BILL NUMBER: AB 431 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Dutra
FEBRUARY 12, 1999
An act to amend Sections 1058.5, 2924, 2924c, 2924f, 2924j, 2924k,
2924l, and 2934a of the Civil Code, relating to trust deeds.
LEGISLATIVE COUNSEL'S DIGEST
AB 431, as introduced, Dutra. Property: trust deeds.
(1) Existing law provides for security interests in real property
by way of mortgages and deeds of trust. Existing law provides for
the recordation of deeds and similar instruments.
This bill would authorize the trustee to decline to issue a
trustee's deed in case of certain mistakes, and would authorize the
recordation of a notice of rescission of the trustee's deed if the
deed has already been issued. It would also provide for the
execution and recordation of a notice of rescission and reconveyance
if a deed of trust has been mistakenly or wrongfully executed. The
bill would provide that these and related recorded notices shall not
operate to defeat the interest of a bonafide purchaser or
encumbrancer.
(2) The bill would provide that in performing acts required in
connection with a deed of trust, the trustee shall incur no liability
for any good faith error resulting from reliance on information
provided in good faith by the beneficiary.
(3) Existing law authorizes the reinstatement of a monetary
default under a deed of trust or mortgage in certain circumstances.
Existing law provides that no beneficiary, trustee, mortgagee, or
their agents or successors shall be liable to a trustor or mortgagor
for the failure to allow a reinstatement of the obligation secured by
a deed of trust or mortgage during the period of 5 business days
prior to the sale of the security property.
This bill would also provide in those circumstances that there is
no liability to any beneficiary under a subordinate deed of trust.
(4) Existing law requires a notice of sale under a power of sale
contained in a mortgage or deed of trust to contain specified
information, including the street address and telephone number of the
trustee.
This bill would require that information to be the street address
and telephone number in the state.
(5) Existing law requires notice to certain persons with recorded
interests after a sale in which there are proceeds remaining.
This bill would provide that the notice inform the persons that
they may be required to provide proof of ownership of the obligation
or an indemnity. The bill would require the Judicial Council to
adopt the form of the notice by July 1, 2000.
(6) Existing law authorizes a trustee to charge costs and
expenses, and specifies that if a fee does not exceed $100, it is
conclusively presumed reasonable.
This bill would provide that if the fee does not exceed $150 or 1%
of the surplus proceeds, it is conclusively presumed reasonable.
(7) Existing law provides that in certain actions in which a deed
of trust is involved, the trustee may file a declaration of
nonmonetary status, but that parties may file and serve on the
trustee a demand to participate in the action.
This bill would instead authorize parties to make a motion to
amend pleadings.
(8) Existing law provides for the substitution of trustees in
certain circumstances, and requires the beneficiary or beneficiaries
to mail a copy of the substitution to be mailed.
This bill would authorize the mailing by authorized agents.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1058.5 of the Civil Code is amended to read:
1058.5. (a) A notice of nonacceptance of a recorded deed executed
by a holder of a security interest, which notice identifies the
security interest, contains a legal description of the property,
properly identifies the parties to the deed, the date of recordation
of the deed, the county in which the project is located, and the
county assessor's parcel number of the real property referenced in
the deed, may be recorded in the office of the county recorder where
the real property is located.
(b) Where a trustee's deed is invalidated by a pending bankruptcy
or otherwise, recordation of a notice of rescission of the trustee's
deed, which notice properly identifies the deed of trust, the
identification numbers used by the recorder or the books and pages at
which the trustee's deed and deed of trust are recorded, the names
of all trustors and beneficiaries, the location of the property
subject to the deed of trust, and the reason for rescission, shall
restore the condition of record title to the real property described
in the trustee's deed and the existence and priority of all
lienholders to the status quo prior to the recordation of the trustee'
s deed upon sale. Only the trustee or beneficiary who caused the
trustee's deed to be recorded, or his or her successor in interest,
may record a notice of rescission.
(c) In the event of a mistake in the opening bid by the trustee,
or its subagent, or by the crier at the trustee's sale, or in the
event of a mistaken or an erroneous sale of property at a trustee's
sale, the trustee may decline to issue the trustee's deed or, in the
event that the trustee's deed has been issued, may record a notice of
rescission of the trustee's deed, which notice properly identifies
the deed of trust, the identification numbers used by the recorder or
the books and pages at which the trustee's deed and deed of trust
are recorded, the names of all trustors and beneficiaries, the
location of the property subject to the deed of trust, and the reason
for rescission, which notice of rescission shall restore the
condition of record title to the real property described in the
trustee's deed and the existence and priority of all lienholders to
the status quo prior to the recordation of the trustee's deed upon
sale. Only the trustee who caused the trustee's deed to be recorded,
or his or her successor in interest, may record a notice of
rescission.
