Reset A A Font size: Print

Court of Appeal, Fourth District, Division 1, California.

I.E. ASSOCIATES, Plaintiff and Appellant, v. SAFECO TITLE INSURANCE COMPANY, Defendant and Respondent.


Decided: July 02, 1984

Procopio, Cory, Hargreaves & Savitch, Richard H. Benes and Linda Cory Allen, San Diego, for plaintiff and appellant. Higgs, Fletcher & Mack, Sheila M. Muldoon, San Diego, for defendant and respondent.

I.E. Associates (Associates), a general partnership, became a defaulting trustor under a deed of trust when it failed to receive notice of the default before its property was sold through a nonjudicial foreclosure.   Associates claims damages on alternative theories of negligence and breach of trust against its trustee, Safeco Title Insurance Company (Safeco).   On appeal of a summary judgment, Associates contends there are triable issues of fact whether Safeco had “actual knowledge” of its then current address, as defined by Civil Code 1 section 2924b, and whether Safeco, as a common agent for both Associates and the beneficiary of the deed of trust, used reasonable efforts to locate and inform Associates of the impending foreclosure once it learned the mailed notices were returned unclaimed.

We hold a trustee under a deed of trust has no statutory duty to a trustor to independently search to discover a defaulting trustor's current address to which to mail notice of default and/or pending foreclosure and fulfills its statutory obligation by mailing such notice to the last address it actually knows, even when made aware that notices mailed to that address are not received.   However, we hold a trustee, who is also an agent for the trustor, has a common law duty to use reasonable efforts to notify a defaulting trustor and whether, on these facts, Safeco breached that obligation is a triable issue.


In April 1977, Associates purchased real property, securing its promissory note by a deed of trust, identifying Associates, a general partnership, as the trustor.   The trust deed named each of the four partners, and listed Associates' address as “480 Camino Del Rio South, San Diego, California 92108.”   Associates hired Mission Professional Properties (MPP) to manage the property and make installment payments on the promissory note.

On January 12, 1982, the beneficiaries under the deed of trust notified Safeco of Associates' default.   Unknown to Associates, MPP stopped making the monthly payments in July 1981.

Safeco recorded a notice of default and election to sell.   From information supplied by the beneficiaries and the absence of either a change-of-address notification to Safeco or a recorded request for a notice of default, Safeco determined Associates' last known address was the same as specified on the deed of trust.   A notice of default sent by registered mail to that address was returned, marked “address unknown.”   Safeco then noticed the grant deed was addressed to Associates in care of MPP at a suite at the same street address.   A notice mailed to the address on the grant deed was also returned.   Finally, Safeco searched the 1982 San Diego telephone directory for Associates' listing, but found none.   Safeco did not, however, look for individual listings for any of the partners.   The partners' individual addresses were in the directory, and filed with the County Clerk on the Fictitious Business Name Statement for Associates.

Safeco's recorded notice of sale was posted on the property described in the deed of trust and at the San Diego County Courthouse, and published according to law.   The notice of sale was again mailed to Associates at both previously used addresses, and the letters were again returned unopened.

The surplus of the sale was distributed to the partners of Associates in care of their attorney.   The communication regarding the surplus was the first actual notice Associates or its partners received.

Safeco obtained a summary judgment.


Preliminarily, we address the standard for appellate review of a summary judgment.   A summary judgment “shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”  (Code Civ.Proc., § 437c, subd. (c).)  Thus, we engage in issue finding, not issue determination.  (Southern Pacific Co. v. Fish, 166 Cal.App.2d 353, 358, 333 P.2d 133.)

 The trial court must consider “all of the evidence set forth in the papers, except that to which objections have been made and sustained by the court, and all references reasonably deducible from such evidence ․”  (Code Civ.Proc., § 437c, subd. (c).)  The movant's papers must be strictly construed (Eaton v. Connolly-Pacific, Inc., 134 Cal.App.3d 825, 828, 184 Cal.Rptr. 852), and a defendant moving for summary judgment “must conclusively negate a necessary element of the plaintiff's case or establish a complete defense, and thereby demonstrate that under no hypothesis is there a material factual issue which requires the process of a trial.”  (Vanderbilt Growth Fund, Inc. v. Superior Court, 105 Cal.App.3d 628, 633–634, 164 Cal.Rptr. 621.)   If the defendant fails to sustain this burden, the trial court is powerless to proceed under the motion, and must allow the unrefuted issue to be tried.   (Lynch v. Spilman, 67 Cal.2d 251, 271, 62 Cal.Rptr. 12, 431 P.2d 636.)


