By: Steven K. Vote

Turner v. Seterus, Inc.(2018) 2018 Cal.App. LEXIS 850

Plaintiffs asserting a claim for wrongful foreclosure must contend with the so-called “tender rule,” which generally requires that the plaintiff debtor allege tender of the full outstanding amount of the loan unless otherwise excused.  In fact, this requirement applies to maintenance of any claim related to a wrongful foreclosure. Recently, the California Court of Appeal clarified the requirements of the tender rule and eased the burden on borrowers.

Specifically, the Court of Appeal noted key differences between “redemption” and “reinstatement” by a borrower.  Reinstatement refers to the tender by a borrower of the amount required to cure a default, which reinstates the obligation as though there was no default. Redemption refers to the tender by a borrower of the entire outstanding amount to the beneficiary, which pays the loan in full and requires a release of the deed of trust or mortgage.

With respect to the latter situation, the California Legislature has established a framework regulating the power of sale contained in a deed of trust detailed in Civil Code 2924c.  The borrower must tender the entire amount due, including principal, interest, taxes, insurance premiums, and other reasonable costs incurred as a result of the default.  The debtor must tender the amount necessary to cure the default at least five (5) business days prior to the date of the foreclosure sale.  Redemption, by contrast, may occur any time prior to entry of the decree of foreclosure.  Once an effective tender is made, the default proceedings must be ceased and the loan obligation reinstated by the lender.

In Turner v. Seterus, Inc.(2008) 2018 Cal.App. LEXIS 850, the plaintiff borrowers alleged that the defendant lender failed to accept their tender of the amount necessary to cure the default on the underlying loan, which resulted in the wrongful foreclosure of their real property.  The defendant argued that plaintiffs could not proceed with a wrongful foreclosure claim because the tender of reinstatement was not actually made five (5) business days prior to the foreclosure sale.  In order to proceed, the lender argued, the debtors would have to allege a tender of the full outstanding amount under the loan.

The Court of Appeal disagreed, stating that cessation of the pending sale would have been required if the lender’s representative had accepted the tender.  The lender could not force the debtors to tender the amount required for redemption, and escape liability for wrongful foreclosure, by rejecting a proper tender of the amount necessary to cure the default.  In order to sustain their wrongful foreclosure claim, the plaintiff debtors simply needed to allege that their tender of the amount required for reinstatement was made in a timely manner and the lender had refused the tender.

The Turnercourt also noted that actual submission of the amount required to cure the default is unnecessary. A tender is an offer of performance and the plaintiffs had “effectively” tendered payment when they told defendant’s representative that they would like to pay the amount of the default.  The plaintiffs were not required to actually make the payment and defendant could not benefit from the fact that its representative wrongfully informed plaintiffs it would not accept the amount to cure the default. Accordingly, the plaintiff debtors could proceed with their wrongful foreclosure cause of action against the lender.

In short, plaintiff debtors may proceed with wrongful foreclosure claims simply by alleging an offer of the amount necessary to cure a default was made and rejected by the lender.  It is not necessary that the tender have actually been made or that the plaintiff allege a tender of the full outstanding amount after the tender offer was rejected.

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Steven K. Vote is an attorney with Wanger Jones Helsley PC and practices in Fresno.  He regularly represents lenders in real estate and secured transaction matters.  This article is intended to notify our clients and friends of changes and updates to the law and provide general information. It is not intended, nor should it be used, as legal advice, and it does not create an attorney-client relationship between the author and the reader.

By: Ylan H. Nguyen

Atempa v. Pedrazzani (Cal. Ct. App. Sept. 28, 2018) No. D069001, 2018 WL 4657860.

Can corporate individualsother than the corporate employerbe held liable for alleged wage and hour violations?  A California Court of Appeal in San Diego recently considered this question and held that individuals, such the owner or officer of an entity, can also be held liable for wage and hour violations.

In 2013, two former restaurant employees sued their employer, Pama, Inc. and its owner, Mr. Pedrazzani.  The two former restaurant employees alleged seven causes of action relating to wage and hour violations, including unpaid overtime (California Labor Code Section 558) and unpaid minimum wages (California Labor Code Section 1197.1), through the Private Attorney General Act of 2004 (PAGA).  The employees prevailed on all their causes of action following a bench trial.  The trial court found both Pama and Pedrazzani jointly and severally liable for civil penalties based on unpaid overtime and minimum wage violations. Additionally, the trial court also found Pedrazzani liable for over $315,000 in attorneys’ fees under PAGA. While both Pama and Pedrazzani appealed, Pama’s bankruptcy filing during the pendency of the appeal left Pedrazzani the sole party on the hook for paying the civil penalties and attorneys’ fees.

The Court of Appeal rejected Pedrazzani’s argument that an individual should not be liable for an employer’s wage and hour violations without evidence that the employer was the individual’s alter ego (or some other means to pierce the corporate veil).  The Court of Appeal distinguished two California Supreme Court decisions, Reynolds v. Bement(2005) 36 Cal.4th 1075, and Martinez v. Combs(2010) 49 Cal.4th 35, which Pedrazzani relied upon.  Both cases essentially limit liability for wage and hour violations to the employer and not its agents.

