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Nativi v. Deutsche Bank National Trust Company

California Court of Appeal, Sixth District

January 23, 2014

Rosario NATIVI et al., Plaintiffs and Appellants,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, et al., Defendants and Respondents.

Santa Clara County Superior Court, Hon. William J. Monahan, Hon. Carrie Zepeda. (No. CV158254).

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COUNSEL

[167 Cal.Rptr.3d 180] Attorneys for Appellants: Madeline Howard, San Jose, and Robert P. Capistrano, S. Lynn Martinez, Richard A. Rothschild, Los Angeles, and Robert D. Newman, M. Julie Patino, Alborg, Veiluva & Martin and Michael J. Veiluva, Walnut Creek, Jenner & Block, Andrew J. Thomas and Kate T. Spelman, Los Angeles.

Attorneys for amicus curiae in support of Appellants: Kent Qian, Barbara A. Jones.

Attorneys for Respondents: Wright, Finlay & Zak, T. Robert Finlay, Charles C. McKenna and Peter M. Watson, Newport Beach.

Attorneys for amicus curiae in support of Respondents: Noonan & Lieberman, Janes V. Noonan, Ruth B. Sosniak, Michael H. Walsh and Cody J. Cocanig, Simmonds & Narita and Tomio B. Narita.

OPINION

ELIA, J.

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In May 2009, the United States Congress enacted the Protecting Tenants at Foreclosure Act of 2009 (PTFA or Act) (Pub.L. 111-22, Div. A, Title VII, §§ 702-704, May 20, 2009, 123 Stat. 1660) and, in 2010, the Congress amended it (Pub.L. 111-203, Title XIV, § 1484, July 21, 2010,

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124 Stat. 2204).[1] The Act provides protections for bona fide tenants of residential real property at foreclosure following the [167 Cal.Rptr.3d 181] date of its enactment until its sunset at the end of 2014. (PTFA, §§ 702, 704.)

Subsequent to a nonjudicial foreclosure sale of residential property in August 2009, tenants Rosario Nativi (Nativi) and her son Jose Roberto Perez Nativi (hereinafter Jose Perez or Perez) were displaced from the property's converted garage unit, which they had been renting for several years. At the time of the foreclosure sale, appellants' operative lease provided for a one-year term through June 1, 2010. Deutsche Bank National Trust Company as Trustee for American Home Mortgage Assets Trust 2007-5 Mortgage-Backed Pass-Through Certificates, Series 2007-5 (Deutsche Bank or Bank) was the beneficiary under the deed of trust and the purchaser at the foreclosure sale. Appellants sued respondents Deutsche Bank National Trust Company (in its nontrustee capacity), Deutsche Bank (as trustee), and American Home Mortgage Servicing Inc. (AHMSI).

The trial court granted respondents' motion for summary judgment based on its determination that the foreclosure sale extinguished the lease under California law and, therefore, the immediate successor in interest did not step into the shoes of the landlord. The court concluded that the federal PTFA merely required the Bank, as the immediate successor in interest, to give a 90-day notice to vacate the premises to appellants and it imposed no affirmative duty on the Bank to assist such tenants in recovering possession of the leased premises. The court further found that appellants could not establish that the Bank excluded them from the property or put their belongings in the backyard.

Appellants now challenge the trial court's interpretation of the PTFA. They assert that the Act created a landlord-tenant relationship between the Bank and them for the duration of their lease. The appeal raises difficult questions regarding the proper interpretation of the PTFA and the potential liability of an immediate successor in interest in foreclosed residential real property for breach of the implied covenant of quiet enjoyment and wrongful eviction under California law. The parties have not raised any contention regarding the validity of the PTFA or asserted that Congress exceeded its authority in enacting it. An amicus curiae brief was filed on behalf of the National Housing Law Coalition, National Law Center on Homelessness and Poverty, the AARP, the National Fair Housing Alliance, and the California Reinvestment Coalition in support of appellants. The American Legal and Financial Network filed an amicus curiae brief that supports respondents' position.

