California Real Estate SalespersonFinancingHard
A promissory note is secured by a deed of trust on real property. After the borrower defaults, the lender files a lawsuit seeking only a personal money judgment against the borrower, without first foreclosing on the security. Under California's one-action rule, what is the primary consequence for the lender?
- AThe lender must first exhaust the security through foreclosure before pursuing the borrower personally
- BThe lender is entitled to double damages for filing the wrong type of action
- CThe lender may proceed freely since the note is legally separate from the security instrument
- DThe borrower is automatically released from all debt obligations
Show answer & explanationAnswer & explanation
Correct answer: A. The lender must first exhaust the security through foreclosure before pursuing the borrower personally
California's one-action rule (CCP §726) requires a secured lender to first exhaust its security through foreclosure before—or as its only means of—seeking to collect on the debt; suing for a personal judgment first without foreclosing can bar the lender from later foreclosing on the security.
Why the other options are wrong
- B. There is no double-damages penalty under the one-action rule; the sanction is losing the right to foreclose or the security.
- C. The one-action rule specifically prevents treating the note and security as unrelated for enforcement purposes.
- D. The rule limits the lender's remedy but does not automatically forgive the debt.
One-Action Rule (CCP §726)
California law requiring a lender holding a note secured by real property to pursue foreclosure on the security as the sole (or first) remedy before obtaining a personal judgment against the borrower.
- Prevents multiple lawsuits over the same secured debt
- Failure to foreclose first can cause lender to lose security rights
- Works alongside antideficiency statutes (CCP §580b, §580d) to protect borrowers
Memory trick: One debt, one lawsuit — security comes first.