Trustee could be liable to Borrower for 2924 violations

12. Damages for Improper Sale
The sale process must closely adhere to the procedure set forth in Civil Code §§ 2924 et sea.; “The statutory requirements must be strictly complied with, and a trustee’s sale based on a statutorily deficient notice of default is invalid.” (Miller v. Cote, supra. 127 Cal.App.3d 888, 894.) A trustee is liable to the trustor for damages sustained from an “illegal, fraudulent or willfully oppressive” foreclosure sale.Munaer v. Moore, supra, 11 Cal.App.3d 1, 7.] Normally, the trustor will attempt to stop or vacate a foreclosure sale based on an invalid notice of default. However, an action for damages may be the only avenue of redress if the property has been sold to a bona fide purchaser.
a. Liability for Deficient Notice
Although no case has held a trustee liable for damages for a deficient notice of default, a variety of theories depending on the nature of the trustee’s failings would support causes of action for damages. In any event, the trustor will likely have to show prejudice or an impairment of rights as a result of the deficiency in the notice of default. (See U.S. Hertz. Inc. v. Niobrara Farms (1974) 41 Cal.App.3d 68, 86; 116 Cal.Rptr. 44.) If the appropriate nexus between the notice and the loss is established, the trustor may be able to show that (1) the trustee intentionally failed to perform, or was negligent in performing, its duties under the trust deed and statute; (2) the trustee engaged in negligent or
intentional misrepresentation in setting forth the information contained in the notice of default; (3) the trustee breached the covenant of good faith and fair dealing which is implied in a trust deed (see Schoolcraft v. Ross (1978) 81 Cal.App.3d 75; 1146 Cal.Rptr. 57); and (4) the trustee may have the duty as agent of the trustor to inquire of the beneficiary to verify the accuracy of the information contained in the notice of default and the trustor’s entitlement to a Spanish translation (but see Civ. Code § 2924c(b)(1) providing that the trustee has no liability for failing to give a Spanish language explanation of the right of reinstatement unless Spanish is specified on a lien contract or unless the trustee has actual knowledge that the obligation was negotiated principally in Spanish).
b. Liability for Deficient Sale
If the property is sold without compliance with notice requirements the trustee may be liable for damages. The trustor must first establish that any damages were sustained. Since a sale held without proper notice may be void, the trustor may suffer no damages because no sale was actually effected. (Scott v. Security Title Ins. & Guar. Co.. supra. 9 Cal.2d 606, 613-14, 72 P.2d 143.) However, the trustor may be precluded from attacking the sale and recovering the property from the purchaser if the sale was made to a bona fide purchaser for value and without notice and the trustee’s deed recites that all notice requirements were met. (See Chapter III F, “The Status of Bona Fide Purchaser or Encumbrancer’1, section 4, at p. 111-32; F, at p. 111-40, infra.) As a result, the trustor will have incurred damage.
The trustee will be liable to the trustor for damages resulting from the trustee’s bad faith, fraud or deceit (Scott v. Security Title Ins. & Guar. Co., supra, 9 Cal.2d 606, 611.) In Scott, the trustee failed to post notice of the sale and then sold the property in satisfaction of the debt. The sale was set aside because of the improper notice, and the trustee thereafter properly sold the property but only for a nominal sum insufficient to pay the debt. The beneficiary obtained the deficiency from a former owner who had assumed the debt and who in turn sued the trustee for breach of contract and agency. The Supreme Court held that the only valid sale was regularly conducted, and that the trustee had no liability for breach of contract or agency for mistakenly performing the first sale which was declared a nullity. (9 Cal.2d at 612-14.) The court indicated that the only liability might be for negligence but that the plaintiff could not recover since that theory had not been alleged. (9 Cal.2d at 614.)
Munger indicates that a trustee can be held liable for its negligence in the conduct of an illegal sale. [See supra, 11 Cal.App.3d at 7 citing Civ. Code § 1708; Dillon v. Legg (1968) 68 Cal.2d 728; 69 Cal.Rptr. 72; Davenport v. Vaughn (1927) 137 S.E. 714, 716 (the trustee is “charged with the duty of fidelity, as well as impartiality; of good faith and every requisite degree of diligence; of making due advertisement; and giving due notice . . . . If, through haste, imprudence, or want of diligence, his conduct was such as to advance the interest of one person to the injury of another, he became personally liable to the injured party”).]
c. Beneficiary’s Liability For Trusteefs Misconduct
The trustee is the common agent of the parties, and, as a result, a party to whom the trustee owes a duty to conduct a fair and open sale may impute a breach of that duty to the beneficiary. (Bank of Seoul & Trust Co. v. Marcione, supra, 198 Cal.App.3d 113, 120.)