Legal Question in Real Estate Law in California

I have a loan secured by a first deed of trust on a commercial real property (vacant gas station) in California. The loan is additionally collateralized by a second deed of trust on a single family residential property also in California.

The lender does not want to foreclose on the gas station because of the liability on taking over a vacant former gas station site which have not been remediated. Also the value of the residential property is less than the first loan so there is no incentive for the lender to foreclose on its second.

Because of these circumstances I have not paid the lender for years and the lender has not taken any action.

However, for other reasons I want to have the lien on the additional collateral removed at this time.

With that in mind I want to work it out with the lender so that they will reconvey or assign the note for a nominal amount (say $2,000).

Do I have the right to execute a Deed in Lieu of Foreclosure (or other procedure to put the property in the name of the lender) without the lender's approval? If I do then the possibility of my taking that action would probably get the lender to accept my offer.

Is there another course of action to achieve my objective of getting the additional collateral released?

Even though there is no value in the lender's second on the residential property I wonder if the lender can foreclose on the additional collateral without foreclosing on the primary collateral (gas station)? The answer to this last question will help me evaluate the lender's options.

Thank you.


Asked on 2/20/11, 4:32 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

No, because a deed of any kind has to be accepted by the grantee in order to convey title. Normally, acceptance is inferred by the grantee's physical acceptance of the paper, his participation in escrow (or his agent's), his taking possession, or things of this kind....but if the intended grantee says "No thanks, no way!" the deed is ineffective.

Another think I'd be concerned about is the possibility that the lender will sell the paper to someonne else who is less concerned about the possible environmental risks, who will go ahead and foreclose. I had a client who bought an abandoned gas station (against my advice) and actually made money converting the property into some other use. Fortunately for him, he was doing this about 2005.

A lender with multiple collateral can ordinarily choose which to pursue first, assuming there are two separate deeds of trust. (There need not be two separate notes.) Under the one-action rule, only one judicial foreclosure is possible on a (single) note, but there is no limit on the number of trustee sales under separate deeds of trust that a lender may conduct to collect on a single note.

Finally, there is a statute of limitations of sorts against the enforcement of very old mortgages and deeds of trust. In general, a deed of trust cannot be enforced in any way, including by trustee sale, 10 years after its final maturity date or 60 years after it is recorded, whichever is last. See Civil Code section 882.020 et seq.

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Answered on 2/20/11, 6:58 pm


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