Melendrez v. D & I Investment, Inc.
| Decision Date | 29 March 2005 |
| Docket Number | No. H027098.,H027098. |
| Citation | 26 Cal.Rptr.3d 413,127 Cal.App.4th 1238 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Miguel MELENDREZ et al., Plaintiffs and Appellants, v. D & I INVESTMENT, INC., Defendant and Respondent. |
Maryam S. Karson, Richard S. Timan, Timan & Walsh, Watsonville, Attorneys for Plaintiffs/Appellants.
Edward C. McDonald, Jr., McDonald Law Offices, San Jose, Benjamin R. Levinson, Law Office of Benjamin R. Levinson, Campbell, Patric J. Kelly, Duane W. Shewaga, Adleson, Hess & Kelly, Campbell, Robert H. Darrow, Darrow Law Offices, Santa Cruz, Attorneys for Defendant/Respondent.
Miguel and Maria Melendrez (Borrowers) lost their Watsonville home through a nonjudicial foreclosure sale in July 2001, approximately eight months after their loan default. The residence was purchased by a third party, defendant Royal Realty (Buyer). Borrowers thereafter sued to set aside the trustee's sale and to cancel the trustee's deed. They claimed that the sale was in violation of a repayment agreement (which included a conditional agreement to postpone the sale) with their lender, Washington Mutual Bank, N.A. (Lender), and thus violated Civil Code section 2924g, subdivision (c)(2).1
After a three-day bench trial, the court concluded that the trustee's sale was valid. It decided that the sale did not violate the repayment agreement between Borrowers and Lender. It held further that Buyer was a bona fide purchaser for value (BFP) of the property at the sale.
Borrowers appeal. They argue that the trustee's sale was invalid because it took place notwithstanding a repayment agreement under which Lender agreed to postpone the sale. Borrowers contend further that the court erred by applying the wrong legal standard in reaching the conclusion that Buyer was a BFP. They assert that the correct standard required significant consideration of the fact that Buyer was experienced in foreclosure sales.
We review case law suggesting that an experienced foreclosure buyer who acquires property at significantly less than its fair market value cannot be a BFP and reject that conclusion. Accordingly, we hold that the trial court properly determined that Buyer was a BFP. The conclusion flowing directly from the fact that Buyer was a BFP was that the trustee's sale was unassailable as to Buyer in the absence of fraud. Since there was no evidence of fraud chargeable to Buyer, we conclude that the court properly rejected Borrowers' request to void the trustee's sale. We thus affirm the judgment.
In or about June 1987, Borrowers executed a note and deed of trust in favor of Great Western Savings, Lender's predecessor in interest. The deed of trust granted a security interest in residential property located at 61 White Street, Watsonville, California (Property). Borrowers defaulted on the loan, and Lender initiated foreclosure proceedings in January 2001.2
On January 26, Lender, through the trustee, California Reconveyance Company (Trustee), recorded a notice of default. Borrowers received a copy of the notice. The default notice indicated that Borrowers had defaulted with respect to monthly payments commencing in November 2000, and that the amount due under the loan as of January 24 was $4,266.08.
Lender, through Trustee, recorded a notice of trustee's sale, dated April 27; the notice set the sale date for May 22. Borrowers received a copy of that sale notice as well. The trustee's sale was postponed initially from May 22 to June 4; it was postponed a second time to July 16.3
After receiving the notice of sale in early May, Miguel Melendrez contacted Lender to make payment arrangements concerning the default.4 Miguel understood from his telephone conversation with Lender's representative, Mary Garcia, that he and his wife, Maria, needed to make three payments, namely, (1) $5,000 before the sale date, (2) a payment at the end of June, and (3) a payment at the end of July. According to Miguel's testimony, Garcia said that, if the $5,000 payment was made before the sale date, Lender would "cancel" the sale.5 Miguel understood further that, if either of the payments due in June or July were missed, Lender would "start" the sale again.
Thereafter on May 3, Lender faxed a letter (Repayment Agreement, or Agreement) to Borrowers at Maria's store. Miguel was in Greenfield at the time and asked Maria to sign the Repayment Agreement on his behalf and return it by fax to Lender. Maria signed it for herself and on her husband's behalf, and returned it to Lender by fax on May 3.
