In re: Names, No. 10-65697-elp13 (Bankr. D. Oreg., May 13, 2011).
When can a debtor attack a foreclosure sale as invalid for lack of notice? A recent Oregon bankruptcy court considered this issue.
In 2009, debtor Carol Names purchased a home subject to a trust deed in favor of Gerald and Janet Norman. When Carol failed to make payments to the Normans, they prepared to foreclose on the home. As required by Oregon law, the Normans provided notice to Carol of the fact of default on the loan, the date, time, and place of the sale, and her right to cure the default. However, the Normans did not provide notice to residential tenants regarding the foreclosure, as is also required, because there was no residential tenant living in the property at the time of the notice.
When Carol was unable to arrange for a cure of the default, the property was sold. Carol then filed a petition for Chapter 13 bankruptcy, and claimed that the foreclosure sale was invalid because the Normans failed to provide notice as required by Oregon law of the sale to residential tenants.
The court granted summary judgment to the buyers and the Normans that the property was validly sold. The court held that Carol was precluded from claiming that the sale was void due to the defect in the form of the notice of sale, reasoning that the defect in the form of notice had no impact on her substantive rights. Further, because she had timely notice of everything she needed to protect her rights in the property, and did not bring the defect to anyone's attention before the sale occurred precluded her from raising the issue later.
Although defect in notice is technically required by statute, the court was not willing to void an otherwise good sale for a defect that had no relevance to the situation at hand. Not only did Carol have no residential tenants to notify, but she had all relevant information herself and chose not to do anything until after an otherwise valid sale was conducted.
