Garcia v. World Savings, FSB

In Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, a lender foreclosed on the homeowners' property after assuring them that the foreclosure sale was postponed. (Garcia, supra, 183 Cal.App.4th at p. 1036.) The homeowners had made arrangements to finance other property they owned to obtain funds to cure the loan deficiency. (Ibid.) Although the lender verbally promised to postpone the foreclosure sale until the following week when the homeowners' new loan was slated to close, the trustee sale proceeded as scheduled. (Ibid.) The Court of Appeal concluded that the promise to postpone the sale was "sufficiently definite to determine the scope of the promise and respondent's obligation." (Id. at p. 1045.) Garcia v. World Savings, FSB (2010) was an action for wrongful foreclosure based in part upon a theory of promissory estoppel, the plaintiffs' property was in foreclosure, but they arranged an extension of the trustee's sale with their lender based upon their representation they would cure the default with proceeds of a refinance of another property owned by the plaintiffs. (Id. at p. 1035.) The lender represented the foreclosure sale would be postponed to August 30 and that the parties would "'see where they are after that'" and that the property would not go to foreclosure. (Ibid.) Nonetheless, the bank foreclosed on the property on August 30, although the plaintiffs had received the proceeds of their refinance. (Id. at pp. 1035-1036.) Garcia found the plaintiffs presented sufficient evidence of reliance to create issues of fact whether the bank was promissorily estopped from proceeding with the foreclosure sale. (Id. at pp. 1038-1044.) The Court noted that "a party is estopped to assert the statute of frauds as a defense 'where the party, by words or conduct, represents that he will stand by his oral agreement, and the other party, in reliance upon that representation, changes his position, to his detriment.' " (Garcia, supra, 183 Cal.App.4th at p. 1040, fn. 10.) The Court thus held that the plaintiffs' promissory estoppel claim was not barred by the statute of frauds. (Ibid.) In Garcia, the plaintiffs contacted their lender to ask for a postponement of a foreclosure sale while they obtained funds to cure their default by refinancing other property they owned. The lender agreed to postpone the foreclosure. Before the deadline, the plaintiffs asked the lender for another extension in the event the new loan on their other property did not close in time. The lender's representative reassured them that the foreclosure would not occur without his approval and agreed to extend the deadline if they needed more time. The new loan took longer than expected, so the plaintiffs left messages for the representative to let him know. The foreclosure took place on the original date, unbeknownst to the plaintiffs, who went ahead with the refinancing of their other property. When they contacted the representative, he stated that there had been a mistake and the foreclosure should not have occurred. On appeal, this court reversed the trial court's summary adjudication of the plaintiffs' promissory estoppel claim. (Garcia, supra, 183 Cal.App.4th at p. 1046.) Although "as a general rule, a gratuitous oral promise to postpone a foreclosure sale or to allow a borrower to delay monthly mortgage payments is unenforceable," we held that the plaintiffs' "actions in procuring a high cost, high interest loan by using other property they owned as security were sufficient to support detrimental reliance" for their promissory estoppel claim. (Id. at pp. 1039, 1041.) In sum, in Garcia v. World Savings, FSB (2010), a lender foreclosed on homeowners' property after verbally assuring the homeowners that the trustee sale would not occur as scheduled. (Garcia, supra, 183 Cal.App.4th at pp. 1035-1036.) The homeowners were in the process of refinancing another property to obtain funds to cure the loan deficiency, and the lender's agent told the homeowners three days before the scheduled sale that the sale would not proceed if the lender knew the refinance would be closing the following week. (Id. at p. 1035.) The lender had agreed to an earlier postponement after the homeowners had obtained a written conditional loan approval on the refinance. The day before the scheduled trustee sale, the homeowners informed the lender's agents in several voice messages that the refinance would not close for another week. The refinance closed the following Friday, and, when the lender rejected their reinstatement payment, the homeowners learned that the foreclosure sale had proceeded as scheduled. (Id. at p. 1036.) Reversing summary judgment in favor of the lender on the homeowners' promissory estoppel claim, Garcia concluded that the homeowners' "actions in procuring a high cost, high interest loan by using other property they owned as security were sufficient to support detrimental reliance." (Garcia, supra, 183 Cal.App.4th at p. 1041.) Garcia further noted that neither section 1698 nor the statute of frauds would defeat the homeowners' promissory estoppel claim. (Id. at p. 1040, fn. 10.)