On appeal, Associates first contend Safeco possessed information sufficient to raise a triable issue as to whether Safeco actually knew Associates' last known address.   It argues Safeco actually knew the names of the individual partners and could have discovered their individual names and addresses by looking in the local telephone directory;  and since, under Corporations Code section 15012, notice to any partner is notice to the partnership, Safeco had actual knowledge of Associates' last known address.   Having such knowledge, Safeco could have properly mailed the default notices as prescribed by section 2924b.   The syllogism is inapposite.

Section 2924b, subdivision (2)(a) states the trustee under a deed of trust shall mail the notice of default “to each trustor ․ at his last known address if different than the address specified in the deed of trust or mortgage with power of sale.”   Subdivision (2)(c) specifically defines the last known address of the trustor as “the last business or residence address actually known by the mortgagee, beneficiary, trustee, or other person authorized to record the notice of default.”  (Italics added.)

 Under the plain meaning of subdivision (2)(c), Associates' argument is meritless.   It is accepted and codified actual knowledge is that “which consists in express information of a fact ․”  (§ 18;  see Prouty v. Devin, 118 Cal. 258, 260, 50 P. 380;  Mason v. Hart, 140 Cal.App.2d 349, 355, 295 P.2d 28.)

Associates presented no evidence Safeco actually knew either the partnership's current address or the address of any partner.   Associates established only that Safeco knew the names of the general partners.   Although these circumstances are sufficient to put Safeco upon inquiry as to Associates' new address, by definition it is constructive, not actual, knowledge (§ 19;  Mason v. Hart, supra, at p. 355, 295 P.2d 28) of that address.

Associates offers no statutory or case law to support its construction of section 2924b, arguing only the legislative policy embodied in the 1979 amendment to the section requires the trustee to exercise “some effort” to ascertain actual knowledge of the trustor's address.  (Stats. 1979, ch. 1015, § 1.)   While the Legislature admittedly attempted to provide greater protection to property owners by its 1979 amendment (see Sen.Com. on the Judiciary, Analysis of Senate Bill 1126 as Amended May 21, 1979, pp. 1–2), it stopped short of adopting Associates' interpretation of a trustee's duty.   The statute specifically requires actual knowledge of the trustor's address, and this Safeco did not have.   Safeco complied with the provisions of section 2924b.


Associates' second contention appears not to have been judicially resolved in this state.   Specifically, does the trustee, under agency principles, have a duty independent of section 2924b, to use reasonable efforts to contact the trustor regarding notice of default?   We determine the trustee has such a duty.

 A trustee under a deed of trust has neither the power nor the obligations of an ordinary trustee.  (Fleisher v. Continental Auxiliary Co., 215 Cal.App.2d 136, 139, 30 Cal.Rptr. 137.)   Technically, such person is not a trustee at all (Lancaster Security Inv. Corp. v. Kessler, 159 Cal.App.2d 649, 656, 324 P.2d 634), but is “merely a ‘functionary of limited power, under a type of mortgage conferring upon him the power to convey under the prescribed conditions' [citation]” (Fleisher v. Continental Auxiliary Co., supra, 215 Cal.App.2d at p. 139, 30 Cal.Rptr. 137) and is bound to follow the provisions of the deed of trust and applicable law.  (Sohn v. California Pac. Title Ins. Co., 124 Cal.App.2d 757, 766, 269 P.2d 223;  Fleisher v. Continental Auxiliary Co., supra, 215 Cal.App.2d at p. 139, 30 Cal.Rptr. 137.)

 The trustee is also characterized as a common agent of both the beneficiary and the trustor.  (Lupertino v. Carbahal, 35 Cal.App.3d 742, 747, 111 Cal.Rptr. 112.)   The trustee's obligations under this tripartite arrangement are “measured by an application of the ordinary principles of agency.”  (Woodworth v. Redwood Empire Sav. & Loan Assn., 22 Cal.App.3d 347, 366, 99 Cal.Rptr. 373.)

 In synthesizing the various characterizations of California cases, we find the trustee's general duties are an amalgam of the terms of the deed of trust, the applicable statutory law, and ordinary agency principles.

