contract-law security foreclosure
Foreclosure on Deed of Trust securing a non-monetary obligation
<p>When a deed of trust is made to secure the trustor's performance of a contractual obligation, how does the beneficiary go about foreclosing on it?</p>
<p>When the obligation is just a monetary debt, the usual process is that the trustee conducts an auction, where the beneficiary is allowed to set a starting price as high as the amount they are owed. But if the obligation isn't monetary, then it's not clear to me how one would set the staring price, and a mere payment of money might not make the beneficiary whole.</p>
<p>So what exactly happens? Does a court need to get involved?</p>

<p>There needs to be some reduction to money or specific property. This has to happen either by some after the fact evaluation of the harm caused, or by an explicit or implicit liquidated damages provision in the agreement (e.g. if X doesn't happen, they entire property is forfeited, which implicitly imposes a liquidated damages amount equal to the value of the property in the event of a default). If the seizure of the entire collateral for a default wouldn't be a valid liquidated damages provision, then the deed of trust is invalid and wouldn't be enforced as written.</p>
<p>I can't say that I have, in twenty-five years and in additional reading of case law and news reports, ever seen a deed of trust securing an obligation that isn't monetary or capable of being reduced to money.</p>
<p>For example, if a deed of trust secured an obligation to appear in court, as is common in a bail bond situation, the amount of the deed of trust is reduced to money when the bond is forfeited by the court for failing to appear.</p>
<p>Similarly, if a deed of trust secures an obligation to carry out a landscaping contract by mowing the lawns of everyone in a subdivision, the obligation would be reduced to money by determining the costs of having someone else do the job.</p>
<p>The <a href="https://dublin.ca.gov/DocumentCenter/View/14638/BMR-Perf-Deed-Trust_Sample_2016?bidId=" rel="nofollow noreferrer">first example I found of a California performance deed of trust</a>, while it is not completely obvious on the face of the instrument since it incorporated another contract by reference, likewise refers to obligations that can be reduced to a dollar amount at the time a default occurs, stating:</p>
<blockquote>
<p>This Deed of Trust is given for the purpose of securing payment and/or
performance of the following (the “Secured Obligations”): (i) all
present and future obligations of Trustor set forth in this Deed of
Trust or in the Resale Restriction Agreement (including without
limitation, Trustor’s obligation to convey the Property only to
Eligible Purchasers at no more than the Adjusted Resale Price, which
is capped at an Affordable Unit Cost (as such terms are defined in the
Resale Restriction Agreement); (ii) all additional present and future
obligations of Trustor, to Beneficiary under any other agreement or
instrument acknowledged by Trustor (whether existing now or in the
future) which states that it is or such obligations are, secured by
this Deed of Trust; (iii) all modifications, supplements, amendments,
renewals, and extensions of any of the foregoing, whether evidenced by
new or additional documents; and (iv) reimbursement of all amounts
advanced by or on behalf of Beneficiary to protect Beneficiary’s
interests under this Deed of Trust.</p>
</blockquote>
<p>The statutory process for a deed of trust foreclosure in every state I have ever seen requires the amount of money secured by the deed of trust to be determined and assumes that there is a debt for a sum certain.</p>
