BILL NUMBER: AB 2585 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 6, 1996
AMENDED IN SENATE JULY 7, 1996
AMENDED IN SENATE JUNE 4, 1996
AMENDED IN ASSEMBLY MAY 8, 1996
AMENDED IN ASSEMBLY APRIL 25, 1996
INTRODUCED BY Assembly Member Kuykendall
FEBRUARY 21, 1996
An act to repeal and add Section 2856 of the Civil Code, relating
to sureties.
LEGISLATIVE COUNSEL'S DIGEST
AB 2585, as amended, Kuykendall. Guarantors.
Existing law provides that any guarantor, including a guarantor of
an obligation secured by real property or any interest therein, may
waive the guarantor's rights of subrogation and reimbursement and any
other rights and defenses available to the guarantor by reason of
specified provisions of existing law.
Existing law provides that specified waivers shall not apply to a
guaranty of a loan to an individual primarily for personal, family,
or household purposes, secured by deed of trust or mortgage or a
specified dwelling occupied by the borrower.
This bill would revise and recast these provisions to provide that
a guarantor or other surety, including a guarantor of a note or
other obligation secured by real property or an estate for years, may
waive any or all of specified rights and defenses, as specified. It
would also provide that specified waivers shall not apply to a
guaranty or other type of suretyship obligation made in respect of a
loan secured by deed of trust or mortgage on a specified dwelling if
the loan was used to pay all or part of the purchase price of the
dwelling. The bill also would state legislative intent in this
regard.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 2856 of the Civil Code is repealed.
SEC. 2. Section 2856 is added to the Civil Code, to read:
2856. (a) Any guarantor or other surety, including a guarantor of
a note or other obligation secured by real property or an estate for
years, may waive any or all of the following:
(1) The guarantor or other surety's rights of subrogation,
reimbursement, indemnification, and contribution and any other rights
and defenses that are or may become available to the guarantor or
other surety by reason of Sections 2787 to 2855, inclusive.
(2) Any rights or defenses the guarantor or other surety may have
in respect of his or her obligations as a guarantor or other surety
by reason of any election of remedies by the creditor.
(3) Any rights or defenses the guarantor or other surety may have
because the principal's note or other obligation is secured by real
property or an estate for years. These rights or defenses include,
but are not limited to, any rights or defenses that are based upon,
directly or indirectly, the application of Section 580a, 580b, 580d,
or 726 of the Code of Civil Procedure to the principal's note or
other obligation.
(b) A contractual provision that expresses an intent to waive any
or all of the rights and defenses described in subdivision (a) shall
be effective to waive these rights and defenses without regard to the
inclusion of any particular language or phrases in the contract to
waive any rights and defenses or any references to statutory
provisions or judicial decisions.
(c) Without limiting any rights of the creditor or any guarantor
or other surety to use any other language to express an intent to
waive any or all of the rights and defenses described in paragraphs
(2) and (3) of subdivision (a), the following provisions in a
contract shall effectively waive all rights and defenses described in
paragraphs (2) and (3) of subdivision (a): The guarantor waives
all rights and defenses that the guarantor may have because the
debtor's debt is secured by real property. This means, among other
things: (1) The creditor may collect from the guarantor
without first trying to collect from the debtor. (2)
(1) The creditor may collect from the guarantor without first
foreclosing on any real or personal property collateral pledged by
the debtor. (3) (2) If the creditor
forecloses on any real property collateral pledged by the debtor:
(A) The amount of the debt may be reduced only by the price for which
that collateral is sold at the foreclosure sale, even if the
collateral is worth more than the sale price. (B) The creditor may
collect from the guarantor even if the creditor, by foreclosing on
the real property collateral, has destroyed any right the guarantor
may have to collect from the debtor. This is an unconditional and
irrevocable waiver of any rights and defenses the guarantor may have
because the debtor's debt is secured by real property. These rights
and defenses include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d , or 726 of the Code
of Civil Procedure.
(d) Without limiting any rights of the creditor or any guarantor
or other surety to use any other language to express an intent to
waive all rights and defenses of the surety by reason of any election
of remedies by the creditor, the following provision shall be
effective to waive all rights and defenses the guarantor or other
surety may have in respect of his or her obligations as a surety by
reason of an election of remedies by the creditor: The guarantor
waives all rights and defenses arising out of an election of remedies
by the creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d
of the Code of Civil Procedure or otherwise.
(e) Subdivisions (b), (c), and (d) shall not apply to a guaranty
or other type of suretyship obligation made in respect of a loan
secured by a deed of trust or mortgage on a dwelling for not more
than four families when the dwelling is occupied, entirely or in
part, by the borrower and that loan was in fact used to pay all or
part of the purchase price of that dwelling.
SEC. 3. It is the intent of the Legislature that the repeal and
enactment of Section 2856 of the Civil Code by this bill does not
represent a change in, but is merely declarative of, and intended to
clarify existing law. It is
(f) The validity of a waiver executed before January 1, 1997,
shall be determined by the application of the law that existed on the
date that the waiver was executed.
SEC. 3. It is the intent of the Legislature that the types
of waivers described in Section 2856 of the Civil Code do not violate
the public policy of this state. Additionally, the Legislature, by
enacting subdivisions (b), (c), and (d) of Section 2856 of the Civil
Code, does not intend to address the legal requirements for waivers
in a guaranty or other suretyship contract in connection with the
types of transactions described in subdivision (e) of Section 2856 of
the Civil Code. No inference of any kind should be drawn from the
exclusion of these transactions from the application of subdivisions
(b), (c), and (d) of Section 2856 of the Civil Code. The
repeal and enactment of Section 2856 of the Civil Code made by this
bill is intended to remove the uncertainty which has been caused by
the (now decertified) decision in Bank of Southern California v.
Dombrow, (1995), regarding the adequacy and enforceability of waivers
by guarantors of the types described in subdivisions (a) to (d),
inclusive, of Section 2856 of the Civil Code. These amendments are
2856 of the Civil Code. These amendments are
not intended to limit or otherwise affect any rights or protections
currently afforded to borrowers under Sections
Section 580a, 580b, 580d , or 726 of the Code
of Civil Procedure.