Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County Super. Ct. No. BC322524. Morris Jones, Judge.
Law Offices of Paul D. Beechen, Inc., Paul D. Beechen; Benedon & Serlin, Douglas G. Benedon and Gerald M. Serlin for Plaintiffs and Appellants.
Edward D. Russell, Michael J. Gilligan and Christina Yu for Defendant and Respondent Chicago Title Company.
Brune & Richard, Hillary Richard, Randall Kim; Willenken Wilson Loh & Lieb, Michael C. Lieb and Leemore Kushner for Defendant and Respondent Laurus Master Fund, Ltd.
ASHMANN-GERST, J.
This opinion is the story of three promissory notes.
The first promissory note was for the principal sum of $6 million. It was signed by appellants Valcom, Inc. and Valencia Entertainment International, LLC (collectively Valcom) in favor of Hawthorne Savings Bank (Hawthorne Note). The Hawthorne Note was secured by a lien (senior lien) on commercial property (property) owned by Valcom. Including interest, fees and expenses, the final sum due on the Hawthorne Note was $6,559,636.60.
At the relevant times regarding the issues in dispute, Valencia was a wholly owned subsidiary of Valcom.
Hawthorne Savings Bank is the successor to First Fidelity Investment and Loan. Neither entity a party to this action.
The second promissory note was signed by Valcom in favor of respondent Laurus Master Fund, Ltd. (Laurus) and was denominated Note A. It was for the principal sum of $1 million, and it was secured by a deed of trust (Deed 1) on the property. The third promissory note was signed by Valcom in favor of Laurus and was denominated Note B. It was also for the principal sum of $1 million. Note B was secured by a deed of trust (Deed 2) on the property.
To prevent being foreclosed out of Deed 1 and Deed 2, Laurus paid off the Hawthorne Note for $6,559,636.60 and extinguished the senior lien.
After Valcom defaulted on Note A and Note B (sometimes collectively referred to as the notes), Laurus retained respondent Chicago Title Company (Chicago) to initiate foreclosure proceedings. At the foreclosure sale under Deed 2, Golden Forest Properties, Inc. (Golden Forest) purchased the property for $2,405,093.01. That amount was $500,000 more than Valcom actually owed on Note A. Nonetheless, Laurus retained the overage of $500,000 and refused to refund that money back to Valcom. Subsequently, to avert foreclosure under Deed 1, Golden Forest paid off Note A for $7,508,000. Included in Note A was the $6,559,636.60 Laurus paid to satisfy the Hawthorne Note. Ultimately, Laurus received total proceeds of $9,913,094.
Valcom sued Chicago and Laurus because they retained the $500,000 overage. Subsequently, the trial court entered summary judgment in favor of Chicago and Laurus. Valcom appeals, contending that there are triable issues as to whether: (1) Valcom suffered damages; (2) Chicago and Laurus violated Civil Code sections 2924k, 2924d, and 2924h; and (3) Chicago breached its duties as the foreclosure trustee. Additionally, Valcom argues that Chicago was not entitled to attorney fees, and the attorney fees awarded to Laurus were excessive.
All further statutory references are to the Civil Code unless otherwise indicated.
The question is this: Was Valcom damaged when it was not paid the $500,000 overage after the foreclosure of Deed 2 and the satisfaction of Note B? Or, did section 2876 permit Laurus and Chicago to retroactively debit $500,000 from the Hawthorne Note payoff to Note A and then credit that $500,000 to Note B in order to eliminate the overage? We conclude that once Laurus made the permissive allocation of the Hawthorne Note payoff to Note A, and once Note B was satisfied and Deed 2 was extinguished by the foreclosure sale, it was impossible for Laurus and Chicago to retroactively credit any portion of the Hawthorne Note payoff to Note B. In any event, we note that the sums owing for Hawthorne Note payoff were neither debited from Note A nor credited to Note B at any time. As a result, the statutory scheme dictated that any overage be paid to Valcom.
After review of the underlying motions, we conclude that there are triable issues as to Valcom’s causes of action for accounting, breach of contract, conversion and violation of section 2924k. Thus, this action must be remanded for further proceedings. The attorney fees issues are moot.
