Court Opinion

ID: 9724637
Source: CourtListenerOpinion
Date Created: 2023-08-26 11:05:40.611672+00
Date Added: 2024-06-11T18:25:03.427388
License: Public Domain

ELKINGTON, J.
I concur in the opinion of, and the result reached by, Presiding Justice Molinari.
Addressing myself to the dissent of Justice Sims, I am in agreement that, as found by the trial court, “The March 13, 1969, note [described as “the third note” in the principal opinion] was not intended by the parties to be secured by the First Deed of Trust.” But I reject the conclusion that this finding mandated the judgment entered by the superior court.
We are, as pointed out in the principal opinion, concerned with the effect of Code of Civil Procedure section 580d. This statute, and its sister sections 580a, 580b and 580c, are an expression of California’s “strong” public policy that lenders shall be strictly limited in their right to deficiency judgments after foreclosure of real property security given for their loans.
The genesis of the policy was pointed out by Hatch v. Security-First Nat. Bank, 19 Cal.2d 254, 259 [120 P.2d 869], as follows: “The evil which led to the enactment of this legislation became pronounced during the recent period of economic depression when creditors were frequently able to bid in the debtor’s real property at a nominal figure and also to hold the debtor personally liable for a large proportion of the original debt.” In Brown v. Jensen, 41 Cal.2d 193, 197 [259 P.2d 425], the court said: “These provisions [§§ 580a-580d, inclusive] indicate a considered course on the part of the Legislature to limit strictly the right to recover deficiency judgments, that is, to recover on the debt more than the value of the security.” (See also Freedland v. Greco, 45 Cal.2d 462, 467 [289 P.2d 463]; Valinda Builders, Inc. v. Bissner, 230 Cal.App.2d 106, 112 [40 *408Cal.Rptr. 735].) The statutes were “adopted to promote the public welfare by shielding the debtor class from oppression.” (California Bank v. Stimson, 89 Cal.App.2d 552, 554 [201 P.2d 39].) They are to be “liberally construed to effectuate the specific legislative purpose behind [them]. . . . ‘[T]he courts have exhibited a very hospitable attitude toward the legislative policy underlying the anti-deficiency legislation and have given it a broad and liberal construction that often goes beyond the narrow bounds of the statutory language.’ ” (Prunty v. Bank of America, 37 Cal.App.3d 430, 436 [112 Cal.Rptr. 370].) And the “legislative purpose against deficiency judgments may not be subverted.” (Union Bank v. Brummell, 269 Cal.App.2d 836, 838 [75 Cal.Rptr. 234].)
The applicability of the statutes does not depend upon the express or presumptive bad faith or tortious conduct of the lender. “The antideficiency statutes impliedly recognize that there are many elements other than tortious conduct on the part of trustors and mortgagors which will prevent the collection of the debt, particularly of a purchase money security, such as failure of an enterprise through inept management, too high a price paid for the property, adverse economic conditions, and the like.” (Weaver v. Bay, 21.6 Cal.App.2d 559, 563 [31 Cal.Rptr. 211].)
The provisions of the statutes may not be waived, since they were “enacted for a public reason and as a declaration of public policy” of the state. (California Bank v. Stimson, supra, 89 Cal.App.2d 552, 554.) “Because of the strong reasons of policy [this rule preventing waiver] should apply to section 580d. The .section would have little effect if the prospective creditor could compel the prospective debtor to waive it in advance.” (Freedland v. Greco, supra, 45 Cal.2d 462, 467.) It thus appears that any “intent of the parties” of the case before us, in contravention of section 580d and the public policy on which it is founded, becomes irrelevant to our consideration of the appeal.
The immediate issue, as I see it, is accordingly narrowed to the question whether the transaction, without consideration of “waiver” or “intent,” was violative of section 580d.
There is an important distinction to be drawn between section 580b, prohibiting deficiency judgments following any foreclosure sale under a “purchase money” real property security instrument, and section 580d„ Section 580d bans any deficiency judgment following a private (as distinguished from judicial) sale “under power of sale contained” in any real property security instrument, “purchase money” or otherwise. But *409section 580d permits a deficiency judgment after a judicial foreclosure sale; the reason is that the debtor’s “right of redemption” following such a sale gives him a protection deemed substantially equivalent to that otherwise afforded by the statute.1
In the instant case the foreclosure sale under the “first deed of trust” was nonjudicial and according to the “power of sale” contained therein. Had that deed of trust, and the sale thereunder, concerned the borrower’s entire obligation to the plaintiff bank, it appears without question that section 580d would bar any deficiency judgment. But instead there were two obligations (the “first” and “third” notes), secured by two deeds of trust upon the same piece of real property.
The issue may be further condensed to the question whether by making two successive loans on the security of the same property, the lender was permitted, by private foreclosure under the “first deed of trust’s” power of sale (1) to obtain title to the real property security, and then (2) hold the borrower liable for a deficiency, i.e., the balance due on “the third note,” the security for which had been rendered valueless by the lender’s own act.
It is opined that such a practice would be contrary to the provisions of section 580d, and to the policy expressed thereby. It would permit the lender to frustrate the statute’s public purpose by obtaining the real property security at a private foreclosure sale thus denying the borrower any right of redemption, and also obtaining a judgment for the remaining deficiency. Such a transaction should be construed in such a manner as “to avoid thwarting the purpose of section 580d.” (See Freedland v. Greco, supra, 45 Cal.2d 462, 468.)
*410It is recognized that the two obligations in question were not created contemporaneously. But the statute’s purpose, that if the lender elects upon default of the borrower to hold a private foreclosure sale he must look to his security alone, and not to the borrower, for repayment, seems reasonably applicable regardless of the timing of the successive loans. (See Freedland v. Greco, supra, 45 Cal.2d 462, 467.)
Nor do I believe that the lender bank, in the context of this case, should be equated with a third party who might make a loan taking as security a second deed of trust on the same real property. It is true that when the security of a second deed of trust is rendered valueless by a prior foreclosure, through no fault or action of the second lender (see Brown v. Jensen, supra, 41 Cal.2d 193, 195-196), that lender for equitable reasons will ordinarily be permitted an action against the debtor on the second obligation. (See Roseleaf Corp. v. Chierighino, supra, 59 Cal.2d 35, 43-44.)2 But such principles are obviously inapplicable in a factual, context such as that before us, where the single lender with the choice of a private or judicial foreclosure sale, opts for the private sale. Having elected to proceed by way of a private sale under the “first deed of trust’s” power of sale the lender in reason, and equity, was .bound by that election. Having taken title to the subject real property in that manner, it was precluded by section 580d from also taking a deficiency judgment.