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After careful and extensive consideration, this court concludes, solely as a matter of statutory interpretation, that the PTFA causes a bona fide lease for a term to survive foreclosure through the end of the lease term subject to the limited authority of the immediate successor in interest to terminate the lease, with proper notice, upon sale to a purchaser who intends to occupy the unit as a primary residence. The Act impliedly overrides state laws that provide less protection but expressly allows states to retain the authority to enact greater protections. Bona fide tenancies for a term that continue by operation of the PTFA remain protected by California law.

We conclude that the trial court's analysis was mistaken and respondents were not entitled to summary judgment. Accordingly, the judgment will be reversed.

Appellants also challenge the trial court's order granting respondent AHMSI's motion for a protective order. We find the order was not within the trial court's discretion and reverse.

[167 Cal.Rptr.3d 182] I

Procedural History

On November 25, 2009, appellants Nativi and Perez filed a complaint against Deutsche Bank National Trust Company, its assigns and successors, and Does 1 to 10 for " restitution of premises," compensatory and punitive damages, and injunctive relief. The complaint alleged eight causes of action as follows: (1) wrongful eviction in tort, (2) breach of the covenant of quiet enjoyment, (3) breach of implied covenants of quiet enjoyment— tort, (4) illegal entry of landlord (violation of Civ.Code, § 1954), (5) violation of Civil Code section 1940.2, (6) illegal lockout (violation of Civ.Code, § 789.3), (7) violation of the PTFA, and (8) unfair business practices (Bus. & Prof.Code, § 17200).

On December 31, 2009, Deutsche Bank National Trust Company filed a Notice of Removal that it was removing the action to federal court.

The United States District Court, Northern District of California subsequently determined that, by enacting the PTFA, " Congress did not intend to create a private right of action remedy, but rather intended to provide tenants additional rights which could be used in state court proceedings." ( Nativi v. Deutsche Bank Nat. Trust Co. (N.D. Cal. May 26, 2010, No. 09-06096 PVT) 2010 WL 2179885, 4.) The court dismissed the seventh cause of action (violation of the PTFA) ( id. at pp. 1, 4-5) and " decline[d] to exercise supplemental jurisdiction over the remaining state law

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claims" and remanded the matter to the Superior Court of California, County of Santa Clara. ( Id. at p. 5.)

On July 1, 2010, appellants filed a first amended complaint, which alleged additional causes of action. Deutsche Bank National Trust Company demurred to the first amended complaint on a number of grounds, most of which were overruled. The trial court struck the seventh cause of action (violation of the PTFA) because the federal court had dismissed it before remanding the case.

On December 3, 2010, appellants filed a second amended complaint against Deutsche Bank National Trust Company, Deutsch Bank (as trustee), and AHMSI and Does 3-10. It alleged nine causes of action against the named defendants: (1) wrongful eviction in tort, (2) breach of the covenant of quiet enjoyment, (3) breach of implied covenants of quiet enjoyment— tort, (4) illegal entry of landlord (violation of Civ.Code, § 1954), (5) illegal lockout (violation of Civ.Code, § 789.3), (6) unfair business practices (Bus. & Prof.Code, § 17200), (7) conversion, (8) trespass, and (9) declaratory and injunctive relief (Code Civ. Proc., §§ 526 & 1060). Respondents filed an answer to that complaint.

In April 2011, respondents filed a motion for summary judgment, supporting declarations, and a separate statement of undisputed material facts. They requested judicial notice of the Trustee's Deed Upon Sale, recorded August 12, 2009, in the Santa Clara County Recorder's Office and appellants' second amended complaint.

By order filed June 21, 2011, the court accepted the parties' written factual stipulations for the purposes of all further proceedings in the case.

Appellants filed opposition to respondents' motion for summary judgment, a separate statement of undisputed facts, and supporting declarations. They filed written evidentiary objections to the evidence submitted by respondents in support of summary judgment.