(d) In the event that a reconveyance of a deed of trust has been
mistakenly or wrongfully executed, the trustee who executed the
reconveyance, or the successor thereto, may execute and record a
notice of rescission of reconveyance. The notice of rescission of
reconveyance shall identify the deed of trust and the deed of
reconveyance, the identification numbers used by the recorder or the
books and pages at which the deed of trust and the deed of
reconveyance are recorded, the names of all trustors and
beneficiaries, and a statement that the reconveyance was mistakenly
or erroneously issued. Recordation of the notice of rescission of
reconveyance shall restore the condition of record title to the real
property described in the deed of trust and the deed of reconveyance
and the existence and priority of all lienholders to the status quo
prior to the recordation of the deed of reconveyance.
(e) No recording authorized by subdivision (a), (b), (c), or (d)
shall operate to defeat the interest of a bona fide purchaser or
encumbrancer.
SEC. 2. Section 2924 of the Civil Code is amended to read:
2924. Every transfer of an interest in property, other than in
trust, made only as a security for the performance of another act, is
to be deemed a mortgage, except when in the case of personal
property it is accompanied by actual change of possession, in which
case it is to be deemed a pledge. Where, by a mortgage created after
July 27, 1917, of any estate in real property, other than an estate
at will or for years, less than two, or in any transfer in trust made
after July 27, 1917, of a like estate to secure the performance of
an obligation, a power of sale is conferred upon the mortgagee,
trustee, or any other person, to be exercised after a breach of the
obligation for which that mortgage or transfer is a security, the
power shall not be exercised except where the mortgage or transfer is
made pursuant to an order, judgment, or decree of a court of record,
or to secure the payment of bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations, or is made by a public utility subject to the
provisions of the Public Utilities Act, until (a) the trustee,
mortgagee, or beneficiary, or any of their authorized agents shall
first file for record, in the office of the recorder of each county
wherein the mortgaged or trust property or some part or parcel
thereof is situated, a notice of default, identifying the mortgage or
deed of trust by stating the name or names of the trustor or
trustors and giving the book and page, or instrument number, if
applicable, where the same is recorded or a description of the
mortgaged or trust property and containing a statement that a breach
of the obligation for which the mortgage or transfer in trust is
security has occurred, and setting forth the nature of each breach
actually known to the beneficiary and of his or her election to sell
or cause to be sold the property to satisfy that obligation and any
other obligation secured by the deed of trust or mortgage that is in
default, and where the default is curable pursuant to Section 2924c,
containing the statement specified in paragraph (1) of subdivision
(b) of Section 2924c; (b) not less than three months shall thereafter
elapse; and (c) after the lapse of the three months the mortgagee,
trustee or other person authorized to take the sale shall give notice
of sale, stating the time and place thereof, in the manner and for a
time not less than that set forth in Section 2924f. In
performing acts required by this section, the trustee shall incur no
liability for any good faith error resulting from reliance on
information provided in good faith by the beneficiary. A
recital in the deed executed pursuant to the power of sale of
compliance with all requirements of law regarding the mailing of
copies of notices or the publication of a copy of the notice of
default or the personal delivery of the copy of the notice of default
or the posting of copies of the notice of sale or the publication of
a copy thereof shall constitute prima facie evidence of compliance
with these requirements and conclusive evidence thereof in favor of
bona fide purchasers and encumbrancers for value and without notice.
The mailing, publication, and delivery of notices as required
herein, and the performance of the procedures set forth in this
article, shall constitute privileged communications within Section
47. There is a rebuttable presumption that the beneficiary actually
knew of all unpaid loan payments on the obligation owed to the
beneficiary and secured by the deed of trust or mortgage subject to
the notice of default. However, the failure to include an actually
known default shall not invalidate the notice of sale and the
beneficiary shall not be precluded from asserting a claim to this
omitted default or defaults in a separate notice of default.
SEC. 3. Section 2924c of the Civil Code is amended to read:
2924c. (a) (1) Whenever all or a portion of the principal sum of
any obligation secured by deed of trust or mortgage on real property
or an estate for years therein hereafter executed has, prior to the
maturity date fixed in that obligation, become due or been declared
due by reason of default in payment of interest or of any installment
of principal, or by reason of failure of trustor or mortgagor to
pay, in accordance with the terms of that obligation or of the deed
of trust or mortgage, taxes, assessments, premiums for insurance, or
advances made by beneficiary or mortgagee in accordance with the
terms of that obligation or of the deed of trust or mortgage, the
trustor or mortgagor or his or her successor in interest in the
mortgaged or trust property or any part thereof, or any beneficiary
under a subordinate deed of trust or any other person having a
subordinate lien or encumbrance of record thereon, at any time within
the period specified in subdivision (e), if the power of sale
therein is to be exercised, or, otherwise at any time prior to entry
of the decree of foreclosure, may pay to the beneficiary or the
mortgagee or their successors in interest, respectively, the entire
amount due, at the time payment is tendered, with respect to (A) all
amounts of principal, interest, taxes, assessments, insurance
premiums, or advances actually known by the beneficiary to be, and
that are, in default and shown in the notice of default, under the
terms of the deed of trust or mortgage and the obligation secured
thereby, (B) all amounts in default on recurring obligations not
shown in the notice of default, and (C) all reasonable costs and
expenses, subject to subdivision (c), which are actually incurred in
enforcing the terms of the obligation, deed of trust, or mortgage,
and trustee's or attorney's fees, subject to subdivision (d), other
than the portion of principal as would not then be due had no default
occurred, and thereby cure the default theretofore existing, and
thereupon, all proceedings theretofore had or instituted shall be
dismissed or discontinued and the obligation and deed of trust or
mortgage shall be reinstated and shall be and remain in force and
effect, the same as if the acceleration had not occurred. This
section does not apply to bonds or other evidences of indebtedness
authorized or permitted to be issued by the Commissioner of
Corporations or made by a public utility subject to the Public
Utilities Code. For the purposes of this subdivision, the term
"recurring obligation" means all amounts of principal and interest on
the loan, or rents, subject to the deed of trust or mortgage in
default due after the notice of default is recorded; all amounts of
principal and interest or rents advanced on senior liens or
leaseholds which are advanced after the recordation of the notice of
default; and payments of taxes, assessments, and hazard insurance
advanced after recordation of the notice of default. Where the
beneficiary or mortgagee has made no advances on defaults which would
constitute recurring obligations, the beneficiary or mortgagee may
require the trustor or mortgagor to provide reliable written evidence
that the amounts have been paid prior to reinstatement.
