Real Property – Mortgage Satisfaction – California
Assignments Generally: Lenders, or holders of mortgages or deeds of trust, often assign mortgages or deeds of trust to other lenders, or third parties. When this is done the assignee (person who received the assignment) steps into the place of the original lender or assignor. To effectuate an assignment, the general rules is that the assignment must be in proper written format and recorded to provide notice of the assignment.
Satisfactions Generally: Once a mortgage or deed of trust is paid, the holder of the mortgage is required to satisfy the mortgage or deed of trust of record to show that the mortgage or deed of trust is no longer a lien on the property. The general rule is that the satisfaction must be in proper written format and recorded to provide notice of the satisfaction. If the lender fails to record a satisfaction within set time limits, the lender may be responsible for damages set by statute for failure to timely cancel the lien. Depending on your state, a satisfaction may be called a Satisfaction, Cancellation, or Reconveyance. Some states still recognize marginal satisfaction but this is slowly being phased out. A marginal satisfaction is where the holder of the mortgage physically goes to the recording office and enters a satisfaction on the face of the the recorded mortgage, which is attested by the clerk.
Assignment: It is recommended that an assignment be in writing and recorded.
Demand to Satisfy: If the trustee has failed to execute and record, or cause to be recorded, the full reconveyance within 60 calendar days of satisfaction of the obligation, the beneficiary, upon receipt of a written request by the trustor, shall execute and acknowledge a document … substituting itself or another as trustee and issue a full reconveyance.
Recording Satisfaction: A certificate of the discharge of a mortgage, and the proof or acknowledgment thereof, must be recorded in the office of the county recorder in which the mortgage is recorded.
Penalty: All damages which that person may sustain by reason of the failure to record satisfaction shall require that the violator forfeit to that person the sum of three hundred dollars ($300).
Acknowledgment: An assignment or satisfaction must contain a proper California acknowledgment, or other acknowledgment approved by Statute.
DIVISION 3- OBLIGATIONS
TITLE 14- LIEN
Chapter 2- Mortgages
Article 1- Mortgages In General: SECTION 2920-2944.5
2939. A recorded mortgage must be dischargedby a certificate signed by the mortgagee, his personal representatives or assigns, acknowledged or proved and certified as prescribed by the chapter on “recording transfers,” stating that the mortgage has been paid, satisfied, or discharged. Reference shall be made in said certificate to the book and page where the mortgage is recorded.
2939.5. Foreign executors, administrators and guardians may satisfy mortgages upon the records of any county in this state, upon producing and recording in the office of the county recorder of the county in which such mortgage is recorded, a duly certified and authenticated copy of their letters testamentary, or of administration or of guardianship, and which certificate or authentication shall also recite that said letters have not been revoked. For the purposes of this section, “guardian” includes a foreign conservator, committee, or comparable fiduciary.
2940. A certificate of the discharge of a mortgage, and the proof or acknowledgment thereof, must be recorded in the office of the county recorder in which the mortgage is recorded.
(a) Within 30 days after any mortgage has been satisfied, the mortgagee or the assignee of the mortgagee shall execute a certificate of the discharge thereof, as provided in Section 2939, and shall record or cause to be recorded, except as provided in subdivision (c), in the office of the county recorder in which the mortgage is recorded. The mortgagee shall then deliver, upon the written request of the mortgagor or the mortgagor’s heirs, successors, or assignees, as the case may be, the original note and mortgage to the person making the request.
(b) (1) When the obligation secured by any deed of trust has been satisfied, the beneficiary or the assignee of the beneficiary shall execute and deliver to the trustee the original note, deed of trust, request for a full reconveyance, and other documents as may be necessary to reconvey, or cause to be reconveyed, the deed of trust.
(A) The trustee shall execute the full reconveyance and shall record or cause it to be recorded, except as provided in subdivision (c), in the office of the county recorder in which the deed of trust is recorded within 21 calendar days after receipt by the trustee of the original note, deed of trust, request for a full reconveyance, the fee that may be charged pursuant to subdivision (e), recorder’s fees, and other documents as may be necessary to reconvey, or cause to be reconveyed, the deed of trust.