FACTS
The senior lien
Valcom borrowed $6 million from First Fidelity Investment and Loan, which later became Hawthorne Savings Bank, and gave back the Hawthorne Note. The Hawthorne Note was secured by the senior lien. Finance Unlimited purchased the Hawthorne Note and was assigned all rights.
The junior trust deeds
Subsequently, Valcom executed Note A and Note B. The notes were secured by Deed 1 and Deed 2. They were concurrently recorded with each other and of equal priority.
The $80,000 per month lease at the property
A production company for the show known as the “Power Rangers” rented space at the property for $80,000 a month.
Valcom’s defaults
Laurus received $408,781.64 in cash from Valcom, and an additional $85,281.99 in proceeds from the sale of Valcom stock. Eventually, however, Valcom could not make any more payments on the Hawthorne Note, Note A and Note B because the tenant at the property sold the “Power Rangers” to Walt Disney Company and did not renew the lease.
Notice of default and election to sell
Chicago recorded a notice of default and election to sell under Deed 1 which stated that the amount due on Note A was $264,397.30. It also recorded a notice of default and an election to sell under Deed 2 which stated that the amount due was on Note B was $263,167.
These numbers are much smaller than the numbers in the notices of trustee’s sales. The record does not disclose the reason.
The bankruptcy proceeding
On April 7, 2003, Valcom filed for chapter 11 bankruptcy. Laurus filed a proof of claim for money loaned. The stated amount, not including all interest, fees and costs, was $2,712,394.83.
Valcom entered into a stipulation with Finance Unlimited and Laurus regarding Valcom’s use of cash collateral to operate its business. The stipulation averred: Hawthorne Savings Bank loaned Valcom $6 million, and Valcom was supposed to make monthly payments of $54,648.98 from February 10, 2000, to January 10, 2010. The Hawthorne Note was secured by the senior lien. Valcom failed to make the required payments, and on February 13, 2003, Hawthorne Savings Bank declared Valcom in default and recorded a notice of default and election to sell. Hawthorne Savings Bank’s rights were assigned to Finance Unlimited. As of May 20, 2003, and excluding legal fees and the fees and costs of an appointed receiver, Valcom had to pay $440,211.33 to reinstate the loan. Exclusive of costs and fees, the amount owed to Finance Unlimited was $6,323,675.78. Valcom also stipulated that it borrowed $2 million from Laurus, as represented by Note A and Note B, and that Laurus claimed $2,712,560.10 was owing.
The failed sale of the property to The Heavener Company
On January 21, 2004, Valcom and The Heavener Company entered into a purchase and sale agreement for the property. The purchase price was $8,450,000. The sale was canceled by The Heavener Company.
Notices of trustee’s sales
Teresa M. Drake (Drake), a Chicago employee, recorded notices of trustee’s sale for Note A and Note B. The notices stated that the default amount owing for Note A was $769,046.74, and the default amount owing for Note B was $2,209,829.45. The notices also stated that accrued interest and additional advances, if any, would increase the figures prior to sale.
The $769,046.74 purportedly due on Note A presumably represents the Note A debt absent the Hawthorne Note payoff. After the Hawthorne Note payoff was added in, the Note A debt went over $7 million. The $2,209,829.45 purportedly due on Note B was later changed to $2,405,093. Ostensibly, this is because extra interest and fees, etc. were added in for the foreclosure sale.
Satisfaction of the Hawthorne Note
Laurus preserved its interests by satisfying the Hawthorne Note. It paid Finance Unlimited $6,559,636.60.
Valcom’s application for a temporary restraining order
Valcom applied to the bankruptcy court for a temporary restraining order to prevent Laurus from foreclosing on the property. The motion was denied. In its order, the bankruptcy court stated that “Laurus is authorized to exercise its rights and remedies, including . . . foreclosure proceedings for all amounts owed to it,” including the $6,565,997.61 paid to Finance Unlimited and money loaned pursuant to Note A and Note B.
The trustee’s sale under Deed 2; satisfaction of remaining obligations
Drake prepared foreclosure status reports for Note A and Note B.
Regarding Note A, Drake determined that the total due to Laurus was $7,403,576.72. This included interest of $117,192.86, $3,797.24 in fees and costs, an acceleration payment of $142,847.14, advances on the Hawthorne Note of $6,565,997.61 and $37,207.32, $476,190.48 in principal due with interest, and $34,360.11 for attorney fees, less $30,000 for an interest payment. After adding trustee fees, the payoff amount was increased to $7,407,873.
