Little v. Harbor Pacific Mortgage Investors (1985)

JAMES S. LITTLE et al., Plaintiffs and Appellants, v. HARBOR PACIFIC MORTGAGE INVESTORS No. 79B et al., Defendants and Respondents.

(Opinion by Sonenshine, J., with Trotter, P. J., and Crosby, J., concurring.)

COUNSEL

Marc C. Kennedy for Plaintiffs and Appellants.

Joel A. Osman, J. Thomas Hunsucker and Hunsucker & Sabo for Defendants and Respondents.

OPINION

SONENSHINE, J.

In July of 1980, Harbor Pacific Mortgage Investors No. 79B (Harbor) loaned James and Phyllis Little $28,700. The debt was [175 Cal. App. 3d 719] evidenced by a note requiring monthly interest payments of $435.50 for 23 months. A balloon payment of principal and interest in the amount of $29,135.50 was due in two years. A late payment of $25.83 accrued for each payment delinquent for 10 days. The debt was secured by a second lien on the Littles' real property. The first lien deed of trust was held by Home Federal Savings and Loan Association.

The Littles made only the first payment. In February of 1981, Harbor filed a notice of default and election to sell under deed of trust. fn. 1 The Littles were put on notice that as of February 4, 1981, the amount of the default was $2,598.45.

On April 20, the Littles asked Harbor what amount was necessary to cure the default. Before Harbor advised the Littles as to the exact amount owing it discovered the Littles were also delinquent on the first mortgage. Harbor paid $6,086.48 to Home Savings, bringing the Littles' obligation current. fn. 2 Thereafter on either the 22d or 23d of April, Harbor told the Littles the total amount due was $10,319.85. fn. 3

A week later, the Littles, through their attorney, attempted to tender $4,177.54 to Harbor. It rejected the offer insisting, under California Civil Code section 2924c, it was entitled to the full $10,319.85. fn. 4 Prior to the expiration of the reinstatement period, the Littles tendered $10,319.85 and the deed of trust was reinstated.

But the Littles were unhappy. In October of 1981 they filed the underlying complaint against Harbor. They alleged Harbor improperly refused the tender of $4,177.54, thereby breaching their contract. fn. 5 The trial court granted Harbor's summary judgment motion finding "the complaint of Plaintiffs raised no triable issue of material fact against Defendants." The Littles appeal. [175 Cal. App. 3d 720]

The Littles contend their first tender was sufficient. They claim section 2924c mandates the notice of default must set forth the nature of the breach, and, when applicable, the information contained in paragraph 1 of subdivision (b). Because the default was curable, the Littles argue the notice should have included as grounds for default the amounts owed on the first. In other words, the notice did not specify the Littles were delinquent on the first, and, as a result, Harbor could not have demanded payment for it.

[1] There is no question Harbor had the right to pay off the first. "Moreover, the statutory scheme concerning nonjudicial foreclosures contemplates that in order to protect his interest, the junior lienor shall pay the trustor's obligation to the senior lienor. Thus, Civil Code section 2904 permits a junior lienor to redeem a property from the senior lienor ...." (Arnolds Management Corp. v. Eischen (1984) 158 Cal. App. 3d 575, 579 [205 Cal. Rptr. 15].)

[2] In order to protect its security, Harbor had to pay the amounts owing on the first. "The effect of section 2876 is to give to the holder of a special lien who is compelled to satisfy any prior lien for his own protection the right to add the amount so paid to the amount for which his special lien was security and to enforce both together." (Windt v. Covert (1907) 152 Cal. 350, 353 [93 P. 67].)

But this still does not answer the Littles' concerns. [3] Even if Harbor had the right to pay off the first, the Littles were still entitled to sufficient notice of the alleged breach. "A purpose of the required statement in the notice of default is to afford the debtor an opportunity to cure the default and obtain reinstatement of the obligation within three months after the notice of default as provided in section 2924c of the Civil Code. [Citation.]" (System Inv. Corp. v. Union Bank (1971) 21 Cal. App. 3d 137, 153 [98 Cal. Rptr. 735].) The debtor is to be given enough information so the default can be cured. "[T]he statute is sufficiently complied with if the notice of default contains a correct statement of some breach or breaches sufficiently substantial in their nature to authorize the trustee or beneficiary to declare a default and proceed with a foreclosure." (Birkhofer v. Krumm (1938) 27 Cal. App. 2d 513, 523-524 [81 P.2d 609].)

Here the notice indicated "payment[s] had not been made of: The installment of interest which became due September 15, 1980, and all subsequent installments of interest, and delinquent taxes, if any, plus a late charge of [175 Cal. App. 3d 721] $25.83 for each payment delinquent more than ten days." No mention was made of the obligation on the first or any alleged deficiency. fn. 6

Section 2924c requires the notice must "[set] forth the nature of such breach." The information contained in this notice did not comply with that mandate. We conclude, therefore, the trial court abused its discretion in granting summary judgment. Harbor improperly refused the Littles' tender.

Judgment reversed. Appellant to receive costs on appeal.

Trotter, P. J., and Crosby, J., concurred. [175 Cal. App. 3d 722]

Appendix

[Graphic Material Omitted.]

FN 1. The notice is reproduced in an appendix to this opinion.

FN 2. The advancement was made pursuant to subdivision A, paragraph (4) of the deed of trust. That paragraph provides: "Should Trustor fail to make any payment or to do any act as herein provided, then Beneficiary or Trustee, but without obligation to do so and without notice to or demand upon the Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof ...; pay, purchase, contest or compromise any encumbrance, charge or liens which in the judgment of either appears to be prior or superior here ..."

FN 3. This amount included fees, late charges and back due installments of interest plus the $6,086.48 paid to Home Savings.

FN 4. All statutory references are to the Civil Code unless otherwise specified.

FN 5. They allege that in order to raise the necessary money, they had to sell their house at a loss. They seek compensatory and punitive damages.

FN 6. We do not, however, agree with the Littles' further contention a second notice is always required each time a payment is made. The purpose of the statute is to put the debtor on notice as to which breaches the lienholder wishes cured. It would be sufficient if the original notice includes a specific reference to the obligation. Here, for example, the notice indicates Harbor will look to the Littles for delinquent taxes, if any. Thus the notice would have been sufficient if it had also indicated a reference to delinquent payments, if any, on the first.