By written order filed November 15, 2011, the trial court granted respondents' motion for summary judgment. The trial court concluded that, under California law, [167 Cal.Rptr.3d 183] the foreclosure sale extinguished the lease and, consequently, Deutsche Bank did not step into the shoes of the former landlord. It also determined that the obligation to give a 90-day notice was the " only burden" imposed on the Bank by the PTFA.

A judgment in favor of respondents and against appellants was filed on November 15, 2011.

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By separate written order, also filed on November 15, 2011, the court granted respondent AHMSI's motion for a protective order with respect to certain documents that the court had ordered it to produce.

On December 13, 2011, appellants filed a notice of appeal from the judgment and from the order granting the motion for a protective order.

II

California Law Background and the Federal PTFA

A. Effect of Foreclosure on Preexisting Tenancy Under California Law

1. Traditional Property Law

" Title conveyed by a trustee's deed relates back to the date when the deed of trust was executed. ( Bank of America v. Hirsch Merc. Co. (1944) 64 Cal.App.2d 175, 148 P.2d 110....) The trustee's deed therefore passes the title held by the trustor at the time of execution. ( Hohn v. Riverside County Flood Control etc. Dist. (1964) 228 Cal.App.2d 605, 612, 39 Cal.Rptr. 647....)" ( Dover Mobile Estates v. Fiber Form Products, Inc. (1990) 220 Cal.App.3d 1494, 1498, 270 Cal.Rptr. 183 ( Dover ).) " The law is clear that the trustee's deed conveys to the purchaser the trustor's interest as of the date that the deed was recorded. ( Dover Mobile Estates v. Fiber Form Products, Inc. (1990) 220 Cal.App.3d 1494, 1498, 270 Cal.Rptr. 183...; Sain v. Silvestre (1978) 78 Cal.App.3d 461, 471, 144 Cal.Rptr. 478...; Hohn v. Riverside County Flood Control etc. Dist. (1964) 228 Cal.App.2d 605, 612-613, 39 Cal.Rptr. 647....)" ( Homestead Savings v. Darmiento (1991) 230 Cal.App.3d 424, 437, 281 Cal.Rptr. 367.)

" A lease is generally deemed to be subordinate to a deed of trust if the lease was created after the deed of trust was recorded. ( Bank of America v. Hirsch Merc. Co., supra, 64 Cal.App.2d at p. 184, 148 P.2d 110...; Miller & Starr, Cal. Real Estate 2d; § 8:82, p. 422.)" ( Dover, supra, 220 Cal.App.3d at p. 1498, 270 Cal.Rptr. 183.) " Also, there is no dispute that the general rule is that foreclosure of a senior encumbrance terminates subordinate liens, including leases. ( Hohn v. Riverside County Flood Control etc. Dist. (1964) 228 Cal.App.2d 605, 613, 39 Cal.Rptr. 647....)" ( Miscione v. Barton Development Co. (1997) 52 Cal.App.4th 1320, 1326, 61 Cal.Rptr.2d 280; see Dover, supra, 220 Cal.App.3d at p. 1498, 270 Cal.Rptr. 183 [" A lease which is subordinate to the deed of trust is extinguished by the foreclosure sale. [Citations.]" ].) Under traditional California law, " [a] foreclosure proceeding destroys a lease junior to the deed of trust, as well as the lessee's rights and obligations under the lease. (Nelson & Whitman, Real Estate Finance Law (2d ed. [Lawyer's Ed.] 1985) § 15.11, p. 1114.)" ( Dover, supra, 220 Cal.App.3d at pp. 1498-1499, 270 Cal.Rptr. 183.) " Thus, if the sale of the landlord's

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interest is forced by one having a superior title to that of the tenant, the tenant's interest will be defeated by the sale under the deed of trust. ( Dover, supra, 220 Cal.App.3d at p. 1499, 270 Cal.Rptr. 183.)" ( Aviel v. Ng (2008) 161 Cal.App.4th 809, 816, 74 Cal.Rptr.3d 200.)

