Articles – Page 2 – Law Offices of Randolf Krbechek

Janice H. v. 696 North Robertson, LLC – Premises Liability is Never a Clear Question in California

The recent decision in Janice H. v. 696 North Robertson, LLC (July 14, 2016) ___ Cal.App.4th ___ addressed the always difficult question of premises liability. More specifically, When is the operator of real property liable for an injury to a guest in a unisex bathroom? The court’s answer – a resounding, It depends.

The facts were somewhat lurid, or as we might say, Only in LA. “On a Sunday in March 2009, Plaintiff drank with a friend at bars in Pasadena and then in West Hollywood.

“Plaintiff went to Here Lounge to wait for her friend. At the time, Here Lounge was a very popular West Hollywood dance club and bar … Here Lounge also fostered a sexually charged atmosphere by permitting bartenders to wear nothing but underwear.”

Comment – The Dept of Alcoholic Beverage Control later closed the club, which was described as a gay bar, based on “allegations of lewd conduct by go go dancers.”

Fresno real estate lawyer — From the Here Lounge (now closed).

Explained the court, “Here Lounge designed the bar to have a common restroom area accessible to both men and women. On busy nights, a long line of patrons waited to use the restrooms …

“Plaintiff went into an ADA restroom stall and shut the door. As was common among patrons of Here Lounge, Plaintiff did not lock the door.”

Comment – How in the world was this fact proven – That it was “common” for patrons at the club to leave the door to the bathroom stall unlocked?

While in the bathroom stall, plaintiff was assaulted by a “man [ ] later identified as Victor Cruz, a bus boy at Here Lounge … The assault, which caused Plaintiff to lose her virginity, lasted about five minutes and ended with Victor ejaculating on Plaintiff’s dress.”

The jury found in favor of plaintiff, and awarded $5.42 million in damages. The verdict was affirmed on appeal, because, frankly, jury verdicts are always affirmed on appeal.

Here’s how the court handled the issue of premises liability. “The issue is whether Here Lounge owed a duty to use reasonable care in securing the restrooms for its patrons … A possessor of land owes a duty to an invitee to make the property reasonably safe for the intended use by the intended user. Thus, the property holder only has a duty to protect against types of crimes of which he has notice and which are likely to recur if the common areas are not secure.”

The club owner argued that it was not liable because there had been no prior assaults. This argument was unavailing. “Here Lounge argues it has no duty unless and until it experiences a similar criminal incident. We disagree. While a property holder generally has a duty to protect against types of crimes of which he is on notice, the absence of previous occurrences does not end the duty inquiry. We look to all of the factual circumstances to assess foreseeability.”

Comment – Great. It’s always a “facts and circumstances” question.

“In this case, Here Lounge promoted a sexually charged atmosphere and designed an open restroom area allowing unrestricted entry for men and women. It designed the larger ADA stalls with full length walls shielding the occupants from view.

“Here Lounge knew that sexual activity in the restrooms and elsewhere in the club was an ongoing issue … There was testimony that sexual activity in the club increased towards the end of the night and tended to occur in the ADA bathroom stalls, like the stall where Plaintiff was raped, because the full length doors shielded the occupants from view. The owner also admitted that an employee once observed a woman performing oral sex on a man at the club and ignored it …

“This evidence [ ] made the risk of harm to intoxicated and vulnerable patrons reasonably foreseeable, regardless whether the club was on notice of a prior similar incident. Knowing the potential serious harm of non-consensual sex, a reasonable person managing the property would have posted a guard in the restroom area whenever the club was open to the public, even when attendance tapered off.

“The burden for monitoring the restroom area during business hours was small, requiring only a change in policy to eliminate the guards’ individual discretion to leave the restroom area and roam the premises when patronage dwindled.”

Result – Judgment for plaintiff affirmed.

Janice H. v. 696 North Robertson, LLC (July 14, 2016) ___ Cal.App.4th ___

Taylor v. NU Digital Marketing, Inc. – Remedy of Unlawful Detainer Notwithstanding Contract for Sale

The remedy of unlawful detainer is available in three situations under California law, most commonly when a tenant holds over after termination of the lease, or when the tenant continues to occupy the property after breach of the lease.

Less commonly, unlawful detainer is available to an owner “against an employee, agent, or licensee whose relationship is terminated,” and in the third situation, to a purchaser at a foreclosure sale against the former owner and other occupants.

