Tuesday, April 22, 2014

FYI: Cal App Holds No Private Right of Action Under Cal. Civ. Code §§ 2923.52 and 2923.53

Sunday, October 31, 2010

The Court of Appeal for the State of California, Fourth District, recently held that there is no private right of action for violation of Cal. Civ. Code §§ 2923.52 and 2923.53.
 
A copy of the opinion is available at:
http://www.courtinfo.ca.gov/opinions/documents/G043544.PDF
 
This matter involves a California foreclosure, where the lender purchased the collateral at sale.  The borrowers filed a writ proceeding with the appellate court to stay the eviction pending further order.
 
The borrowers attempted among other things to invalidate the foreclosure sale, alleging violations of Cal. Civ. Code §§ 2923.52 and 2923.53.  As you may recall, California Civil Code section 2923.52 imposes a 90-day delay in the normal foreclosure process, and California Civil Code section 2923.53 allows for an exemption to that delay if lenders have loan modification programs that meet certain criteria.  
 
Enforcement of sections 2923.52 and 2923.53 is committed to regulatory agencies, which have implicit power to terminate the license of any company whose program is not in compliance. Section 2923.53, subdivision (h), makes enforcement a matter of losing a license.
 
The Court held that, "[u]nlike section 2923.5 as construed by this court in Mabry v. Superior Court (2010) 185 Cal.App.4th 208 (Mabry), neither section 2923.52 or section 2923.53 provides any private right of action, even a very limited one as this court found in Mabry."  In the words of the Court, "[n]ot only is there no express unmistakable private right to sue, there is a virtually unmistakable intent not to allow a private right to sue."
 
The borrowers also sought to invalidate the foreclosure sale under Cal. Civ. Code  § 2923.54.  However, the Court noted that "Subdivision (b) of that statute is clear that: 'Failure to comply with Section 2923.52 or 2923.53 shall not invalidate any sale that would otherwise be valid under Section 2924f.'"  The Court rejected the borrowers' argument that the statute does not apply to lenders who themselves buy the property at foreclosure, i.e., to lenders who cannot claim the status of bona fide purchasers, because any claim which the borrowers might have to invalidate the foreclosure sale based on sections 2923.52 and 2923.53 necessarily entails a private right of action which the statutes do not give them.
 
Because the borrowers' claim for relief against the impending eviction rested entirely on alleged violations of statutes which the Court held do not afford them any private right of action, the stay of the eviction was discharged, and the borrowers' petition for the requested writ was denied.




Eric Tsai
McGinnis Wutscher Beiramee LLP
 
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