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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.

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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  Rejecting “a statement found in an unpublished federal district court decision, which decision in turn repeated a statement found in other unpublished district court decisions,” the court explained that, under “the relevant United States Department of the Treasury guidelines[,] where a borrower satisfies the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.”

Category : Case law | Developments | Real Property | Blog

A 2013 decision from the Fifth District Court of Appeal (based in Fresno) has bedeviled the lending community.  In Glaski v. Bank of America (2013) 218 Cal.App.4th 1079, the court held that the borrower could state a “cognizable claim for wrongful foreclosure under the theory that the entity invoking the power of sale (i.e.,  Bank of America in its capacity as trustee for the WaMu Securitized Trust) was not the holder of the [ ] deed of trust.”

This drives lenders bonkers because the lending community wants to cut off challenges to post-funding assignments of the loan.  The new decision in Saterbak v. JPMorgan Chase Bank, NA (Mar. 16, 2016) __ Cal.App.4th ___ casts aspersions on the Glaski decision.

Before reviewing the new case, let’s start with the 2013 case.  The plaintiff in Glaski argued that his loan was untimely transferred to the WaMu Securitized Trust, specifically that the “note and loan were not transferred to the WaMu Securitized Trust prior to its closing date … the transfer to the trust attempted by the assignment of deed of trust recorded on June 15, 2009, occurred long after the trust was closed; and the attempted assignment was ineffective.”  218 Cal.App.4th 1079, 1094.

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Glaski held that “a borrower can challenge an assignment of his or her note and deed of trust if the defect asserted would void the assignment.”  218 Cal.App.4th 1079, 1095.  Glaski found that “a legal basis for concluding that the trustee’s attempt to accept a loan after the closing date would be void as an act in contravention of the trust document.”

Glaski further held that, in its review of New York law (the WaMu Securitized Trust was controlled by New York law), the complaint sufficiently alleged a claim for wrongful foreclosure, based on allegations that the assignment occurred after the closing date for the trust.

Now to the new case.  In  Saterbak v. JPMorgan Chase Bank, NA (Mar. 16, 2016), the plaintiff sought pre-foreclosure relief from the court.  Contrast this to Glaski, which involved claims for post-foreclosure relief.  Specifically, “Saterbak filed suit in January 2014.  She alleged the [deed of trust] was transferred to the 2007-AR7 trust four years after the closing date for the security, rendering the assignment invalid … She also sought declaratory relief that the same defects rendered the assignment void.”

The Fourth District Court of Appeal (based in San Diego) held that such claims were not cognizable, holding “Saterbak lacks standing to pursue these theories.  The crux of Saterbak’s argument is that she may bring a preemptive action to determine whether the 2007-AR7 trust may initiate a nonjudicial foreclosure.  She argues, ‘If the alleged ‘Lender’ is not the true ‘Lender,’ it ‘has no right to order a foreclosure sale.’

“However, California courts do not allow such preemptive suits because they would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.”

Now to the conflict with GlaskiSaterbak held that, on the issue of “whether, under New York law, an untimely assignment to a securitized trust made after the trust’s closing date is void or merely voidable … We conclude such an assignment is merely voidable.”

Saterbak added in a footnote, “the New York case upon which Glaski relied has been overturned … We decline to follow Glaski and conclude the alleged defects here merely render the assignment voidable.”

This author believes that Glaski was correctly reasoned.  But now we have a conflict in the case law.  For cases in the Central Valley, courts will have to wrestle with how to apply Glaski.

Category : Case law | Real Property | Blog

Karl Llewellyn was one of the leading lights of American jurisprudence from the 1930s through the 1950s.  Not only was he the dean of Columbia Law School, he participated in the drafting of Article 2 of the Uniform Commercial Code, and was active in efforts to promote its enactment in the different states.

