FYI: Cal App Holds Foreclosure Sale Proper Despite Trustee's Erroneous Bid Amount

The California Court of Appeal, Sixth District, recently held that a
non-judicial foreclosure sale was procedurally proper where the trustee,
as agent for the beneficiary under a deed of trust, conveyed incorrect bid
information to the auctioneer, who conducted the sale in accordance with
the trustee's information.

A copy of the opinion is available at:
http://www.courtinfo.ca.gov/opinions/documents/H035400.PDF

Plaintiff-Appellant, seeking price information on a property scheduled to
be sold at a trustee's sale, contacted Defendant trustee about the amount
of the opening bid on the property. On the day of the sale and just
before the sale started, the auctioneer, after discussing the property
with Plaintiff, contacted the trustee's office and confirmed the amount of
the opening bid. The trustee's office gave the auctioneer the same
opening bid information that it had given Plaintiff earlier.

Based on the information he had received from the trustee's office,
Plaintiff bid slightly over the amount of the purported opening bid,
thereby submitting the winning bid at the sale. After the sale, however,
the trustee discovered that it had incorrectly conveyed to the auctioneer
an opening bid amount that was substantially lower than the opening bid
amount previously submitted to the trustee by the beneficiary under the
deed of trust. Consequently, the trustee refused to accept Plaintiff's
cashier's check or to issue him a trustee's deed.

Plaintiff then sued the trustee to quiet title and sought specific
performance and declaratory and injunctive relief. Following the
reasoning in 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. 85 Cal.
App.4th 1279 (2001) ("6 Angels"), the trial court initially denied the
trustee's motion for summary judgment and concluded that the trustee's
mistake fell outside California's statutory procedures governing
non-judicial foreclosure sales.

The trustee subsequently successfully moved for reconsideration based on
Millennium Rock Mortgage, Inc. v. T.D. Service Co., 179 Cal. App.4th 804
(2009) ("Millennium Rock"). On reconsideration, the trial court granted
the trustee's motion for summary judgment based on Millennium Rock,
reasoning that the trustee's mistake in causing the incorrect bid to be
submitted by the beneficiary fell within the scope of the trustee's
statutory duties under California's foreclosure law and resulted in a
grossly inadequate price being received at the foreclosure sale. The
trial court also concluded that the Plaintiff was seeking a windfall
profit at the expense of the innocent beneficiary and that the sale should
be set aside. Plaintiff appealed, and the Court of Appeal reversed.

The appellate court noted that under California law governing non-judicial
foreclosure sales, a foreclosure sale may be attacked on grounds of
procedural irregularity where the deed has not been transferred. However,
the Court agreed with Plaintiff that in this case there was no procedural
irregularity in the trustee's sale, because the trustee's mistake fell
outside the procedural requirements set forth in the statutory scheme
governing foreclosure sales.

In so ruling, the Court of Appeal rejected Defendant trustee's argument
that Millennium Rock applied to the foreclosure sale at issue and
determined that 6 Angels, being factually similar, governed this matter.
Specifically, the Court noted that in Millennium Rock, the operative
mistake that resulted in a voidable trustee sale was made by the
auctioneer rather than the trustee and was thus part of the sales process.

The Court concluded that there was no procedural irregularity in the
foreclosure sale to justify setting the sale aside and that the trial
court should have denied the trustee's motion for summary judgment,
because "the mistake was by [the trustee] in the course and scope of its
duty as the beneficiary's agent, not by the auctioneer as in Millennium
Rock" and "[t]he error was wholly under [the trustee's] control and arose
solely from its negligence, just like the error that occurred in 6
Angels."

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: IL AG's Action Against Wells Fargo for Alleged Discrimination in Mortgage Lending Dismissed in Part

Wells Fargo recently achieved a partial dismissal of the discrimination
allegations brought against it by the Illinois Attorney General. A copy
of the court's Memorandum and Order is attached.

As you may recall, Attorney General Lisa Madigan filed a lawsuit against
various Wells Fargo entities, alleging that these entities participated in
illegal discrimination against African American and Latino homeowners by
providing them with high-cost subprime mortgage loans while white
borrowers with similar incomes received lower cost loans. Please see our
prior update below for more information.

The court dismissed the allegations against Wells Fargo and Company for
lack of personal jurisdiction. The Court also dismissed the Illinois AG's
allegations under the Illinois Fairness in Lending Act, 815 ILCS 120, et
seq. ("IFLA"). The IFLA claim sought to enjoin the Wells Fargo
defendants, but that statute only allows injunctions against natural
persons.

However, the court denied the Wells Fargo defendants' motion to dismiss as
to the Illinois AG's allegations under the Illinois Human Rights Act, and
under the state's UDAP and UDTPA statutes.

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

NOTICE: We do not send unsolicited emails. If you received this email in
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______________________________________________________

Subject: FYI: IL AG Sues Wells Fargo for Alleged Discrimination in
Mortgage Lending
Date: Mon, 3 Aug 2009 14:21:03 -0500
From: Ralph T. Wutscher <rwutscher@kw-llp.com>

Attorney General Lisa Madigan filed a lawsuit in state court in Chicago,
Illinois against Wells Fargo and Company; Wells Fargo Bank, N.A., also
doing business as Wells Fargo Home Mortgage; and Wells Fargo Financial
Illinois, Inc., claiming these entities participated in illegal
discrimination against African American and Latino homeowners by providing
them with high-cost subprime mortgage loans while white borrowers with
similar incomes received lower cost loans. Copies of the complaint and
related documents are attached.

Madigan's lawsuit, which reportedly is the result of an investigation into
possible violations of fair lending and consumer fraud laws, cites
supposed "marked disparities in Wells Fargo's lending data."

