due-on-sale clause in California

2012In de la Cuesta, the high court examined federal and state law governing the exercise of a due-on-sale clause, “a contractual provision that permits the lender to declare the entire balance of a loan immediately due and payable if the property securing the loan is sold or otherwise transferred.” (Id. at p. 145.) Under California law, exercise of a due-on-sale clause violates the state prohibition of unreasonable restraints on alienation “ ‘unless the lender can demonstrate that enforcement is reasonably necessary to protect against impairment to its security or the risk of default.’ ” (Id. at

2012In de la Cuesta, the high court examined federal and state law governing the exercise of a due-on-sale clause, “a contractual provision that permits the lender to declare the entire balance of a loan immediately due and payable if the property securing the loan is sold or otherwise transferred.” (Id. at p. 145.) Under California law, exercise of a due-on-sale clause violates the state prohibition of unreasonable restraints on alienation “ ‘unless the lender can demonstrate that enforcement is reasonably necessary to protect against impairment to its security or the risk of default.’ ” (Id. at

1982In Wellenkamp the court held that an institutional lender may not automatically enforce a due-on-sale clause in a promissory note unless the lender can demonstrate enforcement is necessary to protect against impairment to its security or the risk of default. ( 21 Cal.3d at p. 953 .) In reaching this conclusion the Wellenkamp court extrapolates a rule from cases such as Coast Bank v. Minderhout (1964) 61 Cal.2d 311 [ 38 Cal.Rptr. 505 , 392 P.2d 265 ]; La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864 [ 97 Cal.Rptr. 849 , 489 P.2d 1113 ]; and Tucker v. Lassen Sav. & Loan Assn. (1974) 12

1982In Wellenkamp the court held that an institutional lender may not automatically enforce a due-on-sale clause in a promissory note unless the lender can demonstrate enforcement is necessary to protect against impairment to its security or the risk of default. ( 21 Cal.3d at p. 953 .) In reaching this conclusion the Wellenkamp court extrapolates a rule from cases such as Coast Bank v. Minderhout (1964) 61 Cal.2d 311 [ 38 Cal.Rptr. 505 , 392 P.2d 265 ]; La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864 [ 97 Cal.Rptr. 849 , 489 P.2d 1113 ]; and Tucker v. Lassen Sav. & Loan Assn. (1974) 12

1982In Wellenkamp the court held that an institutional lender may not automatically enforce a due-on-sale clause in a promissory note unless the lender can demonstrate enforcement is necessary to protect against impairment to its security or the risk of default. ( 21 Cal.3d at p. 953 .) In reaching this conclusion the Wellenkamp court extrapolates a rule from cases such as Coast Bank v. Minderhout (1964) 61 Cal.2d 311 [ 38 Cal.Rptr. 505 , 392 P.2d 265 ]; La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864 [ 97 Cal.Rptr. 849 , 489 P.2d 1113 ]; and Tucker v. Lassen Sav. & Loan Assn. (1974) 12

1982In Wellenkamp the court held that an institutional lender may not automatically enforce a due-on-sale clause in a promissory note unless the lender can demonstrate enforcement is necessary to protect against impairment to its security or the risk of default. ( 21 Cal.3d at p. 953 .) In reaching this conclusion the Wellenkamp court extrapolates a rule from cases such as Coast Bank v. Minderhout (1964) 61 Cal.2d 311 [ 38 Cal.Rptr. 505 , 392 P.2d 265 ]; La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864 [ 97 Cal.Rptr. 849 , 489 P.2d 1113 ]; and Tucker v. Lassen Sav. & Loan Assn. (1974) 12

1982In Wellenkamp the court held that an institutional lender may not automatically enforce a due-on-sale clause in a promissory note unless the lender can demonstrate enforcement is necessary to protect against impairment to its security or the risk of default. ( 21 Cal.3d at p. 953 .) In reaching this conclusion the Wellenkamp court extrapolates a rule from cases such as Coast Bank v. Minderhout (1964) 61 Cal.2d 311 [ 38 Cal.Rptr. 505 , 392 P.2d 265 ]; La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864 [ 97 Cal.Rptr. 849 , 489 P.2d 1113 ]; and Tucker v. Lassen Sav. & Loan Assn. (1974) 12

