Tucker v. Lassen Sav. & Loan Assn

In Tucker v. Lassen Sav. & Loan Assn. (1974) 12 Cal.3d 629, which involved "a so-called 'due-on' clause commonly used in security transactions in real property to provide, at the option of the lender, for the acceleration of the maturity of the loan upon the sale, alienation, or further encumbering of the real property security," the Supreme Court concluded that "the automatic enforcement of a 'due-on' clause in instances where the trustor-obligor has entered into an installment land contract to sell the secured property would result in a restraint on alienation of very considerable proportions" because "such enforcement would operate to virtually eliminate alienation by installment land contract in all situations where the property to be conveyed was subject to a deed of trust and the obligation under the note remained substantial." (Id. at pp. 631, 637.) In contrast, the court observed that in the context of "an outright sale," "the automatic application of the 'due-on' clause results in little if any restraint on alienation because the terms of the second sale usually provide for full payment of the prior trust deed. In other words, the trustor-vendor normally receives enough money through the financing of the second sale to pay off his note, and he is normally required to do so. Little, if any, restraint on alienation results through enforcement of the provision." (Id. at p. 637.)