Representing Former Homeowners in the Post- · PDF fileRepresenting Former Homeowners in the Post-Foreclosure Eviction Process. Housekeeping

P r e s e n t e d b yB r i t t a n y M c C o r m i c k & L e a h S i m o n - W e i s b e r g

o f t h e

HBOR COLLBORATIVEN A T I O N A L H O U S I N G L A W P R O J E C T

W E S T E R N C E N T E R O N L A W & P O V E R T Y

N A T I O N A L C O N S U M E R L A W C E N T E R

T E N A N T S T O G E T H E R

M a r c h 2 5 , 2 0 1 4

Representing Former Homeowners in the Post-

Foreclosure Eviction Process

Housekeeping

MCLE Credit: Evals and certificates will follow the webinar You must have registered to receive a certificate Please return evaluations to [email protected]

Materials & Recording: This webinar will be recorded and archived at our website,

calhbor.org All materials were emailed before the webinar and are also

available on our website

Questions [email protected], [email protected]

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Who We Are: The HBOR Collaborative

National Housing Law Project Western Center on Law & Poverty National Consumer Law Center Tenants Together

Objectives Funding: Grant from the Office of the CA Attorney

General under the National Mortgage Settlement Resources: calhbor.org

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What we will cover today

A. Nonjudicial foreclosure process1. Basic procedural & substantive requirements

B. The standard UD process1. Timeline2. Motions, Discovery, Trial

C. The post-foreclosure unlawful detainer process1. What makes it different than a standard UD2. What the UD plaintiff must prove3. Former homeowner and tenant defenses

D. The res judicata problem1. Recognizing the issue2. Strategies

E. Questions

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Nonjudicial Foreclosure: Basic Procedural & Substantive Requirements

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Judicial ForeclosureJudicial Foreclosure Nonjudicial ForeclosureNonjudicial Foreclosure

Bank must sue homeowner and the court transfers title

Not used very often

Almost administrative process

No court review until the unlawful detainer stage

Cheaper, quicker, easier, and wildly more popular

Foreclosure Process in California6

Nonjudicial FC Timeline7

Homeowner becomes

delinquent120 days

Notice of Default

Notice of Trustee’s

Sale90 days 20 days

Home sold at

Trustee’s Sale

Nonjudicial FC: Requirements

Statutory “scheme” codified at CC§2924 – 2924k If the foreclosing entity jumps through the specified procedural

hoops, then the foreclosure is presumed valid

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Substantive Requirement Procedural Requirements

CC§2924(a)(6), the “authority to foreclose” statute: only the

beneficiary under the DOT, the trustee, or the designated agent of

the beneficiary may record an NOD

everything else

“Everything Else:” Basic Procedural Requirements9

Code Section Coverage

2924Power of sale: who can exercise it and when; NOD (and some NTS and sale) recording and notice requirements

2924b NOD & NTS notice requirements

2924c Curing the default

2924f NTS notice, publication, and recording requirements

2924g Sale and postponement requirements

See chart in materials for breakdown of each section

Basic Procedural Requirements: Highlights

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NOD NTS Sale/PostponementsIdentifies the DOT; describes nature of borrower’s breach; identifies how much $ it would take to reinstate loan

Must state time/date/place of sale, describe property, name original trustor, provide name and contact info of trustee, and total unpaid balance of loan

If sale is postponed for 10 or more business days, a notice must be given to borrowers within 5 days of postponement, listing new date/time

Cannot be recorded until 30 days after servicer contacted (or diligently attempted to contact) borrower to discuss financial situation (HBOR)

Cannot be recorded until borrower is at least 120 days delinquent (CFBP rules)

Cannot be recorded until 3 months after NOD was recorded

Must be recorded at least 20 days before sale date

Must occur at date/time/place in NTS and be an auction

Postponements must be announced at time/date/place of the sale specified in NTS; announcement must include the new time/date

Copy of NOD must be mailed to borrowers within 10 business days of recording

Must be mailed to borrower, posted in a public place, published in a newspaper of general circulation, and posted at the property itself, all at least 20 days before scheduled sale

Sales postponed more than a year require a new NTS

Additional Procedural Requirements: HBOR

Procedural requirements with a private right of action under CC§2924.12: Pre-NOD outreach: 2924.55 Post-NOD outreach: 2924.9 Accuracy of recorded documents: 2924.17 More requirements kick in if borrower submits a complete first

lien loan modification application to their servicer: 2923.6, 2923.10, 2923.11

*small servicers have slightly different requirements and borrowers can enforce those requirements through CC§2924.19

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CC 2924: Substantive, “Authority to Foreclose” Requirement

Existed pre-HBOR, but HBOR codified it at CC§2924(a)(6): only these entities can foreclose–1. Holder of beneficial interest under DOT2. The original or substituted trustee under the DOT, acting

under beneficiary’s authority3. Designated agent of the holder of the beneficial interest,

acting under beneficiary’s authority

Nothing in 2924 requires those entities to prove they are what they say they are

HBOR did not list 2924 as a statute with a private right of action

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Litigating the “Authority to Foreclose” Element

Homeowners must have a specific factual basis to allege the foreclosing entity did not hold the beneficial interest

Basically, something in the chain of title went wrong and the purported beneficiary, their agent, or the trustee is not who they say they are: Improper assignment of the DOT Improper or unrecorded substitution of trustee

Glaski v. Bank of Am., N.A., 218 Cal. App. 4th 1079 (2013) Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497

(2013)

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Litigating the “Authority to Foreclose” Element

Affirmatively: Unavailable pre-sale and extremely difficult post-sale

Defensively, in a UD: Theoretically easier Servicer (foreclosing entity and UD plaintiff) must

prove proper authority Has its own challenges

What does the UD process look like?

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The Standard Unlawful Detainer Process

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Unlawful Detainer and Foreclosure

In California, when a foreclosure is completed, new ownership must avail itself of the unlawful detainer process in order to vacate the property.

In most judicial foreclosure states, a writ of execution is obtained during the foreclosure lawsuit.

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Unlawful Detainer:Forgotten Part of the Foreclosure Process

It is very important for attorneys who advocate for homeowners to understand this process.

However, the process is not easy to maneuver when in pro per. Most homeowners face the UD process without representation. This is concerning for all housing advocates.

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What is an Unlawful Detainer?

Summary proceeding created by statue in which court adjudicates right to possession of real property.

5 days to answer.

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Same as State Civil Matters

Same as any other state civil matter except: Expedited process: 5 days to respond to summons Trial date set within 20 days of at issue memo

No counterclaims Strict adherence to statutory procedure

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Written Notice Must Be Served

• There is a notice requirement for every unlawful detainer.

• Tenants must be served either in person or by posting and mailing.

• The landlord is also required to try and serve the tenant’s place of employment, but this is rarely enforced.

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Post-ForeclosureNotice to Vacate

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Summons23

Complaint

Can be a form Can be a pleading

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Answer/General Denial

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Responsive Pleadings27

Demurrer CCP 430.10 Where complaint fails to state a cause of action (use

this where defect appears on face of complaint and attachments). Alternative to Answer Set on regular motion schedule (~35 days) Defect must be “within four corners” of complaint


Motion to Quash CCP 1167.4 & 418.10 Improper Service Delta Imports, Inc v. Mun. Ct (1983) 146 Cal.

App.3d 1033. Failure to state cause of action proper for

summary proceeding


Motion to Strike CCP 435-437 No verification Improper request for damages Improper forfeiture

More Motions

Motions for Summary Judgment CCP 1170.7 In foreclosure context, very common response by plaintiff

evicting homeowner 5 days notice: Time frame shorter than regular civil case but standard the same Can respond orally at hearing

Need admissible evidence to support motion

Motion on the Pleadings

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Discovery

Full range of discovery is available in unlawful detainers, but on a 5 day timeline.

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Discovery

Depositions are useful because written requests may draw objections and vague formulaic responses. Person Most Qualified depositions are helpful for corporate entities. CCP 2025.230.

Requests for admission can be effective because if the other party fails to respond they will be deemed admitted.

Always be prepared with your motion to compel because you should expect not to get any responses or to get only objections to your requests.

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Jury Trial

Jury Trial Request for Jury Trials should be made at the time

you file responsive pleading Have all the same rights Seems to be a difference by jurisdiction whether

form is sufficient or pleading necessary Fee wavier covers jury trial

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Trial

Same evidence rules apply Often a more casual environment Important to object and be formal Generally no court reporters There is a real problem with a lack of respect for

unlawful detainers and tenants that homeowners inherit

Legal service agencies have lots of pro bono opportunities where you can help tenants and learn how do an unlawful detainer

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Trial

Trial brief is important Generally similar to any other civil matter except you

represent the defendant instead of plaintiff Plaintiff (landlord) has to prove up their case Important to not allow them to use hearsay or argument to

establish elements.

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Settlement

Can happen at any stage.