Add this: Llewellyn was a clear thinker and a gifted writer, and a lawyer through to his core.  At his death, he left an unpublished manuscript, The Theory Of Rules.  Here are some excerpts, as true today as the day they were written:


“Any lawyer dealing with any problem is looking for a rule of law to cover it, and any lawyer recognizes as a rule (allegedly or actually positive) a formula setting forth in general terms a type of fact-situation and laying down a legal consequence therefor.”

Right – That’s what we do.  We look for rules to cover a fact pattern.

“The concept fits not only the speech-usage but the working practices of the profession … Side by side with this functional attribute sits another: rules of law are rules with the function of accomplishing control by language communication.”

Right again – Rules achieve their results by the use of language.

“Unless the language of a purported rule of law is clear enough to mean roughly similar things to different officials about what to do with [roughly similar] states of fact, that purported rule fails … to the extent to which its meaning varies.”

And now a word about what law schools teach to aspiring lawyers:

“That I wrote such an observation implies … that I am judging the bad [rules] by the good ones, seeing their defects against the pattern of what we can do.

“And that our best ones are not the general run is simple to demonstrate.  First, if they
were, it would verge on the criminal to give so large a portion of our law curricula over to study of how to deal with not-so-clear rules.”

And now, Llewellyn shows his skills: “There is a touch of weaseling in this proposed division, in that recognition is itself a concept of fact; but the weasel is one capable of muzzling, with care.”

Karl N. Llewellyn, The Theory of Rules, edited and with an introduction by Frederick Schauer (Univ. of Chicago Press 2011)

Category : Legal Education | Blog

The law of evictions – titled as “unlawful detainer” in California – is a technical area. The law has statutory roots as far back as the Forcible Entry Act of 1381, which prohibited the use of self-help to retake possession of real property.

That remains an important concept in an action based on the unlawful detainer statutes.  The principal objective in an action for unlawful detainer is a judicial determination whether the plaintiff or defendant is entitled, at that time, to possession of the property.  Unlawful detainer does not focus on ownership, and case law holds that the issue of plaintiff’s title to the property cannot be litigated in an unlawful detainer proceeding.

So, the objective is up to obtain a judgment for unlawful detainer, coupled with issuance of a writ of possession.  By law, the writ of possession is delivered to the sheriff, who has the responsibility to serve and enforce the writ of possession, ultimately using the sheriff’s office to restore possession to the plaintiff.

Remember – no self-help.  The court issues a judgment for possession, together with a writ of possession.  The sheriff enforces the writ of possession and restores possession to the plaintiff.

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Now mix in issues arising under bankruptcy law.  In In re Perl, __ F.3d __ (Jan. 8, 2016), the plaintiff in an unlawful detainer action obtained judgment and the court issued a writ of possession.  The writ was delivered to the sheriff.  Then, before the sheriff effected service, the tenant filed for bankruptcy.  Does the Sheriff’s actions in enforcing the writ of possession violate the automatic stay created under bankruptcy law?

“The question in this case is whether Perl had any remaining legal or equitable possessory interest in the property after … the state court fully adjudicated in the unlawful detainer proceedings.”  According to the 9th Circuit, the answer is No.

More specifically, “We conclude that under California law, entry of judgment and a writ of possession following unlawful detainer proceedings extinguishes all other legal and equitable possessory interests in the real property at issue.”

In so doing, the court overruled the decisions in In re Di Giorgio, 200 B.R. 664 (Bankr. C.D. Cal. 1996) and In re Butler, 271 B.R. 867 (Bankr. C.D. Cal. 2002).

It gets more interesting when the court reviewed the statutory scheme.  The court found that “Pursuant to Code of Civil Procedure § 415.46, no occupant of the premises retains any possessory interest of any kind following service of the writ of possession.”

Comment – Look up CCP § 415.46 for yourself.  It deals with the prejudgment claim to possession that can be asserted by third parties in possession of the property.  The court’s analysis is not supported by statute.

