Court Opinion

ID: 9746177
Source: CourtListenerOpinion
Date Created: 2023-08-27 14:06:10.860722+00
Date Added: 2024-06-11T07:25:10.264740
License: Public Domain

HOLLENHORST, Acting P. J.
I dissent. The majority correctly states the dispositive test of Hibernia S. & L. Soc. v. Thornton (1895) 109 Cal. 427 [42 P. 447], but inexplicably fails to apply it.
*617In Thornton, our Supreme Court said: “[W]hen the mortgagee, by his own act or neglect, deprives himself of the right to foreclose the mortgage, he at the same time deprives himself of the right to an action upon the note” (Hibernia S. & L. Soc. v. Thornton, supra, 109 Cal. 427, 429, italics added.)
The majority also cites the more recent statement of the rule in Pacific Valley Bank v. Schwenke (1987) 189 Cal.App.3d 134 [234 Cal.Rptr. 298]: “Although an exception to the one-action rule [of Code of Civil Procedure section 726] has developed in cases where foreclosure would be an idle act because the security has been destroyed or has become worthless [citations], the exception does not apply if the beneficiary himself is responsible for the loss of security. Thus, a creditor is not allowed to circumvent the statute by divesting himself of his security without the consent of the debtor.” (Pacific Valley Bank, supra, at p. 140, italics added.)
In other words, the one action rule of Code of Civil Procedure section 726 prevents the secured creditor from suing on the underlying nonpurchase money promissory note when the secured creditor is not a bona fide sold-out junior lienor.
The one action rule is thus the general rule,1 and the exception is a case in which “foreclosure would be an idle act because the security has been destroyed or has become worthless . . . .” (Pacific Valley Bank v. Schwenke, supra, 189 Cal.App.3d 134, 140.) The exception is inapplicable if the “beneficiary himself is responsible for the loss of security.” (Ibid.)
The majority lessens the protection afforded consumers by the one action rule by holding that Bank of America National Trust and Savings Association is a bona fide sold out junior lienor. Although the bank was a sold-out junior lienor, it did not achieve that status without fault because the bank clearly took affirmative action which resulted in the loss of its security: it intentionally postponed its foreclosure sale so that the senior lienor could foreclose first. This action by the bank rendered its security valueless. The exception to the one action rule was therefore inapplicable and the one-action rule bars the bank from pursuing the debtors individually.
*618The majority nevertheless refuses to apply the one action rule on “public policy” grounds. While not stating what public policy it is trying to further by its decision, the court concludes that “[t]hese practical considerations lead us to conclude that the rule proposed by the Graveses would be both unworkable and inequitable.” (Maj. opn., ante, at p. 616.)
The applicable public policy has been fully and clearly stated by the Legislature in its enactment of the one action rule and by our Supreme Court in Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35 [27 Cal.Rptr. 873, 378 P.2d 97] and Brown v. Jensen (1953) 41 Cal.2d 193 [259 P.2d 425]. For example, in Roseleaf, Justice Traynor explained that, as between the bona fide sold-out junior lienor and the debtor, equitable considerations favor the junior lienor: “The junior lienor, however, is in no better position to protect himself than is the debtor. Either would have to invest additional funds to redeem or buy in at the sale. Equitable 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 Corp., supra, at p. 41.) By basing its opinion on unspecified “equitable considerations,” the majority disregards the statements of both the Legislature and the Supreme Court, and embarks on a rudderless course of its own to unknown destinations.
The “practical considerations” cited by the majority consist of a parade of horribles that are based on the premise that a contrary holding would require lenders “to start and, without interruption, complete foreclosure, lest their hesitancy cause them to lose their secured position.” (Maj. opn., ante, at pp. 615-616.)
I disagree. A contrary holding would merely follow the well-established principle that the lender may not intentionally take affirmative action to lose its security in order to assert that it has become a bona fide sold-out junior lienor. (Pacific Valley Bank v. Schwenke, supra, 189 Cal.App.3d 134, 140.) Nothing in a contrary holding would require the bank to foreclose, or prevent it from doing so. Once the foreclosure process began, nothing in a contrary holding would require or prevent it from continuing or postponing the foreclosure, nor would anything in a contrary holding require the bank to complete or not complete the foreclosure process. The only thing a contrary holding would do would be to prevent the bank from taking affirmative action with the intent to circumvent the one action rule. In other words, a contrary holding would limit only lenders who attempted to manipulate and avoid the one action rule. It would not affect a bona fide sold-out junior lienor.
*619The proper “public policy” is that stated in the statutes. The majority should apply it rather than embarking on its own nebulous interpretation which ignores the purposes of the one action rule. I would reverse the judgment.
Appellants’ petition for review by the Supreme Court was denied March 19, 1997. Baxter, J., and Chin, J., did not participate therein.

Pacific Valley Bank succinctly states the one action rule: “The law of this state is that *[t]here can be but one form of action for the recovery of any debt. . . secured by mortgage upon real property . . .’; that form of action is foreclosure of the security. (Code Civ. Proc., § 726.) If the beneficiary seeks a deficiency judgment in excess of the value of the security, he is further limited to a foreclosure by judicial process rather than by operation of the power of sale under the deed of trust. (Code Civ. Proc., § 580b.) The existence of the security thus denies the secured creditor the right to bring an independent cause of action on the underlying promissory note.” (Pacific Valley Bank v. Schwenke, supra, 189 Cal.App.3d 134, 140.)