Coker v. JPMorgan Chase Bank, N.A.
62 Cal. 4th 667
| Cal. | 2016Background
- In 2004 Carol Coker bought a San Diego condominium with a $452,000 purchase‑money loan secured by a deed of trust; she later defaulted.
- In June 2010 Chase provisionally approved a short sale: borrower to remit all proceeds to Chase, Chase to reconvey its lien only after receiving specified net proceeds; sale closed July 22, 2010 for $400,000.
- After the sale Chase sought the remaining loan balance (~$116,686.89); Coker sued for a declaratory judgment that Code Civ. Proc. § 580b barred any deficiency recovery.
- The trial court sustained Chase’s demurrer without leave to amend; the Court of Appeal reversed, holding § 580b barred the deficiency and that Coker could not validly waive § 580b.
- The Supreme Court granted review to decide whether § 580b’s antideficiency protection applies to short sales and whether Coker’s waiver or other statutes (§ 726, and later § 580e) change the result.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does CCP § 580b bar deficiency judgments after a short sale of a purchase‑money dwelling? | § 580b protects purchase‑money borrowers after any sale that exhausts the security, including short sales. | § 580b applies only to sales "under a deed of trust" (foreclosure sales); short sales are voluntary and outside § 580b. | § 580b applies to short sales of standard purchase‑money loans where the security is exhausted; statute protects borrowers here. |
| Was Coker’s written waiver of § 580b enforceable as consideration for Chase’s approval? | Waiver of § 580b is invalid because § 580b serves public/economic stabilization purposes and cannot be privately waived. | Coker agreed to the waiver as part of the short‑sale deal; it is enforceable. | Waiver was invalid under DeBerard; a private agreement cannot defeat § 580b’s public protection. |
| Do post‑sale statutes (e.g., § 580e) or legislative history show § 580b never covered short sales? | Legislative amendments (including § 580e) do not retroactively change § 580b’s meaning in 2010; judicial construction controls. | The Legislature enacted § 580e to govern short sales prospectively, implying § 580b did not reach them. | Post‑enactment statutes and § 580e do not alter § 580b’s meaning as of 2010; courts must interpret § 580b as it stood then. |
| Does borrower’s assent to a short sale waive § 726 defenses and permit deficiency recovery? | Even if § 726 waiver occurred (borrower induced release of security), § 580b still bars deficiency once lender realized full security value. | By requesting/agreeing to a short sale, borrower waived § 726 rights and cannot insist on foreclosure procedure. | Coker waived procedural right under § 726, but § 580b still bars deficiencies after lender exhausts its security; § 726 waiver does not authorize collection beyond security. |
Key Cases Cited
- Brown v. Jensen, 41 Cal.2d 193 (court held § 580b bars deficiency where security is exhausted even if no sale under junior trust deed)
- Bargioni v. Hill, 59 Cal.2d 121 (applied § 580b to a transaction that in substance was purchase‑money financing despite form)
- Roseleaf Corp. v. Chierighino, 59 Cal.2d 35 (limited § 580b to standard purchase‑money situations; examine purpose for nonstandard cases)
- Spangler v. Memel, 7 Cal.3d 603 (§ 580b "applies automatically" to standard purchase‑money loans; narrow exceptions for nonstandard transactions)
- Cornelison v. Kornbluth, 15 Cal.3d 590 (§ 580b can bar actions that are in effect deficiency judgments, e.g., waste damages)
- DeBerard Properties, Ltd. v. Lim, 20 Cal.4th 659 (two‑part inquiry: is transaction nonstandard and would applying § 580b defeat the statute’s purposes?)
- Kistler v. Vasi, 71 Cal.2d 261 (cited for § 580b’s application to sold‑out junior lienors)
- Security Pacific Nat. Bank v. Wozab, 51 Cal.3d 991 (explains § 726 procedure and election of remedies)
- Jack Erickson & Assocs. v. Hesselgesser, 50 Cal.App.4th 182 (distinguishable; nonstandard/subordination facts and lender left unsecured)
- Bank of America, N.A. v. Roberts, 217 Cal.App.4th 1386 (borrower who obtains lender’s consent to short sale waives right to require foreclosure under § 726)