West v. Buffo

Opinion

McKIBBEN, J.

*

The question on this appeal is whether the rule per-taming to a due-on-sale clause in a deed of trust enunciated in Wellenkamp and Dawn Investment applies to an individual homeowner who sells her home and takes back a promissory note and deed of trust. We hold that it does.

In April 1978, the respondent sold her single faniily residence to Mr. and Mrs. David Lopez for $49,000, and as part of the purchase price received a note for $44,000 secured by a first deed of trust on the property. The note bore interest at 8% percent and was fully amortized for a 30-year term. It contained a typed due-on-sale clause: "In the event the herein described property . . . is sold, agreed to be sold, conveyed or alienated by the trustor. . . all obligations secured by this instrument, irrespective of the maturity dates . . . at the option of the holder hereof. . . shall immediately become due and payable."

In July 1979, the Lopezes sold the property to the Wests, appellants, for $62,500. The Wests took the property subject to the existing note and deed of trust held by respondent in the amount of $43,629 payable at $346 per month, paid $9,000 down and signed a second note and deed of trust in the amount of $9,871. Respondent Buffo refused to accept installment payments on the note. Following unsuccessful demands for a payoff, she commenced foreclosure pro-

[95]

proceedings in October 1979. In January 1980, appellants West filed an action for declaratory relief and an injunction.

In March 1980, respondent court denied appellants’ request for a preliminary injunction to halt the foreclosure.

1

Wellenkamp

v.

Bank of America

(1978) 21 Cal.3d 943 [148 Cal.Rptr. 379, 582 P.2d 970], held that lender enforcement of a due-on-sale clause, contained in a deed of trust or promissory note secured by real property, constitutes an unreasonable restraint on alienation unless the lender can demonstrate that enforcement is reasonably necessary to protect against the impairment of security or risk of default.