Moeller v. Lien

• Decision Date: 07 June 1994
• Docket Number: No. B070991,B070991
• Citation: 25 Cal.App.4th 822,30 Cal.Rptr.2d 777
• Court: California Court of Appeals Court of Appeals
• Parties: Henry G. MOELLER, Plaintiff and Appellant, v. Chun-Yen LIEN et al., Defendants and Appellants.

Page 777

30 Cal.Rptr.2d 777

25 Cal.App.4th 822

Henry G. MOELLER, Plaintiff and Appellant, v. Chun-Yen LIEN et al., Defendants and Appellants.

No. B070991.

Court of Appeal, Second District, Division 5, California.

June 7, 1994.

Burkley, Moore, Greenberg & Lyman, Walter R. Burkley and Edward J. Horowitz, for plaintiff and appellant.

Crane & Humphries and Gary M. Crane, for defendants and appellants.

GRIGNON, Associate Justice.

Appellants Chun-Yen Lien and Fong T. Lien appeal from a judgment after a court trial quieting title to real property in favor of respondent Henry G. Moeller. Appellants were bona fide purchasers for value of certain real property at a nonjudicial foreclosure sale. The trial court granted respondent relief from forfeiture pursuant to Civil Code section 3275. It ordered the nonjudicial foreclosure sale to be set aside and quieted title in respondent on condition respondent reimburse appellants for the purchase price, their other expenses, ten percent interest, costs and attorney's fees. Appellants contend Civil Code section 3275 may not be applied against a bona fide purchaser for value at a nonjudicial foreclosure sale, the trial court abused its discretion in granting equitable

                relief and the reimbursement was inadequate. 1  We reverse
                

PROCEDURAL BACKGROUND

On February 1, 1991, respondent sued American Securities Company, IMCO Realty Services, Inc., Trustee's Assistance Corporation and appellants to set aside a trustee's sale of a medical office condominium located in Torrance, California, to cancel the trust deed, to quiet title and for an accounting. On February 6, 1991, respondent filed a first amended complaint against IMCO, American Securities, Sonoma Conveyancing Corporation, Trustee's Assistance and appellants asserting the following causes of action: (1) equitable action to set aside trustee's sale; (2) equitable action for cancellation of trustee's deed; (3) equitable action to quiet title; (4) action to recover damages for breach of contract (promissory estoppel); (5) action to recover damages for breach of contract (executed oral agreement); and (6) action to recover damages for negligent misrepresentation. On May 1, 1991, a second amended complaint was filed adding Wells Fargo Bank, N.A. as a defendant and alleging three additional causes of action: (7) action to recover damages for breach of duty to disclose facts; (8) action to recover damages for constructive fraud; and (9) action to recover damages for breach of covenant of good faith and fair dealing. On May 29, 1991, appellants cross complained against respondent for rent. ²

Trial was commenced by the court on April 6, 1992, and taken under submission on April 10, 1992. On April 13, 1992, the trial court rendered a decision. Judgment was entered in favor of respondent cancelling the trust deed and quieting title in respondent on condition respondent pay certain sums to appellants, Wells Fargo and IMCO by April 20, 1992. Respondent tendered the sums in a timely fashion. Appellants rejected the tender in order to preserve their right to appeal. The sums payable to Wells Fargo and IMCO were deposited with the trial court in an interest bearing account pending the resolution of this appeal. In all other respects, judgment was entered for defendants. Appellants appealed. Respondent appealed conditionally from the orders requiring him to pay money to appellants, Wells Fargo and IMCO.

FACTS

In November 1979, respondent obtained a loan in the amount of $81,200 from Wells Fargo secured by the medical office condominium. The remaining principal amount of $72,600 became due and payable on November 5, 1989. Respondent did not pay off the loan. He received two 90-day extensions of the loan from Wells Fargo and continued to make the monthly payments. He did not pay off the loan at the expiration of the extensions. Commencing in June 1990, Wells Fargo returned the monthly payments to respondent and began foreclosure proceedings. On July 19, 1990, notice of default and 90-day notice of foreclosure were served on respondent. Apparently, IMCO was Wells Fargo's foreclosure agent.

In August 1990, respondent applied to a branch of Wells Fargo for a loan to refinance his existing loan. Respondent did not inform the branch that his present loan was in foreclosure. The loan application was sent to the loan department of Wells Fargo on September 13, 1990. The loan application was rejected. Over the course of the next two months, respondent attempted to allay the credit concerns which had led to the rejection of his loan application.

