Of course, being named in a complaint carries with it several responsibilities, chief among these being that every defendant must issue a responsive pleading, such as an answer. For the trustee included purely as a precautionary measure, this is frustrating. Not only will they need to file an answer, which is both costly and time consuming, but they will also consistently be served with court documents in a case they have no interest in litigating.
To get around this hassle, trustees may file a declaration of non-monetary status, provided the relevant deed of trust is the “subject” of a lawsuit. Successfully filing this declaration means that the trustee no longer needs to participate in the lawsuit, provided the trustee also agrees to be bound by any court order relating to the subject deed of trust.
What is a Declaration of Non-Monetary Status? (Civ. Code § 2924l) [With Form]
Once a trustee has been sued, they can execute the declaration of nonmonetary status. Civil Code section 2924l provides, “In the event that a trustee under a deed of trust is named in an action or proceeding in which that deed of trust is the subject, and in the event that the trustee maintains a reasonable belief that it has been named in the action or proceeding solely in its capacity as trustee, and not arising out of any wrongful acts or omissions on its part in the performance of its duties as trustee, then, at any time, the trustee may file a declaration of nonmonetary status.”
To file such a declaration, a trustee must include four parts:
First, The declaration needs to set forth the status of the trustee under the deed of trust.
Second, it needs to state that the trustee knows or has a reasonable belief that it has been named as a defendant in the proceeding solely in its capacity as a trustee, and not for any wrongful acts.
Third, it needs to state the basis for that knowledge or reasonable belief.
And fourth, it needs to state that the trustee agrees to be bound by whatever order or judgment is issued by the court regarding the subject deed of trust. (Civ. Code § 2924l (b).)
What is a Trustee Under a Deed of Trust?
A declaration made under Civil Code section 2924l is explicitly aimed at “a trustee under a deed of trust.” (Civ. Code § 2924l (a).) But what does that mean? The simple answer is that mortgages in California are called Deeds of Trust. The differences between the two are negligible, so much so that our own Supreme Court has stated it outright. “Deeds of trust, except for the passage of title for the purposes of the trust, are practically and substantially only mortgages with a power of sale.” (Monterey S. P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454, 460.)
But there’s a key difference concerning the “parties” to the security instrument. With mortgages, there are only two: the lender and the borrower. With deeds of trust, however, there are three. The borrower is called the trustor, and the lender is called the beneficiary. And then there’s a third party, called the trustee, that physically holds the deed of trust. If the borrower fails to pay on time, then the trustee begins a foreclosure sale on behalf of the beneficiary.
Why Would a Trustee Need to Execute a Declaration of Non-Monetary Status?
The reason the small difference between mortgages and deeds of trust is important is on account of something called “joinder.” Joinder is the legal term for including parties in a lawsuit. It’s an expansive topic, but the gist of it is that plaintiffs have to “join” (e.g., name as a defendant) all necessary parties in order for the lawsuit to go forward. (CCP § 389.)
Take a partition action, for example. There, the plaintiff must join all those persons or entities with an “interest” in the property. (CCP § 872.230.) As such, if there’s a mortgage on the property, then it’s not enough for the plaintiff to join only the other co-owner(s). They need to also join the holder of the mortgage to the lawsuit. After all, the mortgage holder’s interest in the property will be affected.
But what if, instead of a mortgage, the property is encumbered by a deed of trust? The calculus above changes because there is that additional party to the security: the trustee. The only problem, though, is that the trustee will likely want no part of the lawsuit. This is because the extent of the trustee’s interest in the property is very limited. (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 508.) Either they reconvey full title to the borrower once they pay off the debt, or exercise the power of sale on request of the beneficiary.
This is where the declaration of nonmonetary status comes in assist. Civil Code section 2924l provides that, “in the event that trustee under a deed of trust is named in an action or proceeding in which that deed of trust is the subject, and in the event that the trustee maintains a reasonable belief that it has been named solely in its capacity as trustee, and not arising out of any wrongful act… then… the trustee may file a declaration of nonmonetary status.”
What Happens After the Declaration is Executed?
Once the declaration is executed, it needs to be filed and served on the parties to the lawsuit in the ordinary manner provided by the Code of Civil Procedure section 1010.
After it is served, the parties who have appeared in the lawsuit will have 15 days from service to object to the trustee’s nonmonetary status. (Civ. Code § 2924l (c).) If a party does want to object, then they need to state the factual basis for that objection and serve it on the trustee.
But if no objection is served, then the trustee will not have to further participate in the action or proceeding at all. (Id., (d).) In addition, they won’t be subject to any monetary awards such as for damages, attorney’s fees or costs.
Additionally, again if there’s no objection, the time for the trustee to file any sort of responsive pleading is automatically tolled. They only need to respond if a party timely files an objection to the declaration. (Id., (f).)
What if I Want to Execute a Declaration of Non-Monetary Status?
If you believe that a declaration of non-monetary status would be appropriate to file in your lawsuit, Underwood Law Firm has provided the relevant form here. This form is merely a potential template. Litigants are encouraged to examine the California Rules of Court and appropriate Local Court Rules regarding formatting and requirements for papers submitted to the court.
How the Lawyers at Underwood Law Firm Can Help
Filing a complaint can sometimes be a hassle, especially when litigants are confused about who and who not to join in the action. For the inexperienced litigant, the next steps might seem impossible to determine. Fortunately, the lawyers at the Underwood Law Firm specialize in partition actions and solving the difficult problems that can accompany them. If you have found yourself in one of these situations, then please do not hesitate to contact us today.