Court Opinion

ID: 9849788
Source: CourtListenerOpinion
Date Created: 2023-09-24 04:46:24.477043+00
Date Added: 2024-06-11T09:20:26.146582
License: Public Domain

KENNARD, J.
I concur in the majority opinion. I write separately to comment further on the purposes of Code of Civil Procedure section 580b. As the majority notes, in Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35, 42 [27 Cal.Rptr. 873, 378 P.2d 97], this court articulated two purposes for section 580b: preventing sellers from overvaluing real property and moderating the economic dislocation caused by downturns in property values.
As to the first purpose, commentators and the Court of Appeal have noted the lack of economic logic to the argument that Code of Civil Procedure section 580b reduces overvaluation of properties. (See Budget Realty, Inc. v. Hunter (1984) 157 Cal.App.3d 511, 515-516 [204 Cal.Rptr. 48]; Harris, California Code of Civil Procedure Section 580b Revisited: Freedom of Contract in Real Estate Purchase Agreements (1993) 30 San Diego L.Rev. 509, 516-517; Bernhardt, Cal. Mortgage and Deed of Trust Practice (Cont.Ed.Bar 2d ed. 1990) One-Action and Antideficiency Rules, § 4.27, pp. 207-208; Hetland, Cal. Real Estate Secured Transactions (Cont.Ed.Bar 1970) p. 270.) Assume the fair market value of the property is X. If the seller finds a buyer willing to pay 2X or 3X for the property, the seller is no worse off selling for that price (and often will be better off) than selling for X. In either case, if default occurs, the price the seller will be able to resell the property for is the same regardless of the initial selling price (assuming a stable property market, that price will be X). The seller gains nothing by refusing to sell its property for the higher price, and loses nothing by selling the property for more than its value as security. Although overvaluing may increase the risk of default in property bought for commercial purposes (by *672increasing the income stream the property must generate in order to pay for itself), the increased selling price may well compensate the seller for the increased risk. Moreover, section 580b encourages buyers to offer more than the market value of the property because they know that in the case of default they will not be personally liable for any deficiency. In my view, the criticisms of the overvaluation rationale of Roseleaf Corp. v. Chierighino, supra, 59 Cal.2d 35, described above are well founded.