Kistler v. Vasi

Anthony Vasi and his colleagues (buyers) (defendants) bought real property from Agajanian Investment Corporation and Santa Anita Investments, Inc. (sellers). The buyers financed a portion of the purchase price by borrowing money from the sellers in exchange for a promissory note secured by a first deed of trust on the property. Art Kistler and his colleagues (brokers) (plaintiffs) negotiated the deal, and both the buyers and the sellers agreed to pay the brokers a 5 percent commission. The buyers paid their commission to the brokers in cash. The sellers, rather than pay their portion directly, agreed to lower the purchase price by the amount the sellers owed the brokers, with the buyers issuing the brokers a promissory note for that amount secured by a second deed of trust on the property. In substance, this arrangement meant that the buyers financed the transaction by taking out two purchase-money loans, one from the sellers, secured by a first deed of trust, and one from the brokers, secured by a second deed of trust. The buyers defaulted, and the sellers sold the property pursuant to the first deed of trust, wiping out the brokers’ security interest. The brokers then brought a deficiency action against the buyers. The trial court granted the buyers’ motion for summary judgment, holding that § 580b of the California Code of Civil Procedure barred the brokers’ recovery. The brokers appealed.