Under Note B, per Drake’s calculations, Laurus was entitled to $2,396,905.52. She added interest of $275,224.75, $167 for late fees, $427,462.08 for acceleration of payment, $167,951.87 for late fees, $191,382.23 for attorney fees, and $1,424.753.59 in principal due with interest, and then she subtracted $90,000 for a partial payment. The trustee fees were $8,187.48. Including the trustee fees for Chicago, a full credit bid was brought up to $2,405,093.
Laurus made a credit bid of $2,405,093 at the foreclosure sale under Deed 2. Golden Forest won the sale with a bid of $2,405,093.01, one cent over the credit bid. A trustee’s deed was issued to Golden Forest. Laurus received $2,396,905.52 of the foreclosure proceeds.
After the purchase, Golden Forest held the property subject to Deed 1. Golden Forest asked Laurus to postpone any contemplated foreclosure proceedings. Subsequently, Golden Forest purchased Note A for $7,508,000, which extinguished Deed 1. As represented by Laurus, the sale price for Note A represented the outstanding debt plus an extra $100,000.
The foreclosure sale under Deed 2 and private sale of Note A resulted in total proceeds of $9,913,094.
Fourth amended complaint
In the fourth amended complaint (complaint), Valcom alleged the following:
On February 19, 2003, Laurus issued a notice of default. On May 5, 2004, it issued a notice of trustee’s sale. Chicago, the trustee, foreclosed on Deed 2 at a June 10, 2004 trustee’s sale. Chicago received $2,405,094. On the same date, Laurus and Chicago sold Note A for $7,608,000. Chicago and Laurus falsely inflated the amount of principal, interest, fees and costs due under Note A and Note B and then wrongfully retained the excess funds.
Valcom asserted claims for accounting, breach of trustee’s duties, breach of contract, fraud, violation of section 2924k, conversion, violation of section 2924d, and violation of section 2924h.
The motions for summary judgment
Chicago and Laurus both moved for summary judgment. Also, they requested summary adjudication of each claim.
In its memorandum of points and authorities, Laurus argued, among other things, that: (1) even if Valcom only owed $8,534,899.98 as it contends, the foreclosure sale under Deed 2 did not produce a high enough bid to pay Valcom’s total debt; (2) the foreclosure sale under Deed 2 was conducted in accordance with the procedures established by the bankruptcy court; and (3) Valcom cannot prove damages because no one was willing to make a bid for a sufficient amount to net a return after Valcom’s total debt was paid.
According to Chicago, Valcom was not owed an overage from the foreclosure sale because there were no surplus funds. Laurus loaned Valcom money. Then, to protect its security interest, it paid $6,559,636.60 to satisfy the senior lien and prevent its security from being extinguished. Laurus was entitled to tack the $6,559,636.60 onto the amount of Valcom’s original debt. Moreover, as foreclosure trustee, Chicago did not owe Valcom an accounting. And Chicago complied with its statutory duties. It had no obligation to verify the debt.
In opposition, Valcom claimed, inter alia: Though it paid $514,063.47, it was only given credit for $315,389.87. As a result, Valcom was denied credit for $198,673.60 in connection with the foreclosure under Deed 2 and private sale of Note A. Valcom was overcharged in other ways, also. The falsely inflated amounts cannot be set off by the sum Valcom owed on Note A. That would be tantamount to an improper deficiency judgment.
The trial court granted summary adjudication of each cause of action and entered summary judgment.
Postjudgment motions
Valcom moved for new a trial. That motion was denied.
Laurus and Chicago moved for attorney fees. Laurus was granted $470,042 and Chicago was granted $65,600.
This timely appeal followed.
STANDARD OF REVIEW
We review summary judgment de novo (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476), and employ a three-step analysis. “We first identify the issues framed by the pleadings, since it is these allegations to which the motion must respond. Secondly, we determine whether the moving party has established facts which negate the opponents’ claim and justify a judgment in the movant’s favor. Finally, if the summary judgment motion prima facie justifies a judgment, we determine whether the opposition demonstrates the existence of a triable, material factual issue. [Citation.]” (Torres v. Reardon (1992) 3 Cal.App.4th 831, 836.)
