Facts: An owner purchased property with a loan secured by a deed of trust held by the lender. Later, the owner defaulted and the lender recorded a notice of default. The owner negotiated a sale of the property with a buyer for less than the remaining balance of the loan. The lender agreed to the short sale on the condition the buyer repay the deficiency balance. After the sale, the lender sent a collection letter to the owner demanding the remaining balance.
Claim: The owner sought to prevent the lender’s collection of the deficiency claiming anti-deficiency legislation prohibited collection of the deficiency balance since the loan was used to purchase property and was therefore nonrecourse.
Counter claim: The lender sought to collect the deficiency claiming the buyer was not protected by anti-deficiency legislation since anti-deficiency protection only applies to debt after foreclosure, which did not occur as the property was sold in a short sale.
Holding: A California Court of Appeals held the owner was protected under anti-deficiency law since the loan was purchase-assist and foreclosure is not a requirement of anti-deficiency protection. [Carol Coker v. JP Morgan Chase Bank (2013) __ CA4d __]