 Safeco argues section 2924b exclusively delimits the obligations of the trustee when giving notice of default.   However, a review of the section's legislative history shows no express supplantation of common law agency principles.   The most recent amendment of section 2924b, while adding new duties, does not denominate this section as defining the entire scope of a trustee's obligations.  (Stats. 1979, ch. 1015, § 1.)   Moreover, the operation of section 2924b is not repugnant to a trustee's agency duties.   In fact, these agency duties may complement the purpose of section 2924b—the assurance of notice to a defaulting trustor before the statutory time to cure the default expires.   As the present case illustrates, full compliance with statutory requirements will not always provide even an innocent, local trustor with notice of impending foreclosure.   The trustee's exercise of reasonable efforts and due diligence may result in notice to an otherwise “lost” trustor, preventing forfeitures of valuable property rights.   Commentators have suggested such nonstatutory duties might include examination of the local telephone directory, inquiry to the Department of Motor Vehicles, or similar non-extraordinary investigations.2  (1 Miller & Starr, Current Law of California Real Estate (1983 pocket supp.) § 3:106, p. 214.)

Safeco cites Lupertino v. Carbahal, supra, 35 Cal.App.3d 742, 747, 111 Cal.Rptr. 112, and McClatchey v. Rudd, 239 Cal.App.2d 605, 48 Cal.Rptr. 783, to support its proposition a trustee has no duty to give notice beyond that statutorily prescribed.   Safeco's argument mistakes the application of those cases.   In Lupertino, the plaintiffs sought to reverse orders denying an injunction of a foreclosure sale.   In McClatchey, the plaintiff attempted to vacate a nonjudicial foreclosure sale.   Thus, in both cases, the validity of the sale under the requirements of section 2924b was in question.   In that circumstance, the law is clear “that the only requirements essential to a valid notice of default and election to sell under a deed of trust are those expressly prescribed by statute or the instrument itself.”   (Lupertino v. Carbahal, supra, 35 Cal.App.3d at p. 748, 111 Cal.Rptr. 112, italics in original.)

 Here, Associates seeks damages for negligence and breach of trust.   Safeco's performance, not the validity of the sale, is the gravamen of the complaint.   Safeco's actual performance must be tested by ordinary principles of agency.   Whether Safeco fulfilled its agency responsibilities to Associates by its minimal efforts to locate a current address likely to give actual notice and afford Associates an opportunity to avoid foreclosure, remains a question of fact.

 Finally, Safeco counsels against recognizing agency duties, fearing the practicability and efficiency of nonjudicial foreclosure would be undermined.   Safeco's argument again misconstrues the nature of the trustee's agency duty in regard to notice of default.   At most, this duty requires some reasonable efforts to locate an otherwise unlocated trustor.   It does not modify the statutory notice requirements of section 2924b, nor does it require actual notice to the trustor.   Moreover, the prerequisites of a valid nonjudicial sale will be measured by compliance with statutory requirements, not reasonable efforts.  (See Lupertino v. Carbahal, supra, 35 Cal.App.3d 742, 749, 111 Cal.Rptr. 112.)

Judgment affirmed as to the second cause of action;  judgment reversed as to the first cause of action.

I agree that Safeco's performance under Civil Code 2924b raises no triable issues.   I respectfully disagree, however, that Safeco has a common law duty to make reasonable efforts to contact the trustor.

The procedures governing nonjudicial foreclosures of deeds of trust are entirely a creature of statute.   In Civil Code sections 2924 through 2924h (the “private sale” statutes), the Legislature has created “a comprehensive statutory scheme regulating in detail all aspects of the nonjudicial foreclosure process.”  (Garfinkle v. Superior Court (1978) 21 Cal.3d 268, 278, 146 Cal.Rptr. 208, 578 P.2d 925, italics supplied (app. dism., 439 U.S. 949, 99 S.Ct. 343, 58 L.Ed.2d 340, rehg. den., 439 U.S. 1104, 99 S.Ct. 886, 59 L.Ed.2d 66), citing Smith v. Allen (1968) 68 Cal.2d 93, 96, 65 Cal.Rptr. 153, 436 P.2d 65.)   This comprehensive and detailed scheme reflects a legislative intent to cover the entire subject of nonjudicial foreclosures.   The private sale statutes, therefore, are the exclusive source of law on rights, duties and liabilities in the context of nonjudicial foreclosures.  (See Civ.Code, § 4;  Estate of Hering (1980) 108 Cal.App.3d 88, 92, 166 Cal.Rptr. 298;  Gray v. Sutherland (1954) 124 Cal.App.2d 280, 290, 268 P.2d 754;  cf. Justus v. Atchison (1977) 19 Cal.3d 564, 574–575, 139 Cal.Rptr. 97, 565 P.2d 122;  see also 3 Sutherland Statutory Construction (Sands rev. ed. 1974) § 61.03, p. 51, fn. 5 and accompanying text.)   It is thus the function of the Legislature to implement any expansion of the duties of trustees vis-a-vis trustors.