(2) If the trustor, mortgagor, or other person authorized to cure
the default pursuant to this subdivision does cure the default, the
beneficiary or mortgagee or the agent for the beneficiary or
mortgagee shall, within 21 days following the reinstatement, execute
and deliver to the trustee a notice of rescission which rescinds the
declaration of default and demand for sale and advises the trustee of
the date of reinstatement. The trustee shall cause the notice of
rescission to be recorded within 30 days of receipt of the notice of
rescission and of all allowable fees and costs.
No charge, except for the recording fee, shall be made against the
trustor or mortgagor for the execution and recordation of the notice
which rescinds the declaration of default and demand for sale.
(b) (1) The notice, of any default described in this section,
recorded pursuant to Section 2924, and mailed to any person pursuant
to Section 2924b, shall begin with the following statement, printed
or typed thereon:
"IMPORTANT NOTICE (14-point boldface type if printed or in
capital letters if typed)
IF YOUR PROPERTY IS IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR
PAYMENTS, IT MAY BE SOLD WITHOUT ANY COURT ACTION, (14-point boldface
type if printed or in capital letters if typed) and you may have the
legal right to bring your account in good standing by paying all of
your past due payments plus permitted costs and expenses within the
time permitted by law for reinstatement of your account, which is
normally five business days prior to the date set for the sale of
your property. No sale date may be set until three months from the
date this notice of default may be recorded (which date of
recordation appears on this notice).
This amount is ___________________ as of ______________________
(Date)
and will increase until your account becomes current.
While your property is in foreclosure, you still must pay other
obligations (such as insurance and taxes) required by your note and
deed of trust or mortgage. If you fail to make future payments on
the loan, pay taxes on the property, provide insurance on the
property, or pay other obligations as required in the note and deed
of trust or mortgage, the beneficiary or mortgagee may insist that
you do so in order to reinstate your account in good standing. In
addition, the beneficiary or mortgagee may require as a condition to
reinstatement that you provide reliable written evidence that you
paid all senior liens, property taxes, and hazard insurance premiums.
Upon your written request, the beneficiary or mortgagee will give
you a written itemization of the entire amount you must pay. You may
not have to pay the entire unpaid portion of your account, even
though full payment was demanded, but you must pay all amounts in
default at the time payment is made. However, you and your
beneficiary or mortgagee may mutually agree in writing prior to the
time the notice of sale is posted (which may not be earlier than the
end of the three-month period stated above) to, among other things,
1) provide additional time in which to cure the default by transfer
of the property or otherwise; or (2) establish a schedule of payments
in order to cure your default; or both (1) and (2).
Following the expiration of the time period referred to in the
first paragraph of this notice, unless the obligation being
foreclosed upon or a separate written agreement between you and your
creditor permits a longer period, you have only the legal right to
stop the sale of your property by paying the entire amount demanded
by your creditor.
To find out the amount you must pay, or to arrange for payment to
stop the foreclosure, or if your property is in foreclosure for any
other reason, contact:
______________________________________
(Name of beneficiary or mortgagee)
______________________________________
(Mailing address)
______________________________________
(Telephone)
If you have any questions, you should contact a lawyer or the
governmental agency which may have insured your loan.
Notwithstanding the fact that your property is in foreclosure, you
may offer your property for sale, provided the sale is concluded
prior to the conclusion of the foreclosure.
Remember, YOU MAY LOSE LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT
ACTION. (14-point boldface type if printed or in capital letters if
typed)"
Unless otherwise specified, the notice, if printed, shall appear
in at least 12-point boldface type.
