Monday, December 10, 2012

California Appeals Court: Non-Judicial Foreclosure OK When No Trustee Named On Deed Of Trust, Provided One Is Named Prior To Initiation Of Process

From a client release from the law firm Seyfarth Shaw LLC:

  • Deciding an issue of first impression in California, the Second District Court of Appeal has held that a lender properly may foreclose when the Deed of Trust fails to name a Trustee, provided that a Trustee is named prior to foreclosure. Shuster v. BAC Home Loans Servicing LP, No. B235890 (Nov. 29, 2012). In doing so, the court followed the weight of authority from other jurisdictions on this issue.
  • The Court of Appeal rejected the borrowers’ argument that the Deed of Trust’s failure to designate a Trustee transformed the instrument into a mortgage which may be foreclosed only through judicial foreclosure. In reaching this conclusion, the court relied on authorities from other jurisdictions as well as California authorities holding that equity will not allow a trust to fail for lack of a trustee.

    The court also rejected the borrowers’ challenges to various alleged irregularities in the foreclosure process, reiterating that a debtor must allege tender of the amounts due under the loan in order to invalidate a foreclosure sale.

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