The lawsuit also follows a recent Chicago Reporter analysis of mortgage
data submitted by Wells Fargo to the federal government. That study found
that, in 2007, Wells Fargo sold high-cost, subprime loans more often to
its highest-earning African-American borrowers in Chicago than to its
lowest-earning white borrowers. According to the study, in 2007, about 34
percent of African Americans earning $120,000 or more received high cost
mortgages from Wells Fargo in the Chicago metro area, while less than 22
percent of white borrowers earning less than $40,000 received high-cost
mortgages from the lender.

The complaint alleges that Wells Fargo "established highly discretionary
lending policies and procedures with weak oversight that permitted Wells
Fargo's employees to steer African-Americans and Latinos into subprime
loans." The AG further alleges that Wells Fargo's discretionary policies
and procedures included a compensation structure that rewarded employees
for placing borrowers into high-cost mortgages. The complaint also
alleges that Wells Fargo targeted African-American borrowers for the sale
of high-cost loans by hosting a series of "wealth building" seminars in
cities throughout the country, including Chicago.

Attorney General Madigan noted that high-cost, subprime loans of the kind
sold by Wells Fargo are "defaulting and going into foreclosure in record
numbers, and are largely responsible for triggering the worst economic
recession in recent memory."

Additionally, the lawsuit alleges that Wells Fargo Financial Illinois, a
subsidiary of Wells Fargo and Company that allegedly primarily originated
subprime loans, and supposedly engaged in unfair and deceptive business
practices by misleading Illinois borrowers about their mortgage terms,
misrepresenting the benefits of refinancing, and repeatedly refinancing
loans, also known as loan flipping, without any real benefit to consumers.
Also, the complaint alleges that Wells Fargo Financial used supposedly
deceptive mailings and marketing tools to confuse borrowers as to which
division of Wells Fargo and Company they were doing business with - prime
or subprime. As a result, the complaint alleges, borrowers believed they
were doing business with Wells Fargo Home Mortgage, which offered mainly
prime loans, when in fact they were dealing with Wells Fargo Financial, a
predominantly subprime lender.

The complaint alleges violations of the Illinois Human Rights Act, the
Illinois Fairness in Lending Act, and the Illinois Consumer Fraud and
Deceptive Business Practices Act, and asks the court to rescind all
contracts entered into between Wells Fargo and Illinois consumers by the
use of methods and practices declared unlawful and to grant full
restitution to the consumers. In addition, the lawsuit asks the court to
impose civil penalties for the violations, permanently enjoin Wells Fargo
from conducting the alleged illegal activity, and order Wells Fargo to pay
court costs and attorneys' fees.

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

NOTICE: We do not send unsolicited emails. If you received this email in
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FYI: Ill App Ct Upholds Trial Court Ruling Against Borrower on Standing Defense

The Appellate Court of Illinois, Third District, recently held that in a
foreclosure proceeding, a borrower's failure to raise the issue of the
foreclosing bank's standing prior to the entry of default judgment
constituted a waiver of that issue.

A copy of the opinion is available at:
http://www.state.il.us/court/Opinions/AppellateCourt/2011/3rdDistrict/Octo
ber/3100436.pdf

The loan owner filed to a complaint to foreclose. A default judgment was
entered by the lower court, which provided that "[t]his is a final and
appealable order and there is no just cause for delaying the enforcement
of this judgment or appeal therefrom."

Subsequently, the borrower filed several emergency motions to stay the
sale of the subject property. After granting three such motions, the
lower court denied the last, and the property was sold at a sheriff's
sale. The investor then filed a motion for an order approving the sale.
The borrower filed a response to the investor's motion, as well as a
motion to vacate the order approving the sale, wherein she raised the
issue of standing. The lower court denied the borrower's motion. The
borrower appealed.

In Illinois, when a trial court enters a judgment that makes an express
written finding that there is no just reason for delaying enforcement or
appeal, the judgment is final and appealable. Ill. S. Ct. R. 304(a).
The Court's analysis hinged on the fact that "the trial court specifically
made a finding pursuant to Rule 304(a) that there was no just reason for
delaying enforcement of the appeal." The borrower limited her appeal to
the order approving the foreclosure sale, and not also the judgment of
foreclosure.

In addition, the Court held that the affirmative defense of lack of
standing is "waived if not raised in a timely fashion." The Court also
placed emphasis on the fact that the borrower participated in court
proceedings - by filing several emergency motions - without raising the
lack of standing defense. Therefore, the Court held that the borrower
"waived the issue of the investor's standing by failing to raise the issue
while, at the same time, participating and accepting the benefits of the
court proceedings."

Finally, the Court noted that Illinois' Code of Civil Procedure "limits a
trial court's discretion to refuse confirmation of a judicial sale to the
four grounds specified in the statute." Those four grounds are (i) lack
of notice; (ii) unconscionable terms of sale; (iii) fraudulently conducted
sale; (iv) justice otherwise not done. See 735 ILCS 5/15-1508(c).

None of these four grounds were raised by the borrower. Because the
borrower "limited her appeal to the order approving the sale," but did not
"contend that the trial court made any of the findings required by section
15-1508," the Court held that the trial court did not abuse its discretion
in approving the sale.

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

NOTICE: We do not send unsolicited emails. If you received this email in
error, or if you wish to be removed from our update distribution list,
please simply reply to this email and state your intention. Thank you.

Our updates are available on the internet, in searchable format, at:
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CONFIDENTIALITY NOTICE: This communication (including any related attachments) is intended only for the person/s to whom it is addressed, and may contain confidential and/or privileged material. Any unauthorized disclosure or use is prohibited. If you received this communication in error, please contact the sender immediately, and permanently delete the communication (including any related attachments) and permanently destroy any copies.

IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed by law.