BILL NUMBER: SB 784 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 19, 1995
INTRODUCED BY Senator Calderon
FEBRUARY 23, 1995
An act to add Section 2934.5 to amend
Section 2941.7 of the Civil Code, relating to deeds of trust.
LEGISLATIVE COUNSEL'S DIGEST
SB 784, as amended, Calderon. Deeds of trust: substitution.
Existing law provides the procedures for the substitution of
trustees under a deed of trust upon real property or an estate for
years therein.
Under existing law, whenever an obligation secured by a mortgage
or deed of trust has been satisfied and the mortgagee or beneficiary
of record cannot be located after diligent search or refuses to
execute and deliver a certificate of discharge or request for
reconveyance, or whenever a specified balance remains due and the
mortgagee or beneficiary cannot be located after diligent search, the
lien of the mortgage or deed of trust shall be released when a bond
acceptable to the trustee is recorded, as specified, and, in the case
of a deed of trust, the trustee executes and records a reconveyance,
as specified.
This bill would authorize, as specified
for purposes of these provisions , the substitution of a
trustee by the trustor or the trustor's successors in interest of a
trust deed upon real property, or an estate for years
therein, executed on or after January 1, 1996,
regardless of whether all of the beneficiaries or their successors in
interest execute or acknowledge the substitution, if
specified requirements are met, including the requirement that the
new trustee is a title insurance company.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 2934.5 is added to the Civil Code,
SECTION 1. Section 2941.7 of the Civil Code is amended to read:
2941.7. Whenever the obligation secured by a mortgage or deed of
trust has been fully satisfied and the present mortgagee or
beneficiary of record cannot be located after diligent search, or
refuses to execute and deliver a proper certificate of discharge or
request for reconveyance, or whenever a specified balance, including
principal and interest, remains due and the mortgagor or trustor or
the mortgagor's or trustor's successor in interest cannot, after
diligent search, locate the then mortgagee or beneficiary of record,
the lien of any mortgage or deed of trust shall be released when the
mortgagor or trustor or the mortgagor's or trustor's successor in
interest records or causes to be recorded, in the office of the
county recorder of the county in which the encumbered property is
located, a corporate bond accompanied by a declaration, as specified
in subdivision (b), and with respect to a deed of trust, a
reconveyance as hereinafter provided.
(a) The bond shall be acceptable to the trustee and shall be
issued by a corporation lawfully authorized to issue surety bonds in
the State of California in a sum equal to the greater of either (1)
two times the amount of the original obligation secured by the
mortgage or deed of trust and any additional principal amounts,
including advances, shown in any recorded amendment thereto, or (2)
one-half of the total amount computed pursuant to (1) and any accrued
interest on such amount, and shall be conditioned for payment of any
sum which the mortgagee or beneficiary may recover in an action on
the obligation secured by the mortgage or deed of trust, with costs
of suit and reasonable attorneys' fees. The obligees under the bond
shall be the mortgagee or mortgagee's successor in interest or the
trustee who executes a reconveyance under this section and the
beneficiary or beneficiary's successor in interest.
The bond recorded by the mortgagor or trustor or mortgagor's or
trustor's successor in interest shall contain the following
information describing the mortgage or deed of trust:
(1) Recording date and instrument number or book and page number
of the recorded instrument.
(2) Names of original mortgagor and mortgagee or trustor and
beneficiary.
(3) Amount shown as original principal sum secured thereby.
(4) The recording information and new principal amount shown in
any recorded amendment thereto.
(b) The declaration accompanying the corporate bond recorded by
the mortgagor or trustor or the mortgagor's or trustor's successor in
interest shall state:
(1) That it is recorded pursuant to Section 2941.7
this section .
(2) The name of the original mortgagor or trustor and mortgagee or
beneficiary.
(3) The name and address of the person making the declaration.
(4) That either the obligation secured by the mortgage or deed of
trust has been fully satisfied and the present mortgagee or
beneficiary of record cannot be located after diligent search, or
refuses to execute and deliver a proper certificate of discharge or
request for reconveyance as required under Section 2941; or that a
specified balance, including principal and interest, remains due and
the mortgagor or trustor or mortgagor's or trustor's successor in
interest cannot, after diligent search, locate the then mortgagee or
beneficiary.
(5) That the declarant has mailed by certified mail, return
receipt requested, to the last address of the person to whom payments
under the mortgage or deed of trust were made and to the last
mortgagee or beneficiary of record at the address for such mortgagee
or beneficiary shown on the instrument creating, assigning, or
conveying the interest, a notice of recording a declaration and bond
under this section and informing the recipient of the name and
address of the mortgagor or trustee, if any, and of the right to
record a written objection with respect to the release of the lien of
the mortgage or, with respect to a deed of trust, notify the trustee
in writing of any objection to the reconveyance of the deed of
trust. The declaration shall state the date any notices were mailed
pursuant to this section and the names and addresses of all persons
to whom mailed.
The declaration provided for in this section shall be signed by
the mortgagor or trustor under penalty of perjury.
(c) With respect to a deed of trust, after the expiration of 30
days following the recording of the corporate bond and accompanying
declaration provided in subdivisions (a) and (b), and delivery to the
trustee of the usual reconveyance fees plus costs and a demand for
reconveyance under this section, the trustee shall execute and
record, or otherwise deliver as provided in Section 2941, a
reconveyance in the same form as if the beneficiary had delivered to
the trustee a proper request for reconveyance, provided that the
trustee has not received a written objection to the reconveyance from
the beneficiary of record. No trustee shall have any liability to
any person by reason of its execution of a reconveyance in reliance
upon a trustor's or trustor's successor's in interest substantial
compliance with this section. The sole remedy of any person damaged
by reason of the reconveyance shall be against the trustor, the
affiant, or the bond. With respect to a mortgage, a mortgage shall
be satisfied of record when 30 days have expired following
recordation of the corporate bond and accompanying declaration,
provided no objection to satisfaction has been recorded by the
mortgagee within that period. A bona fide purchaser or encumbrancer
for value shall take the interest conveyed free of such mortgage,
provided there has been compliance with subdivisions (a) and (b) and
the deed to the purchaser recites that no objections by the mortgagee
have been recorded.
