What is the Statute of Limitations for a Deed of Trust?

By Eric T. Hartnett

A Deed of Trust (“DOT”) is an agreement between a lender and a borrower to transfer an interest in the borrower’s land to a neutral third party, a trustee, to secure the payment of a debt by the borrower. A DOT is a recordable instrument and serves as the enforcement mechanism that allows the property to be sold if the borrow defaults.

Civil Code §882.020 indicates that a DOT has a statute of limitations of 60 years following the DOT’s recording if the DOT does not include a copy of an underlying promissory note nor does it indicate the date the obligation matured. However, can a DOT’s statute of limitation change after the DOT is recorded?

This was the subject of a recent California Appellate decision (Schmidli v. Pearce). Mrs. Pearce loaned money to her brother in 1990 and secured the loan by recording a DOT against her brother’s property. The DOT did not include a copy of an underlying promissory note nor did it indicate the date the obligation matured.

The brother defaulted on the loan and Mrs. Pearce recorded a Notice of Default (“NOD”). The NOD stated that $65,000 was owed as of Dec. 1993. Mrs. Pearce took no further action after recording the NOD.

In 2006, a lawsuit was filed seeking a declaration that the DOT had been extinguished. The lawsuit was premised on the idea that a DOT expires 10 years after the last date fixed for payment of the debt if that date is “ascertainable from the record.” Plaintiff argued that “the record” was any recorded document, not just the DOT. This stance was supported by a 2006 California Appellate decision (Slintak v. Buckeye Retirement Co.). Based on Slintak, plaintiff believed that the NOD changed the statute of limitations of the DOT to 10 years.

The Schmidli Court disputed the logic of the Slintak Court and held that the recording of a NOD did not change the statute of limitations for a DOT. The Schmidli Court recognized that a NOD is required for all nonjudicial foreclosures and reasoned that if more than 10 years has elapsed since the maturity date of the DOT, the beneficiary under a DOT could not seek nonjudicial foreclosure because the recording of the required NOD would eliminate the power of the DOT.

Thus, the statute of limitations for a DOT is 60 years if the last date fixed for payment of a debt is not ascertainable from the DOT. If the last date is ascertainable from the DOT, then the statute of limitations is 10 years from the last fixed date for payment. The NOD will not change any of these deadlines.

In the News

On April 13, 2010, lender World Savings Bank was hit with a negative ruling that bolstered the borrowers’ claim that they had relied on the bank’s promise to postpone the foreclosure sale. The borrowers had borrowed money against another property in order to reinstate their loan with the bank, but the bank marched ahead with its foreclosure sale regardless. The California appellate court held the borrowers had a claim for promissory estoppel. [Garcia v. World Savings FSB] - JMW

Law Offices of Peter N. Brewer News

Simon and Julia successfully levied against a judgment debtor’s bank accounts. The debtor had guaranteed a construction loan that the borrower had defaulted on. Due to the firm’s persistence and success in enforcing the guarantor’s obligation, the creditor has been receiving further payments from the debtor-guarantors.
Amy obtained an Order for in-rem relief from the automatic stay in a Chapter 11 bankruptcy, allowing the lender to conduct its foreclosure sale of the property, regardless if the co-owner files for bankruptcy. Such orders are rare and difficult to obtain.

About Us

Peter N. Brewer established the Firm in 1995. The Firm specializes in real estate and mortgage lending law. Clients of the firm include homeowners, real estate professionals, mortgage brokers, loan servicers, real estate appraisers, real estate developers, construction professionals and investors. The firm takes pride in its highly successful insurance defense practice on behalf of real estate brokers, brokerages, agents, appraisers, mortgage lenders, title companies and foreclosure trustees. Additionally, Peter and his firm represent clients in creditor’s rights in bankruptcy, breach of contract matters, judgment enforcement and other litigation and transactional work.

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