Developments of Interest

New Cases of Interest - July 21, 2014

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07/21/2014

Keshtgar v. US Bank, N.A. (2014) 226 Cal.App.4th 1201.  This is another action involving a foreclosure on real estate in which the borrower seeks to avoid foreclosure on the basis of allowed improper prior assignments of the deed of trust securing the underlying obligation.  In this case, the defaulting borrower brought an action to prevent the bank from initiating foreclosure proceedings, and that complaint was demurrered to with the demurrer being sustained without leave to amend.  The court of appeal affirmed the action of the trial court, finding that the borrower's complaint in alleging that the assignment of the deed of trust to defendant did not occur and was void was not sufficient under California's nonjudicial foreclosure statutes, which did not contemplate a preemptive action to challenge the authority of a party who might initiate foreclosure.  Even if such a cause of action could be brought, the Court of Appeal also found that the borrower lacked standing to challenge the assignment of the deed of trust because the borrower was unable to show that he had suffered any prejudice as a result of any lack of authority of the parties who had participated in the prior assignment of the deed of trust.

Erlich v. Sierra Asset Servicing, LLC (2014) 226 Cal.App.4th 1281.  A tenant alleged breach of the warranty of habitability and other claims relating to a tenancy in which the prior property owner had turned off the utilities shortly before the property was sold at a foreclosure sale.  After the utilities had been shut off, but prior to the foreclosure sale, the county had posted a "red tag" enforcement notice on the property.  The occupant paid rent through the end of the month in which the foreclosure occurred.  The Court of Appeal held that the inspector's notice did not terminate the lease because the statutory framework was comprehensive and provided rights and remedies to tenants who were subjected to dangerous and substandard building conditions, and these statutory enactments reflected an intent on behalf of the Legislature that the tenancy continue after the posting of a "red tag" notice.  The rule barring the enforcement of unlawful contracts did not preclude the creation of a landlord tenant relationship between the parties because the occupant was in the class of persons who was otherwise protected by this comprehensive set of landlord-tenant laws.

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