If the obligation secured by the deed of trust or mortgage is a
contract or agreement described in paragraph (1) or (4) of
subdivision (a) of Section 1632, the notice required herein shall be
in Spanish if the trustor requested a Spanish language translation of
the contract or agreement pursuant to Section 1632. If the
obligation secured by the deed of trust or mortgage is contained in a
home improvement contract, as defined in Sections 7151.2 and 7159 of
the Business and Professions Code, which is subject to Title 2
(commencing with Section 1801), the seller shall specify on the
contract whether or not the contract was principally negotiated in
Spanish and if the contract was principally negotiated in Spanish,
the notice required herein shall be in Spanish. No assignee of the
contract or person authorized to record the notice of default shall
incur any obligation or liability for failing to mail a notice in
Spanish unless Spanish is specified in the contract or the assignee
or person has actual knowledge that the secured obligation was
principally negotiated in Spanish. Unless specified in writing to
the contrary, a copy of the notice required by subdivision (c) of
Section 2924b shall be in English.
(2) Any failure to comply with the provisions of this subdivision
shall not affect the validity of a sale in favor of a bona fide
purchaser or the rights of an encumbrancer for value and without
notice.
(c) Costs and expenses which may be charged pursuant to Sections
2924 to 2924i, inclusive, shall be limited to the costs incurred for
recording, mailing, including certified and express mail charges,
publishing, and posting notices required by Sections 2924 to 2924i,
inclusive, postponement pursuant to Section 2924g not to exceed fifty
dollars ($50) per postponement and a fee for a trustee's sale
guarantee or, in the event of judicial foreclosure, a litigation
guarantee. For purposes of this subdivision, a trustee or
beneficiary may purchase a trustee's sale guarantee at a rate meeting
the standards contained in Sections 12401.1 and 12401.3 of the
Insurance Code.
(d) Trustee's or attorney's fees which may be charged pursuant to
subdivision (a), or until the notice of sale is deposited in the mail
to the trustor as provided in Section 2924b, if the sale is by power
of sale contained in the deed of trust or mortgage, or, otherwise at
any time prior to the decree of foreclosure, are hereby authorized
to be in an amount which does not exceed two hundred forty dollars
($240) with respect to any portion of the unpaid principal sum
secured which is fifty thousand dollars ($50,000) or less, plus
one-half of 1 percent of the unpaid principal sum secured exceeding
fifty thousand dollars ($50,000) up to and including one hundred
fifty thousand dollars ($150,000), plus one-quarter of 1 percent of
any portion of the unpaid principal sum secured exceeding one hundred
fifty thousand dollars ($150,000) up to and including five hundred
thousand dollars ($500,000), plus one-eighth of 1 percent of any
portion of the unpaid principal sum secured exceeding five hundred
thousand dollars ($500,000). Any charge for trustee's or attorney's
fees authorized by this subdivision shall be conclusively presumed to
be lawful and valid where the charge does not exceed the amounts
authorized herein. For purposes of this subdivision, the unpaid
principal sum secured shall be determined as of the date the notice
of default is recorded.
(e) Reinstatement of a monetary default under the terms of an
obligation secured by a deed of trust, or mortgage may be made at any
time within the period commencing with the date of recordation of
the notice of default until five business days prior to the date of
sale set forth in the initial recorded notice of sale.
In the event the sale does not take place on the date set forth in
the initial recorded notice of sale or a subsequent recorded notice
of sale is required to be given, the right of reinstatement shall be
revived as of the date of recordation of the subsequent notice of
sale, and shall continue from that date until five business days
prior to the date of sale set forth in the subsequently recorded
notice of sale.
In the event the date of sale is postponed on the date of sale set
forth in either an initial or any subsequent notice of sale, or is
postponed on the date declared for sale at an immediately preceding
postponement of sale, and, the postponement is for a period which
exceeds five business days from the date set forth in the notice of
sale, or declared at the time of postponement, then the right of
reinstatement is revived as of the date of postponement and shall
continue from that date until five business days prior to the date of
sale declared at the time of the postponement.
Nothing contained herein shall give rise to a right of
reinstatement during the period of five business days prior to the
date of sale, whether the date of sale is noticed in a notice of sale
or declared at a postponement of sale.
Pursuant to the terms of this subdivision, no beneficiary,
trustee, mortgagee, or their agents or successors shall be liable in
any manner to a trustor, mortgagor, their agents or successors
or any beneficiary under a subordinate deed of trust or any other
person having a subordinate lien or encumbrance of record thereon
for the failure to allow a reinstatement of the obligation
secured by a deed of trust or mortgage during the period of five
business days prior to the sale of the security property, and no such
right of reinstatement during this period is created by this
section. Any right of reinstatement created by this section is
terminated five business days prior to the date of sale set forth in
the initial date of sale, and is revived only as prescribed herein
and only as of the date set forth herein.
As used in this subdivision, the term "business day" has the same
meaning as specified in Section 9.
SEC. 4. Section 2924f of the Civil Code is amended to read:
2924f. (a) As used in this section and Sections 2924g and 2924h,
"property" means real property or a leasehold estate therein, and
"calendar week" means Monday through Saturday, inclusive.
