one form of action rule in California

2021(Kinsmith Financial Corp. v. Gilroy (2003) 105 Cal.App.4th 447, 453 .) Under the one form of action rule, “[a] secured creditor can bring only one lawsuit to enforce its security interest and collect its debt” (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 997 (Wozab))—a foreclosure proceeding.

2015A debtor can raise it as an affirmative defense in an action on the promissory note, forcing the creditor to proceed against the security, or he may invoke it as a sanction against the creditor on the basis that the creditor, by not foreclosing first on the security, has waived his right to do so. ( Wozab, supra, at p. 997 .) Downtown Sunnyvale has not provided any evidence that would demonstrate a probability of prevailing on its claims that Wells Fargo violated section 726 either by breaching the one form of action rule or the security first rule.

2015A. Section 726 Claim In relevant part, section 726 provides that “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property . . . , which action shall be in accordance with the provisions of this chapter.” (§ 726, subd. (a).) Under this so-called “one form of action” rule, a “secured creditor can bring only one lawsuit to enforce its security interest and collect its debt.” (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 997 (Wozab).) Included in the one form of action rule is the security-first prin

2015A. Section 726 Claim In relevant part, section 726 provides that “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property . . . , which action shall be in accordance with the provisions of this chapter.” (§ 726, subd. (a).) Under this so-called “one form of action” rule, a “secured creditor can bring only one lawsuit to enforce its security interest and collect its debt.” (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 997 (Wozab).) Included in the one form of action rule is the security-first prin

2025(Kirkpatrick v. Westamerica Bank, supra, 65 Cal.App.4th at p. 986 [“Section 726 does not prescribe a sanction for violation of the one form of action rule.

2014(See Kirkpatrick v. Westamerica Bank (1998) 65 Cal.App.4th 982, 986 [“Section 726 does not prescribe a sanction for violation of the one form of action rule.

2014(E.g., Paykar Construction, Inc. v. Spilat Construction Corp. 12 The dissent’s position that Bank complied with the security first principle is contrary to the Supreme Court’s interpretation of how section 726 applies to debt secured by multiple parcels. (2001) 92 Cal.App.4th 488, 496 [Second App. Dist.]; Bank of America v. Graves (1996) 51 Cal.App.4th 607, 614 [Fourth App. Dist.]; First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1668 [Sixth App. Dist.]; see also National Enterprises, Inc. v. Woods (2001) 94 Cal.App.4th 1217, 1238 [Third App. Dist. stated that a comaker of a note

2014Woods (2001) 94 Cal.App.4th 1217, 1238 [Third App. Dist. stated that a comaker of a note is entitled to protection of the one form of action rule, but did not mention the consent requirement]; 4 Witkin, Summary of Cal. Law, supra, § 135, p. 934 [summarizing Schwenke].) Lastly, Bank suggests the absence of cases involving loans with multiple debtors secured by more than one parcel of real property demonstrates the reasoning in Schwenke is unreliable.

2021(Bank of America, N.A. v. Roberts (2013) 217 Cal.App.4th 1386, 1396 [the “one form of action is a foreclosure action”].) Under the “ ‘security first’ rule[, a] secured creditor must ‘rely upon his security before enforcing [the] debt.’ ” (Coker v. JPMorgan Chase Bank, N.A. (2016) 62 Cal.4th 667, 691 .) Section 726 can be invoked in two ways, as an affirmative defense or as a sanction.

2019(See Bank of America, N.A. v. Roberts (2013) 217 Cal.App.4th 1386, 1396-1398 [discussing the context and purpose of the rule].) 5 2953 took effect and that did not apply section 2953, our Supreme Court suggested in often-cited dictum that because section 2953 prohibits contemporaneous waivers of certain code sections, specifically Code of Civil Procedure section 726, it implicitly permitted such waivers after a loan is made.

2012Soc. v. Thornton (1895) 109 Cal. 427 , 429 [ 42 P. 447 ].) But this exception to the one form of action rule “ ‘does not apply if the beneficiary himself is responsible for the loss of security. . . .’ ” (Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 48 [ 57 Cal.Rptr.2d 687 , 924 P.2d 996 ].) For instance, a creditor may not unilaterally divest its security interest without the consent of the debtor.

2012Soc. v. Thornton (1895) 109 Cal. 427 , 429 [ 42 P. 447 ].) But this exception to the one form of action rule “ ‘does not apply if the beneficiary himself is responsible for the loss of security. . . .’ ” (Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 48 [ 57 Cal.Rptr.2d 687 , 924 P.2d 996 ].) For instance, a creditor may not unilaterally divest its security interest without the consent of the debtor.