" When a lease is executed and recorded prior to the recordation of the deed of trust, or if the beneficiary of the deed of [167 Cal.Rptr.3d 184] trust had notice of a prior unrecorded lease at the time the trust deed was recorded, the lien of the trust deed is junior to the estate of the lessee and his or her right to occupy the premises. The title of the purchaser at a foreclosure sale of the junior lien is subject to the lessee's contract right to occupy the premises." (Miller & Starr, Cal. Real Estate (3d ed. 2009) § 11:101, p. 11-307, fns. omitted; see Civ.Code, §§ 1214 [prior recording of subsequent conveyances], 1215 [defining " conveyance" ], 1217 [" An unrecorded instrument is valid as between the parties thereto and those who have notice thereof" ]; 3395 [" Whenever an obligation in respect to real property would be specifically enforced against a particular person, it may be in like manner enforced against any other person claiming under him by a title created subsequently to the obligation, except a purchaser or encumbrancer in good faith and for value...." ]; R-Ranch Markets # 2, Inc. v. Old Stone Bank (1993) 16 Cal.App.4th 1323, 1327, 21 Cal.Rptr.2d 21 [trustee's sale]; Sumitomo Bank v. Davis (1992) 4 Cal.App.4th 1306, 1314, 6 Cal.Rptr.2d 381 [judicial foreclosure sale]; Dover, supra, 220 Cal.App.3d at p. 1498, 270 Cal.Rptr. 183.)

In the absence of other applicable law providing greater protection to tenants at foreclosure, the purchaser at a foreclosure sale is entitled to recover possession through an unlawful detainer action. (See Code Civ. Proc., § 1161a, subds. (b)(3), (c).)

2. Enactment and Amendment of Code of Civil Procedure Section 1161b

Code of Civil Procedure section 1161b (§ 1161b) was enacted in 2008, effective July 8, 2008, in the wake of the foreclosure crisis. (Stats. 2008, ch. 69, §§ 1, 6 & 10, pp. 175-176, 179.) As enacted, it provided: " Notwithstanding Section 1161a , a tenant or subtenant in possession of a rental housing unit at the time the property is sold in foreclosure shall be given 60 days' written notice to quit pursuant to Section 1162 before the tenant or subtenant may be removed from the property as prescribed in this chapter." (Stats. 2008, ch. 69, § 6, p. 179 [former § 1161b, subd. (a) ], italics added.) The section did not apply, however, " if any party to the note remains in the property as a tenant, subtenant, or occupant." (Stats. 2008, ch. 69, § 6, p. 179 [former § 1161b, subd. (b) ].) The enactment of section 1161b was not " intended to affect any local just-cause eviction ordinance." (Stats. 2008, ch. 69, § 7, p. 179.) The Legislature also declared that " [t]his act does not, and shall not be construed

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to, affect the authority of a public entity that otherwise exists to regulate or monitor the basis for eviction." ( Ibid. )

Section 1161b was amended in 2012 (Stats. 2012, ch. 562, § 3, p. 4960) and the amendment went into effect on January 1, 2013. (See Cal. Const., art. IV, § 8, subd. (c); Gov.Code, § 9600, subd. (a).) As amended, section 1161b, subdivision (a), provides: " Notwithstanding Section 1161a, a tenant or subtenant in possession of a rental housing unit under a month-to-month lease or periodic tenancy at the time the property is sold in foreclosure shall be given 90 days' written notice to quit pursuant to Section 1162 before the tenant or subtenant may be removed from the property as prescribed in this chapter." As amended, section 1161b, subdivision (b), additionally provides that " tenants or subtenants holding possession of a rental housing unit under a fixed-term residential lease entered into before transfer of title at the foreclosure sale shall have the right to possession until the end of the lease term, and all rights and obligations under the lease shall survive foreclosure ...." (Italics added.) A fixed-term [167 Cal.Rptr.3d 185] residential lease is not entitled to this additional protection, however, where " [t]he purchaser or successor in interest will occupy the housing unit as a primary residence," " [t]he lessee is the mortgagor or the child, spouse, or parent of the mortgagor," " [t]he lease was not the result of an arms' length transaction," or " [t]he lease requires the receipt of rent that is substantially less than fair market rent for the property, except when rent is reduced or subsidized due to a federal, state, or local subsidy or law." (§ 1161b, subd. (b).) Section 1161b does " not apply if any party to the note remains in the property as a tenant, subtenant, or occupant." (§ 1161b, subd. (d).)

