Dismissal of claims seeking to set aside HOA’s nonjudicial foreclosure sale for delinquent assessment fees was improper when owners were not notified of right of redemption under CCP §729.050.
Multani v Witkin & Neal (2013) 215 CA4th 1428
After an HOA conducted a nonjudicial foreclosure sale of Owners’ unit for delinquent assessment fees, Owners sued the HOA and its agents to set aside the foreclosure, alleging irregularities in the sale notices and procedure. The trial court granted summary judgment for the defendants.
The court of appeal reversed and remanded. Defendants failed to demonstrate that they notified Owners of their right of redemption or the applicable redemption period as required under CCP §729.050. Thus, they did not make a prima facie showing that plaintiffs could not establish any of the three elements generally necessary to set aside a foreclosure, i.e., that:
- The trustee caused an illegal, fraudulent, or willfully oppressive sale of real property under a power of sale in a mortgage or deed of trust;
- The trustor was prejudiced or harmed; and
- The trustor tendered the amount of the secured indebtedness or was excused from tendering.
The trustee’s failure to comply with the statutory procedural requirements for the notice or conduct of the sale satisfied the first element. An HOA’s nonjudicial foreclosure for delinquent assessments is subject to a right of redemption within 90 days after the sale under CCP §729.035. The trustee must serve notice of the right of redemption, indicating the applicable redemption period, under CCP §729.050. Even if a common law presumption of regularity applies to postsale redemption procedures, defendants had to prove that they complied with the statutory procedures to discharge their initial burden of production on a motion for summary judgment; simply referring to the presumption did not suffice.
As to the second element, a debtor who has not received notice under §729.050 has been harmed or prejudiced by not being informed of the postsale right of redemption and the date on which those redemption rights expire. The debtor has no duty to independently calculate the redemption period based on presale notice of the right of redemption. Section 729.050 relieves the debtor of any such burden.
As to the third element, the court concluded that a debtor is excused from complying with the tender requirement when, as here, the nonjudicial foreclosure is subject to a statutory right of redemption and the trustee failed to provide the notice required under §729.050.
THE EDITOR’S TAKE: Homeowner association lien foreclosure sales are made subject to a 90-day period of post-sale statutory redemption, like judicial foreclosure sales, even though these HOA sales are otherwise conducted like nonjudicial trustee sales. That crossover makes it easy for discrepancies to creep in, since the procedure is unique—the trustee must comply with the different rules of both judicial and nonjudicial sales at the same time.
On the pre-sale end, CC §1367.4 requires the notice of sale to contain an extra statement that the sale will be made subject to a right of redemption, while on the post-sale side, CCP §§729.040 and 729.050 require a special certificate of sale (rather than a deed) to go to the foreclosure purchaser and a separate notice of redemption to go to the foreclosure purchaser and former homeowner, respectively, in addition to the notice that was included in the earlier notice of sale. It’s easy to get that mixed up, and clearly makes these HOA sales more complicated than the quick and final (at least in theory) nonjudicial sale under a deed of trust.
This decision holds that an HOA sale that arguably gave the homeowner only one of the two required notices concerning redemption (1) may make the sale “illegal, fraudulent or willfully oppressive”; (2) may be ipso facto harmful or prejudicial; and (3) eliminates the need for the challenger to tender either the amount of the association lien ($13,640) or the amount bid by the purchaser ($20,400), although the obligation itself appeared to not be under attack.
That was a pretty successful (and surprising) outcome for the homeowner—limited, perhaps, by the fact that it came only by way of rejection of the association’s summary judgment motion.—Roger Bernhardt