(B) The trustee shall deliver a copy of the reconveyance to the beneficiary, its successor in interest, or its servicing agent, if known.
(C) Following execution and recordation of the full reconveyance, upon receipt of a written request by the trustor or the trustor’s heirs, successors, or assignees, the trustee shall then deliver the original note and deed of trust to the person making that request.
(2) If the trustee has failed to execute and record, or cause to be recorded, the full reconveyance within 60 calendar days of satisfaction of the obligation, the beneficiary, upon receipt of a written request by the trustor or trustor’s heirs, successor in interest, agent, or assignee, shall execute and acknowledge a document pursuant to Section 2934a substituting itself or another as trustee and issue a full reconveyance.
(3) If a full reconveyance has not been executed and recorded pursuant to either paragraph (1) or paragraph (2) within 75 calendar days of satisfaction of the obligation, then a title insurance company may prepare and record a release of the obligation. However, at least 10 days prior to the issuance and recording of a full release pursuant to this paragraph, the title insurance company shall mail by first-class mail with postage prepaid, the intention to release the obligation to the trustee, trustor, and beneficiary of record, or their successor in interest of record, at the last known address.
(A) The release shall set forth:
(i) The name of the beneficiary.
(ii) The name of the trustor.
(iii) The recording reference to the deed of trust.
(iv) A recital that the obligation secured by the deed of trust has been paid in full.
(v) The date and amount of payment.
(B) The release issued pursuant to this subdivision shall be entitled to recordation and, when recorded, shall be deemed to be the equivalent of a reconveyance of a deed of trust.
(4) Where an obligation secured by a deed of trust was paid in full prior to July 1, 1989, and no reconveyance has been issued and recorded by October 1, 1989, then a release of obligation as provided for in paragraph (3) may be issued.
(5) Paragraphs (2) and (3) do not excuse the beneficiary or the trustee from compliance with paragraph (1). Paragraph (3) does not excuse the beneficiary from compliance with paragraph (2).
(6) In addition to any other remedy provided by law, a title insurance company preparing or recording the release of the obligation shall be liable to any party for damages, including attorneys’ fees, which any person may sustain by reason of the issuance and recording of the release, pursuant to paragraphs (3) and (4).
(c) The mortgagee or trustee shall not record or cause the certificate of discharge or full reconveyance to be recorded when any of the following circumstances exists:
(1) The mortgagee or trustee has received written instructions to the contrary from the mortgagor or trustor, or the owner of the land, as the case may be, or from the owner of the obligation secured by the deed of trust or his or her agent, or escrow.
(2) The certificate of discharge or full reconveyance is to be delivered to the mortgagor or trustor, or the owner of the land, as the case may be, through an escrow to which the mortgagor, trustor, or owner is a party.
(3) When the personal delivery is not for the purpose of causing recordation and when the certificate of discharge or full reconveyance is to be personally delivered with receipt acknowledged by the mortgagor or trustor or owner of the land, as the case may be, or their agent if authorized by mortgagor or trustor or owner of the land.
(d) For the purposes of this section, the phrases “cause to be recorded” and “cause it to be recorded” include, but are not limited to, sending by certified mail with the United States Postal Service or by an independent courier service using its tracking service that provides documentation of receipt and delivery, including the signature of the recipient, the full reconveyance or certificate of discharge in a recordable form, together with payment for all required fees, in an envelope addressed to the county recorder’s office of the county in which the deed of trust or mortgage is recorded. Within two business days from the day of receipt, if received in recordable form together with all required fees, the county recorder shall stamp and record the full reconveyance or certificate of discharge. Compliance with this subdivision shall entitle the trustee to the benefit of the presumption found in Section 641 of the Evidence Code.
(e) The violation of this section shall make the violator liable to the person affected by the violation for all damages which that person may sustain by reason of the violation, and shall require that the violator forfeit to that person the sum of three hundred dollars ($300). However, a trustee acting in accordance with subdivision (c) shall not be deemed a violator for purposes of this subdivision.
