UTA Mabry Appeal Is A Successful Win For Trustees

Published Decision Reinforces That Declaration
Does Not Have To Be Signed Under Penalty of Perjury

For those of you tracking the 2923.5 issues raised in the Mabry appeal, we have some great news.  In a published decision on June 2nd, the Court of Appeals made some key findings as it relates to complying with Civil Code section 2923.5, adopting most of the arguments the UTA asserted in its’ Amicus Curiae brief.

To recap, at the end of last year, Robert Finlay of Wright, Finlay & Zak, LLP filed an amicus brief on behalf of the UTA in the case of Mabry v. Carrington.  The key issues in the Mabry case for the trustee industry were: (1) whether the declaration required by Civil Code section 2923.5 must be signed under penalty of perjury; and (2) whether the 2923.5 Declaration must identify the specific method of compliance rather than simply provide a general statement of compliance. The lack of guidance on this issue had left the trustee world confused and divided. If the § 2923.5 Declaration must be signed under penalty of perjury, it would be practically impossible to embed within the NOD, necessitating a separate declaration signed by the client. Getting the client to sign the declaration was both time consuming and labor intensive. In other words, the separate declaration increased the cost to the trustees.  On the other hand, not providing a separate declaration signed under penalty of perjury, exposed trustees to repeated litigation, as well as potential liability.  Trustees were left to weigh the risks versus the costs of the two alternatives.
A favorable decision that the § 2923.5 Declaration does NOT have to be signed under penalty of perjury or specifically identify the method of compliance, could potentially save trustees hundreds of thousands of dollars in litigation and labor costs.  For this reason, the issue in the Mabry case was one of the most important, if not the most important, issue currently affecting the trustee industry.  For this reason, the UTA solicited its members for contributions to file an Amicus Curiae brief.  For those who contributed, your contributions paid off – Thank You!
Robert Finlay, provides an update for members on the Mabry Case:

“The Court of Appeals decision in the Mabry case just came down on June 2nd.  It’s a mixed bag for the servicing and trustee industries.  On the positive side, the Court of Appeals adopted most of the arguments we asserted in the Amicus Curiae brief we filed for the United Trustees Association.  Specifically, the Court of Appeals ruled, in a published decision, that: 

(1) the 2923.5 Declaration does not have to be signed under penalty of perjury;
(2) that the compliance language in the 2923.5 Declaration can simply track the statute itself, i.e., the Dec does not have to identify the specific method by which the servicer complied with 2923.5;
(3) the remedy for non-compliance with 2923.5 is postponement only; and
(4) completed sales are not invalidated by alleged non-compliance with 2923.5. 

As for the rest of the decision, the Court of Appeals held that:

(1) there is a private right of action under 2923.5;
(2) a tender is not required as a pre-requisite to stating a substantive 2923.5 claim;
(3) 2923.5 is not preempted by HOLA;
(4) the matter is remanded to the trial court to determine if Aurora complied with 2923.5; and (5) under the facts presented in the Mabry case, it is not appropriate for a class action.

As you can see, the decision was very favorable for the trustee industry.  Unfortunately, it was not nearly as positive our servicing clients.  Nevertheless, there will be positive fallout for both trustees and servicers down the road.  To discuss the potential impact of the decision on your current business procedures or any particular case, please feel free to contact me at 949-677-3306 or via email at rfinlay@wrightlegal.net.