Forbearance of Foreclosure is Within the Statute of Frauds
In Secrest v. Security National Mortgage Loan Trust 2002-2, the Fourth District California Court of Appeal held that an agreement to forbear foreclosure comes within the statute of frauds.
In Secrest, plaintiff borrowers filed suit to enjoin foreclosure proceedings initiated by defendant lenders. Borrowers alleged that lenders' predecessors in interest had entered into an agreement to forbear foreclosure based on certain conditions. Borrowers had in fact made two such agreements, one in 2001 and one in 2002, each of which included a lump sum payment and timely payments on the note securing the deed of trust. Lenders asserted that the forbearance agreement was unenforceable under California's statute of frauds (Civil Code §1624) because lenders did not sign it. The trial court held that the forbearance agreement was unenforceable, and borrowers appealed.
Continue Reading...9th Circuit Remands Class Arbitration Waiver
The Ninth Circuit last week addressed choice of law considerations in the context of a class wide arbitration waiver. In Hoffman v. Citibank (South Dakota), N.A., the Ninth Circuit held that the district court's analysis of California choice of law was flawed, and remanded for the district court to re-analyze whether California or South Dakota law applies to the class arbitration waiver.
In Hoffman, Citibank issued a credit card to Hoffman in 1994 which contained a choice of law provision favoring South Dakota law. In a mailing in 2001, Citibank gave Hoffman notice of a change in the arbitration provision of the cardholder agreement, including a waiver of class arbitration. Hoffman did not object and continued to use the card.
Hoffman later sued Citibank, alleging that Citibank had improperly retroactively increased cardholders' interest rates, among other things. Citibank removed the case to federal court and moved to compel arbitration. The district court applied South Dakota law pursuant to the choice of law provision. Holding that the class arbitration waiver was not unconscionable under South Dakota law, the district court granted Citibank's motion to compel arbitration of plaintiff's claims on an individual basis. Hoffman moved to certify the ruling for immediate appeal. The district court granted the motion and the Ninth Circuit granted Hoffman's petition to be heard.
Continue Reading...One to Watch: U.S. Supreme Court to Address Preemption
The Supreme Court heard opening day oral arguments in a preemption case that could have far-reaching effects for financial institutions. The case, involving a suit against tobacco company Altria, presents the question whether state law challenges to FTC-authorized statements in advertising are expressly or impliedly preempted by federal law. The Court's opinion could significantly impact the preemption landscape generally, including the balance between state and federal consumer protection statutes.
Court of Appeal Addresses Issues in Foreclosure Litigation
In what may be the leading edge of a wave of litigation related to foreclosures, in FDIC v. Dintino, the California Court of Appeal last week issued an opinion addressing statutes of limitations and attorney's fees related to an IndyMac (FDIC) foreclosure.
In Dintino, IndyMac sued borrower to foreclose on a mortgage, alleging breach of contract, money lent, and unjust enrichment. Borrower raised affirmative defenses based on the statute of limitations, the antideficiency statutes (Code of Civil Procedure §580 et seq.) and the doctrine of unclean hands. Both parties moved for summary judgment. The trial court denied IndyMac's motion for summary judgment and granted, in part, borrower's motion for summary adjudication, holding IndyMac's breach of contract cause of action was barred by the One Action Rule (Code of Civil Procedure §726 et seq.). The trial court rejected borrower's statute of limitations argument, holding IndyMac's unjust enrichment cause of action was not barred by the applicable statute of limitations (Code of Civil Procedure § 337).
The parties stipulated to a bench trial, after which the trial court entered judgment for IndyMac. Borrower moved to recover attorney's fees incurred in the defense of the breach of contract cause of action. The trial court denied the motion. Borrower appealed the partial denial of his motion for summary judgment and the denial of his motion for attorney's fees.
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