Everyone Wins When a Foreclosure Sale Generates Excess Proceeds

By: Ben Reeves

Introduction

When a foreclosure sale generates more money than needed to pay off the lien, the excess proceeds usually go first to creditors in the order of their priority, and second to the owner after creditors are paid in full. So, in truth, not everyone wins when a foreclosure sale brings in too much money.  Amusingly, in Steinmetz v. Everyone Wins, the court awarded excess sale proceeds to….you guessed it…Everyone Wins, despite the owner’s argument that Arizona’s anti-deficiency statutes barred it from recovering anything.

In addition to supplying a clever title for this post, Steinmetz v. Everyone Wins provides an important analysis of how Arizona’s anti-deficiency statutes, homeowner’s assessment lien statutes, and foreclosure statutes apply when determining who “wins” when it comes to excess sale proceeds.… Read More »

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California Mediation Confidentiality May Apply to Third Party “Participants” Retained to Provide Analysis

By: Tony Carucci

California Evidence Code section 1119 governs the general admissibility of oral and written communications generated during the mediation process. Section 1119(a) provides that “[n]o evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation . . . is admissible or subject to discovery, and disclosure of the evidence shall not be compelled, in any . . . civil action . . . .” Cal. Evid. Code § 1119(a) (emphasis added). Similarly, section 1119(b) bars discovery or admission in evidence of any “writing . . . prepared for the purpose of, in the course of, or pursuant to, a mediation .… Read More »

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Green Energy Can Complicate Real Estate Foreclosures

Bob L. Olson

A quick drive through almost any newer residential community in the Southwest will show that a lot of residents are embracing “Green Energy” or renewable energy by placing solar panels on their properties. While most people would agree that increasing the use of alternative energy is socially responsible, there are a number of real estate investors that may view it as an opportunity to make additional profits by purchasing distressed properties with solar panels and then reselling those properties for more than they would be worth without solar panels. The theory is relatively straight forward as many believe that foreclosure of a deed of trust that was recorded before the solar panels were installed would extinguish any liens in favor of the vendor that sold or financed the sale of the solar panels. … Read More »

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Avoiding Lender Liability for Credit-Related Actions in California

By: Anthony J. Carucci

Aside from general statutory prohibitions on lender discrimination, there are certain circumstances under California law in which lenders may be held liable for credit-related actions, such as negotiating or denying credit. See generally 11 Cal. Real Est. § 35:3 (explaining that the business of lending money is subject to the Unruh Civil Rights Act, Cal. Civ. Code § 51 et seq., the Fair Employment and Housing Act, Cal. Gov. Code § 12900 et seq., the Federal Fair Housing Act, 42 U.S.C. § 3601 et seq., and the Equal Credit Opportunity Act, 15 U.S.C. § 1691, et seq.Read More »

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What Do I Do With This Stuff? Dealing With Abandoned Property After Foreclosure

By: Lyndsey Torp

You’ve successfully foreclosed on a commercial building in California, and, thankfully, the borrower moved out after foreclosure or after a period of tenancy. But the borrower left behind all sorts of property – furniture, filing cabinets, records, and other assorted property.  While you may be tempted to just toss it all in the dumpster, doing so may subject you to liability.  There are several statutes that you should consider when determining how to handle the abandoned property.

Statutory Options for a Landlord

A landlord-tenant relationship may arise following foreclosure if, for example, the owner of the property accepts rent from the former owner.… Read More »

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California’s One-Action Rule May Apply to Federal Lenders

By: Anthony J. Carucci

California’s one-action rule provides that “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property or an estate for years therein . . . .” Cal. Code Civ. Proc. § 726(a). In other words, the one-action rule prescribes that the only process for recovery of a debt secured by a mortgage or deed of trust is to foreclose on the lien. The rule aims to prevent a multiplicity of actions and vexatious litigation, and to force a beneficiary to look to all of the security as the primary fund for payment of a debt before looking to the trustor’s other assets.… Read More »

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California Case Deals with Nuisance Lawsuit Intended to Delay Foreclosure

A recent California case provides good precedent for dealing with nuisance lawsuits that are intended to delay valid foreclosures. In Brown v. Deutsche Bank National Trust Company —Cal.Rptr.3d—, 2016 WL 2726229 (May 9, 2016), plaintiff sued defendants to stop them from foreclosing on her home.  The trial court sustained defendants’ demurrer without leave to amend, and dismissed plaintiff’s complaint.  The court of appeal affirmed.

In 2004, plaintiff took a $450,000 home loan from Washington Mutual Bank. Washington Mutual failed in 2008, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed its receiver.  The FDIC sold many of Washington Mutual’s assets, including loans and mortgage servicing rights, to JPMorgan Chase Bank (“Chase”). … Read More »

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Nevada Supreme Court Holds that Foreclosure Of HOA Lien Extinguishes Equal Priority HOA Lien.

