When Bids Go Bad: Navigating the Complexities of Foreclosure Statute § 2924m

The following is a case update written by Hale Andrew Antico, Chief Counsel of Antico Law Firm, analyzing Applegate v Carrington Foreclosure Services, ___ Cal. Rptr. 3rd ___,  2025 WL 1766233 (Court of Appeal, First District, California (June 26, 2025)), a recent case of interest:

Summary

In Applegate v Carrington Foreclosure Services, the California Court of Appeals affirmed a judgment in favor of defendants, holding that a trustee lawfully rescinded a foreclosure sale and rejected a bidder’s post-auction offer where the bidder failed to satisfy the requirements for a “prospective owner-occupant” under Civil Code § 2924m.

To read the full published decision, click here.

Facts

At all pertinent times, Carrington Foreclosure Services (“CFS”) was trustee and Wilmington Savings Fund Society, NSB (“WSF”) was the beneficiary of the Deed of Trust (“DOT”).

In 2007, Charles and Anna Utzman signed a deed of trust to purchase a home in Mill Valley (“Property”), secured by a debt for $1,365,000 dollars.

In 2021, they defaulted on the loan, and CFS recorded a Notice of Default and a Notice of Sale. The amount of the unpaid balance and other charges was listed as $2,096,064.11.

On May 12, 2022, CFS held a public auction. WSF, as beneficiary, bid $100 and won the auction as a beneficiary. At WSF’s request, CFS canceled and unwound the sale on May 18, 2022.

On May 23, 2022, enter potential buyer Conner Applegate. Applegate was not the original borrower/owner, but a third-party bidder. He mailed a “Notice of Potential Intent to Bid (Pursuant to CCC § 2924(m))” [sic]. However, Applegate’s notice failed to include the required declaration or affidavit establishing his status as a “prospective owner-occupant” under § 2924m.

On June 1, 2022, CFS informed Applegate that the Property was no longer on the market, and that CFS was no longer accepting bids for it.

Applegate persisted by sending CFS a “Notice of Bid” letter accompanied by a $575,000 cashier’s check. This bid also lacked an affidavit or declaration to comply with the requirements of § 2924m.

On June 17, 2022, CFS returned the check to Applegate along with an explanation there would be no post-auction bid process and that they could accept his Notice of Intent to Bid or bid.

On June 22, 2022, Applegate sent CFS a “Corrected Notice of Bid.” This correction came with a note that allegedly fixed a typographical error in the June 13, 2022 bid. For the third time, Applegate failed to provide an affidavit or declaration that complied with the requirements of § 2924m. A week later, CFS returned the check.

On February 17, 2023, CFS recorded another “Notice of Trustee’s Sale.” CFS did conduct a sale and recorded a Trustee’s Deed Upon Sale on April 14, 2023.  The winning bid was beneficiary WFS, who purchased Property by credit bid for a little over $2,300,000, which was the amount of the unpaid debt.

Following these events, Applegate then sued CFS and WSF. In his complaint, Applegate claimed that CFS tried to improperly rescind the post-foreclosure bidding window, wrongfully rejected his bid, which he asserts was the highest for the Property within the 45-day window following the May 12, 2022 auction. He alleged violations of Civil Code Section 2924m and Business and Profession Code Section 17200, and sought quiet title, declaratory and injunctive relief.

CFS and WSF moved for summary judgment. At the hearing on summary judgment, Applegate’s counsel verbally asked for leave to amend the complaint to allege collusion and fraud, which was opposed by Defendants and denied by the trial court.

Then, the trial court ruled in favor of the defendants, dismissing Applegate’s claim under § 2924m. In doing so, the trial court based its decision on three key findings: (1) the legislature did not intend for individuals to have a private right of action under the statute; (2) the sale at issue was rescinded before finalization, without any indication of wrongdoing; and (3) Applegate failed to meet the statutory requirement of filing a Notice of Intent to Bid, thus negating any potential duty owed by the defendants.

As Applegate’s remaining claims relied entirely on the § 2924m claim, the Court also dismissed those claims.

Applegate then appealed to the California Court of Appeals, First District, Second Division (“Court”), which affirmed.