1982In Wellenkamp the court held that an institutional lender may not automatically enforce a due-on-sale clause in a promissory note unless the lender can demonstrate enforcement is necessary to protect against impairment to its security or the risk of default. ( 21 Cal.3d at p. 953 .) In reaching this conclusion the Wellenkamp court extrapolates a rule from cases such as Coast Bank v. Minderhout (1964) 61 Cal.2d 311 [ 38 Cal.Rptr. 505 , 392 P.2d 265 ]; La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864 [ 97 Cal.Rptr. 849 , 489 P.2d 1113 ]; and Tucker v. Lassen Sav. & Loan Assn. (1974) 12

2013(Saucedo, supra, 111 Cal.App.3d at p. 315 .) The court held that “in every case in which the nonassuming grantee has sufficient interest in the property to warrant his resisting foreclosure, he would as a real and practical matter be required to pay reasonable attorney fees incurred by trustee and/or beneficiary should they prevail in the action to prevent foreclosure. [¶] While the nonassuming grantee would not have been personally liable for payment of attorney fees under the note and deed of trust, the trustee and/or beneficiary would have been entitled to attorney fees under the provisions

1981They also rely heavily upon the decision of this court in Pas v. Hill (1978) 87 Cal.App.3d 521 [ 151 Cal.Rptr. 98 ], overruled on a separate point to the extent inconsistent by Saucedo v. Mercury Sav. & Loan Assn. (1980) 111 Cal.App.3d 309, 315 [ 168 Cal.Rptr. 552 ], and they urge that, historically, one of the purposes for prohibiting restraints on alienation was to protect creditors.

1982(Wellenkamp v. Bank of America, supra, 21 Cal.3d at pp. 949-951.) To reach that conclusion, the Supreme Court was compelled to explain away dicta suggesting otherwise in both La Sala and Tucker , and disapprove Cherry v. Home Sav. & Loan Assn. (1969) 276 Cal.App.2d 574 [ 81 Cal.Rptr. 135 ], in which the court had concluded at page 580 that a due-on-sale clause was not an invalid restraint on alienation. ( Wellenkamp, supra, 21 Cal.3d at pp. 949-950, 953.) Moreover, the Supreme Court itself has referred to Wellenkamp as an example of a case which overruled a settled rule of law.

1982(Wellenkamp v. Bank of America, supra, 21 Cal.3d at pp. 949-951.) To reach that conclusion, the Supreme Court was compelled to explain away dicta suggesting otherwise in both La Sala and Tucker , and disapprove Cherry v. Home Sav. & Loan Assn. (1969) 276 Cal.App.2d 574 [ 81 Cal.Rptr. 135 ], in which the court had concluded at page 580 that a due-on-sale clause was not an invalid restraint on alienation. ( Wellenkamp, supra, 21 Cal.3d at pp. 949-950, 953.) Moreover, the Supreme Court itself has referred to Wellenkamp as an example of a case which overruled a settled rule of law.

1978In view of the fact that the quitclaim deed was subsequently treated by the parties as an absolute conveyance, apparently prior to January 23, 1975, and well before defendants attempted to exercise the due-on-sale clause, the transaction is more appropriately viewed as an absolute conveyance in satisfaction of a junior encumbrance in lieu of foreclosure. 5 Arguably, this would bring the case within the ambit of Hellbaum v. Lytton Sav. & Loan Assn., 274 Cal.App.2d 456, 458-459 [79 Cal.Rptr. *527 9], and Cherry v. Home Sav. & Loan Assn., 276 Cal.App.2d 574, 580 [ 81 Cal.Rptr. 135 ], holding, and