In Taylor v. NU Digital Marketing, Inc. (2016) 245 Cal.App.4th 283, the parties entered into a hybrid contract. Although styled a contract for sale, the court held that the contract actually was a lease, seemingly tied to an option to purchase, such that the remedy of unlawful detainer was available to the owner.

Note to potential purchasers: An unrecorded “contract of sale” that does not include a deed from the owner to the purchaser is an invitation for trouble. The court will want to fit the contract into one of its traditional modes of analysis. As the following decision shows, the court might view the document as a lease, with potentially disastrous consequences to the purchaser. Be careful when you try to be creative in making a grant of real property.

Now to the facts. In August 2012, the parties entered into an agreement entitled “Contract of Sale Residential Property.” The contract provided that “plaintiffs (designated ‘Seller’ in the agreement) agreed to sell a piece of property to defendant (designated ‘Buyer’ therein) for $1.25 million subject to the following terms and conditions:

“Paragraph 1 required defendant to ‘consummate’ the purchase ‘within 60 months of the execution date of the agreement’ by making ‘payment’ of the purchase price, i.e., $1.25 million through [escrow].”

Comment: That sounds like an option, exercisable in 60 months. An option to purchase is not the same a contract for sale. The option must be exercised by act of the grantee, while the contract for sale is enforceable per se.

“Paragraph 2 purported to divide the purchase price into five components: (1) a grant of equity in defendant corporation (referred to as the ‘Equity Grant’); (2) payment of all property taxes and insurance costs from the move-in date; (3) payment of all homeowners association fees and any related penalties or special assessments; (4) the ‘Down Payment’; and (5) ‘Probationary Installment’ payments of $2,300 per month for 60 months (also referred to as ‘Probationary Payments’).”

The dispute arose when “the probationary installment payments increased to $4,216.48 in accordance with the provision allowing for an upward adjustment of such payments to match plaintiff’s adjustable rate mortgage payment.”

Now the conflict comes into sharper focus. If you “rented” a property, with a fixed purchase price, and paid 100% of the owner’s mortgage payments plus property taxes plus homeowners association fees, then you might believe you had purchased the property. But this court did not agree – “In addition to awarding possession to plaintiffs, the court awarded damages in the amount of $31,683.68 and declared the agreement forfeited.”

The court started by explaining that “Unlawful detainer actions are authorized and governed by state statute. The statutory scheme is intended and designed to provide an expeditious remedy for the recovery of possession of real property … Unlike the foregoing situations, a vendee in possession of land under a contract of sale who has defaulted in the payment of an installment of the purchase price, is not subject to removal by the summary method of unlawful detainer.”

Held the court, “The relationship created by the agreement must be characterized by reference to the rights and obligations of the parties and not by labels … While defendant also agreed to purchase the property within the lease term, possession of the property was conditioned upon payment of the probationary installments, which entitled defendant only to continued possession, and were therefore rent.”

“Probationary payments” in a real estate contract? I never heard of such a thing, and neither had the court. Taylor v. NU Digital Marketing, Inc. (2016) 245 Cal.App.4th 283

McCulloch v. Maryland (1819) and the Second Bank of the United States

Today, McCulloch v. Maryland (1819) is cited for its interpretation of Congress’ powers under the Constitution. But the case actually involved the Second Bank of the United States, a contentious period in our history.

The first Bank of the United States was established in 1791 by Congress. It had a 20-year charter. Hamilton was a strong proponent. It was not rechartered at the end of its 20-year term.

Then came the War of 1812. The war triggered additional financial obligations by the United States government.

In 1816, Congress chartered the Second Bank of the United States. McCulloch v. Maryland was a challenge to the legality of the bank. Chief Justice Marshall ruled in favor the bank. Today, the case is largely known for its discussion of Congress’s ability to enact “necessary and proper” legislation in furtherance of its powers.

The specific legal issue in McCulloch v. Maryland involved a tax that the state of Maryland levied on the operations of all banks within the state, including the Second Bank of the United States. McCulloch, head of the Baltimore Branch of the Second Bank of the United States, refused to pay the tax. McCulloch was sued by the state of Maryland, and found liable for the tax.

The Supreme Court held that the tax as levied on Second Bank of the United States was unconstitutional, using the famous phrase, “the power to tax involves the power to destroy.” At the same time, the court upheld the constitutionality of the bank.