(f) (1) The trustee, beneficiary, or mortgagee may charge a reasonable fee to the trustor or mortgagor, or the owner of the land, as the case may be, for all services involved in the preparation, execution, and recordation of the full reconveyance, including, but not limited to, document preparation and forwarding services rendered to effect the full reconveyance, and, in addition, may collect official fees. This fee may be made payable no earlier than the opening of a bona fide escrow or no more than 60 days prior to the full satisfaction of the obligation secured by the deed of trust or mortgage.
(2) If the fee charged pursuant to this subdivision does not exceed sixty-five dollars ($65), the fee is conclusively presumed to be reasonable.
(g) For purposes of this section, “original” may include an optically imaged reproduction when the following requirements are met:
(1) The trustee receiving the request for reconveyance and executing the reconveyance as provided in subdivision (b) is an affiliate or subsidiary of the beneficiary or an affiliate or subsidiary of the assignee of the beneficiary, respectively.
(2) The optical image storage media used to store the documentshall be nonerasable write once, read many (WORM) optical image media that does not allow changes to the stored document.
(3) The optical image reproduction shall be made consistent with the minimum standards of quality approved by either the National Institute of Standards and Technology or the Association for Information and Image Management.
(4) Written authentication identifying the optical image reproduction as an unaltered copy of the note, deed of trust, or mortgage shall be stamped or printed on the optical image reproduction.
(h) The amendments to this section enacted at the 1999-2000 Regular Session shall apply only to a mortgage or an obligation secured by a deed of trust that is satisfied on or after January 1, 2001.
2941.5. Every person who willfully violates Section 2941 is guilty of a misdemeanor punishable by fine of not less than fifty dollars ($50) nor more than four hundred dollars ($400), or by imprisonment in the county jail for not to exceed six months, or by both such fine and imprisonment. For purposes of this section, “willfully” means simply a purpose or willingness to commit the act, or make the omission referred to. It does not require an intent to violate the law, to injure another, or to acquire any advantage.
Related California Legal Forms
Related California Legal Forms
Plaintiff Eugenia Calvo obtained a loan secured by a deed of trust against her residence. The original lender assigned the loan and deed of trust to HSBC Bank USA, N.A. (HSBC Bank). A new trustee was also substituted after the loan was originated. Plaintiff defaulted in payment of the loan. The new trustee initiated foreclosure proceedings and executed a foreclosure sale of plaintiffs residence. Notice of the assignment of the deed of trust appeared only in the substitution of trustee, which was recorded on the same date as the notice of trustee's sale. The second amended complaint seeks to set aside the trustee's sale for an alleged violation of Civil Code section 2932.5, 1 which requires the assignee of a mortgagee to record an assignment before exercising a power to sell real property. HSBC Bank and its agent, the nominal beneficiary under the deed of trust, demurred to the second amended complaint, and the trial court sustained the demurrer without leave to amend.
All statutory references are to the Civil Code unless otherwise specified.
We find defendant HSBC Bank did not violate section 2932.5 because that statute does not apply when the power of sale is conferred in a deed of trust rather than a mortgage. We affirm the judgment dismissing the complaint.
Plaintiff sued HSBC Bank and Mortgage Electronic Registration Systems, Inc. (MERS), its agent and nominal beneficiary under the deed of trust recorded against her residence. Plaintiff had borrowed money from CBSK Financial Group, Inc., which is not a defendant in this lawsuit. Her loan was secured by a deed of trust against her residence that was recorded on September 1, 2006. The deed of trust identified plaintiff as the trustor, CBSK Financial Group as the lender, MERS as the nominal beneficiary and lender's agent, and Lawyers Title Company as the trustee. In the deed of trust, plaintiff granted title to her residence to the trustee, in trust, with the power of sale. The deed of trust stated: "MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, *121 including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling the Security Instrument."