DISCUSSION
1. Accounting.
The trial court granted summary adjudication of the accounting cause of action on the ground that no balance was owed to Valcom, and Chicago was not a fiduciary. According to Valcom, the amounts due under Note B were improperly inflated, and there are triable issues. Upon review, we conclude that accounting cause of action may proceed as to Laurus. The debt represented by Note A did not absolve Laurus of liability for retaining any overage that resulted from the trustee’s sale under Deed 2. In other words, though Laurus essentially contends that its retention of $500,000 of Valcom’s money was no harm no foul, the existence of Note A did not provide Laurus with immunity for unlawful conduct.
a. The law.
An accounting claim requires a balance due to the plaintiff. (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 776, pp. 233-234.)
b. Laurus.
The fourth amended complaint alleged that Laurus improperly allocated excessive principal, interest, fees and costs as sums allegedly due under Note B. Based on this allegation, Laurus was tasked with demonstrating either that it did not allocate excessive amounts to Note B, or that Valcom was not otherwise damaged by it. (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064 [summary judgment issues are “framed by the pleadings since it is these allegations to which the motion must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the opponent’s pleading”].)
In its motion for summary judgment, Laurus made no attempt to negate the allegations that it inflated the amounts due. For purposes of its motion, Laurus assumed that Valcom owed $8,534,899.98 rather than the $9,913,094 Golden Forest paid to buy the property in foreclosure and pay off Note A. Laurus argued that it was entitled to allocate the Hawthorne Note payoff between Note A and Note B under section 2876, which provides that when a lienholder is compelled to satisfy a prior lien for its own protection, “he may enforce payment of the amount so paid by him, as a part of the claim for which his own lien exists.” When the debts are aggregated, Laurus pointed out, they exceed the $2,405,093 obtained at the foreclosure under Deed 2. As a result, Laurus argued that there were no damages.
Valcom contends that it paid $514,063.40, but was given a credit for only $315,389.87. As a result, Valcom contends it was improperly charged the difference, which is $198,673.57. To support its assertion, Valcom refers to four foreclosure sale status reports. Those reports subtracted a $30,000 “partial payment of interest” and a “partial payment” of $90,000 from the amounts due on Note A and Note B respectively. Next, Valcom refers to the declaration of Vince Vellardita (Vellardita), the chief executive officer and president of Valcom. Vellardita declared that Valcom made total payments of $514,063.40. We are then directed to deposition excerpts from Patrick F. Regan (Regan), a senior analyst with Laurus. Regan testified that he was unaware that Valcom made interest payments in 2003 and 2004, and that his records did not reflect those payments. Regan’s records reflected that Valcom paid a total of only $96,333.99. These citations do not support Valcom’s numbers. But they do lead to the reasonably deducible inference that Laurus gave Valcom a $120,000 credit instead of a $514,063.40 credit. This creates doubt regarding the propriety of summary adjudication. It is apropos to note that “[b]ecause a summary judgment denies the adversary party a trial, it should be granted with caution. [Citation.] Declarations of the moving party are strictly construed, those of the opposing party are liberally construed, and doubts as to whether a summary judgment should be granted must be resolved in favor of the opposing party.” (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1071.)
On appeal, Valcom argues that Laurus was not entitled to allocate any part of the Hawthorne Note payoff of $6,559,636.60 to Note B after it was satisfied and Deed 2 was extinguished. We agree.
1. Interpretation of section 2876.
As a preliminary matter, we must interpret section 2876. Our objective is to ascertain the intent of the Legislature. “‘In doing so, we first look to the words of the statute and try to give effect to the usual, ordinary import of the language, at the same time not rendering any language mere surplusage. The words must be construed in context and in light of the nature and obvious purpose of the statute where they appear . . .’” (Klajic v. Castaic Lake Water Agency (2001) 90 Cal.App.4th 987, 997.) Our reading must be practical rather than technical in nature, and must result in wise policy rather than mischief or absurdity. (Ibid.)