(b) (1) Except as provided in subdivision (c), before any sale of
property can be made under the power of sale contained in any deed of
trust or mortgage, or any resale resulting from a rescission for a
failure of consideration pursuant to subdivision (c) of Section
2924h, notice of the sale thereof shall be given by posting a written
notice of the time of sale and of the street address and the
specific place at the street address where the sale will be held, and
describing the property to be sold, at least 20 days before the date
of sale in one public place in the city where the property is to be
sold, if the property is to be sold in a city, or, if not, then in
one public place in the judicial district in which the property is to
be sold, and publishing a copy once a week for three consecutive
calendar weeks, the first publication to be at least 20 days before
the date of sale, in a newspaper of general circulation published in
the city in which the property or some part thereof is situated, if
any part thereof is situated in a city, if not, then in a newspaper
of general circulation published in the judicial district in which
the property or some part thereof is situated, or in case no
newspaper of general circulation is published in the city or judicial
district, as the case may be, in a newspaper of general circulation
published in the county in which the property or some part thereof is
situated, or in case no newspaper of general circulation is
published in the city or judicial district or county, as the case may
be, in a newspaper of general circulation published in the county in
this state that (A) is contiguous to the county in which the
property or some part thereof is situated and (B) has, by comparison
with all similarly contiguous counties, the highest population based
upon total county population as determined by the most recent federal
decennial census published by the Bureau of the Census. A copy of
the notice of sale shall also be posted in a conspicuous place on the
property to be sold at least 20 days before the date of sale, where
possible and where not restricted for any reason. If the property is
a single-family residence the posting shall be on a door of the
residence, but, if not possible or restricted, then the notice shall
be posted in a conspicuous place on the property; however, if access
is denied because a common entrance to the property is restricted by
a guard gate or similar impediment, the property may be posted at
that guard gate or similar impediment to any development community.
Additionally, the notice of sale shall conform to the minimum
requirements of Section 6043 of the Government Code and be recorded
with the county recorder of the county in which the property or some
part thereof is situated at least 14 days prior to the date of sale.
The notice of sale shall contain the name, street address in
the state , and telephone number in the state of the
trustee or other person conducting the sale , and
the name of the original trustor, and also shall contain the
statement required by paragraph (3) of subdivision (c). In addition
to any other description of the property, the notice shall describe
the property by giving its street address, if any, or other common
designation, if any, and a county assessor's parcel number; but if
the property has no street address or other common designation, the
notice shall contain a legal description of the property, the name
and address of the beneficiary at whose request the sale is to be
conducted, and a statement that directions may be obtained pursuant
to a written request submitted to the beneficiary within 10 days from
the first publication of the notice. Directions shall be deemed
reasonably sufficient to locate the property if information as to the
location of the property is given by reference to the direction and
approximate distance from the nearest crossroads, frontage road, or
access road. If a legal description or a county assessor's parcel
number and either a street address or another common designation of
the property is given, the validity of the notice and the validity of
the sale shall not be affected by the fact that the street address,
other common designation, name and address of the beneficiary, or the
directions obtained therefrom are erroneous or that the street
address, other common designation, name and address of the
beneficiary, or directions obtained therefrom are omitted. The term
"newspaper of general circulation," as used in this section, has the
same meaning as defined in Article 1 (commencing with Section 6000)
of Chapter 1 of Division 7 of Title 1 of the Government Code.
The notice of
sale shall contain a statement of the total amount of the unpaid
balance of the obligation secured by the property to be sold and
reasonably estimated costs, expenses, advances at the time of the
initial publication of the notice of sale, and, if republished
pursuant to a cancellation of a cash equivalent pursuant to
subdivision (d) of Section 2924h, a reference of that fact; provided,
that the trustee shall incur no liability for any good faith error
in stating the proper amount, including any amount provided in good
faith by or on behalf of the beneficiary. An inaccurate statement of
this amount shall not affect the validity of any sale to a bona fide
purchaser for value, nor shall the failure to post the notice of
sale on a door as provided by this subdivision affect the validity of
any sale to a bona fide purchaser for value.
(2) If the sale of the property is to be a unified sale as
provided in subparagraph (ii) of paragraph (a) of subdivision (4) of
Section 9501 of the Commercial Code, the notice of sale shall also
contain a description of the personal property or fixtures to be
sold. In the case where it is contemplated that all of the personal
property or fixtures are to be sold, the description in the notice of
the personal property or fixtures shall be sufficient if it is the
same as the description of the personal property or fixtures
contained in the agreement creating the security interest in or
encumbrance on the personal property or fixtures or the filed
financing statement relating to the personal property or fixtures.
In all other cases, the description in the notice shall be sufficient
if it would be a sufficient description of the personal property or
fixtures under Section 9110 of the Commercial Code. Inclusion of a
reference to or a description of personal property or fixtures in a
notice of sale hereunder shall not constitute an election by the
secured party to conduct a unified sale pursuant to subparagraph (ii)
of paragraph (a) of subdivision (4) of Section 9501 of the
Commercial Code, shall not obligate the secured party to conduct a
unified sale pursuant to subparagraph (ii) of paragraph (a) of
subdivision (4) of Section 9501 of the Commercial Code, and in no way
shall render defective or noncomplying either that notice or a sale
pursuant to that notice by reason of the fact that the sale includes
none or less than all of the personal property or fixtures referred
to or described in the notice. This paragraph shall not otherwise
affect the obligations or duties of a secured party under the
Commercial Code.