In enacting the 2012 amendment of section 1161b, the California Legislature was attempting to bring California law in line with the federal PTFA. An Assembly Floor analysis of the bill amending section 1161b explained: " The PTFA, which is currently scheduled to sunset on December 31, 2014, generally requires the purchaser of a home at a foreclosure sale to honor bona fide tenant's lease unless the purchaser intends to occupy the home as their primary residence. If there is no lease, if the lease is terminable at will (a month-to-month tenancy), or if the purchaser will occupy the home as their primary residence, the tenant must be provided with a 90-day notice to vacate (unless a longer period is required by state or local law). As a result, currently federal law generally provides greater protection to tenants than state law by providing additional time (90 vs. 60 days) and imposes a requirement that the lease be honored under certain circumstances. [¶] This bill would make the state law provisions described above comparable to federal law by providing that a new owner of a foreclosed property must honor a tenant's lease." (Assembly Floor, Analysis of Assem. Bill No. 2610 (2011-2012 Reg. Sess.) as amended Aug. 20, 2012, pp. 3-4; see Sen. Rules Com., Office of Senate

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Floor Analyses, 3d Reading Analysis of Assem. Bill No. 2610 (2011-2012 Reg. Sess.) as amended Aug. 20, 2012, pp. 2, 4-5.)

B. Federal Protecting Tenants at Foreclosure Act of 2009

1. Provisions of the PTFA

The PTFA was enacted as part of the " Helping Families Save Their Homes Act of 2009" enacted in 2009. (Pub.L. 111-22, Div. A, Title VII, May 20, 2009, 123 Stat. 1660.) The PTFA is a very short act, consisting of only four sections. Section 701 of the PTFA establishes its short title.

Section 702 of the PTFA specifies the protections for bona fide tenants of foreclosed properties. Section 702, subdivision (a), of the PTFA provides: " IN GENERAL.— In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title [May 20, 2009], any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to— [¶] (1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and [¶] (2) the rights of any bona fide tenant— [¶] (A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or [¶] (B) without a lease or with a lease terminable at will under state law, subject to the receipt by the tenant of [167 Cal.Rptr.3d 186] the 90 day notice under subsection (1), [¶] except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants."

Section 702, subdivision (b), of the PTFA, provides that for purposes of this section " a lease or tenancy shall be considered bona fide only if— [¶] (1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant; [¶] (2) the lease or tenancy was the result of an arms-length transaction; and [¶] (3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit's rent is reduced or subsidized due to a Federal, State, or local subsidy."

Section 702, subdivision (c), of the PTFA, states that as used by this section " the term ‘ federally-related mortgage loan’ has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974

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(12 U.S.C. 2602)." As amended in 2010, section 702, subdivision (c), also provides: " For purposes of this section, the date of a notice of foreclosure shall be deemed to be the date on which complete title to a property is transferred to a successor entity or person as the result of an order of a court or pursuant to provisions in a mortgage, deed of trust, or security deed." (Pub.L. 111-203, Title XIV, § 1484, July 21, 2010, 124 Stat. 2204.)

Section 703, subdivision (2), of the PTFA inserted new language at the end of (o)(7)(F) of United States Code, title 42, section 1437f, which concerns low income housing assistance: " In the case of any foreclosure on any federally-related mortgage loan (as that term is defined in section 2602 of Title 12) or on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit, except that this provision and the provisions related to foreclosure in subparagraph (C) shall not affect any State or local law that provides longer time periods or other additional protections for tenants." (Italics added.)