Holding Pedrazzani personally liable for the civil penalties, the Court of Appeal relied on the “unambiguous” language of Labor Code Sections 558 and 1197.1, which states both the employer and “other person” who causes a wage and hour violation by failing to pay overtime or minimum wage are subject to civil penalties.  Concluding “the business structure of the employer is irrelevant,” the Court of Appeal reasoned that neither statute mentions the business structure, corporate form, or any potential reason or basis for disregarding the corporate form.  The Court concluded that as Pama’s owner, president, secretary, and director, Pedrazzani qualified as an “other person” within the meaning of Labor Code Section 558 and 1197.1.

Personal liability can attach even where the “other person” has no relationship with the employer.  With respect to the overtime violations under Labor Code Section 558, the court found it sufficient that the “other person” “act on behalf of the employer.”  For minimum wage violations Labor Code Section 1197.1, it is sufficient that the “other person” “pays or causes to be paid less than the prescribed minimum wage.”

Having established individual liability for wage and hour violations, the Court of Appeal relied on PAGA to award attorneys’ fees.

The key take-way from this case is that wage and hour violations not only expose an employer to civil penalties, but also expose its owners, officers, directors, or individuals overseeing wage and hour compliance (managers, supervisors, human resources directors, etc.) to personal liability. Such individuals may also be held personally liable for attorneys’ fees under PAGA.  Employers and managers must be more vigilant than ever in making wage and hour compliance a top priority.

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Ylan H. Nguyen is an attorney with Wanger Jones Helsley PC and practices in Fresno and throughout the Central Valley.  Ylan’s practice focuses primarily on environmental law, public agency law, land use, and business litigation.  This article is intended to notify our clients and friends of changes and updates to the law and provide general information.  It is not intended, nor should it be used, as legal advice, and it does not create an attorney-client relationship between the author and the reader.

By: Micaela L. Neal

A number of employment bills were sent to Governor Jerry Brown’s desk for his final legislative session, which ended on September 30, 2018.  While he vetoed some, several were signed into law.  Here are some of the more important new laws that employers should be aware of:

Senate Bill 820 – Confidentiality Provisions in Settlement Agreements.

Existing law prohibits settlement agreements from including provisions preventing the disclosure of factual information in a civil action for damages for certain sexual offenses.

This new law prohibits settlement agreements from preventing the disclosure of factual information relating to certain claims of sexual assault, sexual harassment, harassment or discrimination based on sex, or related retaliation or failure to prevent discrimination/harassment, that are filed in a civil or administrative action.  Such agreements entered into on or after January 1, 2019 will be void as a matter of law.  There will be an exception for a provision shielding the identity of the claimant and related facts, if the claimant requests such a provision.

Senate Bill 826 – Public Companies Must Have Woman on Board of Directors.

This law requires publicly held corporations with principal executive offices in California to have at least one female on the board of directors by December 31, 2019.  By the end of 2021, there must be two female directors if the corporation has five directors, or three female directors if the corporation has six or more directors.

The Legislature recognized that several studies have concluded that publicly held companies perform better with women on the board, and determined that this change will boost the California economy, improve opportunities for women in the workplace, and protect California taxpayers, shareholders and retirees.

Senate Bill 1300 – Employer Liability for Discrimination and Harassment.

Existing law prohibits discrimination and harassment in the workplace.  This new law greatly increases the burden on employers with respect to discrimination and harassment liability.

Most notably, the law provides that “a single incident of harassing conduct is sufficient to create a triable issue regarding the existence of a hostile work environment if the harassing conduct has unreasonably interfered with the plaintiff’s work performance or created an intimidating, hostile, or offensive working environment.”  Additionally, even a discriminatory remark not made in the context of an employment decision and not uttered by a decisionmaker, may be circumstantial evidence of discrimination.  The law also provides that “harassment cases are rarely appropriate for disposition on summary judgment.”

The law clarifies that an employer may be responsible for the actions of nonemployees with respect to any typeof harassment of employees, applicants, interns, volunteers, or independent contractors if the employer knows or should have known about the conduct.  An employee alleged to have engaged in harassment may now be personally liable for retaliation, as well.

Additionally, it is now unlawful for an employer to require an employee to sign a release or waive rights under the law in exchange for a raise or bonus, or as a condition of employment, or to require the signing of a nondisparagement agreement relating to the disclosure of information about unlawful acts in the workplace, such as sexual harassment.  The new law also severely limits a prevailing employer’s ability to recover attorneys’ fees and costs from a plaintiff employee.

Senate Bill 1343 – Sexual Harassment Training.

Existing law requires employers with 50 or more employees to provide sexual harassment training to supervisors.

By January 1, 2020, employers with only fiveor more employees must provide at least two hours of classroom or other interactive sexual harassment training and education to supervisors, andat least one hour of classroom/interactive training and education to all nonsupervisory employees within six months of hire.  Training may be completed individually or in groups, and can take place in shorter segments. Further training must be conducted every two years.  Training and education must include practical examples.

