Failure to Allege Lack of Default

Failure to Allege Lack of Default

by Daniel Edstrom
DTC Systems, Inc.

I came across the following on Google Scholar (http://scholar.google.com/scholar_case?case=16055101289176414591&q=Restatement+(Third)+Of+Property+(Mortgages)+%C2%A7+5.4&hl=en&as_sdt=2,5):

A. Failure to Allege Lack of Default

First, Nevada law is clear that “[a]n action for the tort of wrongful foreclosure will lie if the trustor or mortgagor can establish at the time the power of sale was exercised or the foreclosure occurred, no breach of condition or failure of performance existed on the mortgagor or trustor’s part which would have authorized the foreclosure or exercise of the power of sale.Ernestburg v. Mortgage Investors Group, No. 2:08-cv-01304-RCJ-RJJ, 2009 WL 160241, at *6 (D. Nev. Jan. 22, 2009) (internal citations and quotations omitted). The plaintiff must establish that they were not “in default when the power of sale was exercised.Id. (citing Collins v. Union Fed. Sav. & Loan Ass’n, 662 P.2d 610, 623 (Nev. 1983)). Furthermore, a claim for wrongful foreclosure does not arise until the power of sale is exercised. Collins, 662 P.2d at 623.

Continue reading “Failure to Allege Lack of Default”

The Wrong Remedy at the Wrong Time, Part 2

The Wrong Remedy at the Wrong Time, Part 2

By Daniel Edstrom
DTC Systems, Inc.

New Note added on 1/22/2012 thanks to Simonee.  California Probate Code does not seem to apply based on this California Supreme Court decision: Monterey S.P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454 , 261 Cal.Rptr. 587; 777 P.2d 623 (download here: http://dtc-systems.net/wp-content/uploads/2012/01/Monterey_SP_Partnership_vs_WL_Bangham.pdf)

This is a continuation from The Wrong Remedy at the Wrong Time, Part 1 (http://dtc-systems.net/2011/01/wrong-remedy-wrong-time-part-1/).

It turns out that if you want to modify the Trust created by your Deed of Trust, or if you want to determine if the trust exists, you need to petition the court under California Probate Code 17200.  If you are not in California, but are in a Deed of Trust state, your state probably has similar probate laws.

In order to petition the court, California Probate Code 17200 has the following provision:

“(a) Except as provided in Section 15800, a trustee or beneficiary of a trust may petition the court under this chapter concerning the internal affairs of the trust or to determine the existence of the trust.”

Right off the bat we find that only a trustee or a beneficiary has the ability to petition the court under 17200.  If no trustee is specified, the default trustee is the trustor (the parties that executed the note – i.e. the homeowners).  The beneficiaries can easily substitute in a new trustee if that occurs.  But what if Mortgage Electronic Registration Systems (MERS) is named as the beneficiary?  Consider California Mortgage and Deed of Trust Practice § 1.39 (3d ed Cal CEB 2008) § 1.39 (1) the Beneficiary Must Be Obligee:  The beneficiary must be an obligee of the secured obligation (usually the payee of a note), because otherwise the deed of trust in its favor is meaningless. Watkins v Bryant (1891) 91 C 492, 27 P 775; Nagle v Macy (1858) 9 C 426. See §§ 1.8-1.19 on the need for an obligation. The deed of trust is merely an incident of the obligation and has no existence apart from it. Goodfellow v Goodfellow (1933) 219 C 548, 27 P2d 898; Adler v Sargent (1895) 109 C 42, 41 P 799; Turner v Gosden (1932) 121 CA 20, 8 P2d 505. The holder of the note, however, can enforce the deed of trust whether or not named as beneficiary or mortgagee. CC § 2936; see § 1.23.

Continue reading “The Wrong Remedy at the Wrong Time, Part 2”

The Wrong Remedy at the Wrong Time, Part 1

The Wrong Remedy at the Wrong Time, Part 1

By Daniel Edstrom
DTC Systems, Inc.

New Note added on 1/22/2012 thanks to Simonee.  California Probate Code does not seem to apply based on this California Supreme Court decision: Monterey S.P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454 , 261 Cal.Rptr. 587; 777 P.2d 623 (download here: http://dtc-systems.net/wp-content/uploads/2012/01/Monterey_SP_Partnership_vs_WL_Bangham.pdf)

Monterey S.P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454 , 261 Cal.Rptr. 587; 777 P.2d 623

Here is a quick overview of what happens in a non-judicial foreclosure.  If you are in a judicial state, this post does not apply directly to your case.  But if you understand what happens in a non-judicial foreclosure, you may get insight into what might apply to your case.

I am not indicating that any of these documents are true or accurate, just that this is what typically happens.

Closing the Transaction

The homeowner executes a note and security instrument (i.e. Deed of Trust).  The parties to the trust created by the Deed of Trust are the trustor (homeowner), trustee (usually a title company) and the beneficiary (either MERS or the named lender).    Everyone seems to assume that the trust was constituted (created), that it is valid and continuing.  This is where the trouble begins (not really, but for this article we will assume it begins here and not before).

Notice of Default

Supposedly the Notice of Default is recorded and sent to the homeowner by the agent for the beneficiary.  Who is the beneficiary?  Looking at my notice of default the only beneficiary mentioned is MERS.  However, other documents sent usually point to one or more other parties who “might” be a beneficiary.

Continue reading “The Wrong Remedy at the Wrong Time, Part 1”