Aztec Foreclosure Corporation was substituted as trustee under the deed of trust on or about June 2, 2008. The substitution of trustee stated that MERS, as nominee for HSBC Bank, "is the present Beneficiary" under the deed of trust, as MERS had been for the original lender. The substitution of trustee was not recorded until October 14, 2008, the same date on which Aztec Foreclosure Corporation recorded a notice of trustee's sale. More than three months before recordation of the substitution of trustee, Aztec Foreclosure Corporation had recorded a notice that plaintiff was in default in payment of her loan and that the beneficiary had elected to initiate foreclosure proceedings. The notice of default advised plaintiff to contact HSBC Bank to arrange for payment to stop the foreclosure.
HSBC Bank bought plaintiffs residence in the foreclosure sale, and a trustee's deed upon sale was recorded on January 9, 2009. The gist of the complaint is that HSBC Bank initiated foreclosure proceedings under the deed of trust without any recordation of the assignment of the deed of trust to HSBC Bank in violation of section 2932.5.
A demurrer tests the legal sufficiency of the complaint. We review the complaint de novo to determine whether it alleges facts sufficient to state a cause of action. For purposes of review, we accept as true all material facts alleged in the complaint, but not contentions, deductions or conclusions of fact or law. We also consider matters that may be judicially noticed. ( Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [ 216 Cal.Rptr. 718, 703 P.2d 58].) When a demurrer is sustained without leave to amend, "we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm." ( Ibid.) Plaintiff has the burden to show a reasonable possibility the complaint can be amended to state a cause of action. ( Ibid.)
The trial court did not err in sustaining the demurrer without leave to amend. Plaintiffs lawsuit rests on her claim that the foreclosure sale was void and should be set aside because HSBC Bank invoked the power of sale without complying with the requirement of section 2932.5 to record the assignment of the deed of trust from the original lender to HSBC Bank. We find no merit in this contention. *122
Section 2932.5 provides: "Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded."
It has been established since 1908 that this statutory requirement that an assignment of the beneficial interest in a debt secured by real property must be recorded in order for the assignee to exercise the power of sale applies only to a mortgage and not to a deed of trust. In Stockwell v. Barnum(1908) 7 Cal.App. 413 [ 94 P. 400] ( Stockwell), the court affirmed the judgment against a plaintiff who sought to set aside and vacate a sale of real property under a deed of trust. In Stockwell, a couple borrowed money from two individuals and gave them a promissory note that provided, in case of default in the payment of interest, the holder of the note had the option to demand payment of all the principal and interest. To secure payment of the note, the borrowers executed and delivered a deed of trust by which they conveyed to the trustee legal title to a parcel of real estate, with the power of sale on demand of the beneficiaries of the promissory note. The borrowers defaulted. The original lenders assigned the note to another individual, who elected to declare the whole amount of principal and interest due and made demand on the trustee to sell the property. Before the trustee's sale was made, but on the same day as the trustee's sale, the defaulting couple conveyed the real property to the plaintiff, who then sued to set aside the trustee's sale.
One of the bases on which the plaintiff in Stockwell sought to set aside the sale was that no assignment of the beneficial interests under the deed of trust was recorded and therefore the original lender's assignee had no right to demand a trustee's sale of the property. The plaintiff inStockwell relied on former section 858, the predecessor of section 2932.5, as support for this contention. (The parties correctly acknowledge that § 2932.5 continued former § 858 without substantive change.) (Law Revision Com. com., Deering's Ann. Civ. Code, § 2932.5 (2005 ed.) p. 454.) TheStockwell court found the statute did not apply to a trustee's sale.
The Stockwell court distinguished a trust deed from a mortgage, explaining that a mortgage creates only a lien, with title to the real property remaining in the borrower/mortgagee, whereas a deed of trust passes title to the trustee with the power to transfer marketable title to a purchaser. The court reasoned that since the lenders had no power of sale, and only the trustee could transfer title, it was immaterial who held the note. ( Stockwell, supra, 7 Cal.App. at p. 416.) "The transferee of a negotiable promissory note, *123 payment of which is secured by a deed of trust whereby the title to the property and power of sale in case of default is vested in a third party as trustee, is not an encumbrancer to whom power of sale is given, within the meaning of section 858 . . . ." ( Id. at p. 417.)