The use of the permissive word “may” establishes that section 2876 does not automatically merge the money a junior lien holder paid to satisfy a prior lien into the junior lien holder’s claim against the debtor. In other words, there is no merger of the two debts by operation of law. Thus, section 2876 presents a junior lien holder with a choice as to how to recoup its payoff of a prior lien: it can treat that payoff as a separate debt, or it can enforce it as part of the junior lien. As a practical matter, the choice to enforce the payoff as part of the junior lien can only be made by including it in the amount of debt being recovered in a foreclosure proceeding. But if that choice is not made known to debtors and those who might bid at a foreclosure sale, then foreclosure sales will be rendered untrustworthy and unfair, and no one will know the true amount that must be paid to clear the debt and obtain clean title. We reject such an interpretation. Therefore, we conclude that before the payoff of a prior lien can be enforced as part of a junior lien, that choice must be transparent. The payoff amounts must be included in all notices and be part of the sale.
This interpretation finds support in case law. A hundred years ago, our Supreme Court explained: “The effect of section 2876 is to give to the holder of a special lien who is compelled to satisfy any prior lien for his own protection the right to add the amount so paid to the amount for which his special lien was security and to enforce both together. ‘There can be but one action for the recovery of any debt . . . secured by mortgage.’ (Code Civ. Proc., [§] 726.) Such action, which is an action of foreclosure, affords the only method by which the plaintiff could enforce payment of the ‘claim for which his own lien exists.’ The only way in which he could enforce payment of the amount paid by him in satisfaction of a prior lien as a part of the claim which he already held was by including that amount in the action brought by him for foreclosure of his mortgage.” (Windt v. Covert (1907) 152 Cal. 350, 353 (Windt).)
Windt was cited by Little v. Harbor Pacific Mortgage Investors (1985) 175 Cal.App.3d 717, 720 (Little).) Little is instructive. There, a lender who held a second mortgage advised the borrowers that they were in default and had to pay $4,177.54 to stave off foreclosure. In the meantime, the lender discovered that the borrowers were delinquent on a first mortgage. The lender paid $6,086.48 to satisfy the prior lien. When the borrowers tendered $4,177.54, it was rejected. The lender demanded $10,319.85, which included the payoff of the prior lien. The borrowers sued for breach of contract. After summary judgment was granted to the lender, the Court of Appeal reversed. The court held that it was improper for the lender to demand more than $4,177.54 for the payoff. Although section 2876 permitted the Lender to protect its interests by paying off the senior lien, the borrowers were still entitled to sufficient notice of the amounts due. (Little, supra, at pp. 719–721.)
2. Application of section 2876.
Laurus did not make a decision to enforce the Hawthorne Note payoff as part of Note B transparent. That payoff was not listed in the notice of default and election to sell, nor in the notice of trustee’s sale. As a result, we conclude that an allocation was never legally made to Note B.
Also, the facts demonstrate that Laurus wanted to enforce the Hawthorne Note payoff as part of Note A, which was secured by Deed 1. This is demonstrated by the foreclosure status reports prepared by Drake. Even if this was a valid election, section 2876 did not allow Laurus, after the foreclosure sale, to debit $500,000 of the Hawthorne payoff from Note A and then credit it to Note B to magically wipe out the overage. The statute permits enforcement of a senior lien payoff only as to an existing junior lien. After the trustee’s sale, the junior lien represented by Deed 2 ceased to exist. And, notably, the facts demonstrate that none of the Hawthorne Note payoff was retroactively allocated to Note B. Golden Forest purchased Note A for $7,508,000, the full value it was given by Drake, plus $100,000.
The question remains, however, whether there is a triable issue regarding the accounting cause of action. There is.
Because there is a triable issue as to whether Laurus improperly inflated the amounts due, there is a triable issue as to whether and how much of the trustee’s sale proceeds should have been distributed to Valcom. Section 2924k provides that after a sale, the proceeds must be distributed in the following order of priority: (1) to the costs and expenses of sale; (2) to the payment “of the obligations secured by the deed of trust or mortgage which is the subject of the trustee’s sale;” (3) to “satisfy the outstanding balance of obligations secured by any junior liens or encumbrances in the order of their priority;” and (4) to the trustor. (§ 2924k.)