Thus, the court concluded that “The unlawful detainer judgment and writ of possession entered pursuant to California Code Civil Procedure § 415.46 bestowed legal title and all rights of possession upon Eden Place.  Thus, at the time of the filing of the bankruptcy petition, Perl had been completely divested of all legal and equitable possessory rights that would otherwise be protected by the automatic stay.  Consequently, the Sheriff’s lockout did not violate the automatic stay because no legal or equitable interests in the property remained to become part of the bankruptcy estate.”

Comment – I can’t agree.  Possession could be restored only by the sheriff acting pursuant to the writ of possession issued by the court.  As possession was restored by enforcement of a court order, I believe the act of restoring possession necessarily impacted the bankruptcy stay.

Category : Case law | Developments | Real Property | Blog

Strange how an idea that was once old can become new again.  Roscoe Pound, Dean of the Harvard Law School, was a prolific legal writer in the 1920s and 1930s.  From my perspective, his best work concerned the development of the American legal system from 1850 through 1900, as America reached the end of its Western expansion.

Writing in 1938, Dean Pound discussed why legislation was not effective to address rapidly-changing areas of the law.  Here is Dean Pound’s analysis:

“It would seem that while legislation has proved an effective agency of ridding the law of particular institutions and precepts which have come down from the past and have not been adapted or were not adaptable to the needs of the time, it has not been able, in our legal system, except in rare instances, to do much of the constructive work of change in eras of growth.  So far as everyday relations and conflicts of interests are concerned, it has not been able to anticipate new demands nor to move fast enough when they made themselves felt through litigation.”  Roscoe Pound, The Formative Era of American Law (Little, Brown and Company 1938), pp. 44-45.

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At the same time, I was reading a new law review article by Professor Mark Burge, discussing the future of the law of payment systems.  Once upon a time, the law of payment systems dealt principally with bank drafts, checks, and bills of exchange.  These days, the law of payment systems also encompasses credit cards, debit cards, ETF’s, Apple Pay, and Bitcoin.

As is apparent, payment systems is a rapidly developing area of the law.  In his article, Prof. Burge discusses why efforts at codification via the Uniform Commercial Code have failed, in large part because opponents of consumer protection provisions have “spiked the cannon” (my words, not his).  Note Professor Burge’s analysis of legislative action in this area:

“Public law should presumptively not be the governing device for payments, although the presumption is a rebuttable one … Experience provides three interrelated reasons to err on the side of private governance.

“First, private law is more capable of adapting to technological change in a meaningful timeframe … Public legislative or regulatory process is not nimble enough to keep up with the times. That fact is not a design flaw in deliberative democracy; it is an intentional feature where the intention dates at least as far back as the United States Constitution …

“Second, after bright-line public law protections of system users are in place, the remaining incentives will be for system operators to conduct themselves in a manner that produces the most social benefit.

“Finally, the parties operating a payment system are in the best position to determine allocation of risks unaccounted for by limited public law, and also to handle a limited collection of risks that public law should impose.”

Although separated by 80 years, Prof. Burge’s analysis is not far off the mark from Dean Pound.  Reminding us that everything old is new again.

Mark Edwin Burge, Apple Pay, Bitcoin, and Consumers: the ABCs of Future Public Payments Law, forthcoming in 67 Hastings L.J. (2016)

Category : Developments | Law Reviews | Legal history | Blog

Here is a recent decision that is not a surprise under a traditional agent-principal analysis.  Even so, it has to sting, because the corporation loses twice – first, when it was defrauded by the former president, and second when the corporation was sued by shareholders for the diminished value of their securities.

The fact pattern is straightforward.  “ChinaCast founder and CEO Ron Chan embezzled millions from his corporation and misled investors through omissions and false statements – textbook securities fraud.”  These were not small losses: “From June 2011 through April 2012, Chan ‘transferred’ $120 million of corporate assets to outside accounts that were controlled by him and his allies.”

There’s your background.  The corporation, recognized by law as a separate “person,” lost millions of dollars through embezzlement by the former CEO.  At the same time, the former CEO made false representations on behalf of the corporation, which false representations caused damage to investors in the corporation.