Then came Andrew Jackson, elected in 1828, and reelected in 1832. Jackson was strongly opposed to the bank. He vetoed congressional legislation in 1832 in 1834 and would have extended the charter of the bank. Thus, the national bank came to an end at the end of its 20-year term; the bank continued as a private corporation in Philadelphia, and was ultimately liquidated in 1841.

There is some speculation that Roger Taney wrote Jackson’s veto of the 1832 legislation. Taney also served as Secretary of the Treasury and U.S. Attorney General. Interestingly, Taney became Chief Justice in 1836 after Marshall’s retirement. Taney is infamous for the Dred Scott decision.

Not that I really understand national banking law, just that I can see how some of the pieces fit together.

The Missing Records of the High Commisson

The High Commission was a court that existed in England for more than a century, engendering substantial political dispute. Originally intended for ecclesiatical disputes, the spread of its jurisdiction caused major friction. Yet its records have all disappeared, save for contemporaneous writings. Here is some facinating history.

“Historians have seen in the High Commission’s existence and character one of the chief causes of the Revolution of 1640, one of the most cogent explanations of the popular distrust of Charles I. They have found it the only adequate explanation of the strength of the Puritan movement, which enabled it for a time to abolish the English Church altogether, and which must have rested (it has been supposed) upon a widespread popular hatred of the institution as it then existed.

“The question, however, can never be settled beyond dispute. The one thing indispensable to the demonstration of the truth of this difficult matter, one way or the other, is the evidence of the official records, kept (as we know) by the various Registrars of ‘the Commission’. These would at once reveal by the presence or absence of regularity and continuity, and by the date at which they began to be regular and uniform, whether and when there were various bodies of commissioners or one Court of High Commission.

“But the records have disappeared. That they were accidentally lost during the seventeenth and eighteenth centuries seems improbable. Surely mere accident can scarcely account for the disappearance of registry books, act books, immense files of pleadings and lawyers’ briefs, and bales and sacks of papers similar to those which the Commissioners left at Durham; in short, of every scrap of evidence great and small connected with the Court, except a couple of volumes of the Act Books containing the cases of Bastwick and Burton – needed of course as evidence in the proceedings in the House of Commons to annul their sentences – and a few score formal papers which happened to be in the bags of miscellaneous letters and petitions at the Tower.

“So large a bulk of papers, as the records of the Commission must have been, would, if merely mislaid, hardly have escaped the notice of the Historical Manuscripts’ Commissioners in either public or private archives; and if they were hidden at any time, there would seem to be at present no reason for longer concealment.

“The Great Fire, which destroyed the documents collected at St. Paul’s Cathedral, might explain the loss of the Commission’s records if it could also account for the disappearance of the archives of the Bishop of London at Fulham Palace, which must have been extraordinarily rich in material connected with the Court.

“But the records seem to have disappeared before 1645. Laud complained of their seizure by his enemies in 1640; at his trial he pleaded for their production and claimed that they would completely vindicate him; from that day to this they have never been heard of. All this lends colour to the hypothesis that they were destroyed by order of the Long Parliament, together with all the papers of the High Commission that could anywhere be found.

“The Puritans and the common lawyers united in the passage of that Act not only to abolish the Court which then existed but to make impossible its revival at any future time. They well knew that the Act of one Parliament could not bind its successor; and how could they hope to be permanently successful in securing their object, if they left behind them a voluminous series of records, showing that a law-court had been in operation for at least half a century, not only with the full approbatian of the King and of the ecclesiastics, but with the acquiescence of the common lawyers.”

Roland G. Usher, Ph.D., The Rise and Fall of the High Commission (Oxford at the Clarendon Press 1913)

Greenspan v. LADT LLC – Once and for All, a Trust Is Not an Entity

Sometimes a court provides a clear statement of the law. Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486 is one such opinion, providing a definite and authoritative answer to the issue of whether a trust is an entity – it is not.

From the opinion.

“Courts often speak of the alter ego doctrine as if it applied to a trust as an entity. But a distinction must be made between a trust and a trustee. The general rule that a trust is a relationship is universally recognized by U.S. cases and statutes, and is consistent with the prevailing norms of the entire common-law world. The fundamental nature of this relationship is that one person holds legal title for the benefit of another person.