Based on the pleading and the facts assumed by all parties below, Valcom owed $1.9 million and the Note B debt was overstated. Still, Laurus received $2,396,905.52 in proceeds from the foreclosure sale. As a result, there was an overage that should have been applied to any junior liens or encumbrances. But Deed 1 was the only other lien, and it was not extinguished by the trustee’s sale. Deed 1 was designed to be coequal with Deed 2, and it was treated by Laurus and Chicago as a de facto prior lien that continued to secure Note A. In any event, the only thing pertinent to this analysis is that Deed 1 remained in effect. If there was an overage, that overage should have been paid to Valcom. Though Laurus was still owed money by Valcom, Laurus’s recourse for repayment was Deed 1. Stated another way, Laurus was not entitled to retain excess funds that belonged to Valcom. As Valcom contends, such retention equates to an unlawful deficiency judgment.
“If a junior lienor does not cure the default in the senior obligation or redeem at the senior foreclosure, its lien will be extinguished at the foreclosure sale unless the successful bidder purchases at a price high enough to pay off the senior indebtedness and the junior indebtedness as well. [Citation.]” (FCPI RE-HAB 01 v. E&G Investments, LTD. (1989) 207 Cal.App.3d 1018, 1023.)
Laurus points out that the bankruptcy court ruled that Laurus could foreclose and recover all money owed. But this does not mean that Laurus could foreclose on Deed 2 and inflate the sums due. It only meant that Laurus could, within the dictates of the law, foreclose on Deed 1 and Deed 2.
c. Chicago.
The trial court granted summary adjudication of accounting as to Chicago on the ground it did not owe Valcom a fiduciary duty. Valcom ignores this point in its briefs, so any challenge to the ruling is waived. (Tan v. California Fed. Sav. & Loan Assn. (1983) 140 Cal.App.3d 800, 811.)
2. Breach of trustee’s duties.
Valcom posits that there are triable issues regarding its claim that Chicago breached its statutory duties. This is correct.
A trustee under a deed of trust has a general duty to conduct a foreclosure sale “‘fairly, openly, reasonably, and with due diligence,’ exercising sound discretion to protect the rights of the mortgagor and others. [Citations.]” (Hatch v. Collins (1990) 225 Cal.App.3d 1104, 1112.) Based on this duty, we easily conclude that a trustee has a duty not to unilaterally augment indebtedness by including charges that the beneficiary has not incurred.
Section 2924f, subdivision (b) provides in relevant part that the notice of sale “shall contain a statement of the total amount of the unpaid balance of the obligation secured by the property to be sold and reasonably estimated costs, expenses, advances at the time of the initial publication of the notice of sale, and, if republished pursuant to a cancellation of a cash equivalent pursuant to subdivision (d) of Section 2924h, a reference of that fact; provided, that the trustee shall incur no liability for any good faith error in stating the proper amount, including any amount provided in good faith by or on behalf of the beneficiary.”
Valcom alleged that Chicago breached its trustee’s duties by, among other things, charging $225,742.34 for attorney fees as a sum due under Note A and Note B even though that amount was not requested by Laurus.
Chicago’s separate statement did not recognize or negate the allegation that it improperly and unilaterally included attorney fees in the amounts due under Note A and Note B. Specifically, Chicago’s separate statement does not aver either that Laurus incurred $225,742.34 in attorney fees, or that Laurus requested or documented such an expense. Thus, Chicago never shifted the burden of proof, and summary adjudication should have been denied.
As well, the evidence creates doubt about the origin and propriety of the $191,382.23 for attorney fees charged under Note B in the foreclosure sale under Deed 2. Regan, a senior analyst with Laurus, testified that Laurus incurred $85,000 in attorney fees, and $35,000 of those fees were internal. There was no documentation for the internal fees. Jeffrey Wruble (Wruble) of Laurus testified that he does not think he told Chicago that Laurus was making a claim for attorney fees. Drake, who worked for Chicago, was deposed and asked if Laurus documented attorney fees. Drake testified: “Just the e-mail from [Wruble] giving me the total amount” due on Note A and Note B. She did not request any sort of documentation for the attorney fees. This evidence supports the allegation that Chicago unilaterally charged attorney fees against Note B even though none were requested, and even though the amount incurred by Laurus was far less.
The foreclosure status reports included $34,360.11 in Note A and $191,382.23 in Note B for “ATTORNEY FEES DUE TO BANKRUPTCY.”