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Explained the court, “Throughout 2011, Chan signed SEC filings on behalf of ChinaCast and never disclosed the $120 million in transfers and other fraudulent activities afoot.”  (Of course Chan made false representations – otherwise, he would of been admitting his wrongdoing.)

The corporation brought forth a common-law defense: “The adverse interest doctrine may prevent a court from imputing knowledge of wrongdoing to an employer when the employee has abandoned the employer’s interests, such as by stealing from it or defrauding it.”

“The sole question on appeal is a purely legal one and an issue of first impression in this circuit:  Can Chan’s fraud be imputed to ChinaCast, his corporate employer, even though Chan’s looting of the corporate coffers was adverse to ChinaCast’s interests?”

The Ninth Circuit held that the corporation could be sued by investors based on the false representations, even though the corporation suffered its own separate injuries.  Explained the court, “we conclude that Chan’s fraudulent misrepresentations – and, more specifically, his scienter or intent to defraud – can be imputed to ChinaCast.

“Significantly, imputation is proper because Chan acted with apparent authority on behalf of the corporation, which placed him in a position of trust and confidence and controlled the level of oversight of his handling of the business.”

That’s certainly a difficult result.  Everyone suffered from the wrongful acts of Chan.  In an earlier time, the law probably would have allowed the losses to rest where it found them.  In our increasingly urban society, the law reaches out to protect injured persons, even when the defendant has already “paid once” for the injury.

In re ChinaCast Education Corporation Securities Litigation, __ F.3d __ (9th Cir. Oct. 23, 2015)

Category : Case law | Corporations | Developments | Blog

As the jurisdiction of small claims court has increased (now up to $10,000), attorneys are called on more frequently to assist on appeal.  (Ground rule – attorneys are not permitted to assist at the original trial, only on appeal.)

In Dorsey v. Superior Court (Oct. 22, 2015) __ Cal.App.4th __, “The small claims court dispute [ ] arose out of a condominium lease, which contain[ed] a prevailing party attorney fee provision.  [The trial court] entered judgment in favor of the tenants [ ] against the landlord [ ] in the principal amount of $1,560.”

This is where it gets interesting.  “After judgment, [the tenant] sought $11,497.50 in attorney fees as the prevailing parties under the attorney fee provision in the lease.  [The landlord] opposed the motion, asserting Code of Civil Procedure section 116.780(c) trumped the contractual attorney fees provision, limiting any award to $150.  The superior court awarded Crosier $10,373.”

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Fort Sumter

Explained the court, “Small claims court exists so people with meritorious claims for small amounts may have those claims adjudicated without spending more on attorney fees than the claims are worth.”

Note – English law has recognized “small claims” jurisdiction for at least five centuries.  As the court discussed, “The small claims court system has been refined over hundreds of years with recurring attention from the courts, legal commentators, and the Legislature.”  It’s not like California invented small claims court.

Continued the court, “Section 116.780(c) reflects a legislative determination that a small claims appeal should require no more than minimal attorney time.  The small claims appeal procedure was intended to be integral to the legislative scheme for expeditious and cost-effective resolution of small claims.

“Therefore, as we explain, section 116.780(c) must be construed to override contractual attorney fee provisions and limit the attorney fee award here to $150.”

The court also discussed the unusual procedure of the case.  “The superior court’s judgment on a small claims appeal is ‘final and not appealable’ … However, if law is to be made settling a significant issue of small claims procedure, ‘the appellate courts must have jurisdiction to entertain petitions for extraordinary review in appropriate circumstances.’  Writ relief is appropriate here to review this significant issue in small claims law and to ensure uniform interpretation of the governing statutes.”