(c) (1) This subdivision applies only to deeds of trust or
mortgages which contain a power of sale and which are secured by real
property containing a single-family, owner-occupied residence, where
the obligation secured by the deed of trust or mortgage is contained
in a contract for goods or services subject to the provisions of the
Unruh Act (Chapter 1 (commencing with Section 1801) of Title 2 of
Part 4 of Division 3).
(2) Except as otherwise expressly set forth in this subdivision,
all other provisions of law relating to the exercise of a power of
sale shall govern the exercise of a power of sale contained in a deed
of trust or mortgage described in paragraph (1).
(3) If any default of the obligation secured by a deed of trust or
mortgage described in paragraph (1) has not been cured within 30
days after the recordation of the notice of default, the trustee or
mortgagee shall mail to the trustor or mortgagor, at his or her last
known address, a copy of the following statement:
YOU ARE IN DEFAULT UNDER A
___________________________________________________,
(Deed of trust or mortgage)
DATED ______. UNLESS YOU TAKE ACTION TO PROTECT
YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE.
IF YOU NEED AN EXPLANATION OF THE NATURE OF THE
PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A LAWYER.
(4) All sales of real property pursuant to a power of sale
contained in any deed of trust or mortgage described in paragraph (1)
shall be held in the county where the residence is located and shall
be made to the person making the highest offer. The trustee may
receive offers during the 10-day period immediately prior to the date
of sale and if any offer is accepted in writing by both the trustor
or mortgagor and the beneficiary or mortgagee prior to the time set
for sale, the sale shall be postponed to a date certain and prior to
which the property may be conveyed by the trustor to the person
making the offer according to its terms. The offer is revocable
until accepted. The performance of the offer, following acceptance,
according to its terms, by a conveyance of the property to the
offeror, shall operate to terminate any further proceeding under the
notice of sale and it shall be deemed revoked.
(5) In addition to the trustee fee pursuant to Section 2924c, the
trustee or mortgagee pursuant to a deed of trust or mortgage subject
to this subdivision shall be entitled to charge an additional fee of
fifty dollars ($50).
(6) This subdivision applies only to property on which notices of
default were filed on or after the effective date of this
subdivision.
SEC. 5. Section 2924j of the Civil Code is amended to read:
2924j. (a) Unless an interpleader action has been filed, within
30 days of the execution of the trustee's deed resulting from a sale
in which there are proceeds remaining after payment of the amounts
required by paragraphs (1) and (2) of subdivision (a) of Section
2924k, the trustee shall send written notice to all persons with
recorded interests in the real property as of the date immediately
prior to the trustee's sale who would be entitled to notice pursuant
to subdivisions (b) and (c) of Section 2924b. The notice shall be
sent by first-class mail in the manner provided in paragraph (1) of
subdivision (c) of Section 2924b and inform each entitled person of
each of the following:
(1) That there has been a trustee's sale of the described real
property.
(2) That the noticed person may have a claim to all or a portion
of the sale proceeds remaining after payment of the amounts required
by paragraphs (1) and (2) of subdivision (a) of Section 2924k.
(3) The noticed person may contact the trustee at the address
provided in the notice to pursue any potential claim.
(4) That before the trustee can act, the noticed person may
be required to present proof of ownership of the obligation and the
security interest therefore, or, in the alternative, and indemnity in
the amount of the obligation. The noticed person also shall
submit a written claim to the trustee, executed under penalty of
perjury, stating the following:
(A) The amount of the claim to the date of trustee's sale.
(B) An itemized statement of the principal, interest, and other
charges.
(C) That claims must be received by the trustee at the address
stated in the notice no later than 30 days after the date the trustee
sends notice to the potential claimant.
(b) The trustee shall exercise due diligence to determine the
priority of the written claims received by the trustee to the trustee'
s sale surplus proceeds from those persons to whom notice was sent
pursuant to subdivision (a). In the event there is no dispute as to
the priority of the written claims submitted to the trustee, proceeds
shall be paid within 30 days after the conclusion of the notice
period. If the trustee has failed to determine the priority of
written claims within 90 days following the 30-day notice period,
then within 10 days thereafter the trustee shall deposit the funds
with the clerk of the court pursuant to subdivision (c) or file an
interpleader action pursuant to subdivision (e). Nothing in this
section shall preclude any person from pursuing other remedies or
claims as to surplus proceeds.