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Notice to Vacate38

Post-Judgment Motions

1. Claim to Right of Possession HBOR changes not available to homeowners

2. Temporary Stay of Execution CCP 9183. Motion to Set Aside Default CCP 473

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Appeals

File notice of appeal to preserve rights, but it does not stay hearing

Evaluate your case – bad facts make bad law Contact the HBOR collaborative for help

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The Post-Foreclosure Unlawful Detainer Process

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Nonjudicial FC Process42

Homeowner becomes

delinquent120 days

Notice of Default

Notice of Trustee’s

Sale90 days 20 days

Home sold at

Trustee’s Sale

Tenant & Former Homeowner: UD Similarities

In most respects, the eviction process is the same Both require notice

Methods of serving that notice are the same (CCP§1162) Both require summons and complaint

Method of serving S&C are the same Both entitled to file an Answer Basic timelines are the same

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Tenant & Former Homeowner: UD Differences44

3 day or 3/60/90

day notice

UD summons & complaint

Home sold at trustee’s

sale

Answer No Answer

Settlement Conference (if applicable) New owner obtains default judgment

Settle to move out Go to trial Sheriff posts Notice to Vacate

Move out

Hold over Lose Win Lock out

Sheriff posts Notice to Vacate

New owner refiles UD

5 days

10-14 days

2-5 daysApprox. 1 week

5 days

Adapted from a chart prepared by Community Legal Services in

East Palo Alto

3/60/90-Day Notice to Quit

Who uses it and why? Banks, corporate entities who purchase property at FC sale To cover their bases with former homeowners and tenants

Former homeowners: NOT considered “tenants” under federal, state, or local law Only entitled to a 3-day notice to quit, CCP§1161a(b)

Existing tenants: Entitled to 90-day notice under Protecting Tenants at

Foreclosure Act and CCP§1161b; longer if they have a fixed-term lease or live in a just cause jurisdiction

Cover sheet requirements, CCP§1161c

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sale

Answer No Answer



Move out




5 days

10-14 days


5 days


East Palo Alto

3 day or 3/90 day notice

Summons & Complaint

New owner must file a S&C to move forward with eviction process

Owner “self-help:” basis for forcible entry and detainer, trespass, and wrongful eviction claims No lock outs, no “trash outs” Makreas v. First Nat’l Bank of N. Cal., 2013 WL 2436589 (N.D. Cal.

June 4, 2013); Karp v. Margolis, 159 Cal. App. 2d 69 (1958)

Once S&C is served, homeowner can have as little as 3 weeks before sheriff locks them out

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sale

Answer No Answer



Move out




5 days

10-14 days


5 days


East Palo Alto


“Cash for Keys”

Can be offered throughout the UD process Former homeowners agree to move out (fairly

quickly) in exchange for cash Former homeowners should not agree to anything

without putting it in writing and having it reviewed by an attorney

Make sure bank representative also signs agmt Bank needs to dismiss UD that has been filed and to

keep the eviction record masked

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sale

Answer No Answer



Move out




5 days

10-14 days


5 days


East Palo Alto


The Masking Rule

General masking rule: CCP§ 1161.2(a)(5) Only masks UD documents for 60 days post-filing File becomes public unless UD defendant prevails in 60 days

Post-foreclosure UD masking rule: CCP§1161.2(a)(6) UD documents are masked for 60 days post filing Permanently masked unless:

plaintiff prevails within those 60 days against all defendants after a trial

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CCP 1161a(b): UD Plaintiffs Must Show

Post-foreclosure UD plaintiffs bear the burden of showing:1) Proper service of a valid notice to quit2) Former homeowner is holding over3) Compliance with FC procedures, CC§29244) Compliance with FC substantive requirements: duly

perfected title & “authority to foreclose” aspect of CC§2924(a)(6)

The new owner must prove each of these elements (CAL. EVID. CODE § 500)

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Disclaimer: Status of the Law

Not a lot of UD cases Cal. Rule of Ct. 8.1115 Court of Appeal or superior court appellate division cases that

are not certified for publication or ordered published are NOT citable

Exception: When opinion is relevant under doctrines of law of the case, res

judicata, or collateral estoppel

A lot of the cases used today are not citable, but can be helpful in forming arguments

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Simple Post-Foreclosure UD Defenses

1. Proper 3-day notice to quito All service requirements that apply to tenants apply to former

homeowners and can be used as defenses (CCP § 1162)o Bank of N.Y. Mellon v. Preciado, _ Cal. App. 4th Supp. _,

(publication order Mar. 19, 2014) (improper notice, tenants and former homeowners)

o US Bank v. Cantartzoglou, 2013 WL 443771 (Cal. App. Div. Super. Ct. Feb. 1, 2013) (same, former homeowners)

2. Holdover

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Complicated Post-Foreclosure UD Defenses

1. Compliance with FC procedures (CC§2924)

2. Compliance with FC substantive requirements: duly perfected title, “authority to foreclose” (CC 2924(a)(6))

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Defense: Non-compliance with FC Procedures

UD plaintiff just needs to show that a trustee’s deed upon sale has been recorded Rebuttable presumption that all notice and recording requirements

in CC 2924 were complied with (CC 2924(c))

Difficult to overcome this presumption without specific evidence of non-compliance Wells Fargo v. Detelder-Collins, 2012 WL 4482587, at *6-7 (Cal.

App. Div. Super. Ct. Mar. 28, 2012) (finding former homeowner’s allegations that they never received foreclosure notices not credible)

Presumption becomes conclusive for BFPs Biancalana v. TD Serv. Co., 56 Cal. 4th 807 (2013)

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Defense: Non-compliance with FC Procedures

Tenants should also be able to allege improper foreclosure procedures to defend a UD

Still difficult to prove without specific evidence of non-compliance

CCP 1161a: post-foreclosure eviction process CCP 1161b: “Notwithstanding 1161a . . .” tenants get

right to a 90-day notice, etc.

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Defense: Non-compliance with Substantive, “Authority to Foreclose” Requirement

Pre-HBOR: General rule: authority to foreclose (title) issues cannot be

litigated in a UD (Cheney v. Trauzettel, 9 Cal. 2d 158 (1937)) Exceptions - serious defects or questions going towards the

authority to foreclose, like an improper assignment or substitution of trustee Aurora Loan Servs. LLC v. Brown, 2012 WL 6213737 (Cal. App.

Div. Super. Ct. July 31, 2012) Wells Fargo v. Detelder-Collins, 2012 WL 4482587 (Cal. App. Div.

Super. Ct. Mar. 28, 2012) US Bank v. Espero, 2011 WL 9370474 (Cal. App. Div. Super. Ct.

Dec. 27, 2011)

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Defense: Non-compliance with Substantive, “Authority to Foreclose” Requirement

HBOR: codified the “authority to foreclose:” CC§2924(a)(6) No presumptions, but: Nothing in statute requires foreclosing entity to prove they are

the beneficiary, trustee, or designated agent

Affirmative wrongful foreclosure cases and UD defenses that invoke authority to foreclose arguments require a specific factual basis

So far, no UD cases where former homeowner used non-compliance with CC 2924(a)(6) as a defense

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Defense: Non-compliance with Substantive, “Duly Perfected Title” Requirement

Can be attacked even if there is no “authority to FC” issue

“Duly perfected” title encompasses all aspects of purchasing the property, not just recorded title Bank of N.Y. Mellon v. Preciado, _ Cal. App. 4th Supp. _,

(publication order Mar. 19, 2014) Dang v. Superior Court, No. 30-2013-684596 (Cal. App. Div.

Super. Ct. Jan. 31, 2014)

No default as a defense defeating duly perfected title Barroso v. Ocwen Loan Servicing, LLC, 208 Cal. App. 4th

1001 (2012)

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The Res Judicata Problem

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The Basic Dilemma

Res Judicata: what is it?

Common fact pattern: Foreclosing bank purchases property at FC sale Foreclosing bank files and wins a UD judgment against former

homeowners Former homeowners bring an affirmative wrongful foreclosure suit Court dismisses affirmative case based on res judicata with UD Example: Campos-Riedel v. JP Morgan Chase, 2013 WL 6070432

(E.D. Cal. Nov. 13, 2013) (post-FC case based on improper notice of NTS barred by res judicata with previous UD)

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The Problem with Recognizing the Problem

Unsettled area of law and courts are telling litigants two different things: UD court: we cannot decide title here Non-UD court: title was settled by the UD

Pro per former homeowners If represented, often by two different attorneys Res judicata can apply even if former homeowner did not

allege improper title in the UD, but could have Hopkins v. Wells Fargo Bank, 2013 WL 2253837 (E.D. Cal. May 22,

2013); Malkoskie v. Option One Mortg., 188 Cal. App. 4th 968 (2010)

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Is Title Supposed to be Decided in a UD?

Not in a standard UD UD courts are supposed to be summary proceedings that decide possession only

In a post-foreclosure CCP§1161a UD? Depends on the court Yes: Kartheiser v. Superior Court, 174 Cal. App. 2d 617 (1959) On limited basis: Malkoskie v. Option One Mortg., 188 Cal. App. 4th 968 (2010) No: Martin-Bragg v. Moore, 219 Cal. App. 4th 367 (2013)

When invalid title is asserted as a defense, courts become concerned about balancing rights:

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UD Plaintiff’s Rights UD Defendant’s Rights

Procedural: right to a quick, summary proceeding on possession

Litigating a complex issue like title will infringe on these rights

Constitutional right to due process: right to a full trial of the title issue

Refusing to litigate title will infringe on these rights

Martin-Bragg v. Moore, 219 Cal. App. 4th 367 (2013)

A “standard UD” is not built to accommodate a title issue

Due process rights trump procedural rights “The fact that [defendant] pleaded his title . . . as an

affirmative defense to the [UD] action did not constitute his consent to have his claim heard under the summary unlawful detainer procedures.”

