COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA

CAROL COKER,
Plaintiff and Appellant,

v.

JP MORGAN CHASE BANK, N.A., et al.,
Defendants and Respondents.
In this appeal we are asked to determine a question of first impression. Do the
anti-deficiency protections in Code of Civil Procedure1 section 580b apply to a borrower
after she, with the approval of her lender, sells her residence to a third party for a price
that is less than the outstanding balance owed the lender on the borrower’s mortgage loan,
which was obtained to purchase the residence? We conclude that section 580b’s
protections do apply in this situation.

Here, we are faced with an all too familiar and unfortunate fact pattern in the wake
of the collapse of the residential real estate market in 2008. A borrower obtained a
mortgage loan to buy a house. The loan was secured by a deed of trust recorded against
the residence. After property values fell and the economy declined, the borrower was no
longer able to make payments on her loan, and the mortgage lender began the nonjudicial
foreclosure process. To avoid foreclosure, the borrower agreed to sell her house to a
third party. However, the sale price was less than the amount the borrower owed on her
loan. The mortgage lender agreed to the sale, but, as a condition of approval, stated that
the borrower would be responsible for any deficiency, i.e., the difference between the
outstanding balance on the loan and the money received by the lender after the sale to the
third party.

After the sale, the mortgage lender pursued the borrower for the deficiency. In
response, the borrower filed a complaint for declaratory relief seeking a judicial
declaration, among other things, that section 580b prohibits the lender from obtaining a
deficiency judgment after the sale. The mortgage lender demurred to the complaint, and
the superior court sustained the demurrer without leave to amend finding section 580b
applies only after a foreclosure. The court subsequently entered judgment dismissing the
borrower’s complaint with prejudice.

The borrower appeals, arguing that the court incorrectly interpreted section 580b
in finding that it does not prevent a lender from seeking a deficiency judgment after a sale
of the property to a third party. We agree and thus reverse the judgment and remand this
matter to the superior court with directions.

Comments

comments