California Appeals Court Affirms Decision Requiring Recordation of Assignment for a Mortgage but not Deed of Trust

On September 11, the California Court of Appeals for the Second Appellate District affirmed a lower court's ruling that California Civil Code §2932.5 does not apply when the power of sale is conferred in a deed of trust rather than a mortgage. Calvo v. HSBC Bank USA, N.A., No. BC415545 (Cal. Ct. App. 2011) The plaintiff received a loan, not from the defendant, that was secured by a deed of trust against her residence and was recorded on September 1, 2006. In 2008, a substitution of trustee and notice of default was recorded by the defendant purporting to be the assignee of the loan.  The substitution of trustee did indicate that an assignment had occurred, however, no actual assignment of deed of trust was recorded.  The defendant assignee bought the plaintiff's residence at the foreclosure sale.  The plaintiff then sued, alleging that the defendant violated California law by initiating the foreclosure proceeding under the deed of trust without recording the assignment of the deed of trust. The court held that it has been established since 1908 that under §2932.5, an assignment for the beneficial interest in a debt that was secured by real property required recordation if the assignee wanted to exercise the power of sale only for a mortgage and not for a deed of trust. The court noted that this holding has never been reversed or modified in any reported California decision in the 100 years since. Plaintiff contended that in the modern era, no difference exists between a mortgage and a deed of trust. The court responded that California case law does not support that interpretation and that other statutes allowed parties to initiate foreclosure on behalf of the defendant irrespective of the recording of an assignment of deed of trust.