Cases & Deals

Trial for a 72-year old pro bono client results in victory

Clients Register, Nancy

In the Fall of 2006, Public Counsel asked Jones Day to help Nancy Steele Register, a 72-year old woman who had lost her modest condominium to foreclosure in June 2005 and had been forced into homelessness for the first time in her life. At the time, Nancy was facing dismissal of the latest of her several amended pro per complaints. Unfortunately, we ultimately were unable to persuade the Santa Monica judge presiding over Nancy's lawsuit to find merit to any of her claims, and all defendants were dismissed at some point along the way by demurrer or summary judgment.

One issue remained: the foreclosure sale trustee retained over $48,000 in home equity that remained after the payment of Nancy's $7,200 homeowner association lien. Instead of returning those funds to Nancy, the foreclosure sale trustee instructed its litigation attorney to apply those funds to fees incurred in defending against Nancy's lawsuit. Neither the trustee nor its attorney told anyone they were dissipating Nancy's funds. Rather, they simply said they were holding the funds in the event Nancy was successful in overturning the sale and they subsequently had to refund the monies to the buyer. It was only after the buyer was dismissed and Nancy demanded prompt payment of the funds that the trustee and its attorney disclosed they had already spent the funds on litigation costs over a year earlier.

Had her home equity been returned to her, Nancy would have been able to rent an apartment or put a down payment on another place. Instead, from the time of the foreclosure and her subsequent eviction in December 2005, she had lived in her car, moved from shelter to shelter, and was at the time residing on skid row.

Because the trustee and its lawyer repeatedly refused to return the funds, and the Santa Monica judge denied our motion for leave to amend and add claims to obtain these funds, we initiated a second suit to secure their return. Defendants' initial response was a cross-complaint against Nancy, Public Counsel and Jones Day for malicious prosecution. We responded with an anti-SLAPP motion that was granted; the court struck the cross-complaint in its entirety and awarded approximately $11,000 in attorneys' fees.

When we began attempts to take discovery, we received virtually nothing but objections. After three successful motions to compel and successfully opposing a motion by defendants for a protective order to prevent discovery, we obtained an award of over $18,000 in sanctions.

Defendants steadfastly refused to settle, despite the trial court's encouragement to do so. As trial drew near, defendants first filed a petition for writ of mandate and request that the appellate court stay the trial; the writ petition was denied the same day it was filed. Defendants also filed a section 170.3 challenge to the trial judge, claiming he must be biased and they could not obtain a fair trial because he had ruled against them. Eventually this delay tactic was also denied.

A bench trial before Judge Shook in Department 53 of the Los Angeles Superior Court began on Monday, June 14, 2010. After two days of evidence and another morning of evidentiary objections and closing argument, Judge Shook took the matter under submission and announced his statement of decision from the bench the morning after the trial had finished.

The result was an unequivocal victory for our 76-year old client. The court found: (i) a statutory violation requiring sale trustees to return surplus funds, (ii) a violation of the Unfair Competition Law (Cal. Bus. & Prof. § 17200) for unlawful and unfair business practices, and (iii) the torts of conversion, against both defendants, and breach of a fiduciary duty against the defendant lawyer who held the sales proceeds funds in trust for Nancy. The court ordered the entirety of the surplus funds of over $48,000 to be paid to Nancy immediately, together with an award of $30,000 in compensatory damages on the tort causes of action for the injury sustained by Nancy as a result of her homelessness and associated living conditions - caused by defendants' failure to timely return to her the foreclosure surplus.

Register v. Law Offices of Jonathan G. Gabriel, et. al. (Los Angeles Superior Court, case no. BC398674)