UD court abused its discretion by attempting to litigate title in a UD instead of granting defendant’s motion to consolidate with a pending quiet title action

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Strategies

With a pending wrongful foreclosure or quiet title action: Motion to consolidate (Martin-Bragg)

calhbor.org brief bank: Brown v. Regional Serv. Corp. Motion to stay the UD

calhbor.org brief bank: US Bank v. Barroso

Without a pending wrongful foreclosure or quiet title action: File one and move to stay the UD or consolidate Try to litigate title in the UD

calhbor.org brief bank: JP Morgan Chase v. Allison If there is basis for appeal, appeal the UD: must be within 30 days of

date clerk mailed or other party served notice of entry of judgment Request access to pleadings at calhbor.org

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Questions?

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HBOR Collaborative’s Resources

For consumer attorneys representing homeowners and tenants facing foreclosure: Live trainings and webinars including this one Brief banks Technical assistance to individual attorneys Publications:

Monthly foreclosure newsletter Practice Guides Articles

Limited litigation support

All our resources are free and posted at calhbor.org

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Questions?

Homeowner Issues:Brittany McCormick, National Housing Law [email protected] (415) 546-7000Kent Qian, National Housing Law [email protected] 415-546-7000

Tenant Issues:Leah Simon Weisberg, Tenants [email protected] 415-495-8100Madeline Howard, Western Center on Law & [email protected] (213) 235-2628

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This project was made possible by a grant from the Office of the Attorney General of

California, from the National Mortgage Fraud Settlement, to assist California consumers.

Representing California Tenants & Former Homeowners in

Post-Foreclosure Evictions (Updated March 2014)

Unlawful detainer (UD) actions are typically associated with

landlord-tenant law. Former borrowers, though, often defend eviction

after foreclosure.1 They face different timelines and challenges, but

both tenants and former borrowers continue to struggle against

unlawful detainer actions as lenders and investors buy up foreclosed

properties2 and attempt to evict residents soon after purchase. Various

affirmative defenses arise from improper foreclosure procedures, so

these types of UDs are intimately related to foreclosure law. This

article reviews federal, California, and local measures that govern

post-foreclosure UD actions and provides practice tips for defending

UDs on behalf of both tenants and former borrowers.

Overview

Foreclosure purchasers seeking to remove tenants or former

borrowers must comply with both UD notice requirements and with

statutory foreclosure procedures. Specifically, plaintiffs bear the

burden of establishing:3 1) proper service of a valid notice to quit; 2)

1 The bona fide purchaser (BFP) of a foreclosed home must serve the previous

homeowner with a 3-day notice to quit. If the former homeowner continues to occupy

the property after this notice expires, or “holdover,” the BFP must bring a judicial

unlawful detainer action to evict. CAL. CIV. PROC. CODE § 1161a(b)(3) (2013). 2 See, e.g., Darwin Bond Graham, The Rise of the New Land Lords, EAST BAY

EXPRESS, Feb. 12, 2014, http://www.eastbayexpress.com/oakland/the-rise-of-the-new-

land-lords/Content?oid=3836329 (detailing the recent Oakland-based foreclosure

acquisitions of the “global real estate empire called Colony Capital”); Nathaniel

Popper, Behind the Rise in House Prices, Wall Street Buyers, N.Y. TIMES, June 4,

2013, at A1 (describing the rise or Real Estate Owned (REO) properties in depressed

housing markets). 3 See CAL. EVID. CODE § 500 (2011) (“[A] party has the burden of proof as to each fact

the existence or nonexistence of which is essential to the claim for relief or defense

that he is asserting.”); Wells Fargo Bank, N.A. v. Detelder-Collins, 2012 WL 4482587,

2

compliance with the foreclosure notice and recording requirements of

CC § 2924;4 3) duly perfected title (which includes the authority to

foreclose aspect of CC § 2924);5 and 4) that the tenant or former

borrower is holding over.6

I. UD Notice Requirements and Local Protections

Prior to 2009, tenants renting in states without post-foreclosure

protections were at the mercy of their new landlords once the property

sold at foreclosure.7 All tenants are now protected by federal notice

requirements, but California has added stricter state protections, and

California “just cause” localities often give the greatest amount of

protection.

A. Tenants

1. Federal protections

To address widespread tenant displacement brought on by the

housing crisis, Congress enacted the Protecting Tenants at Foreclosure

Act of 2009.8 Under the PTFA, a successor in interest must provide

bona fide tenants with a 90-day notice to vacate before beginning the

at *7 (Cal. App. Div. Super. Ct. Mar. 28, 2012) (citing § 500 and putting the

evidentiary burden on the UD plaintiff). Please refer to Cal. Rule of Ct. 8.1115 before

citing unpublished decisions. 4 See CAL. CIV. CODE § 2924(a)(1)-(5) for the full list of requirements. 5 See CAL. CIV. CODE § 2924(a)(6) (2013). 6 CAL. CIV. PROC. CODE § 1161a(b)(3) (2013); see also Vella v. Hudgins, 20 Cal. 3d 251,

255 (1977) (requiring UD plaintiffs to show that the foreclosure sale was proper and

demonstrate duly perfected title); Aurora Loan Servs., LLC v. Brown, 2012 WL

6213737, at *7 (Cal. App. Div. Super. Ct. July 31, 2012) (listing plaintiff’s affirmative

burdens). 7 NHLP, The Protecting Tenants at Foreclosure Act: Three Years Later, 42 HOUS. L.

BULL. 181, 181 (Sept. 2012); NAT’L LOW INCOME HOUS. COAL., RENTERS IN

FORECLOSURE: A FRESH LOOK AT AN ONGOING PROBLEM, 1 (Sept. 2012), available at

http://nlihc.org/sites/default/files/Renters_in_Foreclosure_2012.pdf (“[The PTFA]

provides the first national protection for renters.”). 8 The Protecting Tenants at Foreclosure Act of 2009, Pub. L. No. 111- 22, div. A, tit.

VII, §§ 701-704, 123 Stat. 1632, 1660-62 (enacted May 20, 2009), as amended by Pub.

L. No. 111-203, tit. XIV, § 1484 (July 21, 2010) [hereinafter PTFA]. For a more

thorough treatment of the first three years of the PTFA and related case law, refer to

NHLP, supra note 7.

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unlawful detainer process.9 If there is an existing lease, the tenant can

remain in possession until the lease expires.10 This protection does not

apply if the purchaser intends to occupy the property as their primary

residence.11 In that case, a bona fide tenant is still entitled to a 90-day

notice, but their tenancy can be terminated before the expiration of

their fixed-term lease.12

A tenant must be “bona fide” to qualify for the PTFA protection

described above: the tenant cannot be the former homeowner or the

child, spouse or parent of the homeowner, and the lease must have

been an “arm’s length” transaction for not substantially less than fair

market value rent.13 Tenants renting a room, rather than an entire

house, may still be “bona fide” under the PTFA,14 as may tenants

renting illegal units.15 Housing Choice Voucher tenants are

automatically bona fide tenants.16

9 PTFA § 702(a)(2)(B); Bank of N.Y. Mellon v. De Meo, 254 P.3d 1138, 1141 (Ariz. Ct.

App. 2011) (90-day period must be specified in the notice); Curtis v. US Bank Nat’l

Ass’n, 50 A.3d 558, 564-65 (Md. 2012) (90-day period begins the day tenant receives

notice, not the day of foreclosure). See generally NHLP, supra note 7, at 185. 10 PTFA § 702(a)(2)(A); Fontaine v. Deutsche Bank Nat’l Trust Co., 372 S.W.3d 257,

260 (Tex. App. 2012). To benefit from this provision, tenants must enter into their

leases before “notice of foreclosure:” when title is transferred to the new landlord at

the foreclosure sale. PTFA § 702(a)(2)(A); see 28th Tr. No. 119, City Inv. Capital v.

Crouch, 2013 WL 3356585, at *2 (Cal. App. Div. Super. Ct. June 27, 2013) (pointing

to the PTFA amendment that clarified this definition of “notice of foreclosure”). See

NHLP, supra note 7, at 184-85, for a more thorough discussion of this definition. 11 PTFA § 702(a)(2)(A). 12 Id. See generally CEB, California Eviction Defense Manual, § 20.8.3 (2d ed. 1993,

June 2013 update). 13 PTFA § 702(b). See generally NHLP, supra note 7, at 182, 185 (reviewing these

qualifications in more detail). To demonstrate fair market value, a tenant may offer

evidence of services they performed in exchange for rent. Rent does not require

monetary payment. 28th Tr. No. 119, City Inv. Capital v. Crouch, 2013 WL 3356585,

at *1 (Cal. App. Div. Super. Ct. June 27, 2013). 14 See, e.g., TDR Servicing LLC v. Smith, No. 37-2010-00200020 (Cal. App. Div.