 The effect of section 580d is to permit deficiency judgments only in those cases in which the creditor, by foreclosing judicially, allows the debtor the opportunity of exercising his right of redemption. Upon judicial foreclosure, the creditor can recover from the debtor whose obligation is secured by the foreclosed mortgage or deed of trust any deficiency remaining after the proceeds of sale are applied to the debt, and the debtor has a statutory right of redemption. No right of redemption exists following a nonjudicial sale of the security. Section 580d makes up, at least in part, for the loss of the debtor’s right of redemption by depriving the creditor who elects the nonjudicial foreclosure or sale remedy from obtaining a deficiency judgment against the debtor.” (Union Bank v. Gradskv, 265 Cal. App.2d 40,43 [71 Cal.Rptr. 64]; and see Spangler v. Memel, 7 Cal.3d 603, 610-611 [102 Cal.Rptr. 807, 498 P.2d 1055]; Roseleaf Corp. v. Chierighino, 59 Cal.2d 35, 43-44 [27 Cal.Rptr. 873, 378 P.2d 97]; Indusco Management Corp. v. Robertson, 40 Cal.App'.3d'456, 460-461 [114 Cal.Rptr. 47]; Bauman v. Castle, 15 Cal.App.3d 990,993 [93 Cal.Rptr. 565]; Kass v. Weber, 261 Cal.App.2d 417, 421-422 [67 Cal.Rptr. 876]; Loretz v. Cal-Coast Dev. Corp., 249 Cal.App.2d 176, 178 [57 Cal.Rptr. 188]: Lange v.Aver, 241 Cal.App.2d 793, 796-798 [50 Cal.Rptr. 847].)

 “The purpose of achieving a parity of remedies [see fn. I, ante] would not be served by applying section 580d against a nonselling junior lienor. Even without the section the junior has fewer rights after a senior private sale than after a senior judicial sale. He may redeem from a senior judicial sale (Code Civ. Proc., § 701), or he may obtain a deficiency judgment. (Savings Bank v. Central Market Co., 122 Cal. 28 [54 P. 273]; Giandeini v. Ramirez, 11 Cal.App.2d 469 [54 P.2d 91]; see Brown v. Jensen, 41 Cal.2d 193, 196 [259 P.2d 425].) After a senior private sale, the junior has no right to redeem. This disparity of rights would be aggravated were he also denied a right to a deficiency judgment by section 580d. There is no purpose in denying the junior his single remedy after a senior private sale while leaving him with two alternative remedies after a senior judicial sale. The junior's right to recover should not be controlled by the whim of the senior, and there is no reason tq extend the language of section 580d to reach that result.” (Roseleaf Córp. v. Chierighino, supra, 59 Cal.2d 35. 44.)