Under section 704 of the PTFA, a sunset provision, the Act is repealed and its requirements terminate on December 31, 2014.

2. " Shall Assume Such Interest Subject to "

Appellants assert that the federal statute " created a landlord-tenant relationship for the remaining period of [their] lease, i.e. through June 1, 2010." They argue that the Bank owed at least the same duties to them as any California landlord owes to its tenant.

Respondents maintain that " the PTFA only provides a defense to eviction proceedings in state court." They state that " tenants can contest eviction proceedings (i.e., defend an unlawful detainer action) on the grounds that the post-foreclosure owner has not complied" with the PTFA's requirement to provide notice or permit continued occupancy. They contend there is not a single case in which the PTFA has been asserted as a basis for a tenant's claims against a " post-foreclosure owner." They also suggest that the Act " at most provides only that a bona fide tenant has the right to occupy the premises until the end of the remaining term of the lease" and did not make Deutsche Bank the landlord.

[167 Cal.Rptr.3d 187] " Our goal is to determine the Legislature's intent and adopt a construction that best effectuates the purpose of the law.

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( Miklosy v. Regents of University of California (2008) 44 Cal.4th 876, 888, 80 Cal.Rptr.3d 690, 188 P.3d 629...; In re J.W. (2002) 29 Cal.4th 200, 209, 126 Cal.Rptr.2d 897, 57 P.3d 363....) We begin with the statutory language because it generally provides the most reliable indication of legislative intent. ( City of Burbank v. State Water Resources Control Bd. (2005) 35 Cal.4th 613, 625, 26 Cal.Rptr.3d 304, 108 P.3d 862...; People v. Gardeley (1996) 14 Cal.4th 605, 621, 59 Cal.Rptr.2d 356, 927 P.2d 713....) ‘ " If the statutory language is unambiguous, we presume the Legislature meant what it said, and the plain meaning of the statute controls. [Citation.]" [Citation.] We consider extrinsic aids, such as legislative history, only if the statutory language is reasonably subject to multiple interpretations.’ ( Miklosy v. Regents of University of California, at p. 888, 80 Cal.Rptr.3d 690, 188 P.3d 629....)" ( In re W.B., Jr. (2012) 55 Cal.4th 30, 52, 144 Cal.Rptr.3d 843, 281 P.3d 906.)

In determining whether section 702 of the PTFA causes a bona fide lease to survive foreclosure despite contrary state law, we begin taking particular note of its phrases " any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to ..." and " except that a successor in interest may terminate a lease ...." (Italics added.) We also observe that, despite respondents' assertions, the Act does not expressly state that the PTFA's protections may be invoked only as an affirmative defense. The language of section 702 of the Act seems to indicate that a successor in interest takes title in the foreclosed property subject to a bona fide lease for a term because otherwise it would be nonsensical to provide that an immediate successor has the power to " terminate a lease" as specified.

On the other hand, Congress could have been more straightforward. As indicated, section 703, subdivision (2), of the PTFA, which amended existing law to state the effect of foreclosure on housing assistance, contained more direct language: " the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract...." (42 U.S.C. § 1437f, subd. (o)(7)(F), italics added.) Congress could have also said, as did the California Legislature, that " all rights and obligations under the lease shall survive foreclosure" (§ 1161b, subd. (b)).

" To the extent a statutory text is susceptible of more than one reasonable interpretation, we will consider ‘ " a variety of extrinsic aids, including the ostensible objects to be achieved, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction, and the statutory scheme of which the statute is a part." ’ [Citation.]" ( Elsner v. Uveges (2004) 34 Cal.4th 915, 929, 22 Cal.Rptr.3d 530, 102 P.3d 915, fn. omitted.) Accordingly, we turn to extrinsic aids to determine whether or not Congress intended bona fide leases for a term to survive foreclosure and bind successors in interest.

