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No Need To Record An Assignment Of A Deed Of Trust Prior To Foreclosure

In Calvo v. HSBC Bank USA, --- Cal.Rptr.3d ----, 2011 WL 4035791 (Cal.App. 2 Dist. 2011), the California Court of Appeal affirmed the longstanding rule that an assignee of a beneficiary under a deed of trust need not record its beneficial interest prior to initiating foreclosure. In Calvo, the plaintiff argued the foreclosure sale of her property was void because HSBC did not record the assignment of the beneficial interest from the original lender to HSBC. She claimed this violated California Civil Code Section 2932.5. Like the lower court, the Court of Appeal found "no merit" to her claims.

In reaching its decision, the Court of Appeal relied on the plain language of Civil Code Section 2932.5. That section requires the recording of a beneficial interest in real property prior to foreclosure only when "the power of sale is given to a mortgagee, or other encumbrancer." Since 1908, however, this requirement applies only to mortgages, not to deeds of trust. Under a deed of trust, title to the encumbered property is transferred to a trustee, who also exercises the power of sale. A mortgage, however, is a lien on real property, title of which remains with the borrower. Over the course of the last century, "deeds of trust have largely replaced mortgages as the primary real property security device." As a result, Section 2932.5 has become "practically obsolete." For these reasons, the plaintiff had no legal basis to set aside the trustee's sale following foreclosure. 

Calvo v. HSBC Bank USA, --- Cal.Rptr.3d ----, 2011 WL 4035791 (Cal.App. 2 Dis. 2011) 

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About this Author

Alejandro Moreno, Attorney, Sheppard Mullin,  Business Trial Practice

Mr. Moreno is an associate in the Business Trial Practice Group in the firm's San Diego office.

Areas of Practice

Mr. Moreno practices general business and commercial litigation in both state and federal courts. He has experience handling matters in a diverse array of industries, including the banking and finance, mortgage, hospitality, technology and telecommunications, energy and extraction, and pharmaceutical industries. He is also experienced in the law of receivership and has actively managed the legal affairs of businesses placed into receivership. He...

Shannon Z. Petersen, Business Trial Legal Specialist, Sheppard Mullin

Shannon Z. Petersen is a partner in the Business Trial Practice Group in the firm’s Del Mar office and is co-chair of the firm’s consumer class action defense team and the firm’s TCPA class action defense team.

Areas of Practice

Dr. Petersen has substantial trial experience as a business litigator, including consumer class action defense. He has successfully represented clients in claims involving the federal Telephone Consumer Protection Act (TCPA), the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Acting (FCRA), the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Acts (RESPA); California's Unfair Competition Law (UCL), Consumers Legal Remedies Act (CLRA), Rosenthal Act, Automobile Sales Finance Act (ASFA or Rees-Levering), Vehicle Leasing Act, Confidentiality of Medical Information Act (CMIA); breach of contract, insurance bad faith, unfair business practices, false advertising, fraud, breach of fiduciary duty, negligence, wrongful foreclosure, wrongful repossession, unfair debt collection, unfair credit reporting, unjust enrichment, misappropriation of trade secrets, trademark infringement, quiet title, emotional distress, construction defect, privacy, and receiverships, among others.