Baron v. Colonial Mortgage Service Co. of California

Summary

The California Court of Appeal held that a trustee conducting a foreclosure sale under Civil Code section 2924h did not have absolute discretion to reject commercially acceptable cash equivalents, such as cashier's checks payable to the bidder. The trustee's discretion had to be exercised reasonably to promote competitive bidding and protect the trustor's interests. The judgment was reversed and remanded.

Holdings

1. Civil Code section 2924h, subdivision (b), did not give the trustee absolute discretion to reject a commercially acceptable equivalent of cash merely because the check was payable to the bidder rather than the trustee.
2. A foreclosure trustee must exercise reasonable business prudence in accepting cash equivalents and must use its discretion in a manner that promotes competitive bidding and secures the best possible price for the property.
3. The court could adjudicate the issue despite possible mootness because the appeal affected the public interest and future rights and the question was reasonably likely to recur.

Questions Presented

1. Whether Civil Code section 2924h, subdivision (b), gave the foreclosure trustee absolute discretion to reject a commercially acceptable cash equivalent offered by a prospective bidder.
2. Whether the trustee's discretion in qualifying bidders was limited by a duty of reasonableness and the obligation to promote competitive bidding and obtain the highest possible price.
3. Whether the appeal could be decided despite the respondents' contention that the sale had rendered the dispute moot.

Disposition

reversed_and_remanded