Reasoning

Postponement of Sale and Bid Cancellation Was Lawful under § 2924m

In affirming, the Court started with § 2924m, by way of § 2924g. All of Applegate’s argument were inextricably linked with his § 2924m claim, which alleged that CFS “attempted to wrongfully rescind the post-foreclosure 2924m bidding window for eligible bidders, in violation of the civil code.”  The Court began its analysis with § 2924g(c)(1), which says, in relevant part:

“There may be a postponement or postponements of the sale proceedings, including a postponement upon instruction by the beneficiary to the trustee that the sale proceedings be postponed, at any time prior to the completion of the sale for any period of time not to exceed a total of 365 days from the date set forth in the notice of sale. The trustee shall postpone the sale in accordance with any of the following: …

(C) By mutual agreement, whether oral or in writing, of any trustor and any beneficiary or any mortgagor and any mortgagee.
(D) At the discretion of the trustee…”

The statute explicitly authorizes a trustee to postpone a sale upon a beneficiary’s request or, in the absence of such a request, at the trustee’s own discretion. In this case, both were present, and the trustee acted properly. The Court indicated that the statute clearly says a sale can be postponed “upon instruction by the beneficiary to the trustee that the sale proceedings be postponed, at any time prior to the completion of the sale,” which it noted, “is what occurred here.” *8.

Given the trustee’s discretionary right to postpone the sale, the next step is to assess what happens to any bids.  The relevant portion of the statute states: “Any postponement or discontinuance of the sale proceedings shall be a cancellation of the last bid.” § 2924h(e). This principle is summed up more concisely as “[o]nce the sale is postponed, all bids are automatically canceled.”  Hatch v. Collins, 225 Cal.App.3d 1104, 275 Cal..Rptr.. 476 (Cal. App. 1990)

The court also drew upon well-established California appellate precedent. Almost one hundred years ago, a plaintiff bid only $13,000 at a public auction for a property whose debt was over $100,000, and the trustee refused to accept the sum and postponed the sale for the sole reason that the bid was too low and to try to get a better price. At that time, the Court of Appeal held “the rule of law applicable to the power of a trustee or mortgagee to sell by public auction is to the effect that in the exercise of sound discretion a sale may be adjourned by him, in order to obtain a fair price for the property; without such power the property might be sacrificed to the detriment of both the creditor and debtor” and the trustee “had the power to continue the sale even after bids had been received.” Pacific Ready-Cut Homes v. Title Guarantee &Trust Co., 103 Cal.App. 1, 5-6 (1929). *9.

Applegate argued that rescission is allowed in narrow situations, and that the wish to seek a higher bid is insufficient.  However, the Court indicated that the cases Applegate cited were not on point, because they involved sales which were final, unlike the present case. The Court found that there was no evidence of a final sale, allowing the trustee to postpone and unwind it. *10.

Bid Requirements not Satisfied under § 2924m

On appeal, Applegate asserted substantial compliance with the statute’s requirements. Section 2924m lays out very specific requirements for a prospective owner-occupant to bid under that section.

Subsection (a)(1) states:

“Prospective owner-occupant” means a natural person who presents to the trustee an affidavit or declaration, pursuant to Section 2015.5 of the Code of Civil Procedure, that:

(A) They will occupy the property as their primary residence within 60 days of the trustee’s deed being recorded.
(B) They will maintain their occupancy for at least one year.
(C) They are not any of the following: (i) The mortgagor or trustor. (ii) The child, spouse, parent of the mortgagor or trustor. (iii) The grantor of a living trust that was named in the title to the property when the notice of default was recorded. (iv) An employee, officer, or member of the mortgagor or trustor. (v) A person with an ownership interest in the mortgagor, unless the mortgagor is a publicly traded company.
(D) They are not acting as the agent of any other person or entity in purchasing the real property.

(emphasis added by Court) *11.

Thus, the absence of a material factual dispute regarding whether CFS violated § 2924m by postponing the sale, combined with Applegate’s failure to meet the statutory definition of a prospective owner-occupant, led the Court to conclude his first cause of action under that section was unavailing as a matter of law. 

Having decided that Applegate did not meet the § 2924m requirements, the Court addressed  Applegate’s argument on appeal of substantial compliance. Even if that doctrine were considered for § 2924m, the Court noted that “[s]ubstantial compliance, as the phrase is used in the decisions, means actual compliance in respect to the substance essential to every reasonable objective of the statute.” Troyk v. Farmers Group, Inc.  171 Cal.App.4th 1305, 1332 (2009) (emphasis in opinion).  “Furthermore, the doctrine of substantial compliance does not apply at all when a statute’s requirements are mandatory, instead of merely directory… A mandatory statute ‘is one that is essential to the promotion of the overall statutory design and thus does not permit substantial compliance.’” Id. (cites omitted). The Court then held that “Applegate’s notice, bid, and corrected bid did not actually comply with the substance essential to every objective of § 2924m.” *12. 

Because Applegate failed to raise a material issue of fact that CFS violated § 2924m regarding the postponement of the sale, and because the Plaintiff also failed to satisfy the requirements of a “prospective owner-occupant” under the statute, the Court concluded that his first cause of action under § 2924m fails as a matter of law. **11, 13.