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3. Legislative History

On May 1, 2009, Senator John Kerry submitted an amendment (SA 1036) to add the PTFA, as proposed, to another amendment (SA 1018) to a bill (S. 896), which was aimed at preventing mortgage foreclosures and enhancing mortgage credit. (155 Cong. Rec. S5029 (May 1, 2009).)

[167 Cal.Rptr.3d 188] On May 5, 2009, Senator Kerry called up the amendment for consideration. (155 Cong. Rec. S5110 (May 5, 2009).) The senator stated that he was " offering this amendment to address the needs of renters in properties that have been foreclosed." ( Ibid. ) He argued: " Congress has already taken extraordinary measures to help troubled borrowers in communities where they have abandoned foreclosed properties, but Congress has done very little to help renters who have been paying their rent regularly on time but, unfortunately, they have landlords who are losing their property to foreclosure. So these renters are absolutely blameless victims in the foreclosure catastrophe that has hit the country.... [¶] These renters often have absolutely no idea that their home is about to be foreclosed. Depending on the State they live in, they may be evicted with absolutely no notice. Obviously, this could be particularly difficult for low-income renters who don't have the resources to relocate or even to do so very quickly. [¶] Under this amendment, tenants in any federally related mortgage loan or any dwelling or residential real property with a lease have a right to remain in the unit until the end of the existing lease. If a new purchaser intends to use the property as a primary residence, then the lease may be terminated, but the tenant has to receive 90 days' notice to vacate. [¶] So what we believe is that this provides an appropriate level of protection. It doesn't take away the right of someone who takes over the home in foreclosure to be able to then transition that property or it decides if that person is going to keep the property as a rental property, the person who already has a legitimate lease has a right to be able to stay." (155 Cong. Rec. S5110-5111 (May 5, 2009).) Senator Kerry declared that " [a] landlord should not be allowed to come in, change the locks, and force out tenants who were there completely legitimately, with an expectation that they were coming home to their same old home." (155 Cong. Rec. S5111 (May 5, 2009).) He explained: " Furthermore, [it] states specifically that none of the provisions here would affect any State and local law that provides a longer time period or other additional protections to renters. So there is nothing here that reduces the protection renters get." ( Ibid. )

Senator Kerry gave examples of tenants returning home to find locks changed, utilities turned off, or possessions put out on the street. ( Ibid. ) He stated: " It is well documented how foreclosure is already overpowering countless numbers of homeowners who are

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unable to pay their mortgages, but foreclosure is also causing a rampage of sudden evictions of renters. My amendment would stop that rampage and help unsuspecting renters from falling victim to foreclosure in which they played absolutely no part." ( Ibid. )

Senator Dodd offered his comments on the amendment. Among other things, he stated that " the measure requires at least 90-days' notice for all renters in federally related housing, but would honor the full term of any existing lease unless a new owner will occupy the home." (155 Cong. Rec. S5115 (May 5, 2009).) He explained: " What Senator Kerry is saying here, at least for tenants who are in good standing on their properties, they should not be affected because the property ended up in foreclosure through whatever rationale that may have happened to the landlord. It seems to me, putting people out on the street is not what we ought to be doing at a time such as this." ( Ibid. )

On May 6, 2009, during further debate, Senator Kerry argued: " [W]e have taken a lot of effort to try to help troubled borrowers in communities that have foreclosed properties. Here is the problem that exists. If you are a renter and living in a [167 Cal.Rptr.3d 189] property that has been foreclosed on, you have nothing to do with the foreclosure, you are paying rent, you have a lease, but a lot of these people are getting kicked out of their apartments, out of their homes. [¶] What we want to do is provide them with a provision where they will have 90 days— if the people who foreclosed are going to use that residence as a primary residence. If the residence is going to continue to be a multiple-party residence where they have a number of people renting and they will continue to use it as such, we want to leave those leases in effect until the end of the lease. We are protecting legitimate, low- to moderate-income folks in America who do not get protections otherwise from being just booted out on the street, which is literally what has happened in the absence of this protection." (155 Cong. Rec. S5174 (May 6, 2009).)

