The Deed of Trust: Settlor’s Powers

If you signed a Deed of Trust to secure the property related to a promissory note,  You were the Settlor.  That word is synonymous with grantor/mortgagor.

§ 36C-8-808.  Powers of a settlor to take certain actions with respect to the trust.

While a trust is revocable, the settlor of a revocable trust has, at all times, the power to direct or consent to the actions of the trustee whether or not the power is conferred upon the settlor by the terms of the trust. The duty and liability of the trustee subject to the direction and consent of the settlor is as follows:

(1)        The trustee may follow a direction of the settlor that is not authorized by or is contrary to the terms of the trust, even if by doing so (i) the trustee exceeds the authority granted to the trustee under the terms of the trust, or (ii) the trustee would otherwise violate a duty the trustee owes under the trust.

(2)        The trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from compliance with the direction. If the settlor requires the settlor’s consent to certain actions of the trustee, and the settlor does not provide consent within a reasonable time after the trustee has made a timely request for the settlor’s consent, the trustee is not liable, individually or as a fiduciary, for any loss resulting directly or indirectly from the trustee’s failure to take any action that required the settlor’s consent.  (2005-192, s. 2; 2007-106, s. 34; 2012-18, s. 3.1.)”

Don’t be confused by the word “may” in (1).  In the previous sentence, when “duty and liability” are mentioned, those relate to (1)…duty, and (2)…liability.  When read as imparting a duty, “may” should be read as “may only” or “must”, meaning he does not have a choice.

Now, about that revocability thing… in the terms of the Deed of Trust, it might say something to the effect of “…do hereby irrevocably grant, gift, donate…”.  Does that mean that the trust itself is irrevocable?  Changing the trustee is not the same as dissolving the trust. Trustees can be changed regularly.

 I contend that the trust itself is revocable.  When I asked the lawyer* (see bottom of page) about the revocable/irrevocable status of the trust arising from the DoT, he said “Hmmm… we don’t normally think of this kind of trust as being revocable or irrevocable… but yes, you can revoke the trust.”  He also mentioned some particulars in the trust terms that provide consequences for doing so. The problem is… you can effectively remove the power of sale by assigning a different trustee.  What are the remaining consequences?  Bill collectors calling you?

Also of note is “If the settlor requires the settlor’s consent “. It does not say “If the terms of the trust require the settlor’s consent”.  This is because certain powers are always retained by the settlor, whether the settlor knows it or not. This section of the statutes proves that.  It should therefore be sufficient to notice the trustee of that requirement. 

In sum, the settlor can order the trustee to do anything in regard to the trust, as well as require the trustee to ask for settlor’s consent before performing ANY act (wouldn’t that include the act of selling the property?).  No consent= no power of sale, among other things.

*He had already lied and said that the trustee had an equitable interest, and that the legal title was held by us.  My question to him was “If the lender is the trust beneficiary, and the trustee has legal title, what do we have?” Makes sense that we have a mere possessory interest, meaning we are allowed to live there.  We are tenants, paying rent.

“An equitable interest is an “interest held by virtue of an equitable title (a title that indicates a beneficial interest in property and that gives the holder the right to acquire formal legal title) or claimed on equitable grounds, such as the interest held by a trust beneficiary. “The equitable interest is a right in equity that, if violated (suffers a harm), is subject to satisfaction by an equitable remedy. This concept exists only in the common law.”

This mention of common law supports the understanding that the deed of trust is a private agreement– that is also why the power of sale is a non-judicial remedy for the beneficiary (lender) to regain losses due to non-payment of loan (for which, in truth, it has risked no consideration or value whatsoever).