California Appellate Court Sustains Dismissal of Borrower’s Complaint On Very Narrow Grounds
Posted on September 17, 2011 by Neil Garfield
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See Calvo v HSBC
“The trial court did not err in sustaining the demurrer without leave to amend. Plaintiff’s lawsuit rests on her claim that the foreclosure sale was void and should [*5] 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.”
EDITOR’S COMMENT: This Court decision is wrong on the law even if it is narrow. A Deed of Trust is the same as a Mortgage and to construe it otherwise is to approve denial of due process guaranteed by the U.S. and California Constitution. These issues have been debated for years, and the courts have generally held that they know the definition of a mortgage regardless of what it is called and regardless of ornate provisions that might confer other rights.In Florida the gimmick of a Contract for Deed was set aside as a ruse which is exactly the same situation in a Deed of Trust. The appearance of the conveyance of title to real property is a conditional transaction that does not presume the transfer of title from the homeowner and al for all other purposes under law the homeowner is not considered to be the trustee it is considered to be the real people who bought the home.The following analysis taken from this case cited above is therefore wrong:
“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, 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.)”
Editor’s Note: If this line of reasoning were true, then the ability to take the property without due process would be complete and state sanctioned, which would clearly violate the requirement of court review. The finding that the failure to record is a matter for the state to decide, that much is true and this decision only applies to one narrow statute, which was probably a mistake for the appellant to have relied upon.The convoluted reasoning in this case is precisely because of the confusion created by the securitization scam. we never had to consider seriously the possibility of actually splitting the security and the obligation and the possibility that the note did not accurately reflect the obligation, nor that the mortgage lien might not be perfected as a lien because of the failure to adhere to other recording requirements that would satisfy the purpose of recording — to give notice to the world of who owns the property and what liens have attached.This appellate court, like many trial courts is sliding down a slippery slope. It is creating an opening for uncertainty in the marketplace that the recording statutes are meant to close. The result is that nobody can issue a warranty deed without doing an exhaustive investigation into facts that are probably not discoverable to them. Nobody can take a warranty deed or expect title insurance to cover the issue either. It is bending the rules around into something that is unrecognizable.
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