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Foreclosure on mixed collateral
As suggested in Commentary.Mixed collateral, a secured lender often will take both real property (one or more parcels) and personal property (one or more types or items) as collateral for a single obligation. In California, foreclosure on mixed collateral poses complex problems because of the significant differences between the manner in which Article 9 and California real property security law treat issues arising upon default. The following chart summarizes the differences:
| Article 9 | Cal. Real Prop. Sec. Law | |
| Right to reinstate | No | Yes |
| Right to redeem | Yes | Yes |
| Security first | No | Yes, if action filed |
| Limits on availability of deficiency | Not unless defect in notice or comm. unreas sale | 580b and 580d |
| Limits on amount of deficiency | No fair value limitations (cf. U.C.C. 9-615(f)) | Fair value limitations |
These two worlds collide when a secured party has mixed collateral. Section 9-604 of the uniform version of Article 9 (section 9-501(4) of former Article 9) provides little help in mediating the conflict, although less mediation is required in those states where real property security law does not depart as significantly from Article 9 as it does in California.
Effective 1986 the California legislature adopted a non-uniform amendment replacing former U.C.C. 9-501(4) with a unique California version. I reproduce the California version (Cal. 9-604 of revised Article 9) in our materials immediately following the uniform version. The goal of the amendment was stated in a report of a state bar committee that drafted the amendment:
. . . to minimize the interference with the rights and remedies of the secured party vis-a-vis the personal property collateral arising from the fact that the secured party also holds real property collateral, while at the same time not expanding the rights and remedies of the secured party vis-a-vis the real property collateral simply because he also holds personal property collateral. Report of the Uniform Commercial Code Committee of the State Bar of California on Proposed Amendment to California Uniform Commercial Code Section 9501(4) (Dec. 7, 1984), reprinted as Appendix I to Hirsch, et. al., The U.C.C. Mixed Collateral Statute--Has Paradise Really Been Lost, 36 U.C.L.A. L.Rev. 1, 69,72 (1988).
I do not provide cover Cal. 9-604 in a course solely devoted to UCC Article 9, because it would be fruitless to do so absent an understanding of the relevant California real property rules. If you are otherwise familiar with the California real property rules, you may consult Problem.Foreclosure on mixed collateral to explore the operation of Cal. 9-604.