The legislative history of the enactment of PTFA strengthens the case that its section 702 was intended to cause bona fide leases for a term to survive foreclosure.[2]

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4. Administrative Construction

We also take a look at administrative construction of the PTFA as an aid to judicial interpretation. " Although we are not bound by administrative decisions construing a controlling statute, we accord ‘ " great weight and respect to the administrative construction." ’ [Citation.] The amount of deference given to the administrative construction depends ‘ " upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and [167 Cal.Rptr.3d 190] all those factors which give it power to persuade, if lacking power to control." ’ [Citation.]" ( Hoechst Celanese Corp. v. Franchise Tax Bd. (2001) 25 Cal.4th 508, 524, 106 Cal.Rptr.2d 548, 22 P.3d 324, italics omitted.) " When an administrative agency construes a statute in adopting a regulation or formulating a policy, the court will respect the agency interpretation as one of several interpretive tools that may be helpful." ( Agnew v. State Bd. of Equalization (1999) 21 Cal.4th 310, 322, 87 Cal.Rptr.2d 423, 981 P.2d 52.)

Shortly after the PTFA was enacted, the Department of Housing and Urban Development (HUD) issued a notice, entitled " Protecting Tenants at Foreclosure: Notice of Responsibilities Placed on Immediate Successors in Interest Pursuant to Foreclosure of Residential Property," dated June 24, 2009. (74 Fed.Reg. 30106-30108 (June 24, 2009).) HUD indicated that it was " directing this notice to entities and individuals that participate in HUD programs or with whom HUD interacts in its HUD programs" but that " these obligations are not limited to FHA-insured or HUD-assisted housing." (74 Fed.Reg. 30106 (June 24, 2009).) The notice announced: " [The PTFA] ... requires that tenants residing in foreclosed residential properties

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be provided notice to vacate at least 90 days in advance of the date by which the immediate successor, generally, the purchaser, seeks to have the tenants vacate the property. Except where the purchaser will occupy the property as the primary residence, the term of any bona fide lease also remains in effect." ( Ibid. ) It specified: " Section 702 [of the PTFA] provides a tenant under any bona fide lease entered into before the notice of foreclosure has the right to occupy the premises until the end of the remaining term of the lease. The only exception to preserving the remaining term of the lease is for a purchaser who will occupy the unit as a primary residence. Even under this exception, however, the tenant must still be provided with the 90-day advance notice to vacate." (74 Fed.Reg. 30107 (June 24, 2009).)

That June 2009 HUD notice further explained that " Section 703 [of the PTFA] makes conforming changes consistent with the Section 702 requirements to the Section 8 rental voucher assistance of the United States House Act of 1937 (1937 Act)" (74 Fed.Reg. 30106 (June 24, 2009).) The notice stated: " Section 8(o)(7) of the 1937 Act is further amended by Section 703 to provide that the successor in interest in the case of any foreclosure of a property in which a voucher recipient resides assumes the interest in the property subject to the lease and HAP [housing assistance payment] contract in place before the foreclosure. This provision confirms that the section 8 tenant's lease is, in effect a bona fide lease and that the HAP contract survives the foreclosure, just as the lease does." (74 Fed.Reg. 30107-30108 (June 24, 2009).)

In a September 28, 2009 letter to " FDIC-Supervised Institutions," the Federal Deposit Insurance Corporation (FDIC) explained that, under the PTFA, " [a]ll tenants must receive a 90-day notice before being evicted as the result of a foreclosure." [3] (FDIC Financial Institutions [167 Cal.Rptr.3d 191] Letter, FIL-56-2009, Sept. 28, 2009 < http:// www.fdic.gov/news/news/financial/2009/fil09056.html> [as of Aug. 23, 2013].) The letter stated: " With some exceptions, the law requires that in the event of foreclosure, existing leases for renters are honored to the end of the term of their lease." ( Ibid. ) It further said: " The stated exceptions are for tenants without a lease, tenants with a lease terminable at will under state law, or where the ...


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