“Thus, in actuality, a trust is not a legal person which can own property or enter into contracts. It is the trustee or trustees who hold title to the assets that make up the trust estate … Because a trust is not a legal entity, it cannot sue or be sued, but rather legal proceedings are properly directed at the trustee …

“As recognized in California: Unlike a corporation, a trust is not a legal entity. Legal title to property owned by a trust is held by the trustee. A trust is simply a collection of assets and liabilities. As such, it has no capacity to sue or be sued, or to defend an action …

“Because a trust is not an entity, it’s impossible for a trust to be anybody’s alter ego. That’s because alter ego theory, which is simply one of the grounds to ‘pierce the corporate veil,’ is inescapably linked to the notion that one person or entity exercises undue control over another person or entity. However, a trust’s status as a non-entity logically precludes a trust from being an alter ego.

“But while applying alter ego doctrine to trusts is conceptually unsound, applying the doctrine to trustees is a different proposition. Trustees are real persons, either natural or artificial, and, as a conceptual matter, it’s entirely reasonable to ask whether a trustee is the alter ego of a defendant who made a transfer into the trust. Alter-ego doctrine can therefore provide a viable legal theory for creditors vis-à-vis trustees.

“Thus, in the present case, Greenspan properly sought to add Moti Shai, the trustee of the Shy Trust, as a judgment debtor. If Moti Shai is the alter ego of Barry Shy, then Barry may be considered the owner of the Shy Trust’s assets for purposes of satisfying the judgment. The trial court erred in concluding that the alter ego doctrine could not be used to reach the assets of a trust.”

That’s a breath of fresh air, hopefully forever ending any argument that a trust is an entity. Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486

Jones v. Wachovia Bank – Limitation on Property Owner’s Ability to Testify Regarding Value

The decision in Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935 reminds us that all opinion testimony must be supported by reasonable foundation. The underlying complaint was based on an allegation “the bank breached an agreement to postpone the trustee sale and, by reason of that breach, plaintiffs lost their equity in the property.”

The court “explained that a gratuitous oral promise to postpone a sale of property pursuant to the terms of a trust deed ordinarily would be unenforceable under [Civil Code] section 1698. This is because the oral promise had not been executed by the parties, as required by section 1698.”

The homeowners did not prevail because they “produced no evidence showing that they refrained from bringing their loan current in reliance on the June 18 sale date because they had no ability to do so … Plaintiffs did nothing to substantially change their position before their home was sold, and they intended to do nothing other than to seek another postponement.”

More significantly, “Wachovia is entitled to summary judgment for the additional reason that plaintiffs failed to present sufficient evidence of injury.” The court’s analysis is as follows.

“[Plaintiff] claimed that the $555,000 sale price was substantially below the current market value of the home due to demolition conducted by the seller. The trial court sustained Wachovia’s objection to that opinion testimony for lack of foundation …

“An owner’s right to testify regarding the value of real property under [Evidence Code] section 813 is not absolute … A property owner is bound by the same rules of admissibility as any other witness regarding the value of real property. (Evid. Code, § 814 [requiring a foundation for real property value opinion based on information ‘of a type that reasonably may be relied upon by an expert in forming an opinion as to the value of property.’]”

Lacking proper foundation – in other words, a factual basis for his opinion of value – the owner was barred from stating his opinion regarding the value of his property. “A foundation must be laid indicating the other property sold was sufficiently similar to the property in litigation to indicate the price realized for the other land may fairly be considered as shedding light on the value of the land in question. It must also appear that the other sale was genuine and sufficiently voluntary to be a reasonable index of value and that the price was actually paid or substantially secured.”

Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935

Almanor Lakeside Villas Owners Ass’n v. Carson – $100,000 in Attorney’s Fees Awarded to Homeowners Association that Recovered $6,600 in Fines

Let me be up front – this author does not particularly care for homeowners’ associations. In my opinion, they have too much power, which is often wielded with a heavy hand.

Now comes the decision in Almanor Lakeside Villas Owners Ass’n v. Carson (April 19, 2016) __ Cal.Rptr.3d __, which only reinforces this view. Here is a synopsis of the facts:

The homeowners’ association sought to impose fines under CC&Rs against defendants. “Almanor sought to impose fines and related fees [ ] for alleged rule violations related to the Carsons’ leasing of their properties as short-term vacation rentals.”

Defendants paid some of the fines, but disputed others. More specifically, “The Carsons disputed both the fines and Almanor’s authority to enforce those rules, which the Carsons viewed as unlawful and unfair use restrictions on their commercially zoned properties.”