The holding of Stockwell has never been reversed or modified in any reported California decision in the more than 100 years since the case was decided. The rule that section 2932.5 does not apply to deeds of trust is part of the law of real property in California. After 1908, only the federal courts have addressed the question whether section 2932.5 applies to deeds of trust, and only very recently. Every federal district court to consider the question has followed Stockwell. (See, e.g., Roque v. SunTrust Mortgage, Inc.(N.D.Cal., Feb. 10, 2010, No. C-09-00040 RWM) 2010 U.S.Dist. Lexis 11546, p. *8 ["Section 2932.5 applies to mortgages, not deeds of trust. It applies only to mortgages that give a power of sale to the creditor, not to deeds of trust which grant a power of sale to the trustee."]; Parcray v. Shea Mortgage, Inc. (E.D.Cal., Apr. 23, 2010, No. CV-F-09-1942 OWW/GSA) 2010 U.S.Dist. Lexis 40377, p. *31 ["There is no requirement under California law for an assignment to be recorded in order for an assignee beneficiary to foreclose."]; Caballero v. Bank of America (N.D.Cal., Nov. 4, 2010, No. 10-CV-02973-LHK) 2010 U.S.Dist. Lexis 122847, p. *8 ["§ 2932.5 does not require the recordation of an assignment of a beneficial interest for a deed of trust, as opposed to a mortgage"].)2
Plaintiff cited only one bankruptcy court decision in support of her argument that section 2932.5 applies to deeds of trust. ( U.S. Bank N.A. v. Skelton (In re Salazar) (Bankr. S.D.Cal. 2011) 448 B.R. 814.) We find the analysis in that case unpersuasive. Holdings of the federal courts are not binding or conclusive on California courts, though they may be entitled to respect and careful consideration. ( Bank of Italy etc. Assn. v. Bentley (1933) 217 Cal. 644,653 [20 P.2d 940] ( Bank of Italy).) A federal bankruptcy court decision interpreting California law, however, is not due the same deference. (SeeStern v. Marshall (2011) 564 U.S. ___ [ 180 L.Ed.2d 475, 131 S.Ct. 2594].)
Plaintiff argues that Stockwell is "[o]utdated" and, that in the "modern era," there is no difference between a mortgage and a deed of trust. Plaintiff misconstrues Bank of Italy, supra, 217 Cal. 644 as holding that deeds of trust are the same as mortgages with a power of sale, and therefore, as supporting her argument that section 2932.5 applies to both mortgages and deeds of trust. First, our Supreme Court inBank of Italy did not consider or construe section 2932.5 or its predecessor statute.
Second, the court in Bank of Italy did not hold that a mortgage is the same as a deed of trust. Far from it; theBank of Italy court recognized that the distinction between a mortgage, which creates only a lien, and a deed of trust, *124which passes title to the trustee, "has become well settled in our law and cannot now be disturbed." ( Bank of Italy, supra, 217 Cal. at p. 655.) Third, the court's holding was expressly limited to the question (not in issue here) whether in California it is permissible to sue on a promissory note secured by a deed of trust without first exhausting the security or showing that it is valueless. The trial court had found "that no action may be brought on a note secured by a deed of trust unless and until the security is exhausted. The correctness of this conclusion is the sole point involved on this appeal." ( Id. at pp. 647, 648, 650.)
The plaintiff in Bank of Italy had argued the only statute requiring that security be exhausted before suing on the note was limited to mortgages and did not include the distinctly different deeds of trust. ( Bank of Italy, supra, 217 Cal. at p. 653.) The Bank of Italy court therefore considered whether the differences between a mortgage and a deed of trust under California law should permit the holder of a note secured by a deed of trust to sue on the note without exhausting the security by a sale of the property. The court recognized there were an increasing number of cases that applied the same rules to deeds of trust that are applied to mortgages and concluded that "merely because `title' passes by a deed of trust while only a `lien' is created by a mortgage," in both situations the security must be exhausted before suit on the personal obligation. ( Bank of Italy, supra, 217 Cal. at pp. 657-658.) Nothing in the holding or analysis of the Bank of Italy opinion supports plaintiffs position here that we should find section 2932.5 applies to a deed of trust.
