## Facts

- Stricklin (plaintiff) became the holder by assignment of a promissory note.
- The note was secured by an interest in California real property.
- Frederick and Joanne Soued and Enterprises Entres Nous (EEN) (defendants) were the makers/obligors on the note and, at the time of suit, resided in Oregon.
- Stricklin alleged defendants defaulted and filed suit in Oregon seeking to collect on the note as an in personam claim.
- Stricklin did not first foreclose on, or otherwise proceed against, the California real-property security.
- Defendants argued California law should govern enforcement because the debt was secured by California real property.
- Relying on California Code of Civil Procedure § 726 (the “one-action”/“security first” rule), defendants contended Stricklin could not sue on the note without first proceeding against the security.
- Oregon law did not impose a comparable “security first” limitation.
- The trial court dismissed the action for lack of subject-matter jurisdiction.
- Stricklin appealed, arguing that § 726 is procedural (not substantive) and therefore should not control an Oregon action.

## Issues

1. In an Oregon action on a note secured by California real property, is California Code of Civil Procedure § 726 a substantive limitation on remedies that applies under Oregon choice-of-law principles?
2. If § 726 applies, does it bar an Oregon lawsuit brought solely on the note before the creditor proceeds against the California security, supporting dismissal?

## Decision

- The Oregon Court of Appeals affirmed.
- The court concluded California law governed enforcement of the obligation because the debt was secured by California real property.
- The court treated California Code of Civil Procedure § 726 as substantive for choice-of-law purposes because it limits the creditor’s available remedies on a secured real-property obligation.
- Because Stricklin sued only on the note without first proceeding against the security, the claim was not maintainable under the governing law.
- The dismissal for lack of subject-matter jurisdiction was upheld.

## Legal Principles

- In choice-of-law analysis, a forum may apply another state’s substantive law when that law defines the parties’ rights and limits available remedies arising from the transaction.
- California Code of Civil Procedure § 726 provides that, for a debt secured by California real property, the creditor generally must pursue the security (foreclosure) as the primary route to recover the debt and may not maintain a separate action solely on the underlying note first.
- A rule that restricts whether a creditor may sue on a secured debt without first proceeding against the collateral is treated as substantive because it affects the existence and scope of the claim and remedy, not merely the mechanics of litigation.
- When the governing substantive law makes a standalone action on the note unavailable at that time, an action filed solely on the note is subject to dismissal in the forum court.

## Conclusion

Stricklin sought to collect on a note in Oregon even though the note was secured by California real property and Stricklin had not proceeded against that security. The Oregon Court of Appeals held California’s one-action/security-first rule in Code of Civil Procedure § 726 applied as a substantive limit on remedies, making the Oregon suit on the note alone not maintainable, and therefore affirmed the trial court’s dismissal for lack of subject-matter jurisdiction.


Stricklin v. Soued, 936 P.2d 398 (1997)