Xavier deeds to Peter, a trustee, his property in form of security, for the loan, which is lent by Smith, the beneficiary of the trust. The nature of this transaction renders it as a deed of trust. Under these circumstances, if Xavier defaults to pay the loan, which of the following is the appropriate way in which Smith can recover his loan?

Question

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In a deed of trust, the beneficiary (Smith) can recover his loan by notifying the trustee (Peter) to sell the property if the borrower (Xavier) defaults on the loan. This process is known as a non-judicial foreclosure. Option A is incorrect because an action and sale contract is not applicable in this situation. Option B is incorrect because the right of exoneration allows a guarantor to seek reimbursement from the debtor, not the beneficiary. Option C is also incorrect because the right of reimbursement is applicable when a guarantor pays on behalf of the debtor, not the beneficiary.

Xavier Deeds to Peter, a Trustee, His Property in Form