Schwenke

This appeal presents a novel question in the field of mortgage and trust deed law: Is the co-maker of a promissory note entitled to enforce the provisions of Code of Civil Procedure section 726 (the so-called “one-action rule”) even though he is not a party to the deed of trust securing the debt? We decide that he is so entitled.

Statement of Facts

There is no dispute about the facts which follow. Robert Schwenke and Terry O’Brien were partners in a business known as S. & O.B. Enterprises which engaged in property development. On April 15, 1981, Robert and Ute Schwenke (Schwenke) and Terry and Esther O’Brien (O’Brien) 1 signed a promissory note evidencing a debt in the amount of $59,000 to Pacific Valley Bank (Bank), bearing a due date of October 12, 1981. The funds received were deposited in the S & O.B. account for use in the partnership’s business. The note stated that it was secured by deeds of trust on property located at 6709 Leatherwood Court and 4009 Goldrun Court, San Jose. These properties were both owned by O’Brien.

The note also stated that it was a renewal and an extension of a note originally dated January 10, 1980, secured by the same deeds of trust. In…

I concur in the judgment and opinion of the court. Our holding today states a clear rule that each coborrower on a debt secured by a mortgage on real property is entitled to the benefit and protection of Code of Civil Procedure section 726 whether or not he or she has an ownership interest in the property securing the debt or has signed the deed of trust.

I respectfully write separately to express my concern regarding the issue of implied consent to the reconveyance raised by the issues and the dissent. In my view, section 726 becomes part of the contract between the lender *147 and each coborrower in this situation, and that contract cannot be modified so as to impose terms more onerous than those originally agreed to absent a showing of consent to the reconveyance communicated to the lender by the coborrower whose liability is in issue, on the basis of the kind of evidence ordinarily required in proving a modification of the terms of an existing contract by the mutual consent of the parties.

Consent in this situation cannot be implied simply and without more on the basis of agreements inter sese between coborrowers. Here there was no evidence that O’Brien and Schwenke had any…

—I respectfully dissent.

The trial court made a pivotal finding in this case which in my view compels affirmance of the judgment. The court found: “[T]he Schwenkes had reached an oral understanding with Terry O’Brien, in or about April 1981, that the balance of the Schwenke and O’Brien indebtedness to Pacific Valley Bank was to be the responsibility of the Schwenkes.” Is it consistent for the *148 Schwenkes to have agreed to pay off the entire debt balance owing to the bank and then, when pressed to perform their promise, contend that O’Brien’s property was to have remained primarily liable for the debt under Code of Civil Procedure section 726? Of course not! O’Brien’s mortgages and Schwenkes’ promise could not logically coexist. The Schwenkes’ agreement can only be understood as having authorized O’Brien to apply to the bank and to obtain from it a reconveyance of the mortgages, thus leaving the debt unsecured.

As the majority acknowledges, “[s]ince the provisions of section 726 are designed for the protection of the debtor, he is entitled to waive them. (Salter v. Ulrich (1943) 22 Cal.2d 263, 266 ;..(See also Williams v. Reed (1957) 48 Cal.2d 57, 67 [ 307 P.2d 353 ].) The…

This appeal presents a novel question in the field of mortgage and trust deed law: Is the co-maker of a promissory note entitled to enforce the provisions of Code of Civil Procedure section 726 (the so-called "one-action rule") even though he is not a party to the deed of trust securing the debt? We decide that he is so entitled.

There is no dispute about the facts which follow. Robert Schwenke and Terry O'Brien were partners in a business known as S. & O.B. Enterprises which engaged in property development. On April 15, 1981, Robert and Ute Schwenke (Schwenke) and Terry and Esther O'Brien (O'Brien) [1] signed a promissory note evidencing a debt in the amount of $59,000 to Pacific Valley Bank (Bank), bearing a due date of October 12, 1981. The funds received were deposited in the S & O.B. account for use in the partnership's business. The note stated that it was secured by deeds of trust on property located at 6709 Leatherwood Court and 4009 Goldrun Court, San Jose. These properties were both owned by O'Brien.

The note also stated that it was a renewal and an extension of a note originally dated January 10, 1980, secured by the same deeds of trust. In fact…