The typeface of the Repayment Agreement faxed on May 3 was indisputably unclear. Patricia Friedberg (Lender's vice-president) testified that it was faxed to Borrowers not only on May 3, but also on May 22, May 23, and May 29. Miguel testified that he was able to read "part of" the Agreement but did not attempt to obtain a better copy. Maria—who does not read English—did not read the agreement and was not concerned about its legibility.
The Repayment Agreement6 provided: "This letter when signed by you, dated and returned to Washington Mutual as indicated below, will be your Agreement with Washington Mutual as to the repayment arrangement negotiated on 05-[illegible]-01 [illegible] the outstanding delinquency on the above referenced loan. The following are the terms of the repayment plan which were agreed upon:
PLAN DATE AMT
01 05/10/01 5,000.00
02 06/29/01 3,556.22
03 07/30/01 3,556.22."
The letter stated that all payments were to be made "in CERTIFIED FUNDS ONLY," and that they were required to
On the issue of postponement of the trustee's sale, the Agreement provided:
On or about May 18, Borrowers made the $5,000 payment by cashier's check under the Agreement. Several days later, Miguel spoke to Lender's foreclosure specialist, Claudio Hernandez, who asked Miguel to fax him a copy of the cashier's check. Miguel testified that during this conversation, he asked whether he could make the second payment (due at the end of June) when he made the third payment at the end of July; Hernandez told him that combining these two payments at the end of July would be acceptable.
Hernandez testified that he had a telephone conversation with Miguel on or about May 21.7 Hernandez told Miguel that he needed a copy of the cashier's check for the initial payment under the Repayment Agreement in order to postpone the sale. Miguel told Hernandez that he had a copy of the $5,000 cashier's check he had used to make the initial payment, and that he had signed the Agreement.8 At Hernandez's request, on May 22, Miguel faxed a copy of the cashier's check and a copy of the second page of the Agreement. Hernandez forwarded these documents to Lender's collections department. Based upon receipt of the documents, Hernandez postponed the trustee's sale.9
According to Hernandez, Miguel and he did not discuss the June payment due under the Agreement, and Miguel did not ask to defer that payment to the end of July. Hernandez made no notes concerning any such modification request.10 Since Hernandez was not responsible for repayment agreements, had Miguel made such a request, he would have referred it to the collections department.
After the telephone conversation with Hernandez, Borrowers received a letter from Lender dated May 24. The letter noted that there had been a change in the May 3 Repayment Agreement, namely, that the "plan 01" payment was due May 30. The letter indicated that the "plan 02" and "plan 03" payments were still due on June 29 and July 30, respectively. After Miguel read the May 24 letter, he was not concerned that it contained a different agreement than the one he thought he had with Hernandez. Miguel did not contact Lender to advise that the May 24 letter did not accurately set forth his understanding of the Repayment Agreement. Lender's representative (Friedberg) confirmed that Borrowers never objected to the statement in the May 24 letter that the second payment was due under the Agreement on June 29.
The trustee's sale took place on July 16. There were approximately four bidders (including Buyer) interested in the Property. Following the auction crier's announcement of Lender's opening bid of approximately $76,000, there were a number of bids by the four prospective buyers. The Property was sold to Buyer as the highest bidder; it paid $197,100.
Buyer's principal, Dominic Ip, is a licensed real estate broker. Ip testified that, in the five years before September 2001, he—either individually or through his real estate business—had bought approximately 15 properties at foreclosure sales. Approximately 50 percent of Buyer's sales resulted from brokerage deals transacted on behalf of others (i.e., not Buyer's personal investment transactions).
Prior to the trustee's sale, Ip conducted some research regarding the first lien against the Property, drove by the Property, and ran comparable sales with the Multiple Listing...
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...sale is accompanied by a common law presumption that it 'was conducted regularly and fairly.'" Melendrez v. D & I Investment, Inc., 127 Cal.App.4th 1238, 1258, 26 Cal.Rptr.3d 413 (2005) (quoting Brown v. Busch, 152 Cal.App.2d 200, 204, 313 P.2d 19 (1957)). "This presumption may only be rebu......
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