In a stunning blow to lenders, the California Court of Appeals eviscerated a lender’s ability to resolve a wrongful foreclosure lawsuit quickly. In Integan v. BAC Home Loans Servicing LP, the Court upheld a borrower’s claim that the lender had failed to contact her prior to foreclosure. In addition, the court held that the tender offer rule may not apply to an action where the lender had not completed the foreclosure
Facts of the Case
In 2006, Arden Intengan received a $695,000 loan from Countrywide Bank. In late 2010, Intengan defaulted on the loan and the trustee began foreclosure proceedings. The day before the foreclosure sale, Intengan filed suit to stop the foreclosure. The defendants successfully demurred to the complaint and the case was dismissed.
Holding
On appeal, the Court sustained the lower court’s decision on every cause of action except for one, wrongful foreclosure. On the wrongful foreclosure claim, the Appellate Court reversed the lower court and found that Integan potentially had a claim. The Court noted that because the defendants had filed a demurrer, courts are required to assume that everything the Plaintiff alleged was true (there are a few exceptions to this rule). Here, Integan alleged that BAC had failed to contact her as required by law. While BAC had recorded a declaration stating that it had complied with the notice requirements, given the competing factual assertions, the Court assumed Integan’s allegations were correct and therefore, it was possible for her to prevail on her claim.
Further, while many lenders had previously argued that a borrower is required to tender offer (offer to pay the full amount owed) before challenging the foreclosure sale, the Court agreed with a recent line of cases that the tender offer rule does not apply if the foreclosure sale had not yet occurred. With these two holdings, the Court has made it almost impossible for a lender to successfully dismiss a wrongful foreclosure suit without proceeding substantially through trial.
Takeaway
California courts have been steadily whittling away at the tender offer rule and have been allowing litigation against lenders to proceed. There has been a clear trend from the early days of the foreclosure crisis where the courts routinely dismissed these lawsuits at the early stages to the present day where the courts are allowing homeowners to proceed further with litigation. If a foreclosure sale has not occurred, the courts are much more generous in allowing borrowers to proceed with litigation. Accordingly, as a lender, the faster you can foreclose, the stronger your position.
If you have any questions about such matters or any other real estate related legal issues, please contact the Law Offices of Peter Brewer at (650) 327-2900 or on the web at www.BrewerFirm.com.
