Second District, Division 7 Has Nice Discussion of Fees/Costs Distribution of Surplus Fees After HOA Delinquency Foreclosure.
For anyone practicing homeowner association law, this next case is a great primer on the expenses and fees that can be obtained by the foreclosing trustee in an HOA delinquency nonjudicial foreclosure lawsuit or its aftermath.
What happened in this case is hardly shocking, but was not condoned by either the trial or appellate courts in Register v. Gabriel, Case No. B226844 (2d Dist., Div. 7 Dec. 12, 2011) (unpublished).
In a word, after homeowner lost a HOA delinquency foreclosure suit and set aside follow-up action, surplus funds from the nonjudicial foreclosure were disbursed by the foreclosure trustee’s attorney to trustee in payment of trustee’s set aside lawsuit defense costs.
The trial court did not buy it, saying these disbursements were improper by both the trustee and its attorney. The appellate court agreed.
Although the HOA may have been entitled to recoup more in fees, the HOA foreclosure trustee was hamstrung by maximum caps set forth in Civil Code section 2924 et seq. “ . . . the amount of any such fees and costs are expressly limited by statute to recovering expenses related to the trustee’s actual ministerial duties in conducting the sale and in subsequently distributing the sale proceeds.” The extraordinary fees claimed by trustee could only exist if there was an independent sources of fees separate from the statutory scheme, something that did not exist in the case before the court. Trustee was not a party to the CC&R’s or any other governing agreements between the homeowner and HOA, so there simply was no basis for entitlement beyond the small statutory amounts already deducted before surplus funds were disbursed.
(By the way, trustee’s attorney got hit with an award to disgorge certain amounts which he passed on to the foreclosure trustee.)