In Garcia v. World Savings, FSB, 183 Cal. App. 4th 1031 (2010), the appellate court decided that a lender's oral agreement with the borrower to postpone a foreclosure sale was enforceable, absent consideration.
In Garcia, World Savings commenced a non-judicial foreclosure by recording and serving its Notice of Default. After expiration of the statutory three-month notice period, World Savings recorded, served, and published its Notice of Trustee's Sale. World Savings voluntarily postponed the trustee's sale several times, including after Garcia completed a refinancing application. When Garcia asked for another extension on August 27, 2007, the loan officer at World Savings assured on the phone to the borrower that he would extend the pending foreclosure sale a few more days. This was relied on by the borrower, who failed to make payments.
The refinancing closing got delayed. The trustee's sale was completed on August 30, 2007. Not knowing about the foreclosure completion, on September 7, 2007 Garcia closed the refinancing of his other property and tendered a check to World Savings for the reinstatement amount. World Savings did not cash Garcia's check.
Garcia filed a lawsuit against World Savings for "wrongful foreclosure" alleging violations of the statutory foreclosure procedure, breach of oral contract to postpone the sale and promissory estoppel. The trial court granted World Savings' motion for summary judgment. The court decided the foreclosure sale procedure was valid and said there was not enough consideration to support the alleged verbal contract to postpone the foreclosure sale.
On appeal, the appellate court upheld the trial court's grant of World Savings' summary judgment motion except that even with no consideration, Garcia's actions in closing the costly refinancing was reliance on World Savings' promise to postpone the foreclosure sale. The case went back to the trial court for trial on the promissory estoppel claim. Apparently, verbal agreements, if relied on by borrowers to their detriment, can be as binding contracts.
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