At trial, the homeowners’ association sought $54,000 in damages. Defendants disputed this amount. “The trial court determined that it would be unreasonable to strictly enforce the absolute use restrictions against the Carsons …

“Of the fines imposed in 2010, 2011, and 2012, the court concluded only the fines pertaining to the non-use of Almanor’s boat decals were reasonable. Those fines amounted to $6,620, including late charges and interest.”

That’s right – the trial court awarded $6,620 solely for “non-use” of the Association’s “boat decals.”

Then, to pile on, the trial court awarded $98,535 in attorneys fees and $3,267 in costs, for a total award of attorneys fees and costs in the amount of $101,803.

On appeal, the court held that such determination was “reasonable.” The court of appeal held that the homeowners’ association was the “prevailing party” within the meaning of the Davis-Sterling Act, and expressly held that the award of attorneys fees were “reasonable” within the meaning of Civil Code section 5975.

If you are practicing attorney, this case makes it difficult to advise a homeowner ever to contest any charge by the homeowners’ association, the matter what the merits.

In Almanor Lakeside Villas Owners Ass’n v. Carson, the homeowners’ association sought $54,000 at trial, and was awarded $6,600. The appellate court established the following principle – if any amount is awarded to the homeowners’ association, then the association is the “prevailing party” and is entitled to recover its attorney’s fees “as a matter of right.”

To this end, the court of appeal ruled that, “after resolving the threshold issue of the prevailing party, the trial court had no discretion to deny attorneys fees.”

Almanor Lakeside Villas Owners Ass’n v. Carson represents a growing dichotomy in California. This state is home to some fabulously wealthy people, in a few geographic areas. Here we see the court applying a distorted economic viewpoint (Who on earth thought it was worth spending more than $100,000 in attorneys fees to seek $50,000 in court?) to achieve a shocking result. “Reasonableness,” like beauty, is in the eye of the beholder.

Almanor Lakeside Villas Owners Ass’n v. Carson (April 19, 2016) __ Cal.Rptr.3d ___

Salazar v. Matejcek – Treble Damages for Removal of Trees Under California Law

Civil Code section 3346 authorizes an award of treble damages for “wrongful injuries to timber, trees, or underwood upon the land of another, or removal thereof.” The defendant in the recent case of Salazar v. Matejcek (Mar. 10, 2016) 245 Cal.App.4th 63 learned that this statute can support very substantial damages.

The dispute concerned “a 10-acre piece of rural property near Covelo, California. The property was completely undeveloped except for a small cabin.” The defendant was not able to obtain an adequate source of water. According to the court, he “destroy[ed] an estimated 225 trees to build the road and clear the surrounding area to house his water storage devices.”

Argued the defendant “the trial court failed to consider that the area to be restored was approximately two-thirds of one acre out of the 10-acre parcel.”

Stated the court, “Under the circumstances of this case, we find a holistic approach to be reasonable. Plaintiffs had never sought to develop any portion of their parcel.”

And what of the damages? “At trial, Mr. Salazar testified he is saddened by the damage done to his property and he remains nervous about visiting it … Mr. Salazar testified that if he did receive an award of damages, he would use the money to restore the trees defendant had removed.”

Comment – Time will tell. I’ll bet the money goes right into plaintiff’s pocket.

“Mrs. Salazar testified that the dispute with defendant has affected her physically and mentally. She has felt powerless and belittled. She has anxiety and her sleep has been affected. She does not enjoy going to the property anymore and feels as though the land was violated.”

How to calculate damages? “Such damages are generally determined as the difference between the value of the property before and after the injury. But diminution in market value is not an absolute limitation; several other theories are available to fix appropriate compensation for the plaintiff’s loss …

“One such alternative measure of damages is the cost of restoring the property to its condition prior to the injury, and a plaintiff may recover these costs even if they exceed diminution in value if there is a ‘personal reason’ for restoration.”

“At trial an arborist named John Phillips testified for plaintiffs. He prepared a tree replacement plan designed to remedy the effects of defendant’s encroachment. He estimated that 225 trees will need to be planted to restore the property … Phillips estimated the total tree remediation cost would be $67,500.

“The court accordingly trebled the $67,500 award of compensatory damages for tree removal pursuant to Civil Code section 3346 and Code of Civil Procedure section 733, resulting in an award of $202,500 … The total judgment awarded, including costs, is $262,987.”

