Venture v. Lobel
143 Cal. Rptr. 3d 96
Cal. Ct. App.2012Background
- Lobel’s real property was encumbered by two concurrent loans (senior $740,000; junior $138,750) secured by two deeds of trust on the same property in 2006.
- The junior loan was assigned to Residential Funding Co., then LaSalle Bank, N.A., before Lobel defaulted on both loans.
- Sea-Breeze, the originator, assigned the senior loan to Central Mortgage Co. in 2008, which conducted a nonjudicial foreclosure; no surplus proceeds remained, extinguishing the junior lien.
- LaSalle Bank later assigned the junior loan to Cadlerock Joint Venture, L.P. in 2008, which filed suit in 2010 on the junior note for amounts due.
- Cadlerock’s balance as of April 12, 2011 was $220,828.33, consisting of principal and accrued interest; the trial court granted Lobel summary judgment under §580d, ruling that a deficiency could not be pursued on the junior loan.
- The appellate court reversed, holding that §580d does not bar a deficiency judgment for a sold-out junior lien when the senior and junior liens are held by different entities at the time of sale, and the facts did not raise a Simon-type cloak to circumvent the statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §580d bar a deficiency against Lobel where a senior sale extinguishes a junior lien? | Cadlerock argues §580d does not apply to sold-out juniors when the senior lienforeclosure destroys the junior security. | Lobel relies on Simon and related cases to say the same lender cannot obtain a deficiency after selling out the junior. | No; §580d does not bar a sold-out junior lienor from pursuing a deficiency against the debtor. |
| Are Simon/ Mitchell-style expansions of §580d applicable when the junior lien is assigned after origination and the senior and junior liens are held by different entities at sale? | Cadlerock and its predecessors seek to apply Simon’s principle to extend protections despite different assignees at sale. | Lobel argues Simon/Mitchell should apply, barring recovery. | The facts show different entities held the senior and junior liens at the time of the senior sale; Simon-based expansion does not govern, so Cadlerock may pursue the junior debt. |
Key Cases Cited
- Roseleaf Corp. v. Chierighino, 59 Cal.2d 35 (Cal. 1963) (sold-out junior lienor may sue on the junior note; 580d not applicable to sold-out juniors)
- Simon v. Superior Court, 4 Cal.App.4th 63 (Cal. App. 1992) (same-lender dual liens may be barred from deficiency under 580d; concerns of thwarting statute)
- Mitchell v. Bank, 204 Cal.App.4th 1199 (Cal. App. 2012) (extends Simon to post-sale junior lien assignments; assignee stands in shoes of assignor)
- Ostayan v. Serrano Reconveyance Co., 77 Cal.App.4th 1411 (Cal. App. 2000) (sold-out junior rule; prohibition on pursuing deficiency when senior sale extinguishes junior security)
- Freedland v. Greco, 45 Cal.2d 462 (Cal. 1955) (textual limits of §580d; cannot circumvent by duplicative notes)