By: Bob L. Olson

In Nevada’s master-planned communities it is common for one home to be in multiple homeowners’ associations.  In such cases there is generally a master association for the master-planned community and then sub-associations for specific developments within the master-planned community.  The liens of the master association and the sub-association have equal priority unless their declarations provide otherwise. See NRS 116.3116(8) (formerly NRS 116.3116(4)).  Earlier this year in Southern Highlands Community Association v. San Florentine Avenue Trust, 132 Nev. Adv. Op. 3 (Jan. 14, 2016), the Nevada Supreme Court (the “Court”) had the opportunity to discuss the effect of the foreclosure by one association on the other association’s lien of equal priority.… Read More »

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Transfer of Property Title to a Holding Company Did Not Divest Landowner of Owner-Occupant Status Under A.R.S. § 33-1002(B)

By:  Richard G. Erickson

Recently, in Marco Crane & Rigging Co. v. Masaryk, 703 Ariz. Adv. Rep. 29 (Dec. 30, 2014), the Arizona Court of Appeals established that a subcontractor on a residential project has no lien rights against an owner-occupant, even though the homeowner transferred the property’s title to a holding company (an Arizona limited liability company) after the subcontractor commenced work.

In other words, the lien protections afforded to owner-occupants are determined, at the latest, when a contractor records its lien.  After the contractor commences work and records its lien, the homeowner’s actions in negating owner-occupant status do not divest the homeowner of statutory protections against lienholders. … Read More »

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General Contractor’s Prospective Waiver Of Its Lien Rights Is Enforceable In California

By: Lyndsey Torp

http://www.swlaw.com/attorneys/lyndsey_torp

In another decision favoring lenders (See http://www.swlaw.com/blog/real-estate-litigation/2014/08/29/arizona-supreme-court-to-contractor-sorry-but-equitable-subrogation-of-a-banks-later-deed-of-trust-trumps-earlier-mechanics-lien-rights/), the California Court of Appeal, in an opinion published in September 2014, entitled Moorefield Construction, Inc. v. Intervest Mortgage Investment Company, et al., D065464, held an original contractor can contractually waive or impair its own lien rights, even before it gets paid or performs work, as long as it does not waive or impair the lien rights of its subcontractors. In Moorefield, the court of appeal reversed a trial court’s decision awarding a general contractor $2.2 million on its mechanic’s lien.  In doing so, the court of appeal upheld a subordination agreement that the general contractor, Moorefield Construction, Inc., signed with the lender, Intervest Mortgage, “subordinating” the general contractor’s mechanic’s lien claim to the lender’s deed of trust, which was security for the construction loan.… Read More »

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Homestead Exemption Cannot be Denied on Equitable Grounds

By Kevin J. Parker

Arizona’s homestead exemption allows a person to protect from certain creditors up to $150,000 of their equity in their residence (dwelling house, condominium, or mobile home).  A.R.S. § 33-1101 et seq.  This homestead equity is exempt from non-consensual liens, for example recorded judgments against the owner.  The homestead exemption does not apply as against consensual liens such as a mortgage or deed of trust.

 In a recent opinion, the Arizona Court of Appeals addressed the question of whether a property owner could be precluded on equitable grounds from asserting the homestead exemption.  Rogone v. Correia (Opinion filed September 25, 2014). … Read More »

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Arizona Supreme Court to Contractor: Sorry But Equitable Subrogation of a Bank’s Later Deed of Trust Trumps Earlier Mechanics’ Lien Rights

By Rick Erickson

http://www.swlaw.com/attorneys/rick_erickson

The smoke has finally cleared in a hard and long-fought battle between a bank and contractor both claiming priority to foreclose millions of dollars on a Phoenix condominium project. The project, well-known as Summit at Copper Square in central Phoenix (“Summit”), went broke in 2007. The foreclosure case began in 2008, and the construction and real estate industries have been keeping a close eye on the outcome. In the end, the Arizona Supreme Court weighed in for its “first opportunity to address the interplay between equitable subrogation and the priority granted to mechanics’ liens by [Arizona Revised Statutes] § 33-992(A).”

The Arizona Supreme Court issued its decision in The Weitz Company L.L.C.… Read More »

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Guarantors Score Two Victories Before the Nevada Supreme Court.

By:  Bob Olson and Nathan Kanute

On May 29, 2013, the Nevada Supreme Court issued two decisions that all real estate lenders need to be aware of because they have the potential to eliminate the ability of a lender to recover a deficiency judgment from a guarantor.

In Nevada it is common for lenders to commence foreclosure proceedings and, at the same time, sue all guarantors that have waived the benefit of Nevada’s one-action rule for the full amount of the debt they guaranteed.  Often the foreclosure sale will occur before lender obtains a judgment against the guarantor.  In Lavi v.Read More »

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Nevada Supreme Court and District Court Issue Decisions Regarding Nevada’s Limitations on Deficiency Judgments.

By:  Bob Olson and Nathan Kanute

In 2011 the Nevada Legislature enacted Assembly Bill 273 (“AB 273”) which amended NRS 40.459 by limiting deficiency judgments to the difference between the amount the lender paid to acquire the loan or obligation and the larger of the market value of the property or the amount paid for the property at a foreclosure sale.  As one can imagine, a large number of borrowers and guarantors have tried to take advantage of this recent law to limit or in some cases eliminate their liability for deficiencies.  Creditors, on the other hand, have cried foul by arguing that, among other things, the law cannot be applied retroactively, it impairs the value of their pre-enactment paper and violates the Contracts Clauses of both the United States and Nevada Constitutions. … Read More »

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