Filed 12/13/19 Aztec Foreclosure Corp. v. Robertson CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

AZTEC FORECLOSURE CORPORATION,

Plaintiff,

v.

JAMES A. ROBERTSON, as Executor etc.,

Defendant and Appellant;

REAL TIME RESOLUTIONS, INC.,

Defendant and Respondent.

G057127

(Super. Ct. No. 30-2018-01002342)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Robert J. Moss, Judge. Reversed and remanded.

SoCal Law Group and James Dean Mortensen for Defendant and Appellant.

Aldridge Pite, Laurel I. Handley and Tim Pomeroy for Defendant and Respondent.

* * *

Appellant, James Robertson, executor of the estate of Allan Reumont, appeals from an order distributing $659,448.22 in surplus proceeds to Real Time Resolutions, Inc. (Real Time), following a nonjudicial foreclosure sale of Reumont’s real property. The surplus funds were awarded to Real Time after the foreclosure trustee deposited the funds with the superior court and filed a petition regarding unresolved claims under Civil Code section 2924j.

Real Time’s claim to the surplus proceeds was based on a deed of trust securing a home equity line of credit Reumont received in 2006 with a credit limit of $1,035,477 and a variable interest rate. This was a junior lien and was assigned to Real Time after foreclosure on the property following default on the senior lien. Real Time filed a claim in court for all of the surplus proceeds, declaring that at the time of the foreclosure sale the total amount due on the home equity loan was $1,037,727.95. In the trial court and on appeal, Robertson challenges Real Time’s claim to the surplus proceeds on the grounds the company failed to provide sufficient evidence establishing the outstanding balance on the home equity loan at the time of the foreclosure.

We conclude Real Time’s claim was deficient because it did not comply with section 2924j, subdivision (a)(4). Real Time failed to provide an itemized statement showing the principal, interest, and other charges due as of the date of the trustee’s sale as required by the statute. Moreover, the amounts reflected in the document it filed in support of its claim were inconsistent with the terms of the original home equity credit agreement. We reverse the court’s order distributing the surplus proceeds to Real Time and remand the matter to provide Real Time an opportunity to amend its claim to comply with the statutory requirements.

FACTS

In 2003, Allan Reumont acquired real property on Goldenrod Avenue (property) in Newport Beach. In January 2006, he obtained a loan from Countrywide Home Loans, Inc. (Countrywide), which was secured by a deed of trust. In August 2006, Countrywide also provided Reumont a home equity line of credit (HELOC) with a credit limit of $1,035,477 and a variable interest rate. The home equity credit line agreement (Note) was secured by a deed of trust recorded against the property and was junior in priority. In 2012, the deed of trust securing the HELOC was assigned to “the Bank of New York Mellon FKA the Bank of New York, as successor trustee to JPMorgan Chase Bank, N.A., as trustee on behalf of the certificate holders of the CWHEQ Inc., CWHEQ Revolving Home Equity Loan Trust, Series 2006-H” (Bank of New York).

Three events occurred at times not specified in our appellate record—Reumont defaulted on the first loan, he passed away, and Roberston was appointed executor of Reumont’s estate.

Following Reumont’s default on the first loan, the property was sold on January 31, 2017, at a nonjudicial foreclosure sale by Aztec Foreclosure Corporation (trustee) for $2,843,500. After payment of the costs of the trustee sale and fees and satisfaction of the loan secured by the first deed of trust (§ 2924k, subd. (a)(1)-(2)), a surplus of $659,898.22 remained.

In February 2017, the trustee notified Reumont, Bank of New York, and other persons with a recorded interest in the property that surplus proceeds remained following the foreclosure sale. (§ 2924j, subd. (a).) The trustee’s letter informed interested persons that a written claim for the excess proceeds “must be itemized and include any principal, interest and other charges through the date of the foreclosure sale only.” Potential claimants were also advised the claim must be signed in the presence of a notary and received by the trustee within 30 days.

In May 2017, a corporate assignment deed of trust was recorded, in which the Bank of New York granted, assigned, and transferred to Real Time all its interest under the August 2006 deed of trust securing the HELOC. That same month, Real Time submitted a claim with the trustee for all of the surplus funds remaining after the foreclosure sale, indicating the total amount owed was $1,037,727.95. The claim stated “[a]n itemization of the amount claimed” was attached. Attached was a payoff statement prepared by Real Time on May 17, 2017, which indicated that as of the date of the foreclosure sale, the principal balance was $1,037,727.95 with a zero interest rate and nothing due in interest and fees. Real Time also submitted with its claim the original home equity credit line agreement and fee addendum, the recorded deed of trust, and assignments of the trust deed.

