California Appeals Court Ruling Highlights Distinction Between Void & Voidable In Foreclosure Sale

A 2000 ruling of a California appeals court addresses the significance in making the distinction between a deed that is absolutely void, and one that is merely voidable. The case involved a foreclosure/trustee's sale of real estate owned by one, Dimock. At some point before the sale, the lender recorded a substitution of trustee which substituted Calmco Trustee Services, Inc. as the trustee of record in the place of Commonwealth Trust Deed Services, Inc., the original trustee. This substitution was ostensibly made in error, however, no one bothered to record any document which expressly abandoned or otherwise vacated the Calmco substitution. Commonwealth then carried out the foreclosure sale. In reversing a lower court ruling, the California appeals court found that the trustee's deed issued by Commonwealth was absolutely void (ie. wholly void, void ab initio) as opposed to being merely voidable because, based on the recorded documents, it had no authority to conduct the sale. It ruled that Calmco had the sole power to convey the property.

An excerpt from the ruling:

• As Dimock points out, because Commonwealth had no power to convey his property its deed to Emerald was void as opposed to merely voidable. That is, the Commonwealth deed was a complete nullity with no force or effect as opposed to one which may be set aside but only through the intervention of equity. (See Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354, 1358-1359 [233 Cal.Rptr. 923].)

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• The more fundamental difficulty we have with the defendants' contention that the Commonwealth deed was only voidable and not void, is that the particular circumstances which have permitted other courts to save defective foreclosure sales as voidable rather than void, do not exist here. In Little v. CFS Service Corp., supra, 188 Cal.App.3d at pages 1358-1359, the court reviewed the California cases which considered whether defects in notice made a foreclosure sale void or voidable. The court found: "Although the extent of the defect is not determinative, what seems to be determinative is the existence and effect of a conclusive presumption of regularity of the sale. A deed of trust, which binds the trustor, may direct the trustee to include in the deed to the property recitals that notice was given as required under the deed of trust and state that such recitals shall be conclusive proof of the truthfulness and regularity thereof." (Id. at p. 1359.)

• Where no such recitals as to the regularity of a sale appear in a deed and there was a defect in the notice to the trustor, the deed has been found void. (Ibid.) Where such recitals appear on the face of a deed but the deed also sets forth facts which are inconsistent with the recital of regularity, the deed has been found void on the basis that the deed showed that the recitals were not valid. (Ibid., citing Holland v. Pendleton Mtge. Co. (1943) 61 Cal.App.2d 570, 576-577 [143 P.2d 493].)

For the ruling, see Dimock v. Emerald Properties (2000) 81 Cal.App.4th 868 , 97 Cal.Rptr.2d 255.

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