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H.B. 385





Chief Sponsor: V. Lowry Snow

Senate Sponsor: ____________

             7      LONG TITLE
             8      General Description:
             9          This bill modifies provisions relating to a trustee under a trust deed.
             10      Highlighted Provisions:
             11          This bill:
             12          .    provides that a trustee under a trust deed has no duty to a beneficiary until given
             13      written instruction to exercise powers;
             14          .    authorizes and provides a procedure for a trustee to resign as trustee; and
             15          .    makes technical changes.
             16      Money Appropriated in this Bill:
             17          None
             18      Other Special Clauses:
             19          None
             20      Utah Code Sections Affected:
             21      AMENDS:
             22          57-1-21.5, as last amended by Laws of Utah 2008, Chapter 250
             23          57-1-22, as last amended by Laws of Utah 2011, Chapter 228
             25      Be it enacted by the Legislature of the state of Utah:
             26          Section 1. Section 57-1-21.5 is amended to read:
             27           57-1-21.5. Trustees of trust deeds -- Duties -- Prohibited conduct -- Penalties.

             28          (1) Until a beneficiary under a trust deed or the beneficiary's agent provides a trustee of
             29      the trust deed written instructions directing the trustee to exercise powers under this chapter,
             30      the trustee has no duty or obligation to the beneficiary or to the agent of a beneficiary.
             31          [(1)] (2) Except as provided in Subsection [(2)] (3), the following duties of [the] a
             32      trustee may not be delegated:
             33          (a) [the] a preparation and execution of:
             34          (i) [the] a notice of default and election to sell;
             35          (ii) [the] a cancellation of notice of default and election to sell;
             36          (iii) [the] a notice of sale; and
             37          (iv) [the] a trustee's deed;
             38          (b) the notification of foreclosure through publication, posting, and certified or
             39      registered mail;
             40          (c) the receiving and responding to requests for reinstatement or payoff requirements;
             41      and
             42          (d) the handling of reinstatement or payoff funds.
             43          [(2)] (3) Nothing in this section is intended to prevent:
             44          (a) [the] a trustee from using clerical or office staff:
             45          (i) that is under the trustee's direct and immediate supervision; and
             46          (ii) to assist in the duties described in Subsection [(1)] (2);
             47          (b) [the] a trustee from using the services of others for publication, posting,
             48      marketing, or advertising the sale; or
             49          (c) a beneficiary of a trust deed or the servicing agent of the beneficiary from directly
             50      performing the functions described in[:] Subsection (2)(c) or (d).
             51          [(i) Subsection (1)(c); or]
             52          [(ii) Subsection (1)(d).]
             53          [(3)] (4) The amendments in Laws of Utah 2002, Chapter 209, to Subsection [(2)] (3)
             54      do not apply to a foreclosure if the notice of default related to the foreclosure was filed before
             55      May 6, 2002.
             56          [(4)] (5) (a) Except as provided in Subsection [(4)] (5)(c), a trustee may not solicit or
             57      receive any fee for referring business to a third party.
             58          (b) [Fees] A fee prohibited under Subsection [(4)(a) include] (5)(a) includes:

             59          (i) a commission;
             60          (ii) a referral based fee, including a fee for the referral of:
             61          (A) title work;
             62          (B) posting services; or
             63          (C) publishing services; or
             64          (iii) a fee similar to a fee described in Subsection [(4)] (5)(b)(i) or (ii).
             65          (c) Subsection [(4)] (5)(a) does not apply to:
             66          (i) [fees] a fee received by a trustee for the trustee acting as co-legal counsel, if the
             67      trustee is otherwise permitted by law to receive fees as co-legal counsel; or
             68          (ii) a nonpreferred participation in net profits based upon an ownership interest or
             69      franchise relationship that is not otherwise prohibited by law.
             70          [(5)] (6) A trustee may not require the following to pay any costs that exceed the actual
             71      costs incurred by the trustee:
             72          (a) a trustor reinstating or paying off a loan; or
             73          (b) a beneficiary acquiring property through foreclosure.
             74          [(6)] (7) (a) A person that violates Subsection [(4)] (5) or [(5)] (6) is guilty of a class B
             75      misdemeanor.
             76          (b) In addition to a person's liability under Subsection [(6)] (7)(a), if a person violates
             77      Subsection [(4) or (5), that] (5) or (6), the person is liable to the trustor for an amount equal to
             78      the greater of:
             79          (i) the actual damages of the trustor as a result of the violation; or
             80          (ii) $1,000.
             81          (c) In an action brought under Subsection [(6)] (7)(b), the party that does not prevail in
             82      the action that is brought under Subsection [(6)] (7)(b) shall pay the attorney fees of the
             83      prevailing party.
             84          Section 2. Section 57-1-22 is amended to read:
             85           57-1-22. Successor trustees -- Appointment by beneficiary -- Effect -- Substitution
             86      of trustee -- Recording -- Form.
             87          (1) (a) [The] A beneficiary may appoint a successor trustee at any time by filing for
             88      record in the office of the county recorder of each county in which the trust property or some
             89      part of the trust property is situated, a substitution of trustee.