Super. Ct. Aug. 29, 2012) (“Sub-tenant” status is not enough to disqualify a tenant

from PTFA protection.). 15 See Nativi v. Deutsche Bank Nat’l Tr. Co., 223 Cal. App. 4th 261, 286 (2014)

(extending PTFA protection (as a basis for affirmative state law claims) to tenants

renting an illegal garage unit). 16 PTFA § 703; Protecting Tenants at Foreclosure: Notice of Responsibility Placed on

Immediate Successors in Interest Pursuant to Foreclosure of Residential Property, 74

Fed. Reg. at 30,107, 30,108 (June 24, 2009) (“[T]he Section 8 tenant’s lease is, in

effect, a bona fide lease.”). The new owner takes title to the property subject to both

the Section 8 lease and the Housing Assistance Payments (HAP) contract with the

local public housing agency. PTFA § 703.

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2. California protections

a. Time requirements

As part of the Homeowner Bill of Rights, the California Legislature

passed tenant protections that go beyond those in the PTFA.17

Effective January 1, 2013, all tenants occupying a foreclosed home

require a 90-day notice to quit, even tenants who do not qualify as

“bona fide” under the PTFA.18 Like the PTFA, tenants with fixed term

leases may maintain their tenancy through the lease term, paying rent

to their new landlord.19 Tenants with fixed-term leases must meet

criteria identical to the PTFA’s “bona fide” conditions to qualify for

protection throughout their lease term.20 Under state law, the plaintiff

in a UD action bears the burden of showing a tenant with a fixed-term

lease does not meet these requirements.21

b. Cover sheet & method of notice

California law also mandates additional notice requirements than

those in the PTFA. Unless the notice unambiguously provides at least

90 days to vacate, notices must be accompanied by “cover sheets” with

17 The PTFA established a base of protections that state and local jurisdictions can

expand upon: “[N]othing under this section shall affect the requirements for

termination of any . . . State or local law that provides longer time periods or other

additional protections for tenants.” PTFA § 702(a)(2)(B). For a more thorough review

of California statutory notice requirements for UD actions, refer to CEB, supra note

12, § 1.8. 18 See CAL. CIV. PROC. CODE § 1161b (2013). A “tenant” is considered a person who

pays rent for housing, or who works or provides services in exchange for housing. See

Rossetto v. Barross, 90 Cal. App. 4th Supp. 1, 5 (2001) (“Rent may not necessarily be

a single specific dollar amount. It consists even of services.”). People who rent illegal

units may qualify as tenants for purposes of the PTFA. Nativi v. Deutsche Bank Nat’l

Tr. Co., 223 Cal. App. 4th 261, 286 (2014). The reasoning in Nativi could form the

basis for arguing that tenants of illegal units are afforded the California-specific

protections as well. See Carter v. Cohen, 188 Cal. App. 4th 1038 (2010) (finding

tenant’s rental of an illegal unit not a bar to her claim against her landlord for illegal

rent increases). Former homeowners are not considered tenants under federal, state,

or local law. 19 Id; PTFA § 702(c). Also like the PTFA, there is an exception for purchasers who

intend to use the property as their primary residence. In that case, tenants still

require a 90-day notice. CAL. CIV. PROC. CODE § 1161b(b)(1) (2013). 20 § 1161b(b)(2)-(4) (The tenant cannot be the child, spouse, or parent of the landlord-

mortgagor and the lease must be an arm’s length transaction for fair market value). 21 See § 1161b(c).

5

exact language dictated by statute, advising tenants to seek legal

counsel, to respond to all forthcoming notices, and of the 90-day and

fixed-term lease protections.22

California law also governs the method of service of notices to quit,

requiring attempts at personal service first, and then outlining the

posting and mailing alternatives.23 UD plaintiffs must strictly comply

with the method of service requirements and tenant advocates can use

flaws in service to successfully defend a UD.24

3. Local protections

The California Homeowner Bill of Rights set a floor of tenant

protections that localities can build upon.25 There are fifteen California

cities and towns that provide some level of “just cause for eviction”

protection, including San Francisco, Los Angeles, Oakland, and San

Diego.26 In these localities, foreclosure is not considered a “just cause”

for eviction, which prevents landlords from evicting tenants simply for

leasing a home purchased at foreclosure.27 Accordingly, tenants may

retain possession until there is a “just cause” to evict, regardless of

22 § 1161c (“[T]he immediate successor in interest . . . shall attach a cover sheet, in

the form as set forth [below].”) (emphasis added). See 28th Tr. No. 119, City Inv.

Capital v. Crouch, 2013 WL 3356585, at *2 (Cal. App. Div. Super. Ct. June 27, 2013)

(reversing the trial court’s judgment for plaintiff in part due to plaintiff’s failure to

notify tenant of her right to remain in possession until the expiration of her lease,

violating § 1161c(c) cover sheet requirements). 23 See CAL. CIV. PROC. CODE § 1162 (detailing personal delivery and “nail and mail”

methods). 24 See, e.g., Liebovich v. Shahrokhkhany, 56 Cal. App. 4th 511, 513 (1997) (“A lessor

must allege and prove proper service of the requisite notice. [Citations.] Absent

evidence the requisite notice was properly served pursuant to section 1162, no

judgment for possession can be obtained.”); 28th Tr. No. 119, 2013 WL 3356585, at *3

(finding the failure to list a tenant name on the proof of service a fatal defect in

plaintiff’s UD case). 25 “Nothing in this section is intended to affect any local just cause eviction

ordinance.” CAL. CIV. PROC. CODE § 1161b(e) (2013); see also Gross v. Superior Court,

171 Cal. App. 3d 265 (1985) (California foreclosure laws do not preempt local eviction

protections). 26 Refer to Tenants Together, Foreclosure Related Laws,

http://tenantstogether.org/article.php?id=935, for a complete list and links to

municipal websites. 27 See, e.g., BERKELEY MUN. CODE, Rent Stabilization and Eviction for Good Cause

Ordinance § 13.76 (Ord. 5467-NS § 1, 1982: Ord. 5261-NS § 1, 1980).

6

whether they are month-to-month tenants or tenants with a fixed-term

lease.28

B. Former Borrowers

In terms of notice, former borrowers enjoy far fewer UD protections

than tenants. Absent any federal regulation, once title is transferred to

the new owner in a foreclosure sale, the purchaser may give the former

borrower a 3-day notice to quit.29 If the former borrower continues in

possession, the new owner must file an unlawful detainer to evict.30

Self-help, including locking the former borrowers out of the property

without going through the UD process, is grounds for forcible entry

and detainer, trespass, and wrongful eviction claims.31 The same

service requirements that apply to tenant notices-to-quit also apply to

notices served on former borrowers and may be used as defenses in a

UD answer.32

II. Compliance with California Foreclosure Law

Without a proper foreclosure sale, the purchaser does not hold

valid title to the property and cannot satisfy that UD prerequisite

under CCP § 1161a.33 There are two ways to show an improper

foreclosure sale, and both tenants and former borrowers can attack the

28 For more information on this topic, see CEB, supra note 12, at § 20.10.C. 29 See CAL. CIV. PROC. CODE § 1161a(b)(2). 30 Id. See generally CEB, supra note 12, at § 20.4.II. 31 See, e.g., Makreas v. First Nat’l Bank of N. Cal., 2013 WL 2436589, at *11-12 (N.D.

Cal. June 4, 2013) (granting former homeowner-plaintiff’s partial summary judgment

motion on his trespass and wrongful eviction claims based on defendant-bank’s

illegal, post-foreclosure lock-out); Karp v. Margolis, 159 Cal. App. 2d 69, 75-76 (1958)

(holding that purchasers who entered into the premises without legal process after

foreclosure were guilty of forcible entry). 32 See CAL. CIV. PROC. CODE § 1162; Bank of N.Y. Mellon v. Preciado, __ Cal. App. 4th

Supp. __, (publication order Mar. 19, 2014) (finding service improper because plaintiff

used the “nail and mail” method before attempting personal service on tenants and

former homeowner in a foreclosed home); US Bank, N.A. v. Cantartzoglou, 2013 WL

443771, at *10-11 (Cal. App. Div. Super. Ct. Feb. 1, 2013) (same). 33 See Preciado, __ Cal. App. 4th Supp. __, (publication order Mar. 19, 2014) (in a

CCP 1161a UD, a “plaintiff must show that he acquired the property at a regularly

conducted sale and thereafter “duly perfected” his title”); Aurora Loan Servs., LLC v.

Brown, 2012 WL 6213737, at *7 (Cal. App. Div. Super. Ct. July 31, 2012) (linking

invalid title with plaintiff’s lack of standing to sue for possession); US Bank N.A. v.

Espero, 2011 WL 9370474, at *4 (Cal. App. Div. Super. Ct. Dec. 27, 2011) (same).

7

sale to defend a post-foreclosure UD: 1) demonstrate that the

foreclosure notice and recording procedures were not followed; or 2)

show that the beneficiary or trustee did not have the authority to

foreclose.34 The latter can be much more difficult to prove but, if

shown, can void a completed foreclosure sale.