The law also includes training requirements for seasonal, temporary and migrant workers.

Senate Bill 1412 – Employment Applications – Criminal History.

Existing law prohibits employers from asking applicants to disclose (or from seeking from any source or utilizing as factor in determining employment) information relating to participating in a pretrial or posttrial diversion program, or concerning a conviction that was judicially dismissed, expunged or ordered sealed.

This new law expands the exceptions to this rule, and provides that an employer may seek information about a conviction if, pursuant to federal law, federal regulation or state law: (1) the employer is required to obtain information regarding the particular conviction (regardless of whether it was dismissed, expunged, etc.); (2) the applicant would be required to possess or use a firearm during employment; (3) an individual with a particular conviction is prohibited by law from holding the position sought (regardless of whether it was dismissed, expunged, etc.); or(4) the employer is prohibited by law from hiring an applicant with the particular conviction (regardless of whether it was dismissed, expunged, etc.).

Assembly Bill 1976 – Lactation Accommodation.

Existing law requires employers to make reasonable efforts to provide an employee with a location other than a toilet stall to express milk privately.  This new law notes that a space other than a bathroom must be provided, but makes compliance somewhat easier.

An employer who makes a temporary lactation location available is in compliance if: (1) the employer is unable to provide a permanent lactation location because of operational, financial or space limitations; (2) the temporary location is private and free from intrusion while the employee expresses milk; (3) the temporary location is used solely for lactation purposes while the employee expresses milk; and (4) the temporary location otherwise meets the requirements of state law concerning lactation accommodation.

If an employer demonstrates undue hardship, the employer still must make reasonable efforts to provide the employee with the use of a room or other location in close proximity to the employee’s work area to express milk in private.  An agricultural employer is compliant if it provides the employee with a private, enclosed and shaded space (i.e. an air-conditioned cab of a truck or tractor).

Employers should review their handbooks, policies and procedures to ensure compliance with this new legislation.

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Micaela L. Neal is an attorney with Wanger Jones Helsley PC and practices in Fresno and Sacramento.  She regularly represents employers in wage and hour, discrimination and harassment actions.  This article is intended to notify our clients and friends of changes and updates to the law and provide general information. It is not intended, nor should it be used, as legal advice, and it does not create an attorney-client relationship between the author and the reader.

By: Micaela L. Neal

Hart v. Clear Recon Corp., No. B283221, 2018 WL 4443242 (Cal. Ct. App. Sept. 18, 2018); Chacker v. JPMorgan Chase Bank, N.A., No. B281874, 2018 WL 4474732(Cal. Ct. App. Sept. 19, 2018).

In a pair of recent decisions, a California Court of Appeal clarified a prior dispute in California law regarding certain attorneys’ fees provisions in California’s standard form Deed of Trust.  The court decided that while the attorneys’ fees provisions in the standard form do provide for attorneys’ fees to be added to the loan balance in the event the lender must retain legal counsel to protect its rights with respect to the Deed of Trust, they do not allow for a separate fee award to the lender in a subsequent lawsuit.

The deeds of trust at issue provided that the lender “may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this Security Instrument, including…paying reasonable attorneys’ fees to protect its interest in the Property and/or rights under the Security Instrument.”  One section of the deed of trust specifically provided that any amounts disbursed by the Lender for this purpose “shall become additional debt of Borrower secured by this Security Instrument.”

Another section of the deed of trust provided that “Lender may charge Borrower fees for services performed in connection with Borrower’s default, for the purpose of protecting Lender’s interest in the Property and rights under this Security Instrument, including, but not limited to, attorney fees…”

The court found that even the second provision – which did not specifically state that the fees would become additional debt – did not provide for a separate award of attorneys’ fees, because it did not specifically state that a separate fee award was appropriate.  Instead, the word “charge” was determined to “naturally” mean an addition of such fees to the outstanding amount due on the loan. In reaching this conclusion, the court adopted the reasoning of several federal courts that have examined the same issue.

Importantly, the Court noted that a deed of trust is like any other contract and that parties are free to limit or expand how attorneys’ fees may be obtained.  To the extent lenders wish to receive a separate attorneys’ fees award, as opposed to an additional amount added to the loan balance, they must ensure that the Deed of Trust they utilize includes language specifically crafted to provide for a separate award.  Lenders may be well-advised to seek legal counsel in drafting lender-specific deeds of trust, rather than utilizing a standard form.

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Micaela L. Neal is an attorney with Wanger Jones Helsley PC and practices in Fresno and Sacramento.  Her practice includes frequent lender representation, with an emphasis on disputes involving contracts, debt collection, creditor’s rights, bankruptcy, partnership dissolution, breach of fiduciary duty, and indemnity.  This article is intended to notify our clients and friends of changes and updates to the law and provide general information. It is not intended, nor should it be used, as legal advice, and it does not create an attorney-client relationship between the author and the reader.