## Facts

- Buyers agreed to purchase about 140 acres for $185,000 from the sellers.
- The purchase price was structured with (1) a $50,000 first deed of trust loan, (2) a $116,350 seller note secured by a second deed of trust, and (3) a stated $18,650 down payment.
- Only $3,650 of the down payment was paid in cash; the remaining $15,000 was evidenced by a separate promissory note payable to the broker and the sellers.
- The $15,000 note was apportioned $11,100 to the broker (commission) and $3,900 to the sellers, and the trial court found this note was wholly unsecured.
- Buyers failed to pay the $15,000 unsecured note.
- Buyers later defaulted on the $116,350 second-trust-deed note; instead of foreclosing, the sellers accepted a deed in lieu of foreclosure and returned the $116,350 note and second deed of trust to the buyers.
- The deed-in-lieu settlement did not include cancellation of the $15,000 unsecured note, and the broker and sellers sued to collect it.

## Issues

1. Whether Code of Civil Procedure § 580b bars recovery on a promissory note that is part of the purchase price but is wholly unsecured by the sold property.

## Decision

- Judgment for the buyers was reversed.
- Section 580b did not bar recovery on the $15,000 note because it was wholly unsecured and not an obligation secured by a deed of trust or mortgage on the property.
- The matter was remanded for further proceedings consistent with allowing plaintiffs to recover on the unsecured note.

## Legal Principles

- Code of Civil Procedure § 580b bars deficiency judgments tied to purchase-money obligations secured by a deed of trust or mortgage on the purchased real property.
- A separate promissory note that is factually and legally unsecured is not converted into a “secured” obligation merely because it was used to complete the overall purchase-price arrangement.
- Prior authority applying § 580b to bar collection on a broker’s commission note turned on the broker’s note being secured by an interest in the purchased property; that rationale does not extend to a wholly unsecured note.

## Conclusion

Section 580b’s anti-deficiency protection applies to purchase-money obligations secured by the property, not to a separate, wholly unsecured note given as part of the purchase transaction; therefore, the broker and sellers could pursue collection on the unsecured $15,000 note.


Van Vleck Realty v. Gaunt, 250 Cal. App. 2d 81 (Cal. Ct. App. 1967)