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When a Deed of Trust is Not Signed By All Owners – Is it Valid?

A Quiet Title action is a lawsuit that a person files to establish their title against adverse claims. For example, what if a signature is missing on the deed of trust, and the deed of trust is foreclosed? Was it a necessary signature, for example, the wife of the owner, when the wife was not on the deed? In a recent decision from Grenada Hills, the Note Holder started the process for a trustee’s sale, and the owner filed a quiet title action. He claimed that it was community property, and there is a legal presumption that it is community property, so the deed of trust could be voided by the wife who did not sign it. He was right!

Sacramento-Deed-of-trust-attorneyIn Trenk v. Soheili, as a result of a Settlement Agreement in an unrelated matter, Trenk agreed to pay $100,000 and executed a promissory note and a trust deed on the Residence to secure the obligation.
Trenk stopped regular payments on the note after 2003, and by 2018 he still owed about $75,000. Soheili began nonjudicial foreclosure proceedings in January 2018. The Trenks then filed this lawsuit to clear title to their house, alleging that the trust deed was no longer enforceable.

The trial court quieted title in the Residence in favor of the Trenks, ruling that both the statute of limitations and the Marketable Record Title Act (Civ. Code, § 880.020 et seq.) barred enforcement of the trust deed. The trial court found that: (1) enforcement of the settlement agreement and Note are barred by the statute of limitations; (2) enforcement of the Trust Deed is barred by “both the statute of limitations and the Marketable Record Title Act”; and (3) Appellants that “[a]t all relevant times, Plaintiffs Joseph Trenk and Dinah Trenk held title to the property as joint tenants.”
On appeal Appellants argue that the 60 year time period for enforcement of a trust deed applies here under section 880.020, subdivision (a)(2). The Trenks disputed that and also argued that the trust deed is unenforceable because Joseph Trenk’s wife Dinah did not sign it.

The court of appeals found that 1) A power of sale in a trust deed is enforceable even if the statute of limitations has run on the underlying obligation. Because the trust deed here did not state the last date for payment under the promissory note, under section 882.020, subdivision (a)(2) Appellants would have 60 years to exercise the power of sale in the trust deed.

And 2) However, the power of sale is not enforceable because the Residence presumptively is community property. Appellants did not rebut that presumption at trial. Because Dinah did not execute the trust deed, she has the power to void it.

Sacramento-void-deed-of-trust-attorneyMs. Trenk did not sign the Deed of Trust
Trenk argued that if they owned their Residence as community property, the Trust Deed was “subject to set aside” because only Joseph executed it. (See Fam. Code, § 1102, subd. (a) [“both spouses, either personally or by a duly authorized agent, are required to join in executing an instrument by which … community real property or an interest therein is … encumbered”].)
Family Code section 760 provides that, “[e]xcept as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.” The Supreme Court has held that held that, for properties acquired after 1985, 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 separate property. The joint tenancy deed did not suffice to accomplish a transmutation of the residence from community to separate property. Rather, under Family Code section 852, subdivision (a), such a transmutation requires a written declaration expressly stating that “the character or ownership of the property is being changed.”
The Trents held title as joint tenants, but there was nothing to rebut the presumption of community property.

Sacramento-voided-deed-of-trust-attorneyThe 60-year limit on enforceablility applied.
Civil Code section 882.020, “[u]nless the lien of a mortgage, deed of trust, or other instrument that creates a security interest of record in real property to secure a debt or other obligation has earlier expired pursuant to Section 2911, the lien expires at, and is not enforceable by action for foreclosure commenced, power of sale exercised, or any other means asserted after, the later of the following times: [¶] (1) If the final maturity date or the last date fixed for payment of the debt or performance of the obligation is ascertainable from the recorded evidence of indebtedness, 10 years after that date. [¶] (2) If the final maturity date or the last date fixed for payment of the debt or performance of the obligation is not ascertainable from the recorded evidence of indebtedness, or if there is no final maturity date or last date fixed for payment of the debt or performance of the obligation, 60 years after the date the instrument that created the security interest was recorded.”

But, if a Deed of Trust is involved, section 2911 applies only to the lien that is “enforceable through judicial foreclosure, and not the power of sale.” The statute of limitations never runs against the power of sale in a deed of trust.”
In 1933 the Legislature adopted Code of Civil Procedure section 725a, which authorizes judicial foreclosure under a deed of trust. But the Supreme Court subsequently held that Civil Code section 2911 precluded a trust deed beneficiary from pursuing judicial foreclosure when the statute of limitations had run on the secured obligation; the court did not change the general rule that “the statute of limitations does not run against the power of sale in a deed of trust.”