Saturday, April 21, 2012

FYI: Cal App Ct Rejects "Frivolous" Appeal as "Solely for Delay" of Underlying Foreclosure

The California Court of Appeals, Second Appellate District, recently rejected a "frivolous" appeal brought by borrower's counsel involved in a foreclosure action, and referred the matter to the California State Bar for possible discipline of the borrower's attorney. 
 
A copy of the opinion is available at:

Plaintiff-appellant borrower (the "borrower") defaulted on her mortgage loan.  When foreclosure proceedings were initiated, the borrower filed suit to prevent the sale of her home.  The lower court granted a preliminary injunction to stop the trustee sale, on the condition that the borrower deposit $1700 per month into a trust account. 
 
The borrower never made any payments into that account.  Therefore, the foreclosing bank (the "bank") filed an ex parte application to dissolve the preliminary injunction.  The borrower's attorney appeared at the ex parte hearing, represented that his client would make the relevant payments, and argued that the lower court's ruling should not be issued ex parte. 
 
The lower court agreed, and scheduled a hearing date.  At that hearing, the borrower still had not paid anything into the trust account.  Therefore, the lower court dissolved the preliminary injunction, and indicated that the foreclosure sale could go forward. 
 
The borrower appealed, which stopped the trustee sale. 
 
On appeal, the borrower argued that the bank failed to show good cause for ex parte relief, and that the borrower's due process rights were violated.  When the borrower's counsel received calendar notice, he requested that the Court dismiss the appeal. 
 
The Court declined to do so.  Instead, it examined the borrower's counsel's arguments on appeal, terming them "feeble."  It noted that because the lower court's ruling had not been ex parte, the borrower's "premise to the sole contention of the appeal...is false."  Accordingly, the Court rejected the borrower's appeal, and affirmed the ruling of the lower court. 
 
The Court further determined that the borrower's counsel's appeal was "frivolous as a matter of law," and used "solely for delay."  Therefore, the Court ordered that a copy of its opinion be sent to the California State Bar, "for consideration of discipline." 
 


Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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FYI: Cal App Ct Allows Class Plaintiff to Proceed on § 17200 Claim Without "Actual Reliance"

The California Court of Appeal, Second District, recently held that a class action plaintiff had standing to assert a claim under California's Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), where the named plaintiff did not prove "injury in fact" and economic loss based on actual reliance, but instead showed a purchase following failure to provide required disclosures
 
A copy of the opinion is available at: 
http://www.courtinfo.ca.gov/opinions/documents/B230410A.PDF.
 
Plaintiff-appellant ("Buyer") purchased a motorcycle and later filed a class action complaint against defendant motorcycle dealer ("Dealer"), claiming that the Dealer had violated California's Unfair Competition Law ("UCL") and the Consumer Legal Remedies Act ("CLRA") by failing to attach to new motorcycles so-called "hang tags" required by California's Vehicle Code that showed a breakdown of various charges, including the manufacturer's suggested retail price and dealer-added charges for accessories, freight and destination.  The Buyer asserted in part that the Dealer's sale of new motorcycles without hang tags was an unlawful business practice, a fraudulent business practice, and was deceptive and misleading advertising.  The Buyer also claimed that the Dealer had improperly failed to list its add-on charges on the hang tags that were attached to motorcycles.
 
The Buyer's complaint also alleged that she was not informed of dealer-added charges or the total price of the motorcycle she purchased until she was presented with the sales contract and began price negotiations with the Dealer.  Seeking restitution, the Buyer claimed that the Dealer's failure to attach the hang tag to the motorcycle she bought resulted in her paying undisclosed dealer charges of over $2,000.
 
In a prior appeal in this case, the Court of Appeal directed the trial court to certify the class, ruling that issues common to the class outweighed the individual issues.  Following remand, the trial court granted the Dealer's motion for judgment, concluding that the Buyer lacked standing to recover under the UCL or CLRA as she had been informed of all the dealer-added charges prior to signing the contract and had failed to establish that she or any other class member had been injured by the Dealer's conduct.
 
The Buyer appealed.  The Court of Appeal reversed as to the UCL claim, but affirmed as to the CLRA claim.
 
As you may recall, the UCL prohibits as unfair competition "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising" and further provides that a private right of action exists only where the person bringing the action "has suffered injury in fact and has lost money or property as a result of the unfair competition." Bus. &  Prof. Code § 17200; § 17204.
 
In addition, the  California Vehicle Code prohibits a vehicle dealer from selling or displaying a new vehicle without a hang tag indicating, among other things, the suggested retail price and the price of any dealer-added charges for transportation, assembly, and accessories.  See Cal. Vehicle Code § 11712.5; § 24014.
 
In addressing the UCL's standing requirement, the Court of Appeal noted that the current version of the UCL requires that a plaintiff in a class action must have suffered injury in fact and economic loss.  In so doing, the court rejected the Buyer's contention that the UCL's standing requirement only applied at the time of class certification.  
 
