What Statute of Limitations Applies?

A recent secured real property case decision by the Court of Appeal
of California’s Third Appellate District in Schmidli v. Pearce
establishes a split between appellate districts on whether a 10 or 60
year statute of limitations applies to a lender’s recorded trust deed
if the deed’s maturity date of the obligation secured by the trust deed
are not stated in the recorded trust deed.

In the case of Nancy A. Schmidli et al. v. Rodney K. Pearce et al.
recently decided by California’s Court of Appeal in the Third Appellate
District (San Joaquin), the plaintiffs sought to extinguish a lien of
deed of trust held by defendants against their property. Schmidli et.
al. claimed that the defendants’ lien had expired under a 10-year
statute of limitations triggered by defendant’s recording of a notice
of default employing as a rationale that the “record” from which to
determine the maturity date of the obligation secured by the trust deed
included any recorded document that disclosed the debt’s maturity date,
including a notice of default.Defendants countered that a 60-year
statute of limitations applied if the last date fixed for payment of
the debt is not expressly set forth within the recorded trust deed.
With this line of reasoning intact, their notice of default did not
trigger the 10-year statute, and their lien remained viable under a
60-year statute of limitations.

Two previous appellate decisions addressed this issue and reached
different results. Slintak v. Buckeye Retirement Co., L.L.C. LTD.
(2006) concluded a notice of default triggered a 10-year statute. Ung
v. Koehler (2005) determined a notice of default did not trigger a
notice of default where the notice was recorded after the 10-year
period had expired and the trust deed failed to provide the maturity
date of the debt, and therefore, the 60-year statute applied.

The trial court relied upon Slintak and granted a summary judgment
in favor of the plaintiffs. Although the notice of default in this case
was recorded before the 10-year period expired, the court concluded
that Ung’s precedent was the better reasoned authority, and so reversed
the judgment.

Because of this decision, a split between appellate districts on
whether a 10 or 60 year statute of limitations applies to a lender’s
recorded trust deed against real estate where that trust deed fails to
provide for a maturity date of the loan. Although the California
legislature has changed the statute to clarify 60 years as the term of
maturity in the event that the trust deed failed to state a maturity
date and regardless as to whether or not a subsequent notice of default
so indicates, a significant number of trust deeds still recorded prior
to the change are in existence which must be interpreted based upon the
district where recorded unless there is further clarification from the
California Supreme Court.

Roni Balint writes for the Law Office of Alan M. Insul. The content
contained within this feature is not intended as legal advice and does
not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.