Foreclosed Homeowner: Tender Not Required?

   Homeowners who have had their interest in their homes foreclosed frequently feel wronged and file suit to set-aside the sale. Lender’s, and their agent’s, demurrers to homeowner’s complaints are frequently sustained. One reason is that homeowners usually cannot allege tender. California law requires a valid tender sufficient to cure the outstanding balance of the loan in order to challenge and unwind a non-judicial foreclosure sale.

   An exception to the tender requirement is when the trustee’s deed upon sale is “void” as opposed to “voidable”. Ordinary defects and irregularities in a sale render it merely voidable and not void, whereas substantially defective sales have been held void. “Substantially defective” means a defect in regard to a statutory provision which is regarded as mandatory. One such mandatory provision is Civil Code Section 2924g, subdivision (c)(1)(C), which provides for postponement of the trustee sale by instruction by the beneficiary to the trustee, or by mutual agreement between the trustor and beneficiary.

   In the recent non-published case Aharonoff v. American Home Servicing, Inc., Aharonoff did not allege tender and demurrers to the complaint were sustained. The appellate court reversed because Aharonoff alleged sufficient facts to state a claim that there was an agreement to postpone the trustee’s sale. If found true, the trustee’s deed is “void” and an allegation of tender is not required.

   The purchaser at the trustee’s sale was the beneficiary. It appeared unlikely to the court, under the facts of the case, that the beneficiary was a BFP. If the purchaser had been a BFP, Aharonoff likely could not avoid the mandate of Civil Code Section 2924, subdivision (c), which provides that a recital in a trustee’s deed executed pursuant to the power of sale, stating there was compliance with all applicable requirements of law regarding notice of default and notice of the trustee’s sale, “shall constitute prima facie evidence of compliance with these requirements and conclusive evidence thereof in favor of bona fide purchasers and encumbrancers for value and without notice.”

   The distinction between a “void” and merely “voidable” sale is an important one, as the case illustrates. Homeowners who can allege a valid agreement to postpone a sale, which was not honored, may be able to have the sale set-aside and the trustee’s deed cancelled, provided the sale was not to a BFP, without alleging tender.

  An interesting side note: Aharonoff did not make the argument which won the day, in the court below. Nonetheless, under the unique rules applicable in the context of a demurrer, the argument was not forfeited. When a demurrer is sustained without leave to amend, the plaintiff and appellant generally is not precluded from raising a new legal issue or theory on appeal to support an argument that his or her complaint states a cause of action. Since the undisputed alleged facts supported Aharonoff’s new legal theory, the court appropriately considered the merits.

  I consult with clients and accept cases involving foreclosure and allegations of wrongful foreclosure, including those where the trustee’s deed upon sale is void. For other types of cases I accept, please scroll my “Home” and “My Practice” pages. If you are seeking a legal consultation or representation, please give me a call at 818.971.9409. – Michael Daymude

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