Upon recording of a reconveyance under this section, or, in the
case of a mortgage the expiration of 30 days following recordation of
the corporate bond and accompanying declaration without objection
thereto having been recorded, interest shall no longer accrue as to
any balance remaining due to the extent the balance due has been
alleged in the declaration recorded under subdivision (b).
The sum of any specified balance, including principal and
interest, which remains due and which is remitted to any issuer of a
corporate bond in conjunction with the issuance of a bond pursuant to
this section shall, if unclaimed, escheat to the state after seven
years pursuant to the Unclaimed Property Law. From the date of
escheat the issuer of the bond shall be relieved of any liability to
pay to the beneficiary or his heirs or other successors in interest
the escheated funds and the sole remedy shall be a claim for property
paid or delivered to the Controller pursuant to the Unclaimed
Property Law.
(d) The term "diligent search," as used in this section, shall
mean all of the following:
(1) The mailing of notices as provided in paragraph (5) of
subdivision (b), and to any other address that the declarant has used
to correspond with or contact the mortgagee or beneficiary.
(2) A check of the telephone directory in the city where the
mortgagee or beneficiary maintained the mortgagee's or beneficiary's
last known address or place of business.
(3) In the event the mortgagee or beneficiary or the mortgagee's
or beneficiary's successor in interest is a corporation, a check of
the records of the California Secretary of State and the secretary of
state in the state of incorporation, if known.
(4) In the event the mortgagee or beneficiary is a state or
national bank or a state or federal savings and loan association, an
inquiry of the regulatory authority of such bank or savings and loan
association.
(e) This section shall not be deemed to create an exclusive
procedure for the issuance of reconveyances and the issuance of bonds
and declarations to release the lien of a mortgage and shall not
affect any other procedures, whether or not such procedures are set
forth in statute, for the issuance of reconveyances and the issuance
of bonds and declarations to release the lien of a mortgage.
(f) For purposes of this section, the trustor or trustor's
successor in interest of a deed of trust executed on or after January
1, 1996, may substitute the present trustee of record without
conferring any duties upon the trustee other than those that are
incidental to the exercise of the power of sale if both of the
following requirements are met:
(1) The present mortgagee or beneficiary of record cannot be
located after diligent search and the present trustee of record
cannot be located.
(2) The substitute trustee is a title insurance company that
agrees to accept the substitution. This subdivision shall not impose
a duty upon a title insurance company to accept the substitution.
to read:
2934.5. (a) The trustor or the trustor's successors in interest
of a trust deed upon real property, or an estate for years therein,
given to secure an obligation to pay money without conferring any
duties upon the trustee other than those that are incidental to the
exercise of the power of sale therein, may substitute the trustee of
this trust deed, regardless of whether all of the beneficiaries or
their successors in interest execute or acknowledge the substitution,
if all of the following requirements have been met:
(1) The substitution is accompanied by an affidavit that the
beneficiaries have not contacted the trustor or the trustor's
successors in interest for more than 10 years.
(2) The affidavit states that the beneficiaries cannot be located
after a diligent search that includes, but is not limited to, a
search of assessor's records and voter's registration records in
every county of the state.
(3) The current trustee is an individual or all of the members in
a partnership and the trustee cannot be located after a diligent
search as described in paragraph (2) or the trustee is a corporation
with powers that have been suspended for more than 10 years.
(4) The substitute trustee is a title insurance company that
agrees to accept the substitution.
(b) The substitution shall contain the date of recordation of the
trust deed, the name of the trustor, the book and page or instrument
number where the trust deed is recorded, and the name of the new
trustee. From the time the substitution is filed for record, the new
trustee shall succeed to all the powers, duties, authority, and
title granted and delegated to the trustee named in the deed of
trust. A substitution may be accomplished, with respect to multiple
deeds of trust which are recorded in the same county in which the
substitution is being recorded and which all have the same trustee
and beneficiary or beneficiaries, by recording a single document,
complying with the requirements of this section, substituting
trustees for all those deeds of trust.
(c) As an alternative, a substitution may be accomplished with
respect to multiple deeds of trust which are recorded in the same
county in which the substitution is being recorded and which all have
the same trustee and beneficiary or beneficiaries, by recording a
single document without the necessity of (1) setting forth the names
of all trustors and (2) the recording information and dates of
recording for all the deeds of trust for which a substitution of
trustee is being made. However, no notice of default shall be valid
unless a substitution complying with subdivision (b) has first been
recorded. This subdivision shall be operative only until January 1,
1998.
(d) As an alternative, a substitution may be accomplished with
respect to multiple deeds of trust which are recorded in the same
county in which the substitution is being recorded and which all have
the same trustee and beneficiary or beneficiaries, by recording a
single document without the necessity of (1) setting forth the names
of all trustors and (2) the recording of the dates for all the deeds
of trust for which a substitution of trustee is being made.
However, no notice of default shall be valid unless a substitution
complying with subdivision (b) has first been recorded. This
subdivision shall become operative on January 1, 1998.
(e) Notwithstanding any provision of this section or any provision
in any deed of trust, unless a new notice of sale containing the
name, street address, and telephone number of the substituted trustee
is given pursuant to Section 2924f, any sale conducted by the
substituted trustee shall be void.
(f) This substitution shall be effective notwithstanding any
contrary provision in any deed of trust executed on or after January
1, 1996.