1990Savings Bank (1897) 118 Cal. 334, 340-341 [ 50 P. 656 ]; Woodruff v. California Republic Bank (1977) 75 Cal.App.3d 108, 110 [ 141 Cal.Rptr. 915 ]), asserting that in each of those cases, a bank exercised its banker’s lien under Civil Code, section 3043.

1990Savings Bank (1897) 118 Cal. 334, 340-341 [ 50 P. 656 ]; Woodruff v. California Republic Bank (1977) 75 Cal.App.3d 108, 110 [ 141 Cal.Rptr. 915 ]), asserting that in each of those cases, a bank exercised its banker’s lien under Civil Code, section 3043.

1990(Id., at p. 770.) The bank asserted that the setoff did not preclude later judicial foreclosure because the setoff was not “judicial action and thus did not constitute the one action allowed by section 726 for its recovery of the Dailys’ debt.” (Id., at p. 771.) The court rejected this position, noting that it was a settled question that “. . . a bank setoff against a general deposit account [footnote omitted] is an ‘action’ ... for the purpose of applying the one-form-of-action rule of section 726. [Citations.]” (Ibid.) Defendants attempt to distinguish Daily and the authorities on which it w

1990(Id., at p. 770.) The bank asserted that the setoff did not preclude later judicial foreclosure because the setoff was not “judicial action and thus did not constitute the one action allowed by section 726 for its recovery of the Dailys’ debt.” (Id., at p. 771.) The court rejected this position, noting that it was a settled question that “. . . a bank setoff against a general deposit account [footnote omitted] is an ‘action’ ... for the purpose of applying the one-form-of-action rule of section 726. [Citations.]” (Ibid.) Defendants attempt to distinguish Daily and the authorities on which it w

2014(Schwenke, supra, 189 Cal.App.3d at p. 146 .) Schwenke’s oral agreement with O’Brien to assume liability for the partnership loan did not operate as a waiver by Schwenke of the one form of action rule because, in the court’s view, such a waiver was dependent upon him giving his consent to the bank’s release of the security.

2014(Schwenke, supra, 189 Cal.App.3d at p. 146 .) Schwenke’s oral agreement with O’Brien to assume liability for the partnership loan did not operate as a waiver by Schwenke of the one form of action rule because, in the court’s view, such a waiver was dependent upon him giving his consent to the bank’s release of the security.

2017(Roseleaf, supra, 59 Cal.2d at p. 43 .) This suggested to the court in Cadlerock that Simon might have conflated section 580d with the “one form of action rule” set out in section 726.5 (Cadlerock, supra, 206 Cal.App.4th at p. 1549 .) The court in Cadlerock did not explain how the one form of action rule might be used to achieve the same result as the rule stated in Simon.

2012Equitable considerations favor placing this burden on the debtor, not only because it is his default that provokes the senior sale, but also because he has the benefit of his bargain with the junior lienor who, unlike the selling senior, might otherwise end up with nothing.” (Roseleaf, supra, 59 Cal.2d at p. 41.) 8 A subsequent appellate court applied the sold-out junior lienholder rule to a home equity line-of-credit lender, even though the lender intentionally delayed its scheduled trustee’s sale to allow the senior lienor (Federal Home Loan Mortgage Corporation—i.e., “Freddie Mac”) to condu

2014(E.g., Paykar Construction, Inc. v. Spilat Construction Corp. 12 The dissent’s position that Bank complied with the security first principle is contrary to the Supreme Court’s interpretation of how section 726 applies to debt secured by multiple parcels. (2001) 92 Cal.App.4th 488, 496 [Second App. Dist.]; Bank of America v. Graves (1996) 51 Cal.App.4th 607, 614 [Fourth App. Dist.]; First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1668 [Sixth App. Dist.]; see also National Enterprises, Inc. v. Woods (2001) 94 Cal.App.4th 1217, 1238 [Third App. Dist. stated that a comaker of a note

2013Bank v. Chapman (1939) 31 Cal.App.2d 182, 194 ; Pacific Valley Bank v. Schwenke, supra, 189 Cal.App.3d at pp. 140–141; Bank of America v. Graves (1996) 51 Cal.App.4th 607, 611 .) Defendants acknowledge the exception to the one form of action rule set forth above.

2017(Roseleaf, supra, 59 Cal.2d at p. 43 .) This suggested to the court in Cadlerock that Simon might have conflated section 580d with the “one form of action rule” set out in section 726.5 (Cadlerock, supra, 206 Cal.App.4th at p. 1549 .) The court in Cadlerock did not explain how the one form of action rule might be used to achieve the same result as the rule stated in Simon.

