On December 21, 2020, the California Court of Appeal issued its opinion in Trenk v. Soheili. The Appellate Court held that a deed of trust securing an underlying debt on which the statute of limitations had run more than ten years earlier could still be non-judicially foreclosed. However, it further held that the deed of trust, at issue in the action, was void since both spouses, who held title as joint tenants, did not execute the deed of trust.

In Trenk, the Court of Appeal held that even though the four-year statute of limitations had run over ten years earlier on the promissory note secured by the deed of trust, the deed of trust could still be non-judicially foreclosed. This ruling was based on California’s Marketable Record Title Act, Civil Code sections 880.020-887.090 enacted in 1982. Prior to that enactment, California law was that, even when the statute of limitations on enforcement of a
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secured debt had expired, such that an action for judicial foreclosure would have been barred, the power of sale under a deed of trust never expires. Under the Act, if the maturity date of the secured obligation is “ascertainable from the recorded evidence of indebtedness [e.g., from the deed of trust]” then the lien expires ten years after that maturity date. Until that time, the deed of trust may be non-judicially foreclosed. If the maturity date is not ascertainable from the deed of trust, the lien expires sixty years from the date on which the deed of trust was recorded.

The Court ruled, even though the deed of trust contained language generally referring to the note which called for 36 monthly installments, this reference did not make the maturity date “ascertainable” from the recorded deed of trust itself. Accordingly, the Appellate Court ruled the sixty-year statutory limit had not expired and the trust deed could be non-judicially foreclosed. That holding was dictum, however, because the Court affirmed the judgment on a completely different ground, to wit, title to the home was held by husband and wife, as joint tenants. California Family Code section 1102(a) provides that “both spouses . . . are required to join in executing an instrument by which . . . community real property or an interest therein is . . . encumbered.” The trial court’s statement of decision held that “[a]t all relevant times, Plaintiffs Joseph Trenk and Dinah Trenk held title to the property as joint tenants.” California Family Code section 760 provides that “all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.” This section has been held by California courts to create a statutory presumption which may be overcome by a preponderance of the evidence. The Trenk opinion held, that as to third parties, the “titling of a deed” as a joint tenancy is not sufficient to show that the spouses intended that writing to convert community property into two separate property estates.

The Court held that the finding in the trial court’s statement of decision, that the Trenks held title to the property as joint tenants, “does not show that the court found that the Residence in fact was separate property. At best, it is ambiguous on the point.” The Court concluded that the doctrine of implied findings, under which a trial court is presumed to have made the findings necessary to support its judgment, did not apply because the trial court’s ruling was based on its erroneous conclusion that the statute of limitations barred enforcement of the deed of trust.

Under California law the holder of a promissory note secured by a deed of trust may be barred from judicially foreclosing by the expiration of the statute of limitations but retains the right to foreclose non-judicially for sixty years after the deed of trust was recorded. Thus, California law preserves a lien on real property while depriving the lienholder of the ability to foreclose by judicial action.

If you are the beneficiary of a deed of trust where the statute of limitations has run on the underlying debt you should promptly contact legal counsel as you still may be able to non-judicially foreclose on the deed of trust and get paid.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.