Trustee Screw-Up In California F'closure Sale Allowing Property Worth $220K To Be Sold To Investor For $22K To Be Decided By State High Court

In Santa Cruz, California, the San Jose Mercury News reports:

• The state Supreme Court has agreed to review a civil case first filed in Santa Cruz County Court in 2009. The case, Biancalana v. T.D. Service Co., deals with issues surrounding the sale of a foreclosed property.



• Plaintiff David Biancala purchased a property at a foreclosure sale in 2008, but the defendants allege that the wrong opening bid was announced and therefore the sale is void.



• Attorneys for Biancala claim that the trustee for the property did not have the discretionary authority to set aside the foreclosure sale due to that error, and the property rightfully belongs to the purchaser.



• An appeals court eventually overturned a Santa Cruz County judge's judgment in favor of the defendant. The defendant, T.D. Service Co., filed the petition for review of the case by the State Supreme Court. The state's highest court announced last week that it had accepted the case for review.(1)

Source: State's highest court to review foreclosure case.

For the California appeals court ruling to be taken up by the state high court, see Biancalana v. TD Service Co. (2011) 200 Cal. App. 4th 527 [132 Cal. Rptr. 3d 719].

(1) The events surrounding the foreclosure sale follow, as set forth in the appeals court ruling:

• On or about July 22, 2008, TD was substituted in as trustee under a deed of trust securing real property located at 434 Winchester Drive in Watsonville, California (the subject property). TD subsequently provided notice that the subject property would be sold at a foreclosure sale scheduled to take place on September 10, 2008. The beneficiary submitted a specified credit bid in the amount of $219,105 for TD to use as the opening bid for the sale. However, TD erroneously submitted the delinquency amount of $21,894.17 to the auctioneer as the opening credit bid on the subject property.
  
  While researching upcoming foreclosure sales, Biancalana learned of the scheduled sale of the subject property and, on the day of the sale, called the telephone number TD listed on the sales notice to inquire about the opening bid. The recording advised that the opening bid for the property was $21,894.17. After checking comparable property values and asking a colleague to physically view the property, Biancalana again called the recording. The amount of the opening bid was unchanged.
  
  Biancalana decided to bid on the property, so he obtained a cashier's check in the amount of $22,000 and proceeded to the auction site. Having arrived before the scheduled start of the sale, Biancalana discussed this property and other foreclosures with the auctioneer. The auctioneer called TD twice before the start of the sale and spoke to two different employees, both of whom advised him the opening bid for the property was $21,894.17. The auctioneer was not instructed by TD to make any further bids on the property over and above the opening bid.
  
  The sale commenced and the auctioneer, as instructed, announced that the opening bid on the subject property was $21,894.17. Biancalana submitted a bid of $21,896 and, when no other bids were forthcoming, the auctioneer declared this as the high bid. The auctioneer accepted a cashier's check in the amount of $22,000 from Biancalana.
  
  TD discovered the mistake when it reviewed sales figures from September 10, 2008. On September 11 or 12, 2008, TD notified Biancalana that the opening bid it submitted was incorrect, that the sale was void and that a new foreclosure sale would be scheduled. TD did not issue a trustee's deed upon sale and returned Biancalana's cashier's check. Biancalana rejected the check and sent it back to TD. When TD refused to issue the deed, Biancalana sued TD, among other defendants, for quiet title, specific performance, declaratory and injunctive relief.