Facts: A lender provided purchase-assist financing to a borrower secured by a first and second trust deed. The borrower defaulted and the lender initiated non-judicial foreclosure, selling the first trust deed to a third party at a trustee’s sale, wiping-out the second trust deed. The lender later assigned its rights to the second trust deed to an assignee. The assignee attempted to recover the remaining principal balance on the second trust deed from the borrower.
Claim: The assignee claimed it was entitled to recover on the junior lien since it was not the original holder of the senior lien and held the junior lien as an assignee, and was thus exempt from anti-deficiency statutes.
Counterclaim: The borrower claimed the assignee was barred from collecting the principal balance on the second trust deed since he was protected under California anti-deficiency statutes barring a deficiency judgment from being collected following a non-judicial foreclosure sale.
Holding: A California court of appeals held an assignee of a second trust deed is not entitled to recover the remaining principal balance on the junior lien since the recovery is barred by California anti-deficiency protection provided to borrowers whose senior lien is sold at a non-judicial foreclosure, regardless of whether the senior lien was sold to a third party and the junior lien was assigned after the foreclosure sale. [Bank of America v. Michael Mitchell (2012) 204 CA4th 1199]