A. Improper Foreclosure Notice & Recording Procedures

Once a trustee’s deed upon sale is recorded, there is a presumption

that the foreclosing entity complied with the notice and recording

requirements of CC 2924.35 Absent evidence to the contrary, this

presumption may be difficult for former borrowers and tenants to

overcome.36 The presumption becomes conclusive for bona fide

purchasers of the property.37 Importantly, this presumption does not

apply to the authority to foreclose aspect of CC 2924.38

B. Authority to Foreclose & Duly Perfected Title

Pre-HBOR, former borrowers generally had a limited ability to

challenge plaintiff’s title in an unlawful detainer action: only

noncompliance with foreclosure statutes and the legitimacy of the sale

itself could be litigated.39 However, if a defendant could show defects

or serious questions going to the validity of assignments or

substitutions of trustees, or if a plaintiff simply failed to provide any

evidence showing duly perfected title, courts generally reversed

34 See generally HBOR Collaborative, Litigating Under the California Homeowner

Bill of Rights, part II.A (Jan. 2014) (discussing the authority to foreclose and its

relation to CC § 2924(a)(6)). 35 Biancalana v. T.D. Serv. Co., 56 Cal. 4th 807, 814 (2013); Moeller v. Lien, 25 Cal.

App. 4th 822, 831-32 (1994). 36 See, e.g., Wells Fargo Bank, N.A. v. Detelder-Collins, 2012 WL 4482587, at *6-7

(Cal. App. Div. Super. Ct. Mar. 28, 2012) (accepting the trial court’s finding that

defendant borrower’s allegations that they never received foreclosure notices were

not credible and applying the presumption of compliance to § 2924’s notice

requirements, but not its authority to foreclose element); US Bank N.A. v. Espero,

2011 WL 9370474, at *2 (Cal. App. Div. Super. Ct. Dec. 27, 2011) (same). 37 Biancalana, 56 Cal. 4th at 814. 38 See Bank of Am., N.A. v. La Jolla Group II, 129 Cal. App. 4th 706 (2005) (statutory

presumptions do not apply to purchasers at invalid sales). 39 Cheney v. Trauzettel, 9 Cal. 2d 158, 160 (1937); Old Nat’l Fin. Servs., Inc. v.

Seibert, 194 Cal. App. 3d 460, 465 (1987).

8

judgments for plaintiffs and prevented evictions.40 HBOR has since

codified this authority to foreclose requirement in CC 2924.41

Even when the authority to foreclose is not an issue, there may be

some defect that would void the foreclosure sale and destroy the

plaintiff’s claim of “duly perfected title.”42 In Barroso v. Ocwen Loan

Servicing, LLC, for example, borrowers were compliant with their

permanent modification when their servicer foreclosed and the

purchaser brought an eviction action.43 The borrowers defended the

UD as part of larger litigation initiated by the borrowers against their

servicer.44 The court did not resolve the unlawful detainer, but found

that the servicer had breached the permanent modification contract

and that borrowers had a valid wrongful foreclosure claim to void the

foreclosure.45

40 See, e.g., Bank of N.Y. Mellon v. Preciado, __Cal. App. 4th Supp. __, (publication

order Mar. 19, 2014) (reversing UD court’s judgment for plaintiff because plaintiff

had failed to show compliance with CC 2924 – specifically, plaintiff failed to explain

why DOT and Trustee’s Deed upon Sale listed two different trustees); Aurora Loan

Servs., LLC v. Brown, 2012 WL 6213737, at *5-6 (Cal. App. Div. Super. Ct. July 31,

2012) (finding plaintiff’s lack of evidence showing valid assignment and substitution

of trustee fatal to their UD action, in the face of irregularities in the recording of

those documents); Wells Fargo Bank, N.A. v. Detelder-Collins, 2012 WL 4482587, at

*7 (Cal. App. Div. Super. Ct. Mar. 28, 2012) (reversing judgment for plaintiff because

plaintiff could not show a valid, recorded substitution of trustee that would have

given the foreclosing entity authority to foreclose); US Bank N.A. v. Espero, 2011 WL

9370474, at *4 (Cal. App. Div. Super. Ct. Dec. 27, 2011) (reversing trial court’s

judgment for plaintiff because plaintiff provided no evidence that it was assigned the

property from the purchaser after foreclosure). But see Aurora Loan Servs. v. Akins,

No. BV-029730 (Cal. App. Div. Super. Ct. Apr. 26, 2013) (rejecting former borrower’s

argument on appeal that plaintiff had to produce evidence of duly perfected title

because in an appeal, defendant borrower had to offer some evidence of her own to

reverse a trial court’s error). 41 CAL. CIV. CODE § 2924(a)(6) (2013) (“No entity shall record . . . a notice of default

. . . or otherwise initiate the foreclosure process unless it is the holder of the

beneficial interest under the mortgage or deed of trust, the original trustee or the

substituted trustee under the deed of trust, or the designated agent of the holder of

the beneficial interest.”). 42 “Duly” perfected title encompasses all aspects of purchasing the property, not just

recorded title. See Bank of N. Y. Mellon v. Preciado, __ Cal. App. 4th Supp. __,

(publication order Mar. 19, 2014) (finding the trial court erred in accepting the

recorded trustee’s deed as conclusive evidence of duly perfected title in the face of

contradictory evidence that the property was sold to borrower’s loan servicer, not the

UD plaintiff asserting title); Dang v. Superior Court, No. 30-2013-684596 (Cal. App.

Div. Super. Ct. Jan. 31, 2014) (finding the homeowner likely to succeed on appeal

because the plaintiff filed the UD before recording the trustee’s deed). 43 Barroso v. Ocwen Loan Servicing, LLC, 208 Cal. App. 4th 1001, 1007 (2012). 44 Id. 45 Id. at 1017.

9

III. Litigation Issues Unique to Post-Foreclosure

Unlawful Detainers

A. Tender

As a general rule, parties seeking to undo a foreclosure sale must

“tender” (offer and be able to pay) the amount due on their loan.46

There are several exceptions to this general rule, including when the

sale itself would be void.47 Accordingly, when a former borrower

defends an unlawful detainer by asserting that the plaintiff failed to

comply with the duly perfected title/authority to foreclose aspect of

CCP § 1161a(b), most courts do not require tender.48 In addition,

because they are not parties to the loan, courts have not imposed the

tender requirement on tenants who challenge the plaintiff’s compliance

with foreclosure notice and recording requirements of CC § 2924.49

B. The Res Judicata Problem for Former Borrowers

If a foreclosing bank proved “duly perfected” title in an unlawful

detainer, then a subsequent, affirmative wrongful foreclosure claim

brought by the former borrower against the bank is often barred by res

judicata, if the basis for the borrower’s affirmative claim is also

validity of title. This is true even if the borrower did not allege

improper title as an affirmative defense to the UD action, but could

have used this defense.50 This is a tricky problem to address because

46 See Lona v. Citibank, N.A., 202 Cal. App. 4th 89 (2011) (stating the general tender

rule). 47 See, e.g., Dimock v. Emerald Props., 81 Cal. App. 4th 868, 877-78 (2000). A full

discussion of the tender rule and its exceptions in a foreclosure context is in HBOR

Collaborative, supra note 34, at part III.C. 48 See, e.g., Wells Fargo Bank, N.A. v. Detelder-Collins, 2012 WL 4482587 (Cal. App.

Super. Ct. Mar. 28, 2012) (excusing tender when the sale was found void due to an

invalid trustee substitution); Seastone v. Perez, 2012 WL 6858725 (Cal. Super. Ct.

Dec. 13, 2012) (finding tender excused because defendant (former borrower) brought

a statutory attack on plaintiff’s title under CC § 2924); cf. MCA, Inc. v. Universal

Diversified Enters., 27 Cal. App. 3d 170 (1972) (requiring tender when the defendant

combined statutory defenses with claims for affirmative relief to invalidate the sale). 49 JP Morgan Chase Bank v. Callandra, No. 1371026 (Cal. Super. Ct. Santa Barbara

Cnty. Oct. 21, 2010) (allowing tenant to challenge the foreclosure without tender

because the foreclosing entity had failed to post a notice of trustee sale). 50 See, e.g., Hopkins v. Wells Fargo Bank, N.A., 2013 WL 2253837, at *4-5 (E.D. Cal.

May 22, 2013) (barring former borrower’s wrongful foreclosure claim because

defendant bank had already established duly perfected title in a previous UD action

10

many former borrowers choose to litigate UD actions without legal

representation, not anticipating that, by not addressing title, they are

destroying any chance they have of attacking the foreclosure in the

future. Even if former borrowers are represented, advocates defending

UD actions are unlikely to also represent former borrowers in

affirmative wrongful foreclosure cases.