We reject Chicago’s contention that Valcom was not damaged because its debt was larger than the allegedly improper charges. The fact that Valcom owed additional money under Note A does not permit us to ignore improprieties in the foreclosure sale under Deed 2. The only way to preserve public trust in foreclosure sales is to enforce the statutory scheme.
3. Breach of contract and conversion.
The trial court granted summary adjudication of breach of contract and conversion on the theory that there were no damages. As explained, however, there are triable issues regarding improper charges. Therefore, there is a triable issue as to whether Valcom was damaged by Chicago and Laurus.
4. Section 2924k.
Valcom argues that there is a triable issue as to whether Laurus obtained and Chicago distributed funds in violation of the priority of disbursements set forth in section 2924k. We agree, as stated in our accounting discussion. This statutory cause of action must survive summary judgment.
5. Violation of section 2924d.
Valcom contends that there is a triable issue as to whether Chicago included improper charges in the foreclosure proceeding in order to entice Laurus’s future business. This contention lacks merit.
a. The statute.
Subdivision (c) of section 2924d provides in relevant part: “(1) No person shall pay or offer to pay or collect any rebate or kickback for the referral of business involving the performance of any act required by this article. [¶] (2) Any person who violates this subdivision shall be liable to the trustor for three times the amount of any rebate or kickback, plus reasonable attorney’s fees and costs, in addition to any other remedies provided by law.”
b. There is no triable issue as to payment of a kickback.
The trial court granted summary adjudication of this cause of action, stating that “[t]here is no evidence here of any kickback or hidden payment.” To combat that ruling, Valcom argues that there is evidence of a kickback because: (1) Chicago included improper charges in the foreclosure; (2) Drake testified that Chicago reduced its foreclosure division due to a business slowdown; (3) Laurus represented a substantial new client; and (4) a jury could reasonable infer that Chicago wished to sweeten the pot by including improper charges in the foreclosure proceeding in order to secure Laurus’s future business.
We note that Valcom claims that Chicago included improper charges as “an enticement to Laurus in order to secure future business.” Valcom does not contend that Chicago paid Laurus for a referral. As a result, section 2924d has no ostensible application. Further, Valcom offers no statutory interpretation of the word “referral” or “kickback.” In our view, a referral occurs when a person refers a third party to a business. A kickback occurs when the business pays the referrer part of the profits for the referral. That did not happen here. Valcom has not offered argument to debunk this common sense reading of the statute.
6. Section 2924h.
Citing South Bay Building Enterprises, Inc. v. Riviera Lend-Lease, Inc. (1999) 72 Cal.App.4th 1111 (South Bay), Valcom avers that by inflating the amount owed on Note B, Laurus violated section 2924h. But regardless, Valcom did not suffer the damages contemplated by the statute.
Summary adjudication was proper.
a. The law.
Subdivision (g) of section 2924h provides in relevant part: “It shall be unlawful for any person, acting alone or in concert with others, (1) to offer to accept or accept from another, any consideration of any type not to bid, or (2) to fix or restrain bidding in any manner, at a sale of property conducted pursuant to a power of sale in a deed of trust or mortgage.” The false inflation of a debt can restrain bidding. (South Bay, supra, 72 Cal.App.4th at p. 1124.) To prove damages, a plaintiff must demonstrate that a willing and able buyer was dissuaded or prevented from purchasing property at foreclosure due to irregularities. (Ibid.)
b. There is no triable issue as to bid restraint.
Valcom cited South Bay for our consideration. In our view, it does not assist Valcom’s cause. Golden Forest submitted a bid at the allegedly inflated price. Under South Bay, there were no damages. Ironically, if Valcom recovers any money in this action, it is only because Golden Forest overpaid and the overage should have been distributed to Valcom under section 2924k.
7. The attorney fees awards.
Because summary judgment must be reversed, and because portions of this action must be remanded for trial, the attorney fees awards in favor of Chicago and Laurus must necessarily be reversed.
DISPOSITION
Summary judgment and the award of attorney fees in favor of Laurus and Chicago are reversed. The matter is remanded for further proceedings against Chicago and Laurus with respect to breach of contract, conversion and violation of section 2924k. As well, the accounting claim may proceed against Laurus. Valcom is entitled to recover the costs it incurred on appeal.
We concur: BOREN, P. J., CHAVEZ, J.