(c) If, after due diligence, the trustee is unable to determine
the priority of the written claims received by the trustee to the
trustee's sale surplus of multiple persons or if the trustee
determines there is a conflict between potential claimants, the
trustee may file a declaration of the unresolved claims and deposit
with the clerk of the superior or municipal court, as applicable, of
the county in which the sale occurred, that portion of the sales
proceeds that cannot be distributed, less any fees charged by the
clerk pursuant to this subdivision. The declaration shall specify
the date of the trustee's sale, a description of the property, the
names and addresses of all persons sent notice pursuant to
subdivision (a), a statement that the trustee exercised due diligence
pursuant to subdivision (b), that the trustee provided written
notice as required by subdivisions (a) and (d) and the amount of the
sales proceeds deposited by the trustee with the superior or
municipal court. Further, the trustee shall submit a copy of the
trustee's sales guarantee and any information relevant to the
identity, location, and priority of the potential claimants with the
superior or municipal court and shall file proof of service of the
notice required by subdivision (d) on all persons described in
subdivision (a).
The clerk shall deposit the amount with the county treasurer
subject to order of the superior or municipal court upon the
application of any interested party. The clerk may charge a
reasonable fee for the performance of activities pursuant to this
subdivision equal to the fee for filing an interpleader action
pursuant to Article 2 (commencing with Section 26820) of Division 2
of Title 3 of the Government Code. Upon deposit of that portion of
the sale proceeds that cannot be distributed by due diligence, the
trustee shall be discharged of further responsibility for the
disbursement of sale proceeds. A deposit with the clerk of the
superior or municipal court pursuant to this subdivision may be
either for the total proceeds of the trustee's sale, less any fees
charged by the clerk, if a conflict or conflicts exist with respect
to the total proceeds, or that portion that cannot be distributed
after due diligence, less any fees charged by the clerk.
(d) Before the trustee deposits the funds with the clerk of the
court pursuant to subdivision (c), the trustee shall send written
notice by first-class mail, postage prepaid, to all persons described
in subdivision (a) informing them that the trustee intends to
deposit the funds with the clerk of the superior or municipal court,
as applicable, and that a claim for the funds must be filed with the
court within 30 days from the date of the notice, providing the
address of the court in which the funds were deposited, and a phone
number for obtaining further information.
Within 90 days after deposit with the clerk, the court shall
consider all claims filed at least 15 days before the date on which
the hearing is scheduled by the court, the clerk shall serve written
notice of the hearing by first-class mail on all claimants identified
in the trustees' declaration at the addresses specified therein.
The court shall distribute the deposited funds to any and all
claimants entitled thereto.
(e) Nothing in this section restricts the ability of a trustee to
file an interpleader action in order to resolve a dispute about the
proceeds of a trustee's sale. Once an interpleader action has been
filed, thereafter the provisions of this section shall not apply.
(f) "Due diligence," for the purposes of this section means that
the trustee researched the written claims submitted or other evidence
of conflicts and determined that a conflict of priorities exists
between two or more claimants which the trustee is unable to resolve.
(g) Prior to July 1, 2000, the Judicial Council shall adopt a form
to accomplish the filing authorized by this section.
SEC. 6. Section 2924k of the Civil Code is amended to read:
2924k. (a) The trustee, or the clerk of the court upon order to
the clerk pursuant to subdivision (d) of Section 2924j, shall
distribute the proceeds, or a portion of the proceeds, as the case
may be, of the trustee's sale conducted pursuant to Section 2924h in
the following order of priority:
(1) To the costs and expenses of exercising the power of sale and
of sale, including the payment of the trustee's fees and attorney's
fees permitted pursuant to subdivision (b) of Section 2924d and
subdivision (b) of this section.
(2) To the payment of the obligations secured by the deed of trust
or mortgage which is the subject of the trustee's sale.
(3) To satisfy the outstanding balance of obligations secured by
any junior liens or encumbrances in the order of their priority.
(4) To the trustor or the trustor's successor in interest. In the
event the property is sold or transferred to another, to the vested
owner of record at the time of the trustee's sale.
(b) A trustee may charge costs and expenses incurred for such
items as mailing and a reasonable fee for services rendered in
connection with the distribution of the proceeds from a trustee's
sale, including, but not limited to, the investigation of priority
and validity of claims and the disbursement of funds. If the fee
charged for services rendered pursuant to this subdivision does not
exceed one hundred dollars ($100) one hundred
fifty dollars ($150), or 1 percent of the amount of the surplus
proceeds, whichever is greater , the fee is conclusively
presumed to be reasonable.
SEC. 7. Section 2924l of the Civil Code is amended to read:
2924l. (a) In the event that a trustee under a deed of trust is
named in an action or proceeding in which that deed of trust is the
subject, and in the event that the trustee maintains a reasonable
belief that it has been named in the action or proceeding solely in
its capacity as trustee, and not arising out of any wrongful acts or
omissions on its part in the performance of its duties as trustee,
then, at any time, the trustee may file a declaration of nonmonetary
status. The declaration shall be served on the parties in the manner
set forth in Chapter 5 (commencing with Section 1010) of Title 14 of
the Code of Civil Procedure.
