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The Appellate Court reviewed the history of and policies behind California's anti-deficiency laws and noted that section 580d clearly applied to situations where a junior lienor foreclosed its lien pursuant to a trust deed and thus barred that junior lienor from obtaining a deficiency judgment against the debtor. See National Enterprises, Inc. v. Woods, 94 Cal.App.4th 1217, 1221 (2001)(discussing the "one form of action" rule).
Relying on a California Supreme Court opinion, the court noted that section 580d did not refer to multiple liens on a single piece of property and did not apply where a different entity's senior trustee's sale rendered the junior lien unsecured. See Roseleaf Corp. v. Chierighino, 59 Cal. 2d 35, 43-44 (1963)(section 580d inapplicable to "sold-out" junior lienor who may pursue debtor for amounts owed).
In so doing, the Court distinguished the facts of this case, where the lender assigned the junior lien shortly after loan origination, from the situation where a single creditor, holding both the senior and junior liens, assigned the junior lien after the trustee's sale on the senior lien. In such a scenario, the Court noted, the assignee would simply stand in the position of the assignor, and section 580d would apply to prevent a deficiency judgment against the debtor. Bank of America, N.A. v. Mitchell, 204 Cal. App.4th 1199, 1207 (2012).
The Court further rejected Borrower's assertion that the status of the junior lienor should be determined by applying section 580d at the time of loan origination rather than at the time of the senior trustee's sale. The Court pointed out that, according to Borrower's reading of section 580d, "assignment of junior liens at any time . . . would be ineffectual in changing the section 580d consequences that have attached to multiple loans . . . ."
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
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