This is an unsettled area of law, but if a former borrower or their

counsel is fortunate enough to realize the impending res judicata

problem as they defend an eviction (or even before the UD is filed),

they should file an affirmative suit against their servicer (which is, or

will be, the UD plaintiff) as soon as possible. This allows for a couple of

different options moving forward: 1) move to stay the UD until the

wrongful foreclosure suit is resolved; or 2) move to consolidate the UD

with the wrongful foreclosure suit.51 Either option allows for the

litigation of title outside the context of an unlawful detainer, which is

meant to decide possession only.52

C. Rights of Unnamed Occupants

A new landlord who wishes to evict existing, holdover tenants must

serve a summons and complaint to begin the UD process.53 To evict

unnamed tenants, they must also include a blank prejudgment right to

possession form.54 Before HBOR, any unnamed tenants residing on a

and the borrower could have litigated their § 2923.5 issue there); Castle v. Mortg.

Elect. Registration Sys., Inc., 2011 WL 3626560, at *4-9 (C.D. Cal. Aug. 16, 2011)

(dismissing plaintiff borrower’s wrongful foreclosure claims because title was

“litigated” in the previous UD action, even though there was a default judgment in

that action); Lai v. Quality Loan Serv. Corp., 2010 WL 3419179, at *4 (C.D. Cal. Aug.

26, 2010) (finding borrower’s requests for declaratory relief and to set aside the

foreclosure sale issues already litigated in a previous UD action); Malkoskie v.

Option One Mortg. Corp., 188 Cal. App. 4th 968, 973 (2010) (applying the same

reasoning described in Hopkins). 51 See Martin-Bragg v. Moore, 219 Cal. App. 4th 367, 385 (2013) (finding that the UD

defendant and former borrower was prejudiced by the trial court’s refusal to

consolidate the UD with the former borrower’s affirmative wrongful foreclosure suit). 52 A recording of an HBOR Collaborative webinar on this issue will be available

starting in April, 2014. 53 The standard procedure, at least for corporate purchasers of foreclosed homes, is to

name only the former borrower on a UD summons and complaint, but to also list

“Does 1-10” and “all occupants,” thereby covering any tenants that may or may not

reside on the property. 54 See CAL. CIV. PROC. CODE § 415.46 (2012). Including this form complied with pre-

HBOR post-foreclosure eviction law but did not give tenants a fair opportunity to

11

foreclosed property needed to complete this form and file it with the

court within 10 days of being served notice.55 If they did not, these

tenants lost all rights to assert possession by defending the UD,56 or to

object to the enforcement of a judgment for possession.57 Because of

HBOR, however, unnamed tenants in post-foreclosure UD actions can

now file a claim of right to possession or object to a judgment at any

time before a lockout.58

D. Masking Rule

Finding rental housing with an eviction on your rental record can

be difficult and often puts another strain on already stressed tenants

and former borrowers. Usually, court documents related to unlawful

detainer cases are “masked,” or not available to the public, for only 60

days after the complaint is filed.59 After this 60-day “curtain,” the case

file becomes public unless the defendant prevailed in the UD.60 Since

2010, tenants and borrowers defending post-foreclosure evictions have

been afforded more protection: UD documents are masked for 60 days

following the filing of the complaint, and then permanently masked

unless the plaintiff prevails within those 60 days, against all

defendants, after a trial.61

IV. Evictions of Tenants for Nonpayment of Rent and

Breach of Lease

Because California law now clarifies that the landlord-tenant

relationship continues after foreclosure,62 a tenant may also face

assert the right to possession they were entitled to under PTFA or local just cause

statutes. 55 See CAL. CIV. PROC. CODE § 1174.25(a) (2007). 56 Id. 57 See 1174.3 (2007). For more on this subject, see CEB, supra note 12, at § 24.2. 58 See CAL. CIV. PROC. CODE § 415.46(e)(2) (2012); Manis v. Superior Court, No. 1-13-

AP-001491 (Cal. App. Div. Super. Ct. Apr. 26, 2013) (claim of right to possession

must be granted when the claimant has a valid claim to possession); see also CEB,

supra note 12, at § 24.6. 59 See CAL. CIV. PROC. CODE § 1161.2(a)(5) (2013). 60CAL. CIV. PROC. CODE § 1161.2(a)(6) 61 CAL. CIV. PROC. CODE § 1161.2(a)(6) (2013). Documents are still available to parties

listed as exceptions in § 1161.2(a)(1)-(4). 62 See CAL. CIV. PROC. CODE § 1161b (2013) (“[A]ll rights and obligations under the

lease shall survive foreclosure.”). Several courts have also found that the landlord-

12

evictions due to non-payment of rent or breach of a lease term.63

Because these evictions are based on CCP § 1161, the 90-day notice

protection in CCP §1161b and the cover sheet requirement of CCP §

1161c do not apply. Even in that situation, however, courts have held

that bona fide tenants under the PTFA still must receive a 90-day

notice.64

Finally, successors-in-interest (new landlords) must provide notice

to existing tenants of the change in ownership within 15 days of

assuming ownership.65 A new landlord must comply with the notice

requirement before the landlord can evict for non-payment of rent.66

They may, however, request back-rent for any time the tenant was not

paying rent, and bring an action in small claims court to do so.67

Conclusion

Defending tenants and former borrowers in post-foreclosure

unlawful detainer actions requires advocates to become versed in

California foreclosure law. These types of cases also open up UD

defenses uncommon in standard landlord-tenant cases: improper

foreclosure notice and recording procedures and imperfect title.

The California Homeowner Bill of Rights Collaborative works to

train advocates, provide technical assistance, and create a space where

California consumer attorneys can share information on tenant and

homeowner legal developments in California. Visit our website to

access updated information on these topics: www.calhbor.org.

tenant relationship continues post-foreclosure under the PTFA. See Mik v. Fed.

Home Loan Mortg. Corp., __ F.3d __, 2014 WL 486214 (6th Cir. Feb. 7, 2014); Nativi

v. Deutsche Bank Nat’l Tr. Co., 223 Cal. App. 4th 261, 277-84 (2014). 63 But see Solid Rock Homes, LP v. Woods, No. 37-2012-00200205-CL-UD-CTL (Cal.

App. Div. Super. Ct. Nov. 20, 2013) (finding tenants need not pay rent to benefit from

the post-foreclosure notice requirements in former CCP § 1161b or the PTFA). 64 PNMAC Mortg. v. Stanko, No. 11U04495 (Cal. Super. Ct. Los Angeles Cnty. Mar.

7, 2012); Fed. Nat'l Mortg. Ass'n v. Vidal, 2012 WL 597929 (Mass. Hous. Ct. Feb 17,

2012). 65 CAL. CIV. CODE § 1962(c) (2013). 66 Id. 67 “Nothing in this subdivision shall relieve the tenant of any liability for unpaid

rent.” Id.

Landlord serves tenant notice to pay rent, cure violation of rental agreement,

or quit (move out)

Tenant pays rent, cures violation or moves out within

time given

Landlord claims tenant did not pay, cure, or move

within time given


Tenant files answer or one of a few motions.

Which to file is a question for lawyer.

Tenant does not timely file a response with the court

Landlord files Unlawful Detainer (eviction lawsuit) and serves tenant with a

Summons & Complaint

Tenant should document how they timely complied

Tenant moves out. Tenant should document when they

move out.

Landlord serves tenant 30, 60, 90, 120 day notice to terminate tenancy

(move out)

Landlord can get a default judgment against

the tenant—tenant loses automatically.

Tenant loses

Court trial—tenants rarely able to secure legal representation in UD cases

Tenant wins

Tenant stays in home and must immediately

pay all rent

Sheriff comes to lock tenant out

As soon as the next day

About one week

5 days

Tenants can make an agreement with the landlord

at any time. Consult with a lawyer before

signing anything.

Tenants have only 5 calendar days including weekends to properly

respond to the court. If tenant is not served, they

should go to the court to get a copy.

Basic Eviction Process in California

Court also sends courtesy letter

notifying tenant of UD filing.

10-21 days from the date answer was filed

If legal help is sought, tenant can try to file a stay to

get more time.

UDs to owners in foreclosure: tenant also

needs to respond and can file a pre/post judgment

claim any time before eviction.

California Nonjudicial Foreclosure Statutory Requirements: CC 2924 – 2924k

Statute

Subsection Procedural Requirement

2924: NOD (and some NTS and sale)

recording requirements

(a) A power of sale may be exercised:

after a breach of the loan obligation and

only if the following apply (a)(1)-(6):

(a)(1) The trustee, mortgagee, or beneficiary (or their agents) records an NOD in the county recorder’s office

(a)(1)(A)-(D) The NOD must: (A) Identify the DOT by either:

naming the trustor(s) and identifying where in the records the DOT was recorded OR

describing the property (B) State that a breach has occurred (C) Describe the nature of the breach and the foreclosing entity’s intent to exercise their power of sale (D) How much $ it would take to cure the default (see 2924c(b)(1) for exact wording of statement)

(a)(2) The power of sale cannot be exercised until 3 months after the NOD is recorded

(a)(3) The foreclosing entity must wait at least 3months after recording the NOD to record a Notice of Sale (NTS). The NTS state the time and place of sale

(a)(5) (HBOR addition): if sale is postponed for 10 business days or more, a notice of the new sale time/date/place must be given to borrower within 5 business days of the postponement

(a)(6) *Not really

procedural; more substantive (chain

of title)

(HBOR addition): identifies which entities have “the authority to foreclose:” 1. Holder of the beneficial interest under the DOT 2. Original or substituted trustee under the DOT 3. Designated agent of the holder of the beneficial interest Acting within the scope of authority designated by the holder of the beneficial interest

2924b: NOD & NTS notice requirements

(b)(1) The foreclosing entity must mail a copy of the NOD to each borrower within 10 bus. days of recording the NOD

(b)(2) The foreclosing entity must mail a copy of the NTS at least 20 days before the sale date

2924c: Curing the default

(a)(1) Lists amounts to be included in the NOD statement about how much $ it would take to cure the default

(a)(2) If the default is cured, the foreclosing entity must instruct the trustee to rescind the NOD within 21 days following the loan reinstatement. The trustee must record the rescission within 30 days of being notified of the rescission

(b) NODs recorded under 2924 and mailed under 2924b must include the word-for-word statement described in this section

(e) A borrower can cure their default (reinstate their loan and escape foreclosure) at any time between the recording of the NOD and 5 business days before the sale date listed in the operative NTS or sale postponement notice.