2013(Cf. Cadlerock, supra, 206 Cal.App.4th at p. 1549 ["In our view, courts purporting to interpret section 580d have conflated the analysis of section 580d with the one form of action rule."].) 24 mean the creditor loses the right to sue to recover the debt—i.e., the security may be extinguished, but the debt is not. ( Wozab, supra, at p. 1004 .) In Wozab, the bank lost its security interest by immediately taking setoffs against the debt from the debtors' bank accounts instead of foreclosing first.

1984Savings Bank (1897) 118 Cal. 334 [ 50 P. 656 ] held a bank setoff against a general deposit account 5 is an “action” within the meaning of section 22 for the purpose of applying the one-form-of-action rule of section 726.

1984Savings Bank (1897) 118 Cal. 334 [ 50 P. 656 ] held a bank setoff against a general deposit account 5 is an “action” within the meaning of section 22 for the purpose of applying the one-form-of-action rule of section 726.

2024First, appellants contend the trial court’s ruling contradicts “the entire legislative foreclosure scheme.” Citing Winnett v. Roberts (1986) 20 179 Cal.App.3d 909, 922 (Winnett), they contend “a tender of the full amount secured by a trust deed extinguishes the lien on the property [citation], calls a halt to the foreclosure proceedings, and discharges both the obligation and the security, thus entitling the trustor to a full reconveyance of the property.” Winnett concerned the “equity of redemption” we mentioned earlier (see fn. 2, ante), which gives a trustor in default the right to extingui

2014(E.g., Paykar Construction, Inc. v. Spilat Construction Corp. 12 The dissent’s position that Bank complied with the security first principle is contrary to the Supreme Court’s interpretation of how section 726 applies to debt secured by multiple parcels. (2001) 92 Cal.App.4th 488, 496 [Second App. Dist.]; Bank of America v. Graves (1996) 51 Cal.App.4th 607, 614 [Fourth App. Dist.]; First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1668 [Sixth App. Dist.]; see also National Enterprises, Inc. v. Woods (2001) 94 Cal.App.4th 1217, 1238 [Third App. Dist. stated that a comaker of a note

2014(E.g., Paykar Construction, Inc. v. Spilat Construction Corp. 12 The dissent’s position that Bank complied with the security first principle is contrary to the Supreme Court’s interpretation of how section 726 applies to debt secured by multiple parcels. (2001) 92 Cal.App.4th 488, 496 [Second App. Dist.]; Bank of America v. Graves (1996) 51 Cal.App.4th 607, 614 [Fourth App. Dist.]; First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657, 1668 [Sixth App. Dist.]; see also National Enterprises, Inc. v. Woods (2001) 94 Cal.App.4th 1217, 1238 [Third App. Dist. stated that a comaker of a note

2012(Id. at p. 39; see Brown v. Jensen (1953) 41 Cal.2d 193, 196 [ 259 P.2d 425 ] [this “rule has been applied in favor of a second mortgagee, the security being considered lost or valueless as to him, where a first mortgagee forecloses his mortgage and the property is sold for no more than the senior debt and a deed has been given”].) “The fair-value limitations of sections 580a and 726 likewise do not apply to a junior lienor, such as Roseleaf . . . .” (Roseleaf, at p. 39.) 6 As to section 580d, its text does not explicitly contemplate the existence of multiple liens on a single real property or

2012(Id. at p. 39; see Brown v. Jensen (1953) 41 Cal.2d 193, 196 [ 259 P.2d 425 ] [this “rule has been applied in favor of a second mortgagee, the security being considered lost or valueless as to him, where a first mortgagee forecloses his mortgage and the property is sold for no more than the senior debt and a deed has been given”].) “The fair-value limitations of sections 580a and 726 likewise do not apply to a junior lienor, such as Roseleaf . . . .” (Roseleaf, at p. 39.) 6 As to section 580d, its text does not explicitly contemplate the existence of multiple liens on a single real property or

2012(See Union Bank v. Wendland, supra, 54 Cal.App.3d at p. 409 (conc. opn. of Elkington, J.) [noting that “the security . . . had been rendered valueless by the lender’s own act”].) Perhaps Simon and its progeny have come to the right result under the one form of action rule, assuming that it is a proper sanction for a violation of section 726 under these circumstances to bar the junior lienor from obtaining any recovery.

