Also known as: deed of trust · trust deed · trust deeds
Written by attorneys · grounded in primary & secondary sources — see below
A security device by which real property is pledged to secure payment of a debt or performance of an obligation. Title is conveyed to a trustee to hold for the benefit of the lender until the debt is paid. The borrower retains possession and the right to redeem. Upon default the lender may foreclose to satisfy the obligation.
Brighton Development LLC executed a deed of trust on vacant land reciting a two million dollar loan and optional future advances from Oakridge Capital. Oakridge never funded the loan or made any advances. Metro Bank later recorded a valid deed of trust on the same parcel. When Oakridge attempted foreclosure, its instrument proved unenforceable because no underlying obligation had ever arisen.
Field Kitchen LLC defaulted on a senior obligation secured by a deed of trust containing power-of-sale language. Prime Restaurant directed the trustee to conduct a nonjudicial sale. The sale generated surplus proceeds after satisfying the senior debt. Plains Food, holding a junior lien terminated by the sale, claimed the surplus in order of priority.
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Lake Wind executed a deed of trust containing a future-advance clause securing all credit extended by Dusk Wind. After recording, Dusk Wind made an additional acquisition loan. When Lake Wind defaulted, the later advance remained secured by the original instrument because the dragnet language encompassed it.
Ernest Sullivan transferred real estate into an inter vivos deed of trust naming himself trustee. After his death his widow elected her statutory share of his estate. The court included the trust assets in the estate calculation because the deed of trust functioned as a security device retaining the settlor's beneficial interest.
A joint tenant executed a deed of trust on her interest in the property. Upon her death the surviving joint tenant claimed the entire parcel free of the lien. The deed of trust interest terminated with the debtor's death because the right of survivorship ended the encumbered cotenancy share.
One joint tenant leased property subject to a deed of trust and later died. The surviving joint tenant sought to terminate the lease. The lease ended upon the lessor's death because the deed of trust lien attached only to the deceased tenant's interest that terminated by survivorship.
A deed of trust is a security device that cannot exist without an underlying obligation such as a note or other enforceable promise to pay. If no debt or duty is ever created, the instrument is ineffective and cannot be foreclosed.
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A future-advance or dragnet clause allows later loans by the same lender to be secured by the original deed of trust. Priority of those advances depends on state statute, the mortgage terms, and whether the lender had notice of intervening liens before making the advance.
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A deed of trust may authorize nonjudicial foreclosure through a power-of-sale clause or require judicial foreclosure through court action. The chosen method governs notice requirements, the sale process, and the timing of redemption rights.
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…expired with it.” (Accord, Hamel v. Gootkin (1962) 202 Cal.App.2d 27 [20 Cal.Rptr. 372] (applying the Nogarr holding to a trust deed).) As these decisions demonstrate, a joint tenant may, during his lifetime, grant certain rights in the joint property without severing the tenancy. But when such a joint tenant dies his…