Legal Question in Real Estate Law in California

The statute of limitation for breach of written contract (which is what a promissory note is) is 4 years from the breach or the date on which the plaintiff knew or should have known of the breach. If the note is truly "secured" by a deed of trust, why would you want to take the other person to small claims court when you could simply foreclose on the deed of trust?

But also you must remember that in a foreclosure you do not recover all of your costs, so it might cost you $3,000 or so to foreclose. If you are a junior lien holder and the senior lien exceeds the value of the property, as soon as you foreclose the senior will also and will wipe out your secured lien. On the other hand, California has a one action rule that does not allow you to sue twice as to the same debt; a foreclosure is not a lawsuit but the creditor might try to argue it is so that you can either foreclose or sue in small claims court [wilch has a $7,500 limit but from which you might get a judgment within a month but then have the delays and trouble of enforcing that judgment. ]

Indeed, if the note is secured by a deed of trust, I would think that you MUST proceed against the collateral and cannot sue the maker of the note for money damages alone, either in Small Claims or in Superior Court.

Code of Civil Procedure section 726 provides (in part): " (a) There can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property.....which action shall be in accordance with the provisions of this chapter...."

For purposes of CCP 726, "mortgage" is considered synonymous with "note and deed of trust".

Essentially, you have the option of foreclosure by trustee sale (assuming the deed of trust contains a power of sale, which they normally do), or judicial foreclosure under CCP 726, which requires bringing suit in Superior Court. This case does not belong in Small Claims, whatever the amount sought.