The residential eviction process is stressful enough, but California’s SB-1079 (CC § 2924m) can convolute the process in ways that require a skilled litigator with subject-matter expertise to navigate successfully. Whether you’re a foreclosing lender, an investor-bidder or even a wrongfully foreclosed tenant, our litigation team will counsel you through the nuances of the law and achieve the right outcome. We recently helped an aggrieved tenant, which underscores just how complex these situations can get.
The Wrongful Foreclosure
During 2021 our Client’s husband passed away. Her husband left the Subject Property which was encumbered by a First and Second Mortgage. Both loans were serviced by the same entity (the Servicer). Since becoming the owner of the Property, the Client had been working with the Servicer towards a loan modification on the Second Lien. Meanwhile, the Servicer also continued to pursue foreclosure of the Second Lien. During this time, the Servicer refused payments from Client while assuring her this was a part of the loan modification process. While the Servicer led Client to believe her loan modification had been approved, the Servicer instead foreclosed on the Property.
To compound the problems, the Servicer sent the foreclosure notices to incorrect and non-existent addresses. Because of the errant notices, Client was unaware of the foreclosure sale. She was therefore unable to bring a timely wrongful foreclosure action to stop the sale.
The Wrongful Foreclosure Bid
After the foreclosure sale took place, Client’s case became significantly more complicated. As a California property, this nonjudicial foreclosure sale was conducted pursuant to SB-1079, which allows categories of “Eligible Bidders” to submit bids within 45 days after the trustee’s sale. Those bids must meet certain procedural and substantive requirements. The “Eligible Bidders” categories are meant to incentivize individual homeownership and affordable housing. In this case, the winning bidder (the “Bidder”) purported to meet one of these categories—the “Prospective Owner-Occupant.”
Prospective Owner-Occupants are required to submit (to the foreclosure trustee) an affidavit (under penalty of perjury) swearing they will occupy the foreclosed property as a primary residence within 60 days and for a period of at least one year. Shortly after Bidder “won,” Client learned the Bidder had acquired and ostensibly sold at least 10 other properties within the last 12 months under the guise of a Prospective Owner-Occupant. By definition, these affidavits and bids were false because they could not all have been “primary residence.” Once the Bidder acquired the Deed, he filed an unlawful detainer action against Client.
The Litigation Process
Compared to typical litigation, unlawful detainer actions move extremely quickly. They are also limited in scope to the issue of right of possession. This presented a unique challenge for Client. She had a civil claim against the Servicer for wrongful foreclosure and a civil claim against the Bidder for fraudulently exploiting SB-1079. However, due to the expedited unlawful detainer process, Bidder’s unlawful detainer action threatened to evict Client well before Client’s civil claims could be heard.
We therefore needed to stop the unlawful detainer action immediately. Unfortunately, given the special procedures for unlawful detainers, this process was hardly straightforward, and we had a tight timeline to execute our plan. First, we filed a wrongful foreclosure action. Then, we prepared a motion to consolidate the wrongful foreclosure action with the unlawful detainer. Given motions to consolidate are typically “noticed motions”, we also needed to prepare an ex parte application to shorten the hearing date on the motion to consolidate. Consolidation would operate as an automatic stay of the unlawful detainer. Alternatively, if the Court was unwilling to consolidate, we asked that the Court stay the unlawful detainer action.
The unlawful detainer to determine whether our Client would be evicted was set just before Christmas 2022. At that conference, we explained the circumstances to the Judge, including our pending motions. The Judge found our arguments compelling regarding the impossibility that Bidder was a “Prospective Owner-Occupant” and Servicer’s flawed foreclosure notices. Rather than force the parties to expend significant resources working their way through multiple motions, the Judge found there was “enough smoke” to justify imposing a stay of the unlawful detainer. Not only would Client get to keep her home through the holidays, but the stay would also remain in place until Client’s civil claims could be adjudicated on their merits.
In this case, our expertise with SB-1079 and wrongful foreclosure allowed us to effectively prepare our case within an extremely tight window. This no doubt helped us clearly communicate the facts of our case to the Judge. The Judge found these tenets compelling enough that further motions weren’t necessary. Nonetheless, even if our motions were required, we were in the best possible position to achieve the Client’s worthy goals – keeping her from foreclosure and eviction at Christmas time!