## Facts

- Hing Kwan Lo and Yuk Lin Fung owned a condominium in Malibu and defaulted on homeowners association obligations.
- The association conducted a nonjudicial foreclosure sale under a power of sale; statutory notice requirements were met and the sale was regularly conducted.
- Peter Jensen (as trustee of the Las Virgenes Trust) and Kevin Ko were professional foreclosure-sale investors and experienced competitors.
- Jensen and Ko each independently planned to bid at the sale, each intended to bid about $100,000, and each valued the property at $150,000 or more.
- Instead of competing, Jensen and Ko agreed to submit a single joint bid to acquire the property for less.
- With no other bidders, they purchased the property for about $5,412.
- Lo and Fung sued to set aside the sale, alleging the investors’ agreement unlawfully restrained bidding in violation of California Civil Code § 2924h(g).
- The trial court found a statutory violation and set aside the foreclosure sale; Jensen appealed.

## Issues

1. Whether two otherwise competing foreclosure-sale investors violate Civil Code § 2924h(g) by agreeing to bid jointly rather than compete, thereby restraining bidding and depressing the sale price.
2. Whether a court may set aside a nonjudicial foreclosure sale as an equitable remedy when the sale is tainted by an unlawful restraint of bidding under Civil Code § 2924h(g).

## Decision

- The Court of Appeal affirmed the judgment.
- The investors’ agreement to combine into a single bidder restrained bidding “in any manner” within the meaning of Civil Code § 2924h(g).
- The restraint produced an artificially low sale price and unfairness to the defaulting owners.
- The trial court properly exercised equitable power to set aside the foreclosure sale and permit a new sale with the benefit of competition.

## Legal Principles

- Civil Code § 2924h(g) makes it unlawful, acting alone or in concert, to accept consideration not to bid or to “fix or restrain bidding in any manner” at a nonjudicial foreclosure sale conducted under a power of sale.
- An agreement between ready and willing competing bidders to submit a single bid can constitute unlawful bid restraint, even without an express “do not bid” payment arrangement, when it suppresses competition and depresses the price.
- Courts have equitable authority to set aside a nonjudicial foreclosure sale that is unfairly or unlawfully conducted or tainted by fraud; unlawful bid suppression that yields an artificially low price can warrant rescission and a resale.

## Conclusion

The court held that competing foreclosure investors who agree to bid jointly to avoid competition violate Civil Code § 2924h(g), and that a sale produced by such unlawful bid restraint and an artificially low price may be set aside so the defaulting owners can benefit from competitive bidding.


Lo v. Jensen, 88 Cal. App. 4th 1093 (Cal. Ct. App. 2001)