When Do Deeds of Trust Bite the Dust

• Jurisdiction: Colorado,United States
• Citation: Vol. 27 No. 12 Pg. 61
• Pages: 61
• Publication year: 1998

27 Colo.Law. 61 Colorado Lawyer 1998.

1998, December, Pg. 61. When Do Deeds of Trust Bite the Dust

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61

Vol. 27, No. 12, Pg. 61

The Colorado Lawyer

December 1998
Vol. 27, No. 12 [Page 61]

Specialty Law Columns
Real Estate Law Newsletter
When Do Deeds of Trust Bite the Dust
by Maria Massaro Guttenberg

When most lawyers are asked how long deeds of trust remain liens on real property, the impulsive response is fifteen years. However, this is not always the case. The exact date at which the lien created by a deed of trust is extinguished is crucial in many legal scenarios. This date is determinative for a creditor trying to foreclose on a lien; a creditor deciding to make a new or additional secured loan or a junior lienor in deciding whether to exercise redemptive rights in a foreclosure action. The validity of a lien is equally important for a prospective purchaser of property, a title company insuring title, as well as the public trustee commencing foreclosure of a deed of trust.1

According to the common law, a lien will remain until satisfied and released or terminated by operation of law.2 Colorado has lien limitation statutes that specifically provide for the release and extinguishment of recorded liens.3 The language of these statutes is clear and unequivocal; however, the application is another matter. This article explores statutes and case precedents to isolate factors affecting the duration of liens

Colorado's View

A split of authority exists with reference to mortgage liens Some jurisdictions follow the rule that the mortgage lien and the underlying obligation are independent. The prevailing view states the remedy under the mortgage lien is still viable although the underlying debt is barred.4 The contrary rule holds that the underlying obligation controls while the mortgage lien is ancillary.5

Colorado adheres to the philosophy that the mortgage or deed of trust is measured by the life of the obligation it secures.6 CRS § 38-39-207 provides:

The lien created by any instrument shall be extinguished, regardless of any other provision in this article to the contrary, at the same time that the right to commence a suit to enforce payment of the indebtedness or performance of the obligation secured by the lien is barred by any statute of limitation of this state.

When an action on the underlying debt is barred by the statute of limitations, the corresponding lien is extinguished simultaneously.7 Once the underlying debt and lien are extinguished, foreclosure under the deed of trust is barred.8

An action to recover on a promissory note must be commenced within six years from the date the note becomes due.9 The note is considered due one day after its maturity.10 When a promissory note provides for installment payments, the statutory limitation period runs against each installment as it becomes due.11 However, if the entire balance is declared due under a default provision, the statute runs from the date the entire debt is declared due and owing.

A lien created by a joint promissory note may remain against a property even after a spouse's obligation is barred by the statutory period of limitations. In Cache National Bank v. Lusher,12 a married couple executed a promissory note providing for joint and several liability and a deed of trust against their property. Thereafter, the wife quit-claimed her interest in the secured property to the husband, who continued to accept additional loan advances after making reaffirmations of the original debt. The Colorado Supreme Court focused on identifying and qualifying the underlying debt to determine whether the lien created by the wife was extinguished under CRS § 38-39-207.

A promissory note executed by joint obligors was intended to secure not only one spouse's obligations, but the obligation of the other spouse as well. Even though the statute of limitations expired on the promissory note executed by the wife, the lien created by that note continued by virtue of the extensions and advances executed by the husband. Absent any contrary provision in the note or deed of trust, the lien instrument remained in effect as to the entire property.13 While the total debt remained enforceable against one of the co-debtors, the lien securing the debt was not extinguished. This rule adheres to the basic principle that the deed of trust is dependent on the underlying obligation.

Standing to Raise Extinguished Lien

Because CRS § 38-39-207 provides that the...