIED and breach of contract claims).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of non-titled spouse (Zeleny) | Community payments gave community an interest; Zeleny may sue for torts affecting that interest | Property was Turner's separate property; Zeleny not on note/deed so lacks standing | Reversed: Zeleny has standing to pursue tort claims because community contributed to loan payments and acquired a pro tanto interest |
| Application of tender rule to wrongful foreclosure based on §2924c cure | Tender of the statutory cure amount (or offer) was sufficient; full-loan tender not required where servicer wrongfully refused timely cure | Traditional tender rule requires unconditional payment of full indebtedness to challenge foreclosure | Reversed: full-loan tender rule in redemption cases does not bar wrongful-foreclosure claims premised on wrongful refusal to accept a §2924c cure; an offer to pay the cure amount (timely and by an authorized agent) sufficed |
| Whether an actual payment was required (vs. offer/tender) | Offer/tender to pay constituting an offer of performance under Civ. Code §1485 and §2924c is sufficient when servicer wrongfully refuses | Plaintiffs did not actually submit payment; thus cure was ineffective | Reversed: actual payment not required where servicer wrongfully refused the offer; tender (offer) sufficed and servicer cannot benefit from its own wrongful refusal |
| Duty & negligence claims based on servicer conduct | Statutory duty under Civ. Code §2924c to accept timely cure creates duty of care; negligence claim viable | General rule: servicer/lender owes no special duty beyond ordinary lender; no negligence | Reversed: statutory duty to accept timely §2924c cure can give rise to negligence claim; demurrer to negligence claims overruled |
Key Cases Cited
- Sciarratta v. U.S. Bank Nat’l Assn., 247 Cal.App.4th 552 (2016) (elements of wrongful foreclosure claim and discussion of tender)
- Karlsen v. American Sav. & Loan Assn., 15 Cal.App.3d 112 (1971) (tender requirement in redemption-based challenges to foreclosure)
- Arnolds Mgmt. Corp. v. Eischen, 158 Cal.App.3d 575 (1984) (equitable tender rule in foreclosure/redemption context)
- Lona v. Citibank, N.A., 202 Cal.App.4th 89 (2011) (rationale for tender rule and its application)
- Chavez v. Indymac Mortgage Servs., 219 Cal.App.4th 1052 (2013) (borrower alleging enforceable modification need not allege tender where servicer breached modification and proceeded with sale)
- Bank of Am. v. La Jolla Group II, 129 Cal.App.4th 706 (2005) (beneficiary’s acceptance of cure eliminates contractual right to sell; sale invalid)
- Barroso v. Ocwen Loan Servicing LLC, 208 Cal.App.4th 1001 (2012) (borrower under modification who performed need not tender because no default existed under the modification)
- Moeller v. Lien, 25 Cal.App.4th 822 (1994) (statutory scheme for nonjudicial foreclosures, reinstatement and redemption rights)
- Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal.App.3d 1089 (1991) (general rule on lender/servicer duty and limits on negligence claims)