The private sale statutes as an alternative to judicial foreclosure represent an evolving and carefully crafted balancing of interests as between creditors/beneficiaries, debtors/trustors and intermediaries/trustees.   Beneficiaries are desirous of quickly and inexpensively recovering amounts due under promissory notes in default.  (See 1 Miller & Starr, Current Law of Cal. Real Estate (rev. ed. 1975) § 3:97, p. 501.)   Trustors need protection against the forfeiture of valuable property rights.   Trustees need clearly defined responsibilities enabling them to efficiently discharge their duties and avoid embroiling the parties in time-consuming and costly litigation.   The private sale statutes take all these concerns into account.   In so doing, the statutes strike an overall balance favoring the protection of debtors/trustors.  (Garfinkle v. Superior Court, supra, 21 Cal.3d at p. 278, 146 Cal.Rptr. 208, 578 P.2d 925;  Smith v. Allen, supra, 68 Cal.2d at p. 96, 65 Cal.Rptr. 153, 436 P.2d 65;  Baron v. Colonial Mortgage Service Co. (1980) 111 Cal.App.3d 316, 322, 168 Cal.Rptr. 450;  Lupertino v. Carbahal (1973) 35 Cal.App.3d 742, 746, 111 Cal.Rptr. 112.)   The majority's effort to engraft what they perceive as another protection upsets that balance by creating an unnecessary impediment to the expeditious and economical recovery of amounts due.   That impediment will manifest itself not only in additional efforts required to be made by trustees but, more significantly, in litigation (at least to the summary judgment stage) challenging the sufficiency of trustees' efforts.   Even if nonjudicial foreclosures continue unabated, the additional protection has financial repercussions increasing costs passed on to debtors/trustors as consumers of financing and trustee services.   The costs of related services, such as title insurance, will also rise.   In any event, the policy issues and empirical contingencies inherent in creating the duty imposed by the majority are properly addressed by the Legislature in the same manner as it has done in the past after input from all affected groups through the political process.   It requires little imagination to appreciate the dynamics of the respective lobbying groups interested in this subject.

I believe the Legislature has intentionally rejected enactment of the duty imposed on trustees established by the majority in this case.   Our Supreme Court in Garfinkle v. Superior Court, supra, 21 Cal.3d 268, 146 Cal.Rptr. 208, 578 P.2d 925, noted the private sale statutes as then in effect did not always ensure actual notice to trustors of default and sale, and suggested the Legislature should “consider enacting provisions which would require the trustee to make reasonable efforts to ascertain the trustor's present address and to send the required notice [of default and sale] to that address.”   (Id., at p. 283, fn. 22, 146 Cal.Rptr. 208, 578 P.2d 925.)   The Legislature has amended Civil Code section 2924b twice in the six years since Garfinkle was decided.  (Stats.1979, ch. 1015, § 1, pp. 3465–3468;  stats. 1980, ch. 925, § 1, pp. 2933–2936.)   On neither occasion did the Legislature adopt the Supreme Court's suggestion.   In fact, in 1979 the Legislature added subdivision (2)(c) to provide a trustee shall incur “no liability” for failing to send a notice of default and sale to a trustor at an address actually known to the beneficiary but unknown to the trustee.  (Stats.1979, ch. 1015, § 1, p. 3466.)   Although the Legislature specifically imposed a duty on beneficiaries to notify trustees of trustors' addresses actually known to the beneficiaries (ibid.), it imposed no comparable duty on trustees to take steps to keep up to date on trustors' movements.   Significantly, the Legislature declined to impose such a duty with the realization that the 1979 amendments to the private sale statutes would perpetuate the possibility that trustors in some cases would not receive actual notice of default and sale.  (See Analysis of SB 1126 Smith (as amended May 21, 1979) Senate Com. on Judiciary, pp. 1–2.)   In light of this legislative history, it is inappropriate for a court to impose on trustees a duty designed to require efforts and to achieve objectives which the Legislature has rejected in a subject area to which it has given comprehensive and detailed attention over the years.