On November 6, 1990, a 30-day notice of sale under foreclosure was recorded scheduling a sale of the property for December 7, 1990; the notice indicated $83,827 was owing on the loan. On December 6, 1990, respondent's loan application was approved subject to a confirming appraisal. The foreclosure On January 10, 1991, respondent was informed that his appraisal did not comply with federal regulations and he was required to deposit $1,500 for a bank appraisal. The foreclosure sale was continued to January 18, 1991. On January 16, 1991, respondent requested the amount necessary to pay off the loan and was informed the amount owing was $85,707.36. Respondent believed this amount was excessive. Respondent testified that he asked for the amount to be provided to him in writing; an unnamed Wells Fargo employee told respondent she would do this and told respondent not to worry about the foreclosure sale. This testimony was not credible and did not establish a legally sufficient basis for reliance. Respondent neither deposited the $1,500 appraisal sum nor paid off the loan.

sale of the property was continued to January 11, 1991. On December 28, 1990, respondent was informed that he was required by federal regulations to post a $1,500 deposit for the bank appraisal. Instead of posting the appraisal deposit, which he believed was excessive, respondent obtained his own appraisal of the property. Respondent's expert appraised the property at between $350,000 and $360,000. This appraisal was submitted to Wells Fargo on January 9 or 10, 1991.

On January 18, 1991, after confirming that neither amount had been received, Wells Fargo authorized the foreclosure sale to go forward. Appellants, who were speculators, bought the property at the foreclosure sale for $85,710, the amount of the debt. Appellants were the sole bidders.

Respondent learned of the sale later that same day. Respondent obtained a cashier's check for the amount of the debt and sent the check to the foreclosure agent. Apparently, respondent had available cash deposits in another bank of $500,000. The check was received by IMCO on January 21, 1991, and returned to respondent.

A trustee's deed dated January 23, 1991, was recorded on January 30, 1991. The deed contained the following language: "Beneficiary, as owner of the obligations secured by said Deed of Trust executed and delivered to TRUSTEE, a written Declaration of Default and Demand for Sale. Default under said Deed of Trust occurred as set forth in the Notice of Default and Election to Sell Under Deed of Trust which was recorded in the office of the Recorder of said county. Beneficiary made due and proper demand upon TRUSTEE to sell said property pursuant to the terms of said Deed of Trust. The posting and first publication of the Notice of Trustee's Sale of said property occur[r]ed not less than three months from the recording of the Notice of Default and Election to Sell Under Deed of Trust. TRUSTEE executed its Notice of Trustee's Sale stating that it would sell, at public auction to the highest bidder for cash, in lawful money of the United States, the real property above described, which Notice of Trustee's Sale duly fixed the time and place of said sale as therein stated. [p] All requirements of law regarding the mailing, personal delivery and publication of copies of Notice of Default and Election to Sell Under Deed of Trust and Notice of Trustee's Sale, and the posting of copies of Notice of Trustee's Sale have been complied with."

STATEMENT OF DECISION

The statement of decision included the following factual findings and legal conclusions. Wells Fargo's conduct in this matter did not constitute negligence, bad faith, promissory estoppel or breach of a fiduciary duty. Wells Fargo forbore from foreclosure for a total of 14 months and engaged in no delinquencies or improprieties. The $1,500 appraisal fee was not excessive. The payoff amount communicated to respondent was the correct payoff amount.

Respondent's behavior evidenced a pattern of continued neglect and procrastination. Respondent treated the foreclosure in an entirely cavalier fashion. The sole cause of the foreclosure sale was respondent's own negligence.

Appellants were bona fide purchasers for value. There were no irregularities in the sale.

Respondent is entitled to equitable relief pursuant to Civil Code section 3275. The sale price at the foreclosure sale was grossly inadequate. The assessed value of the property In order for respondent to be relieved of this forfeiture, he must make full compensation to appellants, Wells Fargo and IMCO. With respect to appellants, full compensation is equal to the purchase price of $85,710, interest at the rate of ten percent from January 18, 1991, real estate taxes paid by appellants, attorney's fees and costs of suit, all totalling $134,405. With respect to Wells Fargo, full compensation equals its attorney's fees and costs, totalling $16,244. With respect to IMCO, full compensation equals its attorney's fees and costs, totalling $56,451.

was $210,000, and the appraised value was between $350,000 and $360,000. A smaller and less favorable unit in the same complex had been sold a year earlier for $317,500. The value of the property was four times the amount of the debt/sales price. Respondent lost 75 percent of the value of the property in the foreclosure sale. A slight...