Legal Question in Real Estate Law in California

Re: Lien

Unfortunately, this is a situation in which you would be well served by taking all of the documents you have concerning this situation to an attorney for review. There may or may not be a statute of limitation issue, and I know of no need for the holder of a deed of trust to "file a creditor's claim" to secure their deed of trust (unless, of course, the owner has previously filed for bankruptcy protction). However, depending upon the amount you claim is owed it would be well worth spending a couple of hundred dollars to find out what your rights are.

Re: Lien

Sounds from the dates and arguments advanced that you're facing a challenge based upon California's "Ancient Mortgages and Deeds of Trust" law that sunsets old liens on real property, with the stated purpose of cleaning up titles. See Civil Code sections 880.020 to 882.040, especially 882.020. Liens expire 10 years after the final maturity date if that is "ascertainable from the record." If not, or if there is no final maturity date, the lien expires 60 years from the date of recording. Let's hope whatever you recorded is silent as to the maturity date! The lien holder can record a Notice of Intent to Preserve Interest (Civil Code section 880.340) - this is probably what is meant by a "creditor's claim."

The following ONLY applies if you can circumvent the Ancient Mortgages law, mentioned above:

(1) Even though suit on the unpaid principal and interest may be time-barred, the statute of limitations applies only to lawsuits, and, as I understand it, does not affect the right of the trustee to exercise the power of sale and foreclose on the property upon the beneficary's request, when there has been a default. Thus, while you may not be able to sue the borrower, I think there is a good chance you can foreclose.

(2) There are several legal theories of indebtedness and creditors' rights that allow what appears, in effect, to be a circumvention of the statute of limitations. These include the "account stated" and "book account" causes of action - sometimes referred to as "common counts." The general idea is that if debtor and creditor have on-going business, the contract upon which their relationship is founded may be very old, but a new enforceable obligation arises each time a periodic statement of account is tendered to the customer/debtor by the vendor/creditor, or whenever new debits or credits are posted to the merchant's ledger in the ordinary course of business. If you haven't kept good books and haven't sent regular bills, use of these theories might present difficulties.

(3) You seem to be in the driver's seat because they need your pay-off and reconveyance to close. However, giving the borrower an ultimatum or refusing to reconvey without solid legal grounds could subject you to big damages.