2012But “ “a court is not authorized to insert qualifying provisions not included [in a statute] and may not rewrite the statute to conform to an assumed intention which does not appear from its language.” ’ ” (In re Hoddinott (1996) 12 Cal.4th 992, 1002 [ 50 Cal.Rptr.2d 706 , 911 P.2d 1381 ].) In our view, courts purporting to interpret section 580d have conflated the analysis of section 580d with the one form of action rule.

2012But “ “a court is not authorized to insert qualifying provisions not included [in a statute] and may not rewrite the statute to conform to an assumed intention which does not appear from its language.” ’ ” (In re Hoddinott (1996) 12 Cal.4th 992, 1002 [ 50 Cal.Rptr.2d 706 , 911 P.2d 1381 ].) In our view, courts purporting to interpret section 580d have conflated the analysis of section 580d with the one form of action rule.

2001(Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799 [ 35 Cal.Rptr.2d 418 , 883 P.2d 960 ]; Paykar Construction, Inc. v. Bedrosian (1999) 71 Cal.App.4th 803, 806 [ 84 Cal.Rptr.2d 135 ] (Paykar).) B.

2001(Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799 [ 35 Cal.Rptr.2d 418 , 883 P.2d 960 ]; Paykar Construction, Inc. v. Bedrosian (1999) 71 Cal.App.4th 803, 806 [ 84 Cal.Rptr.2d 135 ] (Paykar).) B.

2001(See Professional Collection Consultants v. Hanada (1997) 53 Cal.App.4th 1016, 1018-1019 [ 62 Cal.Rptr.2d 182 ] [“assignee stands in the shoes of the assignor, acquiring all of its rights and liabilities”]; Strike v. Trans-West Discount Corp., supra, 92 Cal.App.3d at p. 744 [“[a] recorded assignment of note and deed of trust vests in the assignee all of the rights, interests of the beneficiary . . .”].) But the restrictions arising from the one-form-of-action rule under section 726 cannot logically be triggered before the one action is commenced.

2001(Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799 [ 35 Cal.Rptr.2d 418 , 883 P.2d 960 ]; Paykar Construction, Inc. v. Bedrosian (1999) 71 Cal.App.4th 803, 806 [ 84 Cal.Rptr.2d 135 ] (Paykar).) B.

2001(Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799 [ 35 Cal.Rptr.2d 418 , 883 P.2d 960 ]; Paykar Construction, Inc. v. Bedrosian (1999) 71 Cal.App.4th 803, 806 [ 84 Cal.Rptr.2d 135 ] (Paykar).) B.

2001(See Professional Collection Consultants v. Hanada (1997) 53 Cal.App.4th 1016, 1018-1019 [ 62 Cal.Rptr.2d 182 ] [“assignee stands in the shoes of the assignor, acquiring all of its rights and liabilities”]; Strike v. Trans-West Discount Corp., supra, 92 Cal.App.3d at p. 744 [“[a] recorded assignment of note and deed of trust vests in the assignee all of the rights, interests of the beneficiary . . .”].) But the restrictions arising from the one-form-of-action rule under section 726 cannot logically be triggered before the one action is commenced.

2001(See Professional Collection Consultants v. Hanada (1997) 53 Cal.App.4th 1016, 1018-1019 [ 62 Cal.Rptr.2d 182 ] [“assignee stands in the shoes of the assignor, acquiring all of its rights and liabilities”]; Strike v. Trans-West Discount Corp., supra, 92 Cal.App.3d at p. 744 [“[a] recorded assignment of note and deed of trust vests in the assignee all of the rights, interests of the beneficiary . . .”].) But the restrictions arising from the one-form-of-action rule under section 726 cannot logically be triggered before the one action is commenced.

2001Background of the Antideficiency and Foreclosure Laws Because the distinction between judicial and nonjudicial foreclosures is important to an understanding of the issues in this case, we begin with a brief discussion of these two remedies. “[D]uring the [G]reat [Depression with its dearth of money and declining property values, a mortgagee was able to purchase the subject real property at [a] foreclosure sale at a depressed price far below its normal fair market value and thereafter to obtain a double recovery by holding the debtor for a large deficiency.” (Simon v. Superior Court (1992) 4 Ca

2001Background of the Antideficiency and Foreclosure Laws Because the distinction between judicial and nonjudicial foreclosures is important to an understanding of the issues in this case, we begin with a brief discussion of these two remedies. “[D]uring the [G]reat [Depression with its dearth of money and declining property values, a mortgagee was able to purchase the subject real property at [a] foreclosure sale at a depressed price far below its normal fair market value and thereafter to obtain a double recovery by holding the debtor for a large deficiency.” (Simon v. Superior Court (1992) 4 Ca