Friday, October 29, 2004

Another Bench Blunder

Now comes before this court a case from one Judge James D. Ward, (California appelate court) who figured the FDCPA didn't apply to stopping a foreclosure when the borrowers challenged the validity of a debt. Styled Sulak, et al. v. Mortgage Electronic Registration System, Inc., et al., No. E035021 (Cal Ct. App. 09/20/04).

The squaliformes, according to this yahoo at least, can violate the Fair Dept Collection Practices Act by refusing to provide debt validation information as the law requires, and they can keep on trying to foreclose and don't have to worry about a victim suing under the Act and stopping the foreclosure via an injunction. In his reasoning (?) the act doesn't offer equitable or injunctive relief, only monetary damages and to top it off, he thinks it's unclear as to whether the Act even applies to mortgage foreclosures! (Even though the notices say that they are attempts to collect a debt!)

Of course, since the victims appeared pro se and they were up against one of the squaliformes foreclosure mills (Moss Pite & Duncan), this Court duly recognizes the nature of the prejudice against the victims so commonly demonstrated in these kinds of cases.

Therefore, Judge Ward, it is the judgement of this Court that you are hereby guilty of judicial lunacy. Your sentence is that you serve five days as a guest in our jail and be fined one hundred dollars in gold pieces.

So ordered. Bailiff, take Judge Ward into custody. And keep him outta sight. And keep an extra shotgun handy. No telling what form of low-life might find its way in here to pay his fine.

The Honorable Judge Roy Bean.


ANN HOLDEN said...

Bulletin #00-23
Chief/Advisory Title Officers
Fidelity National Title Company
American Title Company
Authorized Agents
Douglas W. Borchert
Northern California Underwriting
August 14, 2000
Dimock v. Emerald Properties LLC
OO C.D.O.S. 5010
In Handling a Single Non-Judicial Foreclosure Two Trustees is Too Much of
a Good Thing.
Dimock purchased a house and financed it with an $80,000 deed of trust which was
eventually assigned to Bankers Trust Company [”Bankers”]. When Dimock defaulted on the
payments, Bankers’ agent, Commonwealth Trust Deed Services (“Commonwealth”), prepared a
notice of default which was recorded by its agent, T.D. Service Co. (“TD”).
Dimock entered into a forbearance agreement with Bankers and Temple Inland Mortgage
Corp. (“Temple”). Bankers agreed to forebear from foreclosing in return for Dimock’s promise
to make a series of payments which would bring the loan current. He made the initial
forbearance payment and then defaulted again.
TD recorded a substitution of trustee at Banker’s request naming Calmco Trustee’s
Service (“Calmco”) as trustee. TD, acting on behalf of Calmco recorded a notice of default for
Calmco which bore the standard language - “ No sale date may be set until three months from the
date this notice may be recorded.” TD later testified the substitution of trustee and second notice
of default were mistakes. The employee was not aware of the other pending foreclosure in which
Commonwealth had been named the trustee. Calmco did not send Dimock copies of the new
substitution of trustee or notice of default. Calmco abandoned its “trusteeship in error” by
closing the file.
TD, acting on behalf of Commonwealth, recorded a notice of trustee’s sale under the
original default file. TD sold the property at the sale to Emerald Properties LLC
[”Emerald”]Dimock filed an action for declaratory relief and injunctive relief. He alleged the
Calmco substitution rendered the trustee’s sale void. The trial court denied his motion for
summary judgment and granted the defendants’ competing summary judgment motion.
The Court of Appeal reversed the trial court. Bankers had duly substituted Calmco as
trustee through Banker’s agent, TD. Commonwealth could not, therefore, execute the trustee’s
deed. Only one entity at a time can act as trustee under the terms of Civil Code Section 2934(a).
The Court rejected TD’s argument that by its closing and abandoning the Calmco file,
Commonwealth was defacto reinstated as trustee. The only way to substitute a trustee is by
recording the document specified in Civil Code Section 2934(a). An off record abandonment
does not suffice.
Since Commonwealth lacked the power to convey, its deed to Emerald was void, a
complete nullity, rather than merely voidable. The Court noted that trustee’s deeds contain
recitals of regularity and added:
Because there was no recital in the Commonwealth deed to
Emerald which undermined the Calmco substitution, the deed
to Emerald did not create any conclusive presumption that
Commonwealth continued to act as trustee.
The Court concluded that Dimock could rely on the trustee’s deed itself to show that the
Commonwealth trustee’s deed was void. The Court reversed the trial court decision and
instructed the trial court to quiet title in Dimock subject to such encumbrances that existed at the
time of the foreclosure sale.
The Company prepares and issues Trustee’s Sale Guarantees for use in non-judicial
foreclosure sales. At various points in the process, i.e. recording the notice of trustee’s sale,
preparing to hold the sale, the Company issues date down endorsements that disclose new
matters that have recorded after the date of issuance of the trustee’s sale guarantee which is the
date of recording the notice of default.
The foreclosure process seldom runs smoothly. There are frequently delays related to
events such as the trustor’s bankruptcy or negotiations between trustor and the beneficiary to cure
the default, such as the one involved in this action. Company personnel need to use particular
care in issuing these date down endorsements. Procedural errors, such as the “double
substitution” in this case, need to be accurately reported in the date down endorsements so the
- 3 -
assured under the guarantee has the opportunity to note them and to take remedial action before
the sale.
Corporate Underwriting is available to assist in the resolution of such issues.

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