Plaintiff also is mistaken in contending that Strike v. Trans-West Discount Corp. (1979) 92 Cal.App.3d 735 [ 155 Cal.Rptr. 132] ( Strike) supports her position. In Strike, a homeowner had a judgment entered against him on a business debt he had guaranteed. The homeowner later defaulted in payments on a bank loan that was secured by a deed of trust against his home, and he asked the judgment creditor to help him out. The judgment creditor agreed to buy an assignment of the home loan and deed of trust from the bank, consolidate the indebtedness on the home loan with the amount owed to satisfy the judgment, and extend the maturity date of these obligations.
The homeowner defaulted again, and the judgment creditor initiated nonjudicial foreclosure proceedings. The homeowner sued in an attempt to avoid foreclosure and eviction but did not prevail at trial. The Court of Appeal affirmed. Among the homeowner's arguments that were rejected on appeal was the contention that the judgment creditor's interest in his home was an equitable lien that could only be foreclosed by judicial process. The Court of Appeal found the creditor had the right to pursue nonjudicial foreclosure, distinguishing an equitable subrogee from an assignee of a deed of trust with *125 the power of sale. The court stated: "A recorded assignment of note and deed of trust vests in the assignee all of the rights, interests of the beneficiary [citation] including authority to exercise any power of sale given the beneficiary ([§ 858])." (Strike, supra, 92 Cal.App.3d at p. 744.)
Plaintiff contends the sentence quoted above establishes that section 2932.5 (formerly codified at § 858) applies to deeds of trust. But the Strike court was not asked to consider or construe the predecessor of section 2932.5. TheStrike court briefly referred to the predecessor of section 2932.5 by way of illustrating the difference between an equitable subrogee and an assignee under a deed of trust with a power of sale. ( Strike, supra, 92 Cal.App.3d at p. 744.) "`It is axiomatic, of course, that a decision does not stand for a proposition not considered by the court.`" ( Agnew v. State Bd. of Equalization (1999) 21 Cal.4th 310, 332 [ 87 Cal.Rptr.2d 423, 981 P.2d 52].)
In California, over the course of the past century, deeds of trust have largely replaced mortgages as the primary real property security device. (See 4 Miller Starr, Cal. Real Estate (3d ed. 2003) former § 10:2, p. 15.) Thus, section 2932.5 (and its predecessor, § 858) became practically obsolete and was generally ignored by borrowers, creditors, and the California courts. On the other hand, other statutes expressly give MERS the right to initiate foreclosure on behalf of HSBC Bank irrespective of the recording of a substitution of trustee. Section 2924, subdivision (a)(1), states that a "trustee, mortgagee, or beneficiary, or any of their authorized agents," may initiate the foreclosure process. MERS was both the nominal beneficiary and agent (nominee) of the original lender and also of HSBC Bank, which held the note at the time of the foreclosure sale of plaintiffs residence. Thus, MERS had the statutory right to initiate foreclosure on behalf of HSBC Bank pursuant to section 2924, subdivision (a)(1).
MERS also had the right to initiate foreclosure on behalf of HSBC Bank pursuant to the express language of the deed of trust. Plaintiff agreed in the deed of trust that MERS had the right to initiate foreclosure and to instruct the trustee to exercise the power of sale as nominee (i.e., agent) of the original lender and its successors and assigns. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149,1157, fn. 9 [ 121 Cal.Rptr.3d 819] [construing a deed of trust identical in pertinent part to the trust deed in this case as granting MERS power to initiate foreclosure as the agent of the note holder, even if not also as beneficiary].) HSBC Bank was the assignee of the original lender. Accordingly, HSBC Bank and MERS, its nominal beneficiary and agent, were entitled to invoke the power of sale in the deed of trust, and plaintiff has alleged no legal basis for setting aside the sale in this case. *126
We affirm the judgment of dismissal. Respondent is to recover its costs of appeal.
Bigelow, P. J., and Flier, J., concurred.