Ouch. The damages to this parcel of undeveloped property, out in the middle of nowhere, greatly exceed the total value of the property. Seems like a windfall to me.

One more point of pleading. A generic defense interposing the statute of limitations does not set forth a valid defense. Explained the court, “defendant filed a general denial that includes a broadly worded affirmative defense asserting all of plaintiffs’ claims ‘are barred by all applicable statutes of limitation contained in Code of Civil Procedure sections 312 to 366.3.’”

Explained the court, defendant “failed to articulate any specific statute of limitations argument in his denial or in his pretrial statement … There are two ways to properly plead a statute of limitations: (1) allege facts showing that the action is barred, and indicating that the lateness of the action is being urged as a defense and (2) plead the specific section and subdivision.”

“Here [the defendant] did neither … Raising the defense in the trial brief is [in]sufficient. The failure to properly plead the statute of limitations waives the defense.”

Comment: Sounds like piling on.

Salazar v. Matejcek (Mar. 10, 2016) 245 Cal.App.4th 63

Ferguson v. Yaspan – Statute of Limitations Not Applicable to Defense Based on Rescission

In a lawsuit based on a contract, one party can seek relief based on the theory of rescission. Rescission can be considered an equitable judicial remedy. Under California Civil Code section 1689, rescission supports “extinction” of the obligation.

Rescission can be pled as a basis for affirmative relief, or it can asserted as defense to a claim based on contract. Which is what happened in Ferguson v. Yaspan (2015) 233 Cal.App.4th 676 – the defendant asserted rescission as a defense to a contract lawsuit.

The dispute in Ferguson v. Yaspan arose between an attorney (defendant) and his former client (plaintiff). In 1995, the plaintiff sold defendant an interest in a London flat owned by plaintiff. Later, the Fergusons sought to set aside the written agreement.

Here’s the interesting part of the decision. The court opined on rescission as a defense, holding that such a defense was not subject to the statute of limitations. Explained the court

“The invalidity of a contract may be asserted either as a basis for affirmative relief or as a defense. When a litigant seeks affirmative relief, her claim may be barred if filed outside the statute of limitations period.

“However, where invalidity is raised solely as a defense, there is no limitations period because statutes of limitations are designed to ‘act as a bar to actions or proceedings’ – not to individual claims or defenses.”

Thus, a defense based on a claim of rescission is not subject to being struck as pled outside the statute of limitations.

Majd v. Bank of America – Violation of Dual Tracking Statute Supports Claim for Wrongful Foreclosure

California law now prohibits the practice of “dual tracking,” whereby a lender simultaneously pursues a default while also engaging in loan modification negotiations with the borrower. The question concerns the remedy available when there is a violation of the dual tracking law.

The court in Kazem Majd v. Bank of America, N.A. (Jan. 14, 2016) 243 Cal.App.4th 1293 held that a lender’s violation of the loan modification requirements established by the federal government in the HAMP program, and/or violation of the dual tracking prohibition, could give rise to a claim for wrongful foreclosure against the lender.

The court also made important findings about the HAMP program. Rejecting “a statement found in an unpublished federal district court decision, which decision in turn repeated a statement found in other unpublished district court decisions,” the court explained that, under “the relevant United States Department of the Treasury guidelines[,] where a borrower satisfies the relevant criteria, ‘the servicer MUST offer the modification.’”

Even more, the court held that the “tender requirement” does not apply when a plaintiff states a claim for wrongful foreclosure based on violation of the dual tracking statute.

Explained the court, “the whole point of Civil Code section 2923.5 is to create a new, even if limited, right to be contacted about the possibility of alternatives to full payment of arrearages … The purpose of the modification rules is to avoid a foreclosure despite the borrower being incapable of complying with the terms of the original loan. It would be contradictory to require the borrower to tender the amount due on the original loan in such circumstances.”

But can such violation also support a claim to set aside the foreclosure sale? Only in limited circumstances. The case holds that the additional remedy of setting aside the foreclosure sale would only lie against the purchaser if the purchaser was not a “bona fide purchaser for value.”

In Majd v. Bank of America, the purchaser of the foreclosure sale was the secured lender. But when the purchaser is a third-party, who had no reason to know that the lender had engaged in wrongful dual tracking, the remedy of setting aside the foreclosure sale would not be available.

Overall, Majd v. Bank of America offers important protections to homeowners whose rights have been violated by the lender’s unlawful “dual tracking.”