Nevertheless, the court took issue with the trial court's requirement of a showing of actual reliance and the lower court's determination that the Buyer lacked standing due to a lack of injury since the dealer-added charges were disclosed in the sales contract.  Here, the court observed that the trial court's analysis only addressed the UCL's fraudulent prong, and failed to address the other UCL prongs that are not based on a fraud theory and do not require a showing of actual reliance.  Thus, the court ruled that a UCL action based on unlawful business practices other than fraud or false advertising requires the Buyer to establish both injury in fact and economic injury, but not actual reliance. 
 
Citing a California Supreme Court opinion, the court noted that "injury in fact" requires a showing of a concrete, particularized, "invasion of a legally protected interest," but that an allegation of some specific identifiable injury suffices. See Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 322-25 (2011).
 
Based in part on the Dealer's sales techniques, the court ruled that the Buyer had introduced sufficient evidence at trial showing an injury in fact as a result of the lack of receiving required disclosures prior to the Buyer's purchase of the motorcycle.  The court also ruled that the Buyer had presented evidence of an economic injury caused by the alleged UCL violation in that she still owed a substantial amount of money on a motorcycle that supposedly lacked required disclosures prior to the time of purchase.
 
Noting that in a class action situation, the UCL requires only the named plaintiff to have standing, the court ruled that the Buyer's showing of injury in fact and economic loss satisfied that requirement and thus conferred standing on her to pursue the class action lawsuit. 
 
Turning to the CLRA claim, the court affirmed the lower court's ruling, concluding that the Buyer had failed to adequately brief the CLRA claim.  Accordingly, the court remanded only the UCL claim for further proceedings.
 


Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email:
RWutscher@mtwllp.com
 

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Thursday, April 19, 2012

FYI: Ill App Ct Rejects Borrowers' Challenge to Service of Process and Publication Notice

The Illinois Appellate Court, First District, recently upheld a default judgment in a residential mortgage foreclosure action, ruling that:  (1) a Cook County standing order appointing a special process server was valid, where such order was issued pursuant to a General Administrative Order allowing appointment of special process servers in foreclosure actions; and  (2) service by publication was proper, where the supporting affidavit satisfied the requirements for publication service.
 
A copy of the opinion is available at: 
 
Plaintiff bank ("Bank") filed a complaint to foreclose.  Through its attorneys, the Bank obtained a standing order for the appointment of a special process server in accordance with a General Administrative Order (GAO) allowing law firms in mortgage foreclosure cases in Cook County, Illinois to seek a standing order for the appointment of special process servers. 
 
The special process server appointed through this process attempted to personally serve the borrowers with the summons and complaint on 14 different occasions.   The Bank's attorneys therefore submitted an affidavit requesting leave for service by publication, stating that no other address for the Borrowers could be found.  Based on the affidavit, the court granted approval for publication service. The borrowers never appeared, and the Bank eventually obtained a default judgment in the foreclosure action, the property was sold at a judicial sale, and the court later confirmed the sale.
 
A little over a year after the entry of the default judgment, the borrowers moved to quash service, arguing in part that the standing order appointing the special process server was invalid because the standing order did not follow the requirements of the GAO.  The court denied both motions.
 
The borrowers appealed, and the Appellate Court affirmed.
 
Illinois law specifies that a summons must be issued upon plaintiff's request after the filing of a complaint.  735 ILCS 5/2-201 ("Section 2-201").  Illinois also allows service by publication whenever a plaintiff or plaintiff's attorney files an affidavit showing that the defendant on "due inquiry" cannot be found.  735 IlCS 5/2-206(a)("Section 2-206"). 
 
In addition, Cook County General Administrative Order 2007-03 ("GAO") permits law firms in foreclosure actions to request a standing order designating a special process server for a period of three months.  The GAO specifies in pertinent part: "[e]ach Motion and Order for a standing process server order shall bear the heading '. . . Standing Order for the Appointment of a Special Process Server for the Quarter Ending [INSERT DATE].'"  
 
In assessing the validity of the standing order appointing a special process server in this case, the Appellate Court rejected the borrowers' overall argument that the GAO was invalid because the lower court judge lacked the authority to issue the GAO.  To support their argument, the Borrowers put forth various theories claiming that:  (1) there was no authority under common or statutory law for issuing the GAO; (2) issuance of the GAO violated Illinois Supreme Court Rules; (3) the GAO conflicted with the Illinois Code of Civil Procedure governing the appointment of special process servers and commencement of civil actions; and (4) the GAO circumvented the statutory procedure for service of process and the court therefore lacked jurisdiction.
 
The borrowers asserted that, because the signature on the process server's affidavit was illegible and the affiant's name was not printed on the form permitting clear identification of the affiant, the affidavit failed to satisfy the requirements for publication service in Section 2-206. 
 
Ruling that Section 2-206 did not require identification of the affiant by anything other than a signature, the Court concluded that the affidavit was "more than adequate" to support service by publication and complied with Section 2-206.  In so ruling, the Court also noted that the affidavit contained all the elements of a valid affidavit, including one for service of process by publication.  
 


Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mtwllp.com
 

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Our updates are available on the internet, in searchable format, at:
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