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| Gary F. Torrell |
In a new California appellate court decision published this week called Bank of New York Mellon v. Preciado, the bank foreclosed on the borrower's home pledged as security for the loan and then sought to evict the former owners. According to the decision, the bank made several mistakes along the way, including: (1) failure to provide proof the trustee who conducted the foreclosure sale had been properly substituted in place of the trustee named in the deed of trust; (2) the unlawful detainer complaint and judgment for possession incorrectly described the property as being located in San Jose instead of Alviso, California; and (3) the three-day notice to quit required before filing an unlawful detainer action was not properly served. As a result, the appellate court reversed the trial court's ruling in favor of the bank, which allowed the former owners to remain in the property (presumably rent free and mortgage free) since July 2011, when the bank acquired title to the property.
This case proves how lenders must comply "by the book" with California's non-judicial foreclosure and eviction statutes when dealing with a borrower who fails to repay the loan and attempts to retain possession of the residential property after foreclosure. Many lenders leave the duties associated with loan defaults and remedies to lower level, non-attorney employees who may lack the knowledge or experience to ensure the title company conducting the foreclosure and third parties conducting an eviction strictly comply with California law. California courts can be harsh on such lenders, as this case shows.
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