             90          (b) The new trustee shall succeed to all the power, duties, authority, and title of the
             91      trustee named in the deed of trust and of any successor trustee.
             92          (c) The beneficiary may, by express provision in the substitution of trustee, ratify and
             93      confirm action taken on the beneficiary's behalf by the new trustee prior to the recording of the
             94      substitution of trustee.
             95          (2) [The] A substitution of trustee shall:
             96          (a) identify the trust deed by stating:
             97          (i) the names of the original parties to the trust deed;
             98          (ii) the date of recordation; and
             99          (iii) (A) the book and page where the trust deed is recorded; or
             100          (B) the entry number;
             101          (b) include the legal description of the trust property;
             102          (c) state the name and address of the new trustee; and
             103          (d) be executed and acknowledged by all of the beneficiaries under the trust deed or
             104      their successors in interest.
             105          (3) (a) If not previously recorded at the time of recording a notice of default, the
             106      successor trustee shall file for record, in the office of the county recorder of each county in
             107      which the trust property or some part of it is situated, the substitution of trustee.
             108          (b) A copy of the substitution of trustee shall be sent in the manner provided in
             109      Subsection 57-1-26 (2) to any:
             110          (i) person who requests a copy of any notice of default or notice of sale under
             111      Subsection 57-1-26 (1)(a); and
             112          (ii) person who is a party to the trust deed to whom a copy of a notice of default would
             113      be required to be mailed by Subsection 57-1-26 (3).
             114          (4) A substitution of trustee shall be in substantially the following form:
Substitution of Trustee

(insert name and address of new trustee)

             117              is hereby appointed successor trustee under the trust deed executed by ____ as
             118      trustor, in which ____ is named beneficiary and ____ as trustee, and filed for record
             119      __________(month\day\year), and recorded in Book ____, Page ____, Records of ____
             120      County, (or filed for record __________(month\day\year), with recorder's entry No. ____, ____

             121      County), Utah.
(Insert legal description)

             124      Signature_____________________________
(Certificate of Acknowledgment)

             126          (5) (a) A trustee of a trust deed may, in accordance with this Subsection (5), resign as
             127      trustee by filing for record in the office of the recorder of each county in which the trust
             128      property is located, a resignation of trustee.
             129          (b) A trustee's resignation under this Subsection (5) takes effect upon the recording of a
             130      resignation of trustee.
             131          (c) A resignation of trustee shall be in substantially the following form:
             132          "Resignation of Trustee
             133          (Insert name and address of trustee) hereby resigns as trustee under the trust deed
             134      executed by (insert name of trustor) as trustor, in which (insert name of the beneficiary) is
             135      named beneficiary and (insert name of trustee) as trustee, and filed for record (insert the month,
             136      day, and year the trust deed was recorded), and recorded in Book ___, Page ___, Records of
             137      ______________ County, (or with recorder's entry no.____, ______________ County), Utah.
             138      (Insert legal description)
             139      Signature ________________________
             140      (Certificate of acknowledgment)"
             141          (d) (i) Within three days after the day on which a trustee resigns under this Subsection
             142      (5), the trustee shall deliver written notice of the trustee's resignation to each party in any legal
             143      action pending against the trustee that is related to or arises from the trustee's performance of a
             144      duty of a trustee.
             145          (ii) Except as provided in Subsection (5)(d)(iv), within 10 days after the day on which
             146      a party receives a notice described in Subsection (5)(d)(i), the party may move the court to
             147      substitute the beneficiary of the trust deed as defendant in the action in the place of the trustee
             148      until a successor trustee is appointed. When a successor trustee is appointed, the successor
             149      trustee shall be substituted as defendant in place of the beneficiary.
             150          (iii) Except as provided in Subsection (5)(d)(iv), if, after the expiration of the time
             151      described in Subsection (5)(d)(ii), a party does not move the court to substitute the beneficiary

             152      or the successor trustee in place of the trustee as defendant, the court shall dismiss all claims
             153      against the trustee.
             154          (iv) Subsections (5)(d)(ii) and (5)(d)(iii) do not apply to a cause of action against a
             155      trustee that alleges intentional misconduct.

Legislative Review Note
    as of 2-27-13 3:20 PM

Office of Legislative Research and General Counsel

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