The Denied Request to Amend the Pleadings

The court acknowledged that trial judges possess broad discretion in deciding whether to permit amendments to pleadings. It pointed to authority that it is correct to deny leave to amend if the proposed amendment fails to state a cause of action, or if the request is the result of unwarranted delay. “Thus, when a plaintiff seeks leave to amend his or her complaint only after the defendant has mounted a summary judgment motion directed at the allegations of the unamended complaint, even though the plaintiff has been aware of the facts upon which the amendment is based, ‘[i]t would be patently unfair to allow plaintiffs to defeat [the] summary judgment motion by allowing them to present a ‘moving target’ unbounded by the pleadings.’” Falcon v. Long Beach Genetics, Inc., 224 Cal.App.4th 1263 (Cal. App. 2014), citing Melican v. Regents of University of California,  151 Cal.App.4th 168, 176 (2007).

The Court then found no abuse of discretion on this point and that the trial court was justified to deny the leave to amend on either the failure to state a cause of action or the unexplained delay. **14-15.

Applegate’s Remaining Claims Fall Because Tied to Failed First

Applegate alleges that his remaining claims were independently viable, despite the inadequacies of his § 2924m claim, and that the trial court’s ruling for summary judgment was in error.

The second cause of action was that Defendants violated Business and Professions Code § 17200 for failing to follow the requirements of § 2924m. As the § 2924m claim failed as a matter of law, so must the § 17200 one.

The third cause of action is for quiet title with the assumption that Applegate is the “sole owner” of Property as of the date he submitted his eligible bid because the postponement wasn’t allowed under § 2924m.  Because the postponement was allowed, the quiet title cause of action fails.

The fourth cause of action was for declaratory relief, which fails because it was based on the failed assertion that the refusal to accept his bid was a violation of § 2924m.

The fifth and final cause of action for injunctive relief fails because “[i]njunctive relief is a remedy, not a cause of action.” Allen v. City of Sacramento,  234 Cal.App.4th 41, 65 (2015).

Author’s Commentary

Applegate’s entire case rested upon a particular reading of § 2924m that the Court ultimately rejected, leading to dismissal of all his claims. By trying to plant a seed of doubt on the statute’s clear language, he inextricably linked all subsequent arguments to this flawed premise, effectively putting all his eggs (or apples) in one basket.

Section 2924m of the Civil Code is a relatively new and somewhat complex statute which promotes occupied housing and prevents widespread neighborhood decline similar to that seen during the Great Recession.  This case captures the tension between homeowners’ rights and ensuring foreclosure processes remain efficient and fair. Towards that end, strict compliance with its requirements is essential to achieving its goal of stabilizing housing markets.

Applegate hinges his whole argument on his § 2924m claims. Those core issues are that the sale was wrongfully postponed, his bid unlawfully returned, and that he had satisfied the affidavit requirement. However, his failure to adequately address the specific requirements (such as those surrounding the affidavit) outlined in § 2924m proved decisive to a fruitless resolution his case. This wasn’t merely a strategic choice; it was a misunderstanding of the law. All of his other causes of action stemmed from his initial claim’s underlying legal theory.

While not providing comprehensive guidance on all aspects of § 2924m, this decision does offer important insights into several points: the trustee possesses broad discretion regarding postponements; strict compliance with the requirements of § 2924m is essential; and furthermore, raising novel arguments at summary judgment will fail when basic legal tenets are ignored. Courts disapprove of those who try to benefit from their own delay while presenting a moving target.

Section 2924m presents significant interpretive challenges due to its complexity and specificity. This ruling provides valuable guidance for those seeking to understand and comply with its requirements. The ruling clarifies the boundaries of § 2924m, reaffirming the rights of foreclosure sale trustees and beneficiaries while highlighting the importance of rigorous compliance for prospective owner-occupants. Prospective owner-occupants would be wise to seek experienced counsel, and to follow the Code to the letter, understanding that the sales can be postponed at the trustee’s discretion. Attorneys representing buyers should reassess their due diligence practices when advising clients on § 2924m bids. This case serves as a powerful illustration of the consequences of failing to adhere to statutory requirements and building a legal strategy on a flawed premise. Strategic flexibility, statutory understanding, and comprehensive preparation are essential when navigating complex schemes – or risk seeing all your carefully cultivated arguments wither on the vine.

These materials were written by Hale Andrew Antico, Chief Counsel of Antico Law Firm, representing consumer debtors in the Central District of California, and President of the Central District Consumer Bankruptcy Attorneys Association, with editorial contributions by Kathleen A. Cashman-Kramer, a director at Fennemore LLP’s San Diego office, and by the Hon. (ret.) Meredith Jury.