Bottom line – The court can award attorney’s fees up to $150.00 in small claims court.  Dorsey v. Superior Court (Oct. 22, 2015) __ Cal.App.4th __

Category : Case law | Developments | Blog

The opinion in In re Marriage of Fossum (Feb. 1, 2011) 2011 DJDAR 1629 focused on the characterization of a house that was owned by Edward and Sandra Fossum.  Like many couples, title was taken in the name of one spouse to obtain better credit terms.  The court found that the house was community property, notwithstanding the fact that the wife knowingly and intentionally signed a quitclaim deed in favor of her husband.

That result is interesting, but not as interesting as the finding that the wife was liable to the ex-husband for attorney’s fees as a result of an undisclosed loan in favor of the wife.  Read on.

Concerning the house, “Edward Fossum and his ex-wife, respondent Sandra Fossum purchased a house [at 21557 Placerita Canyon Road, Santa Clarita] in 1994 . . . Edward had a better credit rating than Sandra.  Because of that, a lender recommended, and Edward and Sandra agreed, that Edward should finance the house and take title to the property in his name [only], in order to obtain a better interest rate.”

Here is the essential fact that sunk Edward’s argument.  “After the loan closed in October 1994, Edward kept his promise and executed a quitclaim deed, dated August 16, 1995, in favor of Edward and Sandra Fossum, as joint tenants.”

This was followed by a second loan in 1998.  “Edward told Sandra that because her credit history remained a problem, they should do the same thing they had done when they first bought the house, in order to obtain a better interest rate. “

“Sandra and Edward agreed to refinance the property in Edward’s name alone and that, just as before, Edward would restore Sandra’s name to title once the transaction was complete.  Sandra believed Edward, and signed a quitclaim deed in his favor in May 1998.”

“But, Sandra and Edward ‘got busy,’ and Edward never got around to executing a new quitclaim deed.  By 2002, the marriage was in trouble and, at Edward’s urging, the couple was undergoing counseling. At that point, Edward conditioned his willingness to return Sandra’s name to title on a list of requirements that she behave in a certain way, and become a ‘Godly woman and a good Christian wife,’ with a ‘heart . . . free of sin.’”

In the end, Edward refused to acknowledge that Sandra held a community property interest in the house.  Now, the fact that Sandra voluntarily signed a deed in favor of her ex-husband would seem to be a bad fact.  The court found that “Sandra agreed to execute the third quitclaim deed, and understood what she was doing.”

Mekong Delta4Yet, the court made short work of the deed, noting that “spouses occupy a confidential and fiduciary relationship with each other.  The nature of this relationship imposes a duty of the highest good faith and fair dealing on each spouse as to any interspousal transaction.”   As such, the court explained that “if an interspousal transaction results in one spouse obtaining an advantage over the other, a rebuttable presumption of undue influence will attach to the transaction.”

Edward then bore the burden of proof, meaning that the deed was, for practical purposes, disregarded.  “The advantaged spouse must show, by a preponderance of evidence, that his or her advantage was not gained in violation of the fiduciary relationship.”

More bluntly, “The problem with Edward’s argument is that it essentially ignores the rule that the form of title presumption simply does not apply in cases in which it conflicts with the presumption that one spouse has exerted undue influence over the other.”

The court noted that “Sandra did testify she executed the 1998 deed freely and voluntarily, and that she understood the legal import of a quitclaim deed.  However, when Sandra agreed to deed her interest in the property to Edward, she did so based on his promise to restore her name to the title once the refinance was complete.  She now claims the transaction was predicated on a false promise, that Edward never intended to fulfill.”

So, Sandra prevailed on her claim based on the deed.  Yet, the second part of the decision is the surprise.  Found the court, “Prior to the parties’ separation, Sandra took a cash advance on a credit card of $24,000, but never disclosed the transaction to Edward.  The trial court found Sandra had breached her statutory fiduciary duty to her spouse.”

OK, so Sandra drew on a credit card before the couple separated.  “Spouses have fiduciary duties to each other as to the management and control of community property.”  Here’s the clincher.  “Once a breach is shown, the trial court lacks discretion to deny an aggrieved spouse’s request for attorney fees . . . The matter must be remanded to permit the trial court to determine the amount of attorney’s fee to which Edward is entitled.”

