Bank's Agreement To Accept Late Loan Payment Invalidates Trustee's Sale (Even If Trustee Was Unaware)
Question: If a bank accepts a late loan payment and reinstates a loan - but doesn't tell the trustee, who conducts the sale and delivers a trustee's deed with all necessary recitals - is the sale still invalid?
Answer: Yes, according to the court of appeal in Bank of America, N.A. v. La Jolla Group II, 05 C.D.O.S. 4271 (May 19, 2005).
In so holding, the court first rejected the argument by the foreclosure sale purchaser (La Jolla) that the bank's voluntary agreement to cure the default was ineffective because it did not take place within the five-day period granted to a trustor by law (CCP § 2924c) to cure a default as a matter of right. "Section 2924c is irrelevant [because] we are dealing with a cure and reinstatement by mutual consent, not one forced on the beneficiary by statute."
It also rejected La Jolla's argument that, as a bona fide purchaser, it was entitled to a statutory presumption (CCP § 2924) that the sale had taken place in compliance with all requirements of law regarding notice. So what? "There is no contention in this case that the foreclosure sale was not properly noticed." And, La Jolla did not argue that bona fide purchaser status supported its position, "other than through the statutory provisions we have found inapplicable."
For good measure, the court also rejected La Jolla's argument that once a trustee's deed has been delivered with recitals of statutory compliance, the deed simply cannot be void as a matter of law. "We know of no authority for this proposition."