Difference Between Mortgage and Deed of Trust California
The void nature of the Commonwealth deed derives in some measure from the fact that our courts have adopted a title theory of deeds of trust. (Bank of Italy etc. Assn. v. Bentley (1933) 217 Cal. 644, 655 [20 P.2d 940].)
"[A] deed of trust differs from a mortgage in that title passes to the trustee in case of a deed of trust, while, in the case of a mortgage, the mortgagor retains title; that the statute of limitations never runs against the power of sale in a deed of trust, while it does run against a mortgage; and that a mortgagor has a statutory right of redemption after foreclosure [citation], while no such right exists under a deed of trust." (Ibid.)
Given that title to property is held by the trustee under a deed of trust, it is difficult to accept the notion that one who no longer has title could nonetheless convey effective title. Admittedly, however, the title theory of deeds of trusts does not control their treatment in all circumstances. (Id. at pp. 655-656.)
In any number of cases the title theory has been ignored in order to afford borrowers with the protection provided to mortgagors. (Ibid.)
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].)
Only where recitals of regularity appear in the deed and no contrary recitals are made have notice defects been found to make a deed voidable, rather than void. (Little v. CFS Service Corp., supra, 188 Cal. App. 3d at p. 1359.)
In such instances a trustor then bears the burden of showing that there are grounds for equitable relief from the deed, such as fraud or that the buyer was not a bona fide purchaser for value, and that there were also defects in notice. (Ibid.)
In addition, in the context of overcoming a voidable sale, the debtor must tender any amounts due under the deed of trust. (See Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal. App. 3d 112, 117 [92 Cal. Rptr. 851]; Py v. Pleitner (1945) 70 Cal. App. 2d 576, 582 [161 P.2d 393].)
This requirement is based on the theory that one who is relying upon equity in overcoming a voidable sale must show that he is able to perform his obligations under the contract so that equity will not have been employed for an idle purpose. (Karlsen v. American Sav. & Loan Assn., supra, 15 Cal.app.3d at p. 118.)