That is a profound holding.  Regardless of the lack of malice or bad faith, the finding of a breach of fiduciary duties triggered a mandatory award of attorney’s fees to the other spouse.

The dissent emphasized this point, stating “as a leading treatise observes, the statutorily imposed fiduciary duties in marital dissolution actions are extremely strict, making innocent violations easy to commit.  A mandatory award of attorney fees, imposed regardless of the value of the asset at issue and irrespective of need and ability to pay, is a harsh remedy for a violation that is merely technical and wholly innocent, as might often be the case.”

In re Marriage of Fossum (Feb. 1, 2011) 2011 DJDAR 1629

Category : Case law | Real Property | Blog

For anyone dealing with distressed mortgages, the story about the lender who said it would “work” with a defaulted loan, only to abruptly proceed to foreclosure, is all-to-familiar.  A legal challenge against the lender must be based on existing legal precedent.

The January 27, 2011 decision in Aceves v. U.S. Bank, N.A. gives hope to borrowers who have been led on by their lender during the foreclosure period, only to have the lender change course and proceed with the sale of the property.

The decision provides a measure of relief by expressly stating that “promissory estoppel” is a theory of relief under California.  (More on this below).  However, the scope of the remedy is not certain, and the concluding portion of the opinion casts a damper over any expectation that Aceves will generate expansive relief for beleaguered homeowners.

The underlying facts were not complicated.  According to the lawsuit, Mrs. Aceves obtained an adjustable rate loan secured by a deed of trust on her residence. “About two years into the loan, she could not afford the monthly payments and filed for bankruptcy under chapter 7 of the Bankruptcy Code.”

According to the lawsuit, “Mrs. Aceves intended to convert the chapter 7 proceeding to a chapter 13 proceeding and to enlist the financial assistance of her husband to reinstate the loan, pay the arrearages, and resume the regular loan payments.”

In her complaint, Mrs. Aceves said that “she contacted the bank, which promised to work with her on a loan reinstatement and modification if she would forgo further bankruptcy proceedings. In reliance on that Mrs. Aceves did not convert her bankruptcy case to a chapter 13 proceeding or oppose the bank’s motion to lift the bankruptcy stay.”

The lender sought to have the complaint dismissed, which motion was rejected.  According to the court, “By promising to work with Mrs. Aceves to modify the loan in addition to reinstating it, U.S. Bank presented Mrs. Aceves with a compelling reason to opt for negotiations with the bank instead of seeking bankruptcy relief . . . But the bank did not work with plaintiff in an attempt to reinstate and modify the loan.  Rather, it completed the foreclosure.”

The decision does not reach the merits of the dispute, holding only that the action could proceed because the plaintiff stated a legally-recognized claim.  The court relied on the doctrine of “promissory estoppel,” which lies somewhere between fraud and contract.

Explained the court, “The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.”

Thus, even where there is no legal contract, the injured party can seek relief.  Held the court, “To be enforceable, a promise need only be definite enough that a court can determine the scope of the duty, and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages . . . That a promise is conditional does not render it unenforceable or ambiguous.”

The famous decision in Hoffman v. Red Owl Stores, Inc., 26 Wis. 2d 683 (1965) explained that “Originally the doctrine of promissory estoppel was invoked as a substitute for consideration rendering a gratuitous promise enforceable as a contract.  In other words, the acts of reliance by the promisee to his detriment provided a substitute for consideration.”

The Wisconsin Supreme Court continued.  “We deem it would be a mistake to regard an action grounded on promissory estoppel as the equivalent of a breach-of-contract action . . .  The third requirement, that the remedy can only be invoked where necessary to avoid injustice, is one that involves a policy decision by the court.   ¶ We conclude that injustice would result here if plaintiffs were not granted some relief because of the failure of defendants to keep their promises which induced plaintiffs to act to their detriment.”

