Candee v. Candee
2017 N.D. LEXIS 267
| N.D. | 2017Background
- In 2013 Keith Candee and his parents, Lyla and Douglas Candee, entered a settlement where Keith agreed to pay $2.2 million secured by California (deed of trust with power of sale) and North Dakota (mortgage) real property.
- The agreement specified the California security would be foreclosed first and stated the parties would comply with California’s one-form-of-action rule and anti-deficiency statutes "to the extent applicable."
- Keith defaulted; parents conducted a nonjudicial trustee’s sale in California (credit bid $200,000) and a sheriff’s sale in North Dakota (purchase $975,000).
- Parents sued in North Dakota for a deficiency judgment seeking the shortfall under the settlement agreement; the district court applied North Dakota law to the ND property and entered an $884,508.83 deficiency judgment.
- Keith argued California law governed and barred a deficiency because the trustee’s sale occurred and the California statute imposes a three-month filing limit after a nonjudicial sale.
- The Supreme Court of North Dakota reversed, holding California’s anti-deficiency statutes applied under the parties’ choice-of-law clause and barred the deficiency because the suit was filed beyond California Code of Civil Procedure § 580a’s three-month limit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether California law applies to bar a deficiency judgment sought in ND under the parties' settlement | Plaintiffs (Lyla & Douglas) argued California law did not control the ND deficiency action; ND law governs ND property | Defendant (Keith) argued the agreement’s choice-of-law and anti-deficiency provisions require application of California law, which bars the deficiency | Court: Choice-of-law clause is valid; California s substantive anti-deficiency statutes apply and preclude the deficiency action |
| Whether California's one-form-of-action rule (procedural) prevents the deficiency suit on non-California property | Plaintiffs argued California procedural rules don't apply to ND property or ND proceedings | Defendant argued the anti-deficiency rules are substantive and may apply outside CA under the contract | Court: One-form-of-action is limited to CA property, but the anti-deficiency statutes are substantive and can apply under choice-of-law |
| Whether a deficiency judgment is permitted following a nonjudicial trustee's sale under California law | Plaintiffs contended a deficiency could be obtained under ND law after foreclosing ND security | Defendant contended Cal. Civ. Proc. Code 580d bars deficiencies after trustee's sale and 580a imposes conditions including a 3-month suit limit | Court: Nonjudicial trustee s sale of CA property triggers CA anti-deficiency rules; plaintiffs failed to satisfy CA statutory prerequisites/time limit |
| Whether plaintiffs timely brought their CA-law-based deficiency claim under Cal. Civ. Proc. Code 580a | Plaintiffs argued their filing in Sept 2015 was timely or CA timing did not apply to ND action | Defendant argued § 580a requires suit within three months after the nonjudicial sale (Jan 2014), so the Sept 2015 suit is time-barred | Court: § 580a s three-month limitation applies and bars the deficiency; judgment reversed and dismissal ordered |
Key Cases Cited
- Hersch & Co. v. C & W Manhattan Assocs., 700 F.2d 476 (9th Cir. 1982) (distinguishes CA one-form-of-action as limited to CA property but treats anti-deficiency statute application more broadly)
- Catchpole v. Narramore, 428 P.2d 105 (Ariz. 1967) (California anti-deficiency statute affects substantive rights and can be applied by other states)
- United Bank of Denver v. K & W Trucking Co., 195 Cal. Rptr. 49 (Cal. Ct. App. 1983) (explains limits on deficiency judgments including prohibition after trustee's sale)
- Citibank v. Errico, 597 A.2d 1091 (N.J. Super. Ct. App. Div. 1991) (applied another state's deficiency law under parties' choice-of-law provision)
- Gate City Fed. Sav. & Loan Ass'n v. O'Connor, 410 N.W.2d 448 (Minn. Ct. App. 1987) (held deficiency judgments are substantive and applied different state's deficiency rules under conflicts analysis)