Allstate Savings & Loan Assn. v. Murphy

Facts

Following a foreclosure sale of defendant borrowers’ single-family dwelling by the holder of the first trust deed on the property, plaintiff lender sued defendants for the unpaid amount on two promissory notes, which were secured by trust deeds on the same property and whose proceeds were used for the construction of a swimming pool and a concrete block wall at the property. Plaintiff alleged in its complaint that as a result of the senior creditor’s foreclosure sale, which did not provide funds to satisfy defendants’ indebtedness to plaintiff, plaintiff’s deeds of trust were rendered valueless. Defendