1

Filed 2/1/16 Knott v. JPMorgan Chase Bank CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ord ered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

MICHAEL KNOTT , as Trustee, etc. , Plaintiff and Appellant,

v. JP MORGAN CHASE BANK, N.A., et al., Defendant s and Respondent s

. A141321
(Sonoma County Super. Ct. No. SCV

- 251561)

Plaintiff Michael Knott, as trustee, appeals a summary judgment on his claim to set aside a foreclosure sale that was entered on the mistaken premise that the court in a prior ac tion had determined the validity of the sale. That premise is entirely without justification. Despite the known existence of a temporary restraining order (TRO) prohibiting the foreclosure, JPMorgan Chase Bank, N.A. (JP Morgan) proceeded with a nonjudicial
fo reclosure of plaintiff’s home. The bank successfully moved for summary judgment in
this action to cancel the foreclosure sale , claiming that when the court in the prior action
issued a n order extending the injunction but deleted from the proposed order drafted by
counsel a provision vacating the sale, it had thereby adjudicated the validity of the sale.
Because the prior court never purported to determine the validity of the foreclosure , nor was it ever requested to do so, the jud gment must be reversed

.2 Statement of Facts Walter and Mercedes Taylor owned residential real property on Timberhill Ro ad in Santa Rosa (property)

. In 1996, the Taylors created a family trust and, in April 2006, transferred the property to the trust. 1 Wal ter died in December 2006. In May 2007, Mercedes refinanced the property. She obtain ed a $1 million loan from Washington Mutual Bank (Washington Mutual) secured by the property. At the time, the property was appraised at $1.5 million. The proceeds of the loan paid the balance of an outstanding home loan and provide d a cash disbursement of $366,867. The details of the transaction are not fully described by the parties but it appears from deeds
included in the record that Mercedes, as trustee of the Taylor f amily trust, transferred the property from the trust to herself as an individual before obtaining the loan
, then transferred the property back to the trust after obtaining the loan. Mercedes died in June 2008 at age 88. Her sons from a previous marriage,
Michael and John Knott (collectively, the Knotts) , became co

- trustees of the family trust. John died in May 2014 while this case was on appeal
, so that Michael is now the sole trustee and appellant. Michael ha s been living at the property since 1989

. The K notts , as

co trustees, made mortgage payments on the Santa Rosa property from the time of Mercedes’s death in June 2008 through September 2008 a nd assert that Washington Mutual consented to the trust’s assumption of the loan. 2
The Knotts asked Washington M utual to modify the loan’s balance and interest

rate because the amount owed exceeded the property’s value at the time. They contend Washington Mutual told them they must default on payments to be qualified for a modification and, based on that advice, sto pped making loan payments after September
2008.

1 The deed states the trust was created in 1991 but the trust agreement was actually executed in 1996.

2 There appears to be some dispute on this point. The record contains letters between the Knotts and Washington Mutual stating that the lender would consent subject to certain conditions but it is not clear if final approval was obtained.3

Around this time
, Washington Mutual went into receivership and JPMorgan acquired certain assets of the failed bank , including the right to service the loan on the Santa Rosa property. The Knotts renewed their request for a loan modification after JPMorgan acquired the loan. In March 2009, defendant California Reconveyance Company (CRC) , as agent for the trustee on the deed of trust, recorded notice of default and election to sell the property. A t rustee’s sale was initially scheduled for July 2009 but was postponed numerous times over the course of a year while a loan modification application was being processed.
Knott I
O n July 13, 2010, the Knotts’s attorney wrote to JPMorgan and CRC informing

t hem that the Knotts were filing suit and seeking a TRO to prevent the trustee’s sale scheduled for July 16. The attorney asserted, “The Knotts cannot continue this tortuous game being played by [JPMorgan] as they dangle a loan modification in one hand, ref use to negotiate in good faith, all the while a foreclosure sale hanging over their heads.” The Knotts filed suit the next day against JPMorgan and CRC
, alleging breach of contract and
fraud (SCV

- 247761, hereafter Knott I ) , and moved for a preliminary inju nction together
with an ex parte application for a TRO preventing sale of the property. On July 14, 2010, t he court issued a TRO that enjoined defendants “ from selling or otherwise encumbering the property until the determination of the request for prelim inary injunction” at a hearing set for August 3, 2010. O n July 15, the Knotts’s attorney faxed the court’s order to JPMorgan and CRC and confirmed with CRC by telephone that it received the order. Nonetheless, despite the court’s order, CRC proceeded with the trustee’s sale on July 16 , 2010. JPMorgan acquired the property on a
credit bid and on July 26 CRC recorded a trustee’s deed.
U naware of the trustee’s sale, the court issued a tentative ruling in advance of the August 3 hearing granting a preliminary injunction enjoining sale of the property. 3

3 We grant appella nt’s request for judicial notice of the minute order and reporter’s transcript from Knott I . (Evid. Code, § 452, subd. (d).)4

JPMorgan and CRC did not advise the court of the sale, did not file a response to the motion for preliminary injunction, and did not appear at the hearing. Knott’s attorney appeared at the hearing and informed th e court the property had been sold in contravention of the court’s TRO

. Counsel did not know the details. He said JPMorgan’s attorney left a telephone “message on my machine last night saying that they own the property now and once this case was adjudicate d that we would determine what the status of the property was.” The court adopted its tentative ruling enjoining sale of the property and said it
would schedule a n early settlement conference “requiring personal appearance of
someone from the bank.” A min ute order was recorded on the day of the hearing statin g, “There being no opposition, c ourt adopts its previously published tentative r uling as
follows: Plaintiffs’ motion for preliminary i njunction is granted on the condition that plaintiffs post a bond i n the amount of $1,000. The preliminary injunction enjoins the sale of the property at issue.” Sometime after the hearing, Knott’s attorney submitted a proposed written order confirming entry of the preliminary injunction

. The court accepted the terms of the proposed order confirming the injunction but struck additional paragraphs that counsel
had included

. In its final form, t he court order states that a TRO enjoining sale of the property was in effect from July 14 to August 3, 2010
, and that a preliminar y injunction “is now issued enjoining” sale of the property by defendants and its agents “throughout
the duration of this case.” The order also requires plaintiffs to post a bond of $1,000. The court crossed out two paragraphs in the proposed order , o ne direct ing JPMorgan’s attorney to appear at a settlement conference and t he other
, which state d : “Defendants/Respondents are ordered to invalidate any sale or encumbrance upon the

p roperty that took place in v iolation of the court’s [TRO] or this preliminar y i njunction.
Proof of such invalid ation must be submitted to the c ourt no later than _ _____.” The court issued the order on August 9, 2010.
The record reveals no further action in Knott I until the action was voluntarily dismissed without prejudice almos t two years later , in April 2012 . The property was not5

re sold after the trustee’s sale

. JPMorgan continues to hold title and Michael Knott
remains in residence

. This action. The Knotts filed this action on the same day they dismissed their earlier action

. The complaint pleads causes of action for quiet title, cancellation of instruments, and injunctive relief. 4 The causes of action are founded on the allegation that the trustee’s sale
is void because it was conducted in violation of the Knott I TRO

. Defendants JPMorgan and CRC filed a motion for summary judgment
, contending
that the trustee’s sale was valid and had been “expressly validated” by the court in
Knott I. In its statement of undisputed facts, defendants asserted: “On August 9, 2010, the

cou rt [in Knott I

] issued an o rder enjoining the sale of the p roperty from August 3, 2010 throughout the conclusion of the case. However, the court expressly refused to invalidate JPMorgan ’s trustee sale of the p roperty on July 16, 2010.” By striking that par agraph,
defendants asserted, the court had determined that the foreclosure sale was valid

. Defendants argued the Knott I court declined to order invalidation of the sale at the preliminary injunction hearing “presumably because after the noti ce of default had been served, p laintiffs had a statutory obligation to pay the amount of the delinqu ency in order
to reinstate the l oan to avoid foreclosure

– and they did not.” Defendants argued that the
Knott s ’s failure to tender the full amount of the debt

— at the ti me of the trustee’s sale and currently

— forecloses all claims for relief

. In opposing the summary judgment motion, t he Knotts did not dispute that the
Knott I court struck language from the proposed preliminary injunction order that “would
have acted to re troactively invalidate” the sale but argued that the order did not adjudicate
the ultimate merit of their claim. They argued that the trustee’s sale is void because it “proceeded in violation of a court order” and that tender is not required to set aside a void
sale.

4 The complaint also pleaded causes of action for declaratory relief and violation of the

one

- action rule. The court’s dismissal of these causes of action is not challenged on appeal.6

I n defendants’ reply brief in support of the summary judgment motion defendants for the first time explicitly invoked the doctrine of collateral estoppel. Defendants insisted that the trustee’s sale was valid and that the validity of the sal e “has already been
decided in defendants’ favor. When p laintiffs asked the same judge that issued the July 14, 2 010 order enjoining the sale of the p roperty to hold that the subsequent trustee sale on July 16, 2 010 violated the July 14, 2010 o rder, the judg e expressly refused to ‘invalidate’ the sale or hold that the sale ‘ took place in violation of the c ourt’s [TRO] or this preliminary i njunction.’ Thus, the legal issue as to whether or not the July 16, 2010

trustee sa le is ‘invalid,’ as claimed by p laintif fs ha s already been decided by this court in
the o rder in the previous action, dated August 9, 2010.

. . . Thus, p laintiffs are collaterally estopped from relitigating this issue in another action.” The trial court gra nted summary judgment , explaining that “the key to this lawsuit
and eve ry cause of action seems to be p laintiffs’ claim that the sale was improper in light
of the TRO

. ” Yet, “ [ t ] he undisputed evidence

. . . demonstrates that in the prior action the court granted a preliminary injunction b arring any sale of the property at that point, but expressly rejected any language invalidating the sale that had already occurred. Further, it is undisputed that p laintiffs dismissed that prior action without prejudice without obtaining any relief regardi ng the sale.” The trial court al so stated that, “[i] n any event,

. . . the loan was in default, p laintif fs failed to cure the default, d efendants record ed the proper instruments, and p laintiffs admitted in deposition that they had no money or
income that w ould allow them to pay the loan payments.” Judgment for defendants was entered on January 28, 2014
, and t he Knotts timely filed notice of appeal.
Discussion

“ In reviewing a grant of summary judgment, we independently evaluate the record, liberally construing the evidence supporting the party opposing the motion, and resolving any doubts in his or her favor. [Citation.] As the moving party, the defendant
must sh ow that the plaintiff has not established, and reasonably cannot be expected to7

establish, one or more elements of the cause of action in question. ” ( Patterson v. Domino’s Pizza, LLC (2014) 60 Cal.4th 474, 499

- 500.) As defendants acknowledg e, “The entire basis of the trial court’s order granting [their] m otion rested on the conclusion that [the judge in the prior action] simply refused to invalidate a completed sale.” The trial court, at defendants’ urging, found that the court
in Knott I adjudicated the s ale to be valid and that the prior adjudication is binding in this action. Defendants defend that finding here, expressly abandoning reliance on collateral estoppel, 5 and now asserting that the trial court’s order is justified on the basis of “comity.”
D efendants rely upon People v. Quarterman (2012) 202 Cal.App.4th 1280, 1293,
which states: “ ‘ [F]or reasons of comity and public policy

. . . trial judges should decline to reverse or modify other trial judges ’ rulings unless there is a highly persuasive re ason for doing so

. ’ ” “ Encouraging parties to pursue their appellate remedies, instead of asking a different judge to rehear a matter that was decided adversely to them the first time, serves the purpose of preserving the integrity of the judicial system, and promotes respect for the judicial process. ” ( Ibid. ) Defendants’ argument founders on the simple fact that the trial court in the prior
action made no determination that the trustee’s sale was valid. In striking portions of the proposed preliminary injunction order, t he judge in Knott I simply struck language that went beyond the court’s ruling

. T he extent of the court’s ruling was to gran t the unopposed motion for a p reliminary injunction

. The court was never asked to rule on the
ultimate merit of t he plaintiff ’ s claim that the defendants were not entitled to foreclose or
that the foreclosure sale was invalid. The court only learned of the sale on the day of the hearing and the information provided was scant and second

- hand. The Knotts did not

reques t invalidation of the sale at the hearing nor did defendants request the court to determine the validity of the foreclosure sale. The court did not purport to rule on the

5 Defendants concede they did not raise the issue of collateral estoppel until their summary judgment reply brief and that such belated arguments are improper.8

validity of the sale, as reflected in the reporter’s transcript of the hearing and th e court’s
minute order. Indeed, that the court did not pass on that question is reflected by the very
terms of the corrected written order that the court did sign; that an affirmative ruling can be imputed to language struck from an order is a rather prepo sterous contention for which defendants understandably cite no authority.
A party prevailing on a motion is required to prepare a proposed order and its proposal should conform to the trial court’s announced ruling. (Cal. Rules of Court,
rule 3.131 2.) It is not unusual, however, for a judge to add, delete, or alter language to a proposed order to conform to the court’ s ruling

. The proposed order itself is without effect, as is any language in a propos ed order rejected by the court. It is beyond dispute that by striking language from the proposed preliminary injunction order, the court did not adjudicate the merits of plaintiff’s claim

. Defendant s present no other basis for holding the trustee’s sale to be valid so as to entitle them to summary judgment

. T he sale was conducted when a TRO was in effect despite notice of the order

. At the summary judgment hearing, defendants’ attorney conceded that the trustee’s sale proceeded despite a TRO. The only explanation offered
for the sale in direct violation of t he court order was “one hand at [JPMorgan] did not know what the other hand was doing, and somehow the property was sold

. . . .” In the prior action the Knotts might have petitioned to hold JPMorgan in contempt
and to set aside the sale. ( Bagley v. Ward (1869) 37 Cal. 121, 139.) It is not clear why they did not pursue th o se remedies in that action, but their failure to do so doe s not negate their right to relief in the present action. A long line of cases holds that a sale of real property in violation of an injunction, while not void, is voidable. ( Ibid. ; Powell v. Bank of Lemoore (1899) 125 Cal. 468, 472; D e Albergaria v. American Trust Co. (1932) 12 6 Cal.App. 59 , 60 ; Warburton v. Kieferle (1955) 135 Cal.App.2d 278, 283.) “In such case,

upon a proper showing by a party entitled to the consideration of a court of equity, relief may be granted by setting aside such sale.” ( Powell
, supra , 125 Cal. at p. 472.)
Defendants wrongly argue that the sale cannot be voided absent tender of payment. It is true tha t “[a] defaulted borrower who seeks to set aside a trustee ’ s sale9

ordinarily is required to tender the full amount of the debt for which the property was security. ” (Greenwald & Bank, Cal. Practice Guide: Real Property Transactions (The Rutter Group 2015) ¶ 6:535.15b.) “ ‘ The rationale behind the rule is that if [the borrower] could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the [borrower]. ’ ” ( Lona v. Citibank,
N.A. (2011) 202 C al. A pp. 4th 89, 112 .) But “a tender may not be required where it would be inequitable to impose such a condition on the party challenging the sale.” ( Id. at
p. 113; accord Fonteno v. Wells Fargo Bank, N.A. (2014) 228 Cal.App.4th 1358, 1373.)
P laintiff seeks equitable cancellation of a trustee ’ s deed executed in violation of a lawfully issued TRO meant to restrain sale pending resolution of unsettled fraud and
contract claims. Assuming plaintiff was financially incapable of tendering the balance due on the loan, nonetheless i t cannot be said that he is undamaged by the trustee’s sale
conducted in violation of the TRO

. Th e outcome of the litigation may have established that he did not owe the amount demanded by the bank

. Moreover, the sale conduct ed in
violation of the TRO was in effect a sale without notice that the sale would occur

. Even a homeowner who cannot redeem the property or reinstate the loan must be afforded notice of the time and place of sale to provide an opportunity to attend the sa le and ensure that
his or her interests are protected. ( Ragland v. U.S. Bank, N.A. (2012) 209 Cal.App.4th 182, 202.) T o deny relief for want of tender under the circumstances presented here would defeat the protections afforded by the court’s injunction

. D ispos i tion The judgment is reversed. Appellants shall recover costs incurred on appeal upon timely application in the trial court. (Cal. Rules of Court, rule 8.278(c).)10 _________________________ Pollak, J.

We concur:

_________________________ McGuiness, P. J.

_________________________ Siggins, J.