Returning to Mrs. Aceves, “the question [is] whether U.S. Bank made and kept a promise to negotiate with Mrs. Aceves, not whether [ ] the bank promised to make a loan or, more precisely, to modify a loan . . . The bank either did or did not negotiate.”

The court added that an oral promise to postpone either a loan payment or a foreclosure is unenforceable.  “In the absence of consideration, 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.  The same holds true for an oral promise to allow the postponement of mortgage payments.”

Yet, the court explained that “the doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise. The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange.  Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement.”

Finally, a frosty conclusion.  “A promissory estoppel claim generally entitles a plaintiff to the damages available on a breach of contract claim.  Because this is not a case where the homeowner paid the funds needed to reinstate the loan before the foreclosure, promissory estoppel does not provide a basis for voiding the deed of sale or otherwise invalidating the foreclosure.”

The inescapable fact is that there is no way to know whether a lender will approve a request for a loan modification.  There are no unified rules or procedures for lenders to use in evaluating a request for a loan modification, meaning that the platitudes offered by lenders are almost always empty promises.

Aceves v. U.S. Bank, N.A. (January 27, 2011) 2011 DJDAR 1613

Category : Case law | Real Property | Blog

The recent decision in Kucker v. Kucker focused on a narrow issue.  Is a general assignment of assets valid for transfer of stock into an estate planning trust?  The court answered in the affirmative, but not before confronting the statute of frauds.  And not before stating an important distinction regarding real property.

The facts were as follows. “On June 29, 2009, at the age of 84 years, [Mona Berkowitz]  signed a declaration creating a revocable inter vivos trust.  On the same date, [Mrs. Berkowitz] signed a general property assignment stating, “I . . . hereby assign, transfer and convey to Mona S. Berkowitz, Trustee of the [the Trust], all of my right, title and interest in all property owned by me, both real and personal and wherever located.”

Mrs. Berkowitz “died in November 2009. In February 2010, appellants filed a petition to confirm that 3,017 shares of stock in Medco Health Solutions, Inc., (Medco) were an asset of the Trust.”

Here is where the dispute arose.  “Medco was not mentioned in the assignment of stock signed by the Trustor on October 29, 2009.  Appellants declared that the Medco shares were not held in the Trust’s brokerage account at the time of the Trustor’s death.”

The beneficiaries of the estate planning trust sought a declaration that the Medco stock was an asset of the trust.  The trial court held that “Probate Code section 15207 must be read in conjunction with Civil Code section 1624(a)(7).  In those instances where the settler intends to transfer assets in excess of $100,000, a writing specifically describing the property is required. Accordingly, the petition confirming assets in the trust is denied.”

Mekong Delta

This ruling was reversed on appeal.  The appellate court first dealt with the statute of frauds issue, holding that, “Civil Code section 1624, subdivision (a)(7), cannot be construed as applying to the transfer of shares of stock to a Trust.  The plain meaning of the words of the statute manifests a legislative intent to limit the statute’s application to agreements to loan money or extend credit made by persons in the business of loaning money or extending credit.”

Then the court turned to the effect of the assignment.  As to land, a general assignment is not effective.  “The General Assignment was ineffective to transfer the Trustor’s real property to the Trust.  To satisfy the statute of frauds, the General Assignment was required to describe the real property so that it could be identified.”

According to the court, this restriction does not apply to shares of stock.  “The issue here concerns the Trustor’s transfer of shares of stock, not real property. The statute of frauds does not apply to such a transfer. (Civ. Code, § 1624.)  There is no California authority invalidating a transfer of shares of stock to a trust because a general assignment of personal property did not identify the shares.  Nor should there be.”

Held the court, “it was unnecessary for the General Assignment to identify the Medco stock.  The practice guide says that such a general assignment of personal property is a commonly used estate planning tool.”

So, the general assignment saves the day for the transfer of stock into an estate planning trust.

Kucker v. Kucker (Jan. 26, 2011) 2011 DJDAR 1477

Category : Case law | Trusts and estates | Blog