Over four years ago, I wrote about the unpublished case of Jacobsen v. Aurora Loan Services (2012). Jacobsen was a foreclosure investor who had been negotiating with borrower O’Brien. O’Brien had borrowed $1.24M secured by a deed of trust against the property. O’Brien’s payments to the lender and loan servicer became sporadic and eventually, O’Brien was in default. The day before the Trustee’s Sale, O’Brien deeded the property to Jacbosen.
Jacobsen showed up at the foreclosure sale and bid $500. His bid was not the highest. Here’s where it gets problematic: as is customary, the loan servicer Aurora likely gave instructions to the foreclosing trustee to credit bid. Accordingly, Aurora had the “winning” bid at over $1.5M. However, for some reason, the Trustee’s Deed to Aurora noted a “cash bid”. That became a disputed fact in the subsequent litigation between Jacobsen and Aurora.
Jacobsen and O’Brien ultimately sued Aurora Loan Services and Cal-Western (the foreclosing trustee) on a variety of theories to try to challenge the sale. They sued to quiet title, to invalidate the loan documents, and for wrongful foreclosure. At the trial court level in San Francisco, both sides brought motions for summary judgment. A motion for summary judgment is essentially a trial on the pleadings and requires that there be no disputed material facts.
At that time, the Federal district court granted the defendants’ motions for summary judgment and to dismiss the case.
Plaintiffs appealed to the Ninth Circuit. The Ninth Circuit affirmed the lower court’s ruling on the causes of action for quiet title, the loan validity, and cancellation of loan instruments. However, the Ninth Circuit reversed on the claim of wrongful foreclosure, citing the elements as articulated in the Sciaratta case. On appeal, the Ninth Circuit concluded that there was sufficient evidence on the record of a material dispute regarding the credit bid and whether the credit bid was proper. Further, the Plaintiffs needed to prove that they suffered damage from any wrongful foreclosure and the lower court had not addressed this element in its opinion. On those two grounds, the case was remanded. Now the parties can continue to litigate at the trial court level on the propriety of Aurora’s credit bid and whether the plaintiffs were actually damaged by Cal-Western and Aurora’s foreclosure sale.