Legal Question in Real Estate Law in California

No. The "one form of action rule" requires the lender to elect between the benefits of a trustee's sale (also known as non-judicial foreclosure), which include quicker results, lower cost and much fewer rights to the borrower, or the benefits of a judicial foreclosure action, pretty much the only benefit to the lender being it's the only way to obtain a deficiency judgement. So if the lender choses the trustee's sale, they lose the right to seek recovery of any deficiency.

No, but Mr. McCormick cites the wrong rule. The one form of action rule comes from Code of Civil Procedure section 726, and has nothing to do with prohibitions on a deficiency after nonjudicial foreclosure.

A lender is prohibited from obtaining a judgment for a deficiency after a nonjudicial foreclosure sale by operation of Code of Civil Procedure section 580d. That section provides that "[n[o judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust."

The one action rule acts is different, and is an affirmative defense. If a lender files a lawsuit on the promissory note, section 726 can be raised as an affirmative defense, forcing the lender to exhaust the security, before obtaining any deficiency judgment. If the debtor waives the defense of section 726 by failing to raise it as an affirmative defense, and allows the lender to get a personal judgment, the courts will hold that the lender/beneficiary has made an election of remedies and forfeited the security.

"In the last mentioned situation, section 726 is susceptible of a dual application � it may be interposed by the debtor as an affirmative defense or it may become operative as a sanction. If the debtor successfully raises the section as an affirmative defense, the creditor will be forced to exhaust the security before he may obtain a money judgment against the debtor for any deficiency. �If the debtor does not raise the section as an affirmative defense, he may still invoke it as a sanction against the creditor on the basis that the latter by not

foreclosing on the security in the action brought to enforce the debt, has made an election of remedies and waived the security."

(Walker v. Community Bank (1974) 10 Cal.3d 729.)