2924f: NTS notice, publication &

recording requirements

(b)(1) NTS must specify time and date of sale, the specific location of where the sale will be held, and a description of the property Must be posted at least 20 days before the sale date in a public place in the city (or judicial district) where the sale will take place. This NTS copy must be published in that place each week, 3 weeks in a row

(b)(2) NTS must be published in a newspaper of general circulation, at least 20 days before the sale date

(b)(3) NTS must be posted on the property to be sold, in a conspicuous place (the door) at least 20 days before the sale date

(b)(4) NTS must be recorded with the county recorder’s office least 20 days before the sale date

(b)(5) NTS must include:

Name of the original trustor

Name and CA contact info for the trustee

Street address of the property to be sold (or legal description)

(b)(7) NTS must include:

Total unpaid balance at the time of the publication of the NTS

2924g: Sale requirements

(a) Sales must:

happen in the county the property is located

be conducted via auction and the property sold to the highest bidder

occur between 9am and 5pm M-F and coincide with the time and date listed in the NTS

(c)(1) Sales may be postponed but never more than 365 days from the date in the most recent NTS

(c)(2) If a sale is postponed for more than 365 days:

foreclosing entity must issue a new NTS and go through all the notice, publishing, and recording requirements in 2924f

(d) For a regular (less than a year) postponement, the foreclosing entity must:

declare, at the would-be auction, the reason for postponement and the new sale date and time (the place must remain the same)

Special rules and timelines apply to situations where the sale was postponed because of an injunction, restraining order, or stay

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Filed 8/19/13 (ordered published by Supreme Ct. 3/19/14)

SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

APPELLATE DIVISION

THE BANK OF NEW YORK MELLON,

Plaintiff and Respondent,

v.

VIDAL A. PRECIADO et al.,

Defendants and Appellants.

Appellate Division No. 1-12-AP-001360

(Super. Ct. No. 111CV215286)

THE BANK OF NEW YORK MELLON,

Plaintiff and Respondent,

v.

ROLAND LUKE et al.,

Defendants and Appellants.

Appellate Division No. 1-12-AP-001361

(Super. Ct. No. 111CV215288)

THE COURT*

The appeal by appellants Vidal Preciado (“Preciado”), Roland Luke (“Luke”), and

Kenneth Henderson (“Henderson”) (collectively, “Appellants”) from the unlawful detainer

judgments entered on March 16, 2012, came on regularly for hearing and was heard and

submitted on August 16, 2013. We hereby hold as follows:

Procedural History

This is an appeal from two related unlawful detainer actions. Respondent The Bank of

New York Mellon (“Bank”) is the owner of 1343 State Street, in Alviso, California. On July

25, 2011, Bank acquired title to this property at a trustee’s sale pursuant to foreclosure upon a

deed of trust. The property was previously owned by Preciado and occupied by Appellants.

* Before Lucas, P. J., Ryan J., and Alloggiamento, J.

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On September 1, 2011, Bank served a written notice to Appellants to quit and deliver

possession of the property within three days, 30 days, or 90 days (depending on their occupancy

status). After waiting more than 90 days, Bank filed two unlawful detainer complaints against

Appellants on December 19, 2011. The complaints incorrectly described the property as being

located in San Jose instead of Alviso. Appellants filed individual answers to the complaints,

and Henderson and Luke also filed individual prejudgment claims of right to possession.

Trial on the unlawful detainer actions was held on March 16, 2012, before the

Honorable Socrates Manoukian.1 That same day, a judgment was entered in each case which

awarded Bank possession of the property, rent, and damages. However, when the sheriff sought

to execute the writ, it was discovered that the property was incorrectly listed as being in San

Jose. The sheriff was unable to execute the writ due to this error, and Bank moved for an ex

parte order to amend the judgment. On April 13, 2012, the court entered an order amending the

judgments to change the property address to Alviso.

At Appellants’ request, the court stayed Appellants’ eviction for 40 days, up to and

including April 28, 2012. Appellants filed individual notices of appeal from the March 16,

2012 judgments.

Appealability

A final judgment in a limited civil case is appealable to the appellate division of the

superior court. (Code Civ. Proc., § 904.2, subd. (a).) The trial court entered judgment in these

limited civil cases on March 16, 2012. Accordingly, the judgments are appealable to the

Appellate Division.

Issues on Appeal

On appeal, Appellants make the following arguments:

1) The Appellate Division must conduct an independent review of the entire

record pursuant to People v. Wende;

2) “The Service Process was littered with gross procedural irregularities”;

1 On that same day, Preciado filed a wrongful foreclosure action against Bank and other defendants.

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3) Bank of America did not produce evidence sufficient to prove that the

foreclosure sale was conducted in strict compliance with Civil Code section

2924 and that title was duly perfected; and

4) Bank improperly filed two separate unlawful detainer actions for the same

property.

Standard of Review

In an appeal from an unlawful detainer judgment, “[w]e review the trial court’s findings

of fact to determine whether they are supported by substantial evidence.” (Palm Property

Investments, LLC v. Yadegar (2011) 194 Cal.App.4th 1419, 1425.) To the extent the trial court

drew conclusions of law based upon its findings of fact, we review those conclusions of law de

novo. (Id. at pp. 1425-1426.)

People v. Wende is Inapplicable to Civil Appeals

Appellants’ first argument is that the Appellate Division must conduct an independent

review of the entire record pursuant to People v. Wende (1979) 25 Cal.3d 436. However, a

Wende review only applies to criminal appeals. (See In re Sade C. (1996) 13 Cal.4th 952, 984.)

In civil appeals, the appellate courts are not required to perform an unassisted study of

the record or review of the law relevant to a party’s contentions on appeal. (Air Couriers

Internat. v. Employment Development Dept. (2007) 150 Cal.App.4th 923, 928; Guthrey v. State

of California (1998) 63 Cal.App.4th 1108, 1115.) Instead, a party’s failure to perform its duty

to provide argument, citations to the record, and legal authority in support of a contention may

be treated as a waiver of the issue. (Annod Corp. v. Hamilton & Samuels (2002) 100

Cal.App.4th 1286, 1301; People ex rel. 20th Century Ins. Co. v. Building Permit Consultants,

Inc. (2000) 86 Cal.App.4th 280, 284; Guthrey, supra, at pp. 1115-1116.) Thus, Appellants’

request for an independent Wende review is improper.

Service of Notices to Quit

Appellants argue that they were not properly served with notices terminating their

tenancy. As a prerequisite to filing an unlawful detainer action, a tenant must be served with

either a 3, 30, or 90 days’ notice, depending on the individual’s status as a tenant. (Code Civ.

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Proc., §§ 1161, 1161a, 1161b.) Code of Civil Procedure section 11622 provides three methods

of serving these notices: (1) by personal delivery to the tenant (personal service); or (2) if the

tenant is absent from his residence and usual place of business, by leaving a copy with a person

of suitable age and discretion at either place, and sending a copy through the mail to the tenant’s

residence (substituted service); or (3) if a place of residence and usual place of business cannot

be ascertained or a person of suitable age or discretion cannot be found there, then by affixing a

copy in a conspicuous place on the property and delivering a copy to a person residing there, if

such a person can be found, and also sending a copy through the mail addressed to the tenant at

the place where the property is situated (post and mail service). A notice is valid and

enforceable only if the lessor has strictly complied with these statutorily mandated requirements

for service. (Losornio v. Motta (1998) 67 Cal.App.4th 110, 113-14; Liebovich v.

Shahrokhkhany (1997) 56 Cal.App.4th 511, 513.)

At trial, Henderson testified that he did not receive any notice to quit. (RT, p. 14:11-15.)

In response, Bank’s counsel explained that all the occupants were served with a notice to quit

on September 1, 2011. Bank’s counsel referred the court to Exhibit B of Bank’s complaint

which contained the proofs of service for the notices. (RT, p. 14:16-23.) In the proofs of

service, registered process server Kris Vorsatz (“Vorsatz”) declared that he served the notices

on September 1, 2011. (CT-286, pp. 11-12; CT-288, pp. 11-12.) According to the proofs of

service, “[a]fter due and diligent effort” Vorsatz posted a copy of the notices on 1343 State

Street, San Jose, California. (Id.) Thereafter, Vorsatz mailed a copy of each notice to a post

office box that was designated as Presiado’s mailing address. (Id.) The court then entered

judgment for Bank. (RT, p. 14:26-27.)