1978In view of the fact that the quitclaim deed was subsequently treated by the parties as an absolute conveyance, apparently prior to January 23, 1975, and well before defendants attempted to exercise the due-on-sale clause, the transaction is more appropriately viewed as an absolute conveyance in satisfaction of a junior encumbrance in lieu of foreclosure. 5 Arguably, this would bring the case within the ambit of Hellbaum v. Lytton Sav. & Loan Assn., 274 Cal.App.2d 456, 458-459 [79 Cal.Rptr. *527 9], and Cherry v. Home Sav. & Loan Assn., 276 Cal.App.2d 574, 580 [ 81 Cal.Rptr. 135 ], holding, and

1984(Cf. Kern Sunset Oil Co. v. Good Roads Oil Co. (1931) 214 Cal. 435, 440-441 [ 6 P.2d 71 , 80 A.L.R. 453 ].) More importantly, however, in respect to this argument of Los Angeles Federal, it is simply incorrect that its rights under the due-on-sale clause were legally unenforceable from July 1981 to July 1982.

1984(Cf. Kern Sunset Oil Co. v. Good Roads Oil Co. (1931) 214 Cal. 435, 440-441 [ 6 P.2d 71 , 80 A.L.R. 453 ].) More importantly, however, in respect to this argument of Los Angeles Federal, it is simply incorrect that its rights under the due-on-sale clause were legally unenforceable from July 1981 to July 1982.

1982(Henn v. Henn (1980) 26 Cal.3d 323, 328 [ 161 Cal.Rptr. 502 , 605 P.2d 10 ].) In a related argument, appellants contend that despite its unequivocal language, the Supreme Court did not actually intend to except all completed real estate financing arrangements from its holding.

1982(Henn v. Henn (1980) 26 Cal.3d 323, 328 [ 161 Cal.Rptr. 502 , 605 P.2d 10 ].) In a related argument, appellants contend that despite its unequivocal language, the Supreme Court did not actually intend to except all completed real estate financing arrangements from its holding.

1981(United States v. Stewart (9th Cir. 1975) 523 F.2d 1070 [California’s antideficiency judgment statute controls where trust deed provided for interpretation under California law]; see United *926 States v. Yazell (1966) 382 U.S. 341, 353 [ 15 L.Ed.2d 404, 410-411 , 86 S.Ct. 500 ].) Since the subject deed of trust contains a similar provision invoking the “law of the jurisdiction in which the property is situated” in construing that instrument, we conclude that Pan American Federal Savings and Loan Association has effectively waived any claim of federal preemption.

1981(United States v. Stewart (9th Cir. 1975) 523 F.2d 1070 [California’s antideficiency judgment statute controls where trust deed provided for interpretation under California law]; see United *926 States v. Yazell (1966) 382 U.S. 341, 353 [ 15 L.Ed.2d 404, 410-411 , 86 S.Ct. 500 ].) Since the subject deed of trust contains a similar provision invoking the “law of the jurisdiction in which the property is situated” in construing that instrument, we conclude that Pan American Federal Savings and Loan Association has effectively waived any claim of federal preemption.

1981(Flo rida Avocado Growers v. Paul, supra, 373 U.S. at p. 143 [ 10 L.Ed.2d at p. 257 ].) The Federal Home Loan Mortgage Corporation (FHLMC), appearing as amicus curiae, urges a finding of federal preemption based on a claim of need for national uniformity of loan practices and instruments. 9 In response, we rely upon the persuasive language of the Minnesota Supreme Court: “If this national interest were indeed an important policy, it seems that the inclusion of such clauses would be mandated rather than permitted.” (Holiday Acres No. 3 v. Midwest Fed.

1981(Flo rida Avocado Growers v. Paul, supra, 373 U.S. at p. 143 [ 10 L.Ed.2d at p. 257 ].) The Federal Home Loan Mortgage Corporation (FHLMC), appearing as amicus curiae, urges a finding of federal preemption based on a claim of need for national uniformity of loan practices and instruments. 9 In response, we rely upon the persuasive language of the Minnesota Supreme Court: “If this national interest were indeed an important policy, it seems that the inclusion of such clauses would be mandated rather than permitted.” (Holiday Acres No. 3 v. Midwest Fed.

