Kistler v. Vasi

[262]

TRAYNOR, C. J.

Plaintiffs appeal from a judgment'for defendants in an action to recover the balance due on ■ a promissory note. The note was secured by a second deed of trust on real property, but the security had been exhausted by a sale under the first deed of trust. The trial court granted defendants’ motion for summary judgment on the ground that the undisputed facts established that Code of Civil Procedure section 580b barred any recovery. We agree with plaintiffs’ contention that section 580b does not bar recovery in this case.

Plaintiffs are real estate brokers who acted for both parties in the negotiation of an exchange of an apartment building owned by defendants for two unimproved lots owned by the Agajanian Investment Corporation and Santa Anita Investments, Inc. The exchange agreement was executed.on June 24, 1965. The parties valued the apartment building at $188,000 and the two lots at $350,000. To compensate for the difference in value, defendants executed a note for $144,500 secured by a first deed of trust on one of the lots in favor of Santa Anita and a second note for $17,500 secured by a second deed of trust on the same lot in favor of plaintiffs. The other lot was unencumbered.

Bach party to the exchange agreed to pay plaintiffs a commission of 5 percent of the value of its property. Defendants paid in cash the commission they owed plaintiffs. In lieu of a cash payment of the commission owed by Agajanian and Santa Anita, plaintiffs accepted defendants’’note for $17,500 secured by the second deed of trust. The amount owed by defendants to Agajanian and Santa Anita was correspondingly reduced. In effect, defendants borrowed the amount of the $17,500 commission from plaintiffs and used it as part of the purchase price. The facts thus parallel those in

Bargioni

v.

Hill

(1963) 59 Cal.2d 121 [28 Cal.Rptr. 321, 378 P.2d 593],

In the

Bargioni

case we held that when the price of property is reduced by the. amount of the commission the seller owes to the broker and the buyer executes a note secured by a second deed of trust to the broker for the amount of the commission, the broker is a third-party lender of purchase money. Accordingly, we concluded that section 580b as it then read precluded a deficiency judgment in favor of the broker after the; security had been exhausted by a sale under the first deed of trust. (See also