Where service is carried out by a registered process server, Evidence Code section 647

applies to eliminate the necessity of calling the process server as a witness at trial. (Palm

Property Investments, LLC v. Yadegar, supra, 194 Cal.App.4th at p. 1427.) Under Evidence

Code section 647, “[t]he return of a process server [ ] upon process or notice establishes a

presumption, affecting the burden of producing evidence, of the facts stated in the return.” As

2 Hereafter, unless otherwise stated, all section references are to the Code of Civil Procedure.

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Bank did not produce Vorsatz as a witness, the question is whether Vorsatz’s proofs of service

established Bank complied with the notice requirements of section 1162.

In Highland Plastics, Inc. v. Enders (1980) 109 Cal.App.3d Supp. 1, the court analyzed

whether there was sufficient evidence that the landlord complied with the “post and mail”

provision of section 1162. The court noted that this code section does not require a showing of

reasonable diligence in attempting personal service before utilizing the substituted service

provisions, as required in Code of Civil Procedure section 415.20, subdivision (b). (Id. at p. 6.)

It does require, however, “that if the tenant cannot be located for personal service that the

person making this substituted service first determine either that the tenant’s ‘. . . place of

residence and business cannot be ascertained, or that a person of suitable age or discretion there

cannot be found. . . .’ ” (Id.) In Highland Plastics, the deputy marshal testified that when he

attempted to serve the 30-day notice on defendant, no one answered his knock on the door of

the premises which had been identified to him as the place of residence and business of

defendant. (Id. at pp. 6-7.) When there was no response to the deputy’s knock, he then posted

the notice “in a conspicuous place on the property” and mailed a copy to the place where the

property was situated. (Id. at p. 7.) Thus, the court concluded that there was substantial

evidence supporting the trial court’s finding that there had been a proper service of the notice

utilizing the “post and mail” provisions as neither the defendant nor a person of suitable age and

discretion could be found. (Id.)

Similarly, in Hozz v. Lewis (1989) 215 Cal.App.3d 314, the court held that trial court

properly found that the landlord’s “post and mail” procedure of service of a three-day notice

pursuant to section 1162 was adequate. In that case, testimony at trial established that the

landlord’s agent went to the apartment, rang the bell and knocked on the door. When no one

answered, the employee taped a copy of the notice to the door and slipped another copy under

the door. He then posted another copy by mail addressed to the tenant. (Id. at p. 316.) Since no

one was present when the process server went to the apartment, “post and mail” service was

authorized under section 1162. (Id. at p. 317.)

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As explained above, no showing of reasonable diligence in attempting personal service

before utilizing the substituted service provisions is required under the statute. (See Hozz v.

Lewis, supra, 215 Cal.App.3d at p. 317.) Nevertheless, “post and mail” service is not

authorized as a first-resort method of service. Here, Vorsatz’s declaration does not establish

that Bank complied with section 1162 as it does show that personal service was ever attempted.

The proofs of service do not state that Appellants were not home or that no one of a suitable age

was home when the server posted the notice “in a conspicuous place.”

In its opposition brief, Bank argues that Appellants may not challenge service of the

notices as they did not include this as an affirmative defense in their answers. Bank is mistaken.

An affirmative defense is an allegation of new matter in the answer that is not responsive to an

essential allegation in the complaint. In other words, an affirmative defense is an allegation

relied on by the defendant that is not put in issue by the plaintiff’s complaint. (Bevill v. Zoura

(1994) 27 Cal.App.4th 694, 698; State Farm Mut. Auto. Ins. Co. v. Superior Court (1991) 228

Cal.App.3d 721, 725.) Where the answer alleges facts showing that some essential allegation of

the complaint is not true, those facts are not “new matter,” but only a traverse. (Ibid.) Because

proper service of the termination notices was an essential element of Bank’s unlawful detainer

actions, Appellants’ general denial of each statement of the complaint sufficiently put the

service of the notices at issue and Appellants were not required to plead ineffective notice as an

affirmative defense. (See Bevill v. Zoura, supra, 27 Cal.App.4th at p. 698.)

Accordingly, the judgment for possession must be reversed because Bank failed to

establish proper service of the notices. (See Liebovich v. Shahrokhkhany, supra, 56

Cal.App.4th at p. 514.)

Sale in Compliance with Civil Code § 2924 et seq. and the Deed of Trust

“Historically a cause of action for unlawful detainer was available only to a landlord

against his tenant.” (Gross v. Superior Court (1985) 171 Cal.App.3d 265, 271.) The remedy

has been expanded by statute to additional categories of plaintiffs (see Code Civ. Proc., § 1161)

and defendants (see Code Civ. Proc., § 1161a). The purpose of section 1161a of the Code of

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Civil Procedure was to make clear that one acquiring ownership through foreclosure could also

evict by a summary procedure. (See Gross v. Superior Court, supra, 171 Cal.App.3d at p. 271.)

In an unlawful detainer action brought pursuant to Code of Civil Procedure section

1161a, subdivision (b)(3), the plaintiff must show that he acquired the property at a regularly

conducted sale and thereafter “duly perfected” his title. (Stephens v. Hollis (1987) 196

Cal.App.3d 948, 952; Evans v. Superior Court (1977) 67 Cal.App.3d 162, 169.) “[W]here the

plaintiff in the unlawful detainer action is the purchaser at a trustee’s sale, he or she ‘need only

prove a sale in compliance with the statute and deed of trust, followed by purchase at such sale,

and the defendant may raise objections only on that phase of the issue of title.’ ” (Old Nat’l

Fin. Servs. v. Seibert (1987) 194 Cal.App.3d 460, 465.) “The statute” with which a post-

foreclosure plaintiff must prove compliance is Civil Code section 2924. (Seidell v. Anglo-

California Trust Co. (1942) 55 Cal.App.2d 913, 920.) On appeal, Appellants asserted that Bank

did not meet its affirmative burden in this regard.

At trial, Bank provided the Trustee’s Deed Upon Sale, recorded August 8, 2011. (See

RT, p. 5:1-11.) The Trustee’s Deed Upon Sale purportedly showed that Bank purchased the

property at the trustee’s sale held on July 25, 2011. (See CT-286, pp. 6-8.) Luke then testified

that he was at the auction, and that the property “went back to Bank of America.” (See RT, p.

6:25-26.) Preciado testified that the loan was originally with Countrywide, and then

Countrywide was “taken over by Bank of America.” (See RT, p. 6:27-28.) The court

responded, “Well, I don’t know what Bank of America did or didn’t do, but they have a deed

here showing it’s duly authenticated, the deed that Bank of New York Mellon owns the property

here.” (See RT, p. 7:16-19.) When Appellants pressed Bank to prove it owned the property, the

court stated, “They have a deed showing that they own the property, and that’s all they need to

do.” (See RT, p. 8:21-23.)

The trial court erred when it found that the Trustee’s Deed Upon Sale was sufficient

proof that Bank acquired the property at a regularly conducted sale and thereafter “duly

perfected” its title. “[T]itle is duly perfected when all steps have been taken to make it perfect,

i.e., to convey to the purchaser that which he has purchased, valid and good beyond all

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reasonable doubt, which includes good record title, but is not limited to good record title, as

between the parties to the transaction. The term ‘duly’ implies that all of those elements

necessary to a valid sale exist, else there would not be a sale at all. (Kessler v. Bridge (1958)

161 Cal.App.2d Supp. 837, 841 [internal citations omitted].) Under a deed of trust, power of

sale upon the trustor’s default vests in the trustee. (Calvo v. HSBC Bank USA, N.A. (2011) 199

Cal.App.4th 118, 122.) Therefore, in order to prove compliance with section 2924, the plaintiff

must necessarily prove the sale was conducted by the trustee.

Here, the Trustee’s Deed Upon Sale indicates the property was sold by Recontrust

Company, N.A. acting as trustee. However, the Deed of Trust identifies Commonwealth Land

Title Company as the trustee. (See CT-286, p. 121.) Bank did not provide any evidence

establishing Recontrust’s authority to conduct the trustee’s sale. As Bank failed to provide any

evidence that Recontrust was substituted for the original trustee, Bank was not entitled to

judgment.

Appellants’ Remaining Arguments

Given our decision to reverse the judgments, we need not reach Appellants’ remaining

arguments.

Conclusion

The judgments entered on March 16, 2012, are REVERSED and the trial court is

instructed to entered judgments in favor of Appellants. Appellants are the prevailing party and

are entitled to costs on appeal. (See Cal. Rules of Court, rule 8.891(a)(2).)

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Trial Court: Superior Court of the County of Santa Clara

Trial Judge: Honorable Socrates Manoukian, J.

Iscandari & Associates and Alieu Iscandari for Defendants and Appellants.

Bryan Cave, Andrea Hicks; Miles Bauer Bergstrom & Winters and Christine Chung for

Plaintiff and Respondent.