Ct.App. 6 H035400 Santa Cruz County Super. Ct. No. CV162804 Judge: John Jeffrey Almquist
The opinion of the court was delivered by: Liu, J.
We granted review to decide whether a trustee may declare void a non-judicial foreclosure sale of real property when, before the trustee delivers a deed to the highest bidder, the trustee discovers it had mistakenly communicated to the auctioneer an incorrect opening bid by the lender that was less than 10 percent of the actual amount of the bid. As explained below, we conclude that under the circumstances here, the trustee acted within its discretionary authority in declaring the sale void.
Plaintiff David Biancalana filed an action to quiet title to a parcel of real property located at 434 Winchester Drive in Watsonville, California, alleging that he owned the property because he had been the highest bidder at a trustee's sale that occurred on September 10, 2008. According to Biancalana's complaint, EMC Mortgage Corporation (EMC) was the beneficiary of a loan secured by a deed of trust on the property, and T.D. Service Company (T.D.) was the trustee. After the loan went into default, T.D. issued a notice of trustee's sale. A copy of the notice of sale was attached to the complaint. It stated that the property would be sold at public auction to the highest bidder at the entrance to the county offices in Santa Cruz at 10 a.m. on September 10, 2008. The notice said that "the total amount of the unpaid balance of the obligation secured by the above described Deed of Trust and estimated costs, expenses, and advances is $435,494.74," but added: "It is possible that at the time of sale the opening bid may be less than the total indebtedness due." The notice included a telephone number that could be called the day before the sale to learn "the expected opening bid," if available.
The complaint alleged that on the day before the sale, Biancalana called the telephone number listed on the notice of sale and learned that the opening bid on the property would be $21,894.17. After researching the property, Biancalana called the trustee again and confirmed the amount of the opening bid. Biancalana then obtained a cashier's check for $22,000 and attended the auction the following day.
On the morning of the sale, "the auctioneer for the Defendant Trustee, made at least two calls to Defendant Trustee and spoke with two different Trustee agents to verify the opening bid of $21,894.17." When the auction began, the auctioneer stated he had "been authorized to place an opening bid, on behalf of the beneficiary, in the amount of $21,894.17." Biancalana then bid $21,896. There were no further bids, and the auctioneer announced that "this property is sold to Mr. Biancalana for $21,896.00." Biancalana gave the auctioneer his cashier's check for $22,000.
Two days later, T.D. telephoned Biancalana and said the sale was void because T.D. "did not offer the Property for a high enough bid amount." T.D. returned the cashier's check, but Biancalana returned the cashier's check to T.D. and demanded the deed. After T.D. refused, Biancalana filed the present action.
T.D. filed an answer admitting that Biancalana had given a cashier's check for $22,000 to the auctioneer and that T.D. had returned those funds and refused to issue a deed to the property, but otherwise denying the allegations in the complaint. As an affirmative defense, T.D. alleged that "[p]rior to the auction attended by plaintiff, a proper and enforceable credit bid was submitted by the foreclosing beneficiary in the sum of $219,105, and accepted by Answering Defendant as trustee. Accordingly, . . . that was a fully effective and completed bid which was higher than the amount bid by plaintiff. As such, the actual high bid at the sale was not plaintiff's, but rather was the foreclosing beneficiary's completed and accepted credit bid."
T.D. moved for summary judgment on the ground that it had properly set aside the foreclosure sale due to a significant procedural irregularity in the statutory foreclosure process coupled with an inadequate sales price. T.D. asserted that prior to the sale "the beneficiary submitted for the auction a credit bid in the amount of $219,105 which was accepted by T.D. Service Company and was intended to be announced as the opening bid at the sale." T.D. said it had mistakenly told the auctioneer that the opening bid was "the delinquency amount (exclusive of foreclosure costs) of $21,894.17 . . . rather than the actual credit bid submitted by the foreclosing beneficiary. The lesser figure was likewise mistakenly announced at the sale." In support, T.D. submitted the declaration of its vice president of operations, Patricia Randall, who declared that "the day before the sale, the beneficiary submitted a specified credit bid in the sum of $219,105. This credit bid was contained within a document entitled in part "Bid Information." The document, a copy of which was attached to Randall's declaration, states: "EMC Specified Bid: $219,105.00." The bid of $21,894.17 that T.D. conveyed to the auctioneer does not appear on this document, but near the bottom of the document appear amounts of $21,010.59 for interest, $14.09 for escrow advance, $724.74 for late fees, and $144.75 for "recoverable balance." When added together, these amounts equal $21,894.17.
According to Randall, T.D. then prepared a document entitled "Bid Amount Verification" that mistakenly listed the amount of the opening bid as $21,894.17. This document, a copy of which was also attached to Randall's declaration, instructed the auctioneer to submit only the "specified bid" of $21,894.17 and not to make any further bids. Based upon this document, the auctioneer announced an opening bid of $21,894.17. T.D. discovered its error later that day, after the sale had been completed but before it had issued a deed.
Relying upon 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. (2001) 85 Cal.App.4th 1279 (6 Angels), the superior court initially denied T.D.'s motion for summary judgment, ruling that T.D.'s mistake, "which resulted in the incorrect amount being credit bid at the foreclosure action[,] was outside the statutory foreclosure process as outlined in the California Civil Code." The court also said "[t]here was no information in the Court's file about what the property in question was actually worth in the declining real estate market."
T.D. filed a motion for reconsideration after the Third District Court of Appeal decided Millennium Rock Mortgage, Inc. v. T.D. Service Co. (2009) 179 Cal.App.4th 804 (Millennium Rock), claiming that the decision represented a significant change in the law. The trial court granted T.D.'s motion for reconsideration and, following a hearing, granted summary judgment in favor of T.D. Biancalana appealed.
The Court of Appeal reversed, holding that T.D.'s error was not a procedural irregularity in the statutory foreclosure process and that T.D. therefore had no discretionary authority to void the foreclosure sale. We granted T.D.'s petition for review and now reverse the judgment of the Court of Appeal.
"On appeal after a motion for summary judgment has been granted, we review the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. [Citation.]" (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) A motion for summary judgment is properly granted "if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c).)
There are three parties in the typical deed of trust: the trustor (debtor), the beneficiary (lender), and the trustee. (4 Witkin, Summary of Cal. Law (10th ed. 2005) Security Transactions in Real Property, § 5, p. 795.) The trustee holds a power of sale. If the debtor defaults on the loan, the beneficiary may demand that the trustee conduct a non-judicial foreclosure sale. (4 Miller & Starr, Cal. Real Estate (3d ed.) Deeds of Trust, ch. 10, § 10:181, p. 552.) The trustee, or anyone the trustee appoints, may serve as the auctioneer. (Bernhardt, Cal. ...