Shuster v. BAC Home Loans Servicing, LP
149 Cal. Rptr. 3d 749
Cal. Ct. App.2012Background
- Shusters borrowed $670,000 in 2006 to buy a home; the deed of trust did not name a trustee.
- MERS was named as beneficiary, giving it power to foreclose and to appoint a trustee.
- After default in 2010, ReconTrust substituted as trustee and BAC acquired the deed of trust.
- BAC assigned its interest to Arch Bay, which purchased the property at the foreclosure sale.
- Shusters sued to set aside the sale, arguing the deed of trust lacked a trustee and was infirm; trial court held the omission did not impede enforcement.
- Arch Bay was found to have purchased the property at a properly noticed trustee’s sale; Shusters’ second amended complaint remained without viable tender claims; demurrers were sustained and actions dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Omission of trustee invalidates nonjudicial foreclosure? | Shusters—omission renders deed of trust invalid. | ReconTrust/MERS/BAC/Arch Bay—substitution approved; nonjudicial foreclosure proper. | No; omission does not preclude foreclosure; substitute trustee valid. |
| Foreclosing party must hold the note as holder in due course? | Only holder of the note can foreclose. | Statutory scheme permits foreclosure without possession of the original note. | Foreclosure proper without original note holder. |
| Tender requirement to challenge foreclosure; can claims survive without tender? | Alleged irregularities toll defenses even without tender. | Tender of amounts due is generally essential. | Demurrers proper; lack of tender defeats claims absent exceptions. |
Key Cases Cited
- In re Bisbee, 754 P.2d 1135 (Ariz. 1988) (trustee omission does not invalidate deed of trust; substitute trustee can foreclose)
- Mid City Management Corp. v. Loewi Realty Corp., 643 F.2d 386 (5th Cir. 1981) (omission of original trustee permits substitution and nonjudicial sale)
- Estate of Barter, 30 Cal.2d 549 (Cal. 1947) (equity will not let trust fail for lack of a trustee)
- Estate of McCray, 204 Cal. 399 (Cal. 1928) (equity preserves trust despite trustee absence)
- Lona v. Citibank, N.A., 202 Cal.App.4th 89 (Cal. App. 2011) (tender not required to foreclose under statutory scheme; exceptions apply)
- Karlsen v. American Sav. & Loan Assn., 15 Cal.App.3d 112 (Cal. App. 1971) (tender rule for canceling voidable sale; exceptions exist)
- Debrunner v. Deutsche Bank Nat. Trust Co., 204 Cal.App.4th 433 (Cal. App. 2012) (foreclosure can proceed without possession of original promissory note)