(b) The declaration of nonmonetary status shall set forth the
status of the trustee as trustee under the deed of trust that is the
subject of the action or proceeding, that the trustee knows or
maintains a reasonable belief that it has been named as a defendant
in the proceeding solely in its capacity as a trustee under the deed
of trust, its reasonable belief that it has not been named as a
defendant due to any acts or omissions on its part in the performance
of its duties as trustee, the basis for that knowledge or reasonable
belief, and that it agrees to be bound by whatever order or judgment
is issued by the court regarding the subject deed of trust.
(c) The parties who have appeared in the action or proceeding
shall have 15 days from the service of the declaration by the trustee
in which to object to the nonmonetary judgment status of the
trustee. Any objection shall set forth the factual basis on which
the objection is based and shall be served on the trustee.
(d) In the event that no objection is served within the 15-day
objection period, then the trustee shall not be required to
participate any further in the action or proceeding, shall not be
subject to any monetary awards as and for damages, attorneys fees or
costs, shall be required to respond to any discovery requests as a
nonparty, and shall be bound by any court order relating to the
subject deed of trust that is the subject of the action or
proceeding.
(e) In the event of a timely objection to the declaration of
nonmonetary status, the trustee shall thereafter be required to
participate in the action or proceeding.
Additionally, in the event that the parties elect not to, or fail
to, timely object to the declaration of nonmonetary status, but later
through discovery, or otherwise, determine that the trustee should
participate in the action because of the performance of its duties as
a trustee, the parties may file and serve on the trustee a
demand to participate in the action all parties a
motion pursuant to Section 473 of the Code of Civil Procedure
that specifies the factual basis for the demand. Upon the
filing and service of the demand court's granting of
the motion , the trustee shall thereafter be required to
participate in the action or proceeding.
(f) Upon the filing of the declaration of nonmonetary status, the
time within which the trustee is required to file an answer or other
responsive pleading shall be tolled for the period of time within
which the opposing parties may respond to the declaration. Upon the
timely service of an objection to the declaration on nonmonetary
status, the trustee shall have 30 days from the date of service
within which to file an answer or other responsive pleading to the
complaint or cross-complaint.
SEC. 8. Section 2934a of the Civil Code, as added by Section 2.5
of Chapter 754 of the Statutes of 1993, is amended to read:
2934a. (a) (1) The trustee under a trust deed upon real property
or an estate for years therein given to secure an obligation to pay
money and conferring no other duties upon the trustee than those
which are incidental to the exercise of the power of sale therein
conferred, may be substituted by the recording in the county in which
the property is located of a substitution executed and acknowledged
by: (A) all of the beneficiaries under the trust deed, or their
successors in interest, and the substitution shall be effective
notwithstanding any contrary provision in any trust deed executed on
or after January 1, 1968; or (B) the holders of more than 50 percent
of the record beneficial interest of a series of notes secured by the
same real property or of undivided interests in a note secured by
real property equivalent to a series transaction, exclusive of any
notes or interests of a licensed real estate broker that is the
issuer or servicer of the notes or interests or of any affiliate of
that licensed real estate broker.
(2) A substitution executed pursuant to subparagraph (B) of
paragraph (1) is not effective unless all the parties signing the
substitution sign, under penalty of perjury, a separate written
document stating the following:
(A) The substitution has been signed pursuant to subparagraph (B)
of paragraph (1).
(B) None of the undersigned is a licensed real estate broker or an
affiliate of the broker that is the issuer or servicer of the
obligation secured by the deed of trust.
(C) The undersigned together hold more than 50 percent of the
record beneficial interest of a series of notes secured by the same
real property or of undivided interests in a note secured by real
property equivalent to a series transaction.
(D) Notice of the substitution was sent by certified mail, postage
prepaid, with return receipt requested to each holder of an interest
in the obligation secured by the deed of trust who has not joined in
the execution of the substitution or the separate document.
The separate document shall be attached to the substitution and be
recorded in the office of the county recorder of each county in
which the real property described in the deed of trust is located.
Once the document required by this paragraph is recorded, it shall
constitute conclusive evidence of compliance with the requirements of
this paragraph in favor of substituted trustees acting pursuant to
this section, subsequent assignees of the obligation secured by the
deed of trust and subsequent bona fide purchasers or encumbrancers
for value of the real property described therein.
(3) For purposes of this section, "affiliate of the licensed real
estate broker" includes any person as defined in Section 25013 of the
Corporations Code that is controlled by, or is under common control
with, or who controls, a licensed real estate broker. "Control"
means the possession, direct or indirect, of the power to direct or
cause the direction of management and policies.
(4) 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.
(b) If the substitution is effected after a notice of default has
been recorded but prior to the recording of the notice of sale, the
beneficiary or beneficiaries or their authorized agents
shall cause a copy of the substitution to be mailed, prior to the
recording thereof, in the manner provided in Section 2924b, to the
trustee then of record and to all persons to whom a copy of the
notice of default would be required to be mailed by the provisions of
Section 2924b. An affidavit shall be attached to the substitution
that notice has been given to those persons and in the manner
required by this subdivision.
(c) 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.
(d) This section shall become operative on January 1, 1998.