As you may recall, the Supreme Court of California is currently reviewing two significant appellate court rulings involving the “one form of action” rule:
1. Coker v. JP Morgan Chase Bank, N.A., 218 Cal. App. 4th 1 (4th Dist. 2013); and,
2. First California Bank v. McDonald, 231 Cal. App. 4th 550 (5th Dist. 2014).
In Coker, to resolve a nonjudicial foreclosure, the mortgagee of a purchase-money loan conditioned a short sale on the borrower’s agreement to remain responsible for any deficiency. A copy of the Appellate Court’s ruling in Coker is available here: Link to Opinion.
McDonald involves a judicial foreclosure on a mortgage loan made to a husband and wife, where the husband was deceased, and the mortgagee did not obtain the consent of the deceased husband’s estate prior to liquidating part of the collateral owned exclusively by the wife. A copy of the Appellate Court’s ruling in McDonald is available here: Link to Opinion.
The issues presented for review before the Supreme Court of California in these two cases are:
1. Does a borrower waive the protection of the “security first” rule under California Code of Civil Procedure section 726 by agreeing to a short sale?
2. Can a servicer condition a short sale on waiver by the borrower of the anti-deficiency protections under California Code of Civil Procedure section 580b?
3. Does a servicer violate California Code of Civil Procedure section 726 when it consents to a borrower’s voluntary ″short sale″ of her own property without obtaining the consent of a co-borrower who has no ownership interest in that property?
4. When there is a violation of Section 726, should alternate remedies, short of the servicer losing its right to pursue a deficiency judgment, be available to the courts where the servicer acted in good faith and there has been no prejudice to the co-borrower?
5. Does Pacific Valley Bank v. Schwenke (1987) 189 Cal. App. 3d 134, remain good law after the California Supreme Court’s decision in Security Pacific National Bank v. Wozab (1990) 51 Cal. 3d 991, which bars a loss-of-debt penalty in the absence of evidence of lender bad faith?
California’s “one form of action” rule can spell trouble for mortgage lenders.
Eric Tsai and Patrick Kane of Maurice Wutscher LLP will provide insights into the above rulings, and other developments impacting the “one form of action” rule in its various facets. Eric Tsai is an Associate in the San Francisco office of Maurice Wutscher LLP. Patrick Kane is an Associate in the San Diego office of Maurice Wutscher LLP. The presentation will be moderated by Donald Maurice.
DATE: Tuesday, Aug. 25, 2015 at 11 AM Pacific (Noon Mountain, 1 PM Central, 2 PM Eastern)
TO REGISTER: Please click here.
CAN’T MAKE IT?: We are recording the webinar. Please contact us for a link to view the recording online at any time.