In the trial court, plaintiff bank made a loan to the defendant, who defaulted on the loan. The loan was secured by the defendant's real property located in California. The bank filed an action in South Korea and obtained a prejudgment attachment order from the district court in Seoul against a different piece of real property belonging to the defendant, located in Korea. Defendant claimed that the attachment from the Korean court violated California Code of Civil Procedure s.726, which provides that foreclose is the only form of action permitted for the recovery of debt secured by real property. The trial court dismissed the argument; the defendant appealed.
The appellate court reversed, finding that the purpose of Section 726 is to protect the debtors from collateral attacks from creditors as to the property the debtor did not pledge.
This is one of the most interesting civil procedure cases I have ever read. Apparently this has been the law of California for more than 20 years, although this is the first time I am noticing it. Is this common knowledge among California attorneys?
To me, the most fascinating part is that the prohibition in California Code of Civil Procedure s.726 acts like a permanently standing, statutorily provided anti-suit injunction against creditors, applying even to foreign actions. What would the California court do if the bank didn't stop at prejudgment attachment in Korea, but litigated fully and obtained a judgment in Korea, to be satisfied with the real property in Korea? If the defendant sued the bank in California claiming that the litigation in Korea violated California Civil Procedure, what would the Californian court do? This would make a fascinating law review article.
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