Other Cases Of Interest

Sums Promised To Be Paid In Settlement Of A Lawsuit Were Subject To The Anti-Deficiency Statute Because The Settlement Effected Only A Modification Of A Promissory Note

Weinstein v. Rocha
(Cal. Ct. of App., 2d Dist.), filed August 1, 2012

Alan and Dorina Weinstein purchased real property from Juan Rocha. The primary financing was supplied by a third-party who was given a promissory note and a first trust deed. However, part of the financing was provided by Rocha who was given a promissory note and a second deed of trust.

The Weinsteins sued Rocha. They alleged that Rocha had failed to make proper disclosures in connection with the sale. The Weinsteins and Rocha settled the lawsuit. The settlement provided for a reduction of the promissory note and deed of trust in favor of Rocha.

Sometime later, the Weinsteins stopped paying on Rocha’s note. Rocha sued on the note and obtained a judgment against them for the note’s entire balance.

The Weinsteins appealed, asserting that the anti deficiency statute embodied in Code Civil Procedure section 580b should have limited Rocha’s relief to foreclosing on the promissory note’s security.

The Court of Appeal held that Rocha’s right to recover on the secondary lien was limited by the anti deficiency statute. It reasoned that the settlement agreement was not an ordinary settlement agreement that might be enforced, but rather effected a modification of the promissory note, and it was still subject to the anti-deficiency statute.