Enforcing Remedies Under California's One-Action Rule: Foreclosure, Deficiency Claims, Debtor Defenses

What Constitutes an "Action" and Avoiding Violations: Lessons Learned from Case Law

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Wednesday, October 28, 2020

Recorded event now available

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Course Materials

This CLE course will examine California's One-Action Rule and its applications, judicially created exceptions to the rule, and the consequences of taking an "action" or violating the One-Action Rule.

Description

California's One-Action Rule requires a lender to foreclose on the real property securing its debt before enforcing other available remedies against a defaulting debtor. Lender's counsel must have a thorough understanding of the One-Action Rule when documenting or enforcing a real estate secured loan in California.

California's One-Action Rule includes two general limitations on a lender's ability to recover debt secured by real property collateral. The first limitation, the security first rule, prohibits a lender from collecting against any of the debtor's unpledged assets unless the lender seeks, as part of its action, an order for judicial foreclosure of its mortgage or deed of trust. The second limitation restricts a lender from bringing more than one "action" against a debtor to exhaust the security. Simply put, a lender must enforce all of its security in a single action (i.e., a lender cannot file multiple lawsuits against a debtor on a single debt).

If a lender violates the One-Action Rule by commencing an action for damages against the debtor personally without first exhausting the real property collateral, the debtor can require the lender to proceed against the real property collateral. In California, the debtor may also seek sanctions against the lender, which could result in the lender forfeiting its security interest in the real property collateral.

Listen as our authoritative panel discusses the nuances of the One-Action Rule in California, including what constitutes an "action" for purposes of the One-Action Rule, the unenforceability of certain waivers of the One-Action Rule, and the consequences of a violation.

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Outline

  1. Statutory basis for the One-Action Rule
  2. Limitations imposed under the One-Action Rule
    1. Security first rule
    2. Prohibition against filing multiple lawsuits
  3. What constitutes an "action"
  4. Consequences of violating the One-Action Rule
  5. Enforceability of waivers

Benefits

The panel will review these and other key issues:

  • What distinguishes the One-Action Rule from standard foreclosure law and practice?
  • Can the security first rule prevent a lender from pursuing a guarantor?
  • What remedies can the lender exercise without being deemed to have taken an "action" under the One-Action Rule?
  • Does the lender forfeit any foreclosure remedies if it violates the One-Action Rule?

Faculty

Liverant, Marc
Marc A. Liverant

Partner
Morgan Lewis & Bockius

Mr. Liverant advises real estate developers, owners, operators, investors, lenders and other end-users in the...  |  Read More

Williams, Paul
Paul M. Williams

Partner
Morgan Lewis & Bockius

Mr. Williams advises clients on a range of merger, acquisition, disposition, development, and financing transactions,...  |  Read More

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