1980(Walker v. Community Bank (1974) 10 Cal.3d 729, 735 [ 111 Cal.Rptr. 897 , 518 P.2d 329 ].) While there was no evidence introduced at trial concerning the apportionment of the value of the winery between personalty and realty, the fact that the predominant value of the security interest is in the personalty must be accorded some weight in determining the validity of the operation in this case of the due-on-sale clause. *976 In Tucker v. Lassen Sav. & Loan Assn. (1974) 12 Cal.3d 629 [ 116 Cal.Rptr. 633 , 526 P.2d 1169 ], the Supreme Court, applying Civil Code section 711, held: “[A] ‘due-on’ cla

1980(Walker v. Community Bank (1974) 10 Cal.3d 729, 735 [ 111 Cal.Rptr. 897 , 518 P.2d 329 ].) While there was no evidence introduced at trial concerning the apportionment of the value of the winery between personalty and realty, the fact that the predominant value of the security interest is in the personalty must be accorded some weight in determining the validity of the operation in this case of the due-on-sale clause. *976 In Tucker v. Lassen Sav. & Loan Assn. (1974) 12 Cal.3d 629 [ 116 Cal.Rptr. 633 , 526 P.2d 1169 ], the Supreme Court, applying Civil Code section 711, held: “[A] ‘due-on’ cla

1978(Brewer v. Simpson, 53 Cal.2d 567, 584 [ 2 Cal.Rptr. 609 , 349 P.2d 289 ]; American National Bank v. Donnellan, 170 Cal. 9, 15 [ 148 P. 188 ].) 3 They read: “If the Trustor sells, conveys or alienates the said property, or any part thereof, or any interest therein, any indebtedness or obligation secured hereby, irrespective of the maturity dates expressed therein, at the option of the holder hereof, and without demand or notice, shall immediately become due and payable.” 4 Pas was to receive a 10 percent interest in the property in lieu of interest on the loan anyway. 5 If no more was involved

1978(Brewer v. Simpson, 53 Cal.2d 567, 584 [ 2 Cal.Rptr. 609 , 349 P.2d 289 ]; American National Bank v. Donnellan, 170 Cal. 9, 15 [ 148 P. 188 ].) 3 They read: “If the Trustor sells, conveys or alienates the said property, or any part thereof, or any interest therein, any indebtedness or obligation secured hereby, irrespective of the maturity dates expressed therein, at the option of the holder hereof, and without demand or notice, shall immediately become due and payable.” 4 Pas was to receive a 10 percent interest in the property in lieu of interest on the loan anyway. 5 If no more was involved

1978(Brewer v. Simpson, 53 Cal.2d 567, 584 [ 2 Cal.Rptr. 609 , 349 P.2d 289 ]; American National Bank v. Donnellan, 170 Cal. 9, 15 [ 148 P. 188 ].) 3 They read: “If the Trustor sells, conveys or alienates the said property, or any part thereof, or any interest therein, any indebtedness or obligation secured hereby, irrespective of the maturity dates expressed therein, at the option of the holder hereof, and without demand or notice, shall immediately become due and payable.” 4 Pas was to receive a 10 percent interest in the property in lieu of interest on the loan anyway. 5 If no more was involved

1978(Brewer v. Simpson, 53 Cal.2d 567, 584 [ 2 Cal.Rptr. 609 , 349 P.2d 289 ]; American National Bank v. Donnellan, 170 Cal. 9, 15 [ 148 P. 188 ].) 3 They read: “If the Trustor sells, conveys or alienates the said property, or any part thereof, or any interest therein, any indebtedness or obligation secured hereby, irrespective of the maturity dates expressed therein, at the option of the holder hereof, and without demand or notice, shall immediately become due and payable.” 4 Pas was to receive a 10 percent interest in the property in lieu of interest on the loan anyway. 5 If no more was involved