Notes on Stale Notes

What is a stale note? A stale note is a promissory note—evidence of having made a loan—on which the lender has never demanded payment by the borrower.

You might ask, why would a lender not demand performance of the note? Isn’t that the whole point of the note? And you would be right. But there are two factors that often lead to stale notes.

The first is that lenders are too nice. They know the borrower can’t pay and so they don’t make her pay. If the note is secured by a deed of trust with real property, many lenders feel safe giving the borrower a break—what lawyers call “forbearance.”

The other is circumstances; in particular, the Great Recession of 2008. Because so many borrowers were unable to perform on their loans during the decade-long recession, many lenders—even ones that were not-so-nice—had no real choice. They either had to forbear or foreclose on an underwater property they didn’t really want. As a result, a lot of notes went stale.

OK. So what? The Recession is over. The note is in default. Why not just start collecting on the note? The problem is that if the note has been in default for more than six years, it is illegal to bring any action to collect. A.R.S. § 12-548. The borrower still owes the money—and she can pay it back if she wants to—but you can’t force her. As the leading Arizona case put it, after six years “the debt is not extinguished; rather, the remedy for an action on the debt is merely barred.” De Anza Land and Leisure Corp. v. Raineri, 669 P.2d 1339, 1343 (Ariz. App. 1st Div. 1983).

If you think that’s a lot of legal mumbo-jumbo, hang on, it gets worse. You may think, “OK. I won’t sue on the note. I’ll just foreclose the deed of trust and take the property. The Recession is over. The property is now worth something.” But foreclosure is an “action on the debt.” You can’t foreclose, even though you still have a deed of trust recorded against the property securing the note.

What does the law want you to do? Tear up the note? No, the note is still valid. Release the deed of trust? No, the deed of trust does not have to be released until the latter of two things happens (A.R.S. § 33-714):

1. If the final maturity date or the last date fixed for payment of the debt or performance of the obligation is ascertainable from the county recorder's records, you can maintain the deed of trust until ten years after that date.

2. If the final maturity date or the last date fixed for payment of the debt or performance of the obligation is not ascertainable from the county recorder's records or if there is no final maturity date or last date fixed for payment of the debt or performance of the obligation, then you can maintain the deed of trust until 50 years after the date the mortgage or deed of trust was recorded.

With respect to situation (1), it is each separate payment on the note that is subject to the six-year statute of limitations. So, if the note requires a typical monthly payment of principal and interest, then it is only monthly payments that are more than six years in default on which you cannot collect. The remaining payments can still be collected by foreclosure or by suing on the note.

Also important is whether the borrower made any payments that would restart the six-year clock or if the debtor has done anything in writing to acknowledge or reaffirm debt. Before you jump into that water, you should probably talk to a lawyer.

If this sounds like the recurring nightmare where you try to run as fast as you can but you just stay rooted in place, it basically is. But then you wake up and things get better. Same with stale notes. If the deed of trust can stay recorded for ten or even 50 years, then there is a decent chance that the owner/debtor will want to refinance their property or sell it during that time. If so, your deed of trust is still sitting there and has to be paid off before any closing. Your options to collect go from active to passive, but you may still eventually get your money.

2026 Update

When I wrote this article in 2019 Arizona lawyers, borrowers, and lenders were still dealing—at least remotely—with the fall out of the 2008 recession and the many forbearances that were allowed as a result. Those days are long gone now, and Arizona courts have had a chance to look at stale notes again in a less overheated context.

Anyone who read my article knows that it left a key question unanswered. If a note is six years stale and not subject to foreclosure, based on the statute of limitations and the holding in De Anza, what actually happens to the deed of trust? A.R.S. § 33-714 says it just sits there for either ten years or 50 years, but what does that mean in practical terms?

The deed of trust can’t be foreclosed and no action on the underlying note can be brought by the lender. That much was clear. What was not understood were the rights of the borrower during that ten or 50-year period. Could the borrower bring a quiet title action under A.R.S. § 12-1101, et seq. to extinguish the deed of trust? Arizona legal minds were divided on this. The no side cited A.R.S. § 33-714 for the 10/50-year rule. They thought it was clear the deed of trust could just sit there for up to half a century.

The yes side read A.R.S. § 33-714(A) closely and specifically: “A. The lien of any mortgage or deed of trust on any real property that is not otherwise satisfied or discharged expires at the later of the following times…” (emphasis added). Could the deed of trust supporting the stale note be “otherwise discharged” through a quiet title action brought by the borrower?

The Supreme Court said yes. To reach this conclusion, the Court decided that:

¶25 …§ 33-714 is not a statute of limitations. The plain language of § 33-714 does not set forth a time limit to bring an action to enforce a lien of a deed of trust. Instead, § 33-714 provides an expiration date for a lien of a deed of trust, thereby setting forth an outer time limit for the expiration of the lien (in other words, the maximum duration of the lien).

¶26 Indeed, § 33-714(A) only applies to a “lien of any mortgage or deed of trust on any real property that is not otherwise satisfied or discharged.” (Emphasis added.) Thus, § 33-714 provides a default term for a lien but explicitly recognizes that a lien may be discharged sooner than the expiration period in the statute. As relevant here, once an action to enforce a lien against property accrues, the relevant statute of limitations provides the time period to bring that action. See § 12-1104. In this case, § 12-548(A)(1) establishes a six-year statute of limitations. And § 33-714 does not extend that six-year statute of limitations period. Aroca v. Tang Inv. Co. LLC, 565 P.3d 1054, 1060–61 (Ariz. 2025).

In other words, Aroca overrules De Anza in so far as De Anza appeared to treat A.R.S. § 33-714 as a statute of limitations and not as what the Supreme Court says it is: a kind of outside bookend or parenthesis on the life of a deed of trust. A.R.S. § 33-714 can cause a deed of trust to magically “go away” after ten or 50 years but it does not prevent a borrower from taking action to remove a deed of trust supporting a stale note through a quiet title action at a sooner date: sometime after the running of the six-year statute of limitations under A.R.S. § 12-548 and before ten or 50 years is up under A.R.S. § 33-714.

As lawyers like to say, the holding in Aroca transforms A.R.S. § 33-714 from a “sword” that can slay any attempt to remove a deed of trust supporting a stale note before the ten or 50-year period has run to a “shield” that merely protects an unchallenged deed of trust for the applicable statutory period.

Aroca squarely puts the sword in the hands of the borrower seeking to quiet title to real property burdened by a stale note and it is a balanced ruling with good news for both borrowers and lenders. On the consumer protection side, this is a win for borrowers whose lenders do not timely act to foreclose delinquent loans secured by deeds of trust. On the conservative side, Aroca strikes a blow for free use and alienability of real property. No longer can a lender “tie up” your property for 50 years without even attempting to enforce the terms of its loan. A lot of real estate that was tied up in limbo by De Anza is now free to be transacted, developed, and sold. Ultimately, that’s good news for business.