I also question some of the legal and factual premises underlying the majority's holding.   Most significantly, I disagree that the “purpose of section 2924b” is “the assurance of notice to a defaulting trustor before the statutory time to cure the default expires.”   As protective as the private sale statutes are, nothing in them requires actual notice to the trustor of default and sale.  (Lupertino v. Carbahal, supra, 35 Cal.App.3d at p. 746, 111 Cal.Rptr. 112;  see Garfinkle v. Superior Court, supra, 21 Cal.3d at p. 283, fn. 22, 146 Cal.Rptr. 208, 578 P.2d 925.)   Instead, the statutes “simply mandate certain procedural requirements reasonably calculated to inform those who may be affected by a foreclosure sale and who has requested notice in the statutory manner that a default has occurred and a foreclosure sale is imminent.”  (Lupertino v. Carbahal, supra, 35 Cal.App.3d at pp. 746–747, 111 Cal.Rptr. 112.)   Given the constitutionality of this procedure (Garfinkle v. Superior Court, supra, 21 Cal.3d at pp. 271–272, 276–283, 146 Cal.Rptr. 208, 578 P.2d 925), there is no need for this court to create a common law duty designed to give trustors actual notice.

I also doubt whether the trustor in this case can be labeled “innocent” (slip opn., at p. 344) given the failure of the trustor and its partners to request notices of default and sale.  (Id., at p. 342;  Civ. Code, § 2924b, subd. (1).)  Such requests would have required little effort and even less foresight.  “[T]he law does not always provide a remedy where litigants have failed to take the obvious steps necessary for the protection of their own interests, particularly where such steps are specifically outlined by statute.”  (McClatchey v. Rudd (1966) 239 Cal.App.2d 605, 608, 48 Cal.Rptr. 783.)

I believe it is a mistake to provide the trustor in this case and trustors generally with a “remedy” in the form of an action for damages for negligence.   The entire statutory scheme governing private sales of property under deeds of trust is based on considerations of who can most cheaply avoid the risks inherent in the context of nonjudicial foreclosures.  Lupertino and McClatchey tell us the trustor can most economically avoid the risk of forfeiture by keeping the beneficiary and trustee informed of its current address.  (See 35 Cal.App.3d at pp. 746–748, 111 Cal.Rptr. 112;  239 Cal.App.2d at pp. 607–608, 48 Cal.Rptr. 783.)   Allocating this duty to the trustor helps

“to promote a maximum opportunity for real property sales, exchanges and ownership and at the same time to foster a means of optimum protection for each of the participants.   We accordingly hold that the only requirements essential to a valid notice of default and election to sell under a deed of trust are those expressly prescribed by statute or the instrument itself.

“Thus under ordinary circumstances where a trustor changes his address and neglects to comply with section 2924b, he has no cause to complain if he fails to receive a duly mailed notice of default or notice of sale.   Neither a trustee nor beneficiary is required to keep track of the location or residence changes of a trustor.   To so hold would impose an impractical burden on the creditor-trustee and effectively impair well-established procedures for providing marketable title to real property in California, subject to deeds of trust.”  (Lupertino v. Carbahal, supra, 35 Cal.App.3d at p. 748, 111 Cal.Rptr. 112, italics in original.)

Although the majority distinguishes the rationale and holdings of Lupertino and McClatchey based on the trustors' efforts in those cases to invalidate the trustees' sales rather than to seek damages, those cases are still important precedents.   Here, all the trustor and its partners had to do to avoid the risk of forfeiture was to file a request for notice of default and sale.   Absent such a request, a trustee should not be liable to a trustor for damages based on the trustor's lack of notice when the trustee has done everything lawfully required to conduct a valid sale of the security.

I would affirm the judgment on both causes of action.


FN1. All statutory references are to the Civil Code unless otherwise specified..  FN1. All statutory references are to the Civil Code unless otherwise specified.

2.   Miller & Starr further state:  “Certainly a trustee is not required to exert extraordinary efforts to locate the trustor.   However, when the mailed notice of default or sale are [sic] returned by the post office, the trustee knows that the trustor has not received it.   In those cases, the trustee, as an agent certainly has certain minimum obligations to his principal (the trustor).”  (1 Miller & Starr, Current Law of California Real Estate, supra, at p. 214.)The Supreme Court in Garfinkle v. Superior Court, 21 Cal.3d 268, 283, fn. 22, 146 Cal.Rptr. 208, 578 P.2d 925, also recognized the need for reasonable efforts to ascertain the trustor's address when he has not received notice, and encouraged the Legislature to address this problem because it was not at issue in the case.

WORK, Associate Justice.

STANIFORTH, Acting P.J., concurs.