On behalf of Reumont’s estate, Robertson submitted a claim for the residual proceeds. Determining there was a potential conflict between Robertson, Real Time, and another noticed person who did not submit a claim for the excess funds, the trustee filed a “Petition and Declaration Regarding Unresolved Claims and Deposit of Undistributed Surplus Proceeds of Trustee’s Sale” (petition) in the superior court.

In the superior court, both Real Time and Reumont’s estate filed claims for the surplus proceeds. Real Time claimed it was entitled to all of the excess funds because it was a junior lienholder with priority under section 2924k, subdivision (a), and “the amount due and owing under the Note and Deed of Trust was in the total amount of $1,037,727.95.” To support its claim, Real Time filed the same documents with the court that it submitted to the trustee, including the original home equity credit line agreement, the deed of trust, its assignments, and the payoff statement. It also added a declaration by David Rosas, the director of loss mitigation for Real Time, who declared the attached copies of the Note and deed of trust were true and correct copies and that the total amount due and owing under the documents was $1,037,727.95.

Robertson filed a claim for the surplus proceeds as the successor in interest to Reumont, the trustor and owner of the property at the time of the trustee sale. He challenged Real Time’s claim, objecting to two of the documents Real Time filed in support of its claim: (1) the declaration of David Rosas and (2) the payoff statement. Robertson objected that Rosas failed to show any personal knowledge of the outstanding loan balance or provide a foundation for his opinion as to the amount due. He also argued Real Time failed to present evidence indicating how it calculated the amount due, provided no breakdown of principal, interest or fees, and failed to present evidence of the loan history (i.e., balances, payments, charges, fees, etc.) from the lenders previously servicing the loan.

Following a hearing, the court overruled Robertson’s objections and ordered the $659,448.22 in surplus funds remaining after payment of court fees be distributed to Real Time.

Robertson timely appealed.

DISCUSSION

On appeal, Robertson challenges the court’s order awarding the surplus funds to Real Time. He presents variations of what is essentially one contention—Real Time failed to present sufficient evidence to support its claim that Reumont owed $1,037,727.95 on the home equity loan at the time of the trustee’s sale, and the court, therefore, erred by distributing all of the surplus funds to Real Time. He complains the declaration by Real Time’s employee and the payoff statement were deficient as they lacked foundation and the payoff statement was inadmissible hearsay. The argument we find most compelling is that Real Time’s claim lacked the required breakdown of principal, interest, and fees. (§ 2924j, subd. (a)(4)(B).) Real Time’s failure to include this information raises questions as to the accuracy of its claim. Because Real Time fails to convince us that its claim was properly supported, we reverse the court’s order and remand for further proceedings.

Nonjudicial Foreclosure Statutory Scheme

“Civil Code sections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. The purposes of this comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.” (Moeller v. Lien (1994) 25 Cal.App.4th 822, 830.)

The statutory scheme governs the procedures for a foreclosure sale (§§ 2924, 2924g) and the order in which proceeds from the trustee’s sale are to be distributed (§ 2924k, subd. (a)). First, to be paid from the proceeds of the trustee’s sale are “the costs and expenses of exercising the power of sale . . . including the payment of the trustee’s fees and attorney’s fees.” (Id., subd. (a)(1).) Second, the obligation secured by the deed of trust or mortgage that was the subject of the trustee’s sale is paid. (Id., subd. (a)(2).) Third, in priority are “the outstanding balance of obligations secured by any junior liens or encumbrances in the order of their priority.” (Id., subd. (a)(3).) Thus, unless the successful bidder at the trustee sale purchases the property “‘at a price sufficiently high to pay off both the senior lien and the junior lien,’” the junior lien “‘will be extinguished at the foreclosure sale . . . .’” (Banc of America Leasing & Capital, LLC v. 3 Arch Trustee Services, Inc. (2009) 180 Cal.App.4th 1090, 1101 (Banc of America).) After payment of the trustee’s expenses and payment to the senior and junior lienholders, any proceeds remaining are paid “[t]o the trustor or the trustor’s successor in interest” (i.e., the homeowner at the time of foreclosure). (§ 2924k, subd. (a)(4).)

Section 2924j sets forth the procedures for how interested persons are informed of and claim the surplus proceeds following a nonjudicial foreclosure sale. If there are funds remaining after payment of the trustee’s expenses and satisfaction of the debt secured by the deed of trust that was the subject of the trustee’s sale, section 2924j requires that the trustee provide written notice of the surplus funds to all persons with a recorded interest in the property, informing them how to submit a claim for all or a portion of the remaining proceeds, “[u]nless an interpleader action has been filed . . . .” (§ 2924j, subd. (a); Banc of America, supra, 180 Cal.App.4th at p. 1102.)

Noticed persons have 30 days to submit a written claim to the trustee. (§ 2924j, subd. (a)(4)(C).) A claim must be “executed under penalty of perjury” and contain two elements: “(A) The amount of the claim to the date of trustee’s sale”; and “(B) An itemized statement of the principal, interest, and other charges.” (Id., subd. (a)(4)(A), (B).) A claimant with a promissory note secured by a deed of trust in the property may be required to provide the original promissory note and any assignment of beneficial interests in it. (Id., subd. (a)(4).)

The trustee must then “exercise due diligence to determine the priority of the written claims . . . .” (§ 2924j, subd. (b).) If within 90 days the trustee is unable to determine the priority of the written claims or “if the trustee determines there is a conflict between potential claimants” (id., subd. (c)), then the trustee must either file an interpleader action or deposit the surplus proceeds with the superior court (id., subd. (b)), and file a declaration of unresolved claims (id., subd. (c)).

If the trustee chooses to deposit the undistributed surplus proceeds with the superior court, before doing so, the trustee must provide written notice to potential claimants informing them that the surplus funds will be deposited with the court and that a claim for the funds must be filed with the court within 30 days of the funds deposit with the court. (§ 2924j, subd. (d).) When filing a declaration of unresolved claims, the trustee must also submit to the superior court “any information relevant to the identity, location, and priority of the potential claimants . . . .” (§ 2924j, subd. (c).) After depositing the undistributed funds with the superior court, the trustee is relieved of the responsibility of dispersing the surplus proceeds. (Ibid.)

The court clerk must provide notice of a hearing to all claimants included in the trustee’s declaration and a hearing on the claims should be held within 90 days after deposit of the surplus proceeds with the court. (§ 2924j, subd. (d).) The court “shall consider all claims filed at least 15 days before” the hearing and “shall distribute the deposited funds to any and all claimants entitled thereto.” (Ibid.)

Real Time’s Claim Failed to Satisfy the Requirements of Section 2924j

With these principles in mind, we turn to the issue of whether Real Time presented sufficient evidence to support its claim that Reumont owed $1,037,727.95 on the home equity credit loan at the time of the foreclosure sale. On appeal, Robertson does not dispute Real Time’s status as holder of the 2006 junior lien or that as the junior lienholder Real Time would be entitled to priority over him under section 2924k, subdivision (a). What he does dispute is Real Time’s claim as to the amount of the outstanding balance on the home equity loan. Real Time asserts its claim comported with statutory requirements and included everything requested by the trustee. We disagree with Real Time. Real Time’s claim was deficient because it did not include “[a]n itemized statement of the principal, interest, and other charges” as required by section 2924j, subdivision (a)(4)(B), and the payoff statement it submitted in support of its claim is inconsistent with the original promissory note.

In the trial court, Real Time filed with its claim a declaration by David Rosas, its director of loss mitigation. Rosas stated he “had access to Real Time’s books, records and loan servicing files, and as they pertain to the Home Equity Line Agreement and Disclosure Statement (‘Note’) dated August 7, 2006, executed by Allan W. Reumont (the ‘Trustor’) having a credit limit of $1,035,477.00 and the deed of trust securing the Note dated August 7, 2006 and recorded August 14, 2006, . . . (‘Deed of Trust’).” He does not state that he actually reviewed loan servicing files or records from Real Time or any other entity that serviced Reumont’s home equity loan. Rosas declared that as of “the date of the sale, the amount due and owing under the Note and Deed of Trust was in the total amount of $1,037,727.95.” His declaration does not break down this amount to explain how much is principal, interest, or other charges but states “[a] copy of the Real Time’s payoff statement outlining the exact amounts due is attached.” Rosas does not explain what, if anything, he relied upon in declaring this total, other than the payoff statement.

The payoff statement filed with Real Time’s claim also failed to itemize the amount of “principal, interest, and other charges” due as of the date of the foreclosure sale as required by section 2924j, subdivision (a)(4)(B). Real Time’s payoff statement indicated that as of the date of the trustee sale, $1,037,727.95 was owed as principal balance and that zero was due in interest and fees. The problem is that this is inconsistent with the original home equity credit line agreement, which indicated the credit limit was $1,035,477 and had an adjustable annual percentage rate that at the time of the execution of the agreement in 2006 was 9.750 percent. Similarly, the recorded deed of trust for the HELOC stated it “secures an obligation which calls for payment of interest at a variable interest rate” under the terms of a revolving credit agreement and indicated the maximum principal obligation under the agreement was $1,035,477. Yet, Real Time claimed Reumont somehow managed to exceed the credit limit without accruing any unpaid interest. Under these circumstances, Real Time’s claim was patently unreliable.

Real Time asserts its claim was properly supported by the payoff statement because the statement met the requirements of section 2943, subdivision (a)(5) “as that which is ‘reasonably necessary to calculate the payoff amount’” and was “all the trustee asked for in its [February 2017 letter].” We disagree for two reasons. First, Real Time’s focus on section 2943 is misplaced. Section 2924j, not section 2943, establishes the requirements a claimant must satisfy to claim surplus proceeds remaining after a trustee’s sale. Second, Real Time misunderstands what the trustee requested in its letter.

Section 2924j provides a claimant must “submit a written claim to the trustee, executed under penalty of perjury, stating the following: [¶] (A) The amount of the claim to the date of trustee’s sale[; and] [¶] (B) An itemized statement of the principal, interest, and other charges.” (§ 2924j, subd. (a)(4).) While section 2924j delineates requirements for a written claim submitted to the trustee (id., subd. (a)(4)), it does not specify the contents of such a claim to be filed with the court (id., subd. (d)), after the trustee has filed a declaration of unresolved claims and deposited the undistributed proceeds with the court. (id., subds. (b), (c).) Nevertheless, we see no reason why a claim filed in the court should be any less than that submitted to the trustee after the trustee has determined there is a conflict between the potential claimants or the trustee was unable to determine the priority of the claims. If anything, a claimant should provide more information to the court than it submitted to the trustee to assist the court in resolving the issue that vexed the trustee.

In its February 2017 letter, the trustee advised potential claimants that a claim “must be itemized and include any principal, interest, and other charges through the date of the foreclosure sale only.” This is consistent with the requirements in section 2924j, subdivision (a)(4) set out above.

While an accurate and properly itemized payoff statement submitted under penalty of perjury might be sufficient to satisfy the requirements in section 2924j, subdivision (a)(4), Real Time’s did not. Neither Real Time’s claim submitted to the trustee nor its claim filed with the court complied with section 2924j, subdivision (a)(4)(B), as they did not include “[a]n itemized statement of the principal, interest, and other charges.”

To the extent Robertson asserts Real Time must submit evidence of “the loan history, payments, interest, [and] withdrawls” to support its claim for the surplus funds under section 2924j, he is mistaken. Section 2924j does not command such and we will not insert additional requirements into the statute. (Code Civ. Proc., § 1858; see Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154 [“‘Because of the exhaustive nature of this scheme, California appellate courts have refused to read any additional requirements into the non-judicial foreclosure statute’”].) Nevertheless, we do note such documents or a business record from the company that serviced Reumont’s home equity line of credit would help Real Time substantiate its claim.

Because Real Time’s claim did not satisfy the requirements of section 2924j, the court’s order distributing $659,448.22 in surplus funds to it must be reversed. Robertson asserts we should direct the court to disperse the surplus proceeds to him. We disagree and remand the case to the court for further proceedings wherein Real Time may seek to amend its claim if it can provide the information required by section 2924j, as clarified.

If Real Time amends its claim and provides “[a]n itemized statement of the principal, interest, and other charges” (§ 2924j, subd. (a)(4)(B)) owed as of the date of the trustee’s sale (id., subd. (a)(4)(A)), Robertson may object to Real Time’s documentary evidence and accounting and he may submit any evidence he has of a different amount. Ultimately, the court will determine the accuracy of Real Time’s claim as to the amount of Reumont’s outstanding balance at the time of the foreclosure sale.

DISPOSITION

The October 16, 2018 order dispersing surplus funds in the amount of $659,448.22 to Real Time is reversed. The matter is remanded to the superior court for further proceedings consistent with this opinion. Robertson shall recover his costs on appeal.

IKOLA, J.

WE CONCUR:

O’LEARY, P. J.

MOORE, J.