The statue of limitations in California is 4 years on contracts
. In Oregon it is 6 years. And it is 4 years from the date of breach. So, for example, if the loan was in 2003 and this person was making payments on a regular schedule, and stopped, the time they stopped would be the "breach". The statue of limitations would begin to run on that date.
So what you describe, if the last payment was in 2007 (or that is when your dad demanded repayment? That would start the statute of limitations.
If the letter was in late 2007 (December) it MAY be you still have a shot to sue in Oregon. You would have to have an attorney in California open probate on your dad's estate, and then file a lawsuit in Oregon. Since this person was in Oregon when the contract was made, you can use Oregon as a venue (the place where you file the suit)
So in theory you could do this IF
1. No one has filed probate for your dad's estate
2. If the breach of contract
occurred less than 6 years ago (or you can file the suit before the 6 years expires)
3. You can prove the contract. Since your father is deceased, you would need to prove the loan and the terms of the loan (including repayment schedule)
BotXXXXX XXXXXne: it may still be possible, though what you describe it sounds like you are out of time (since it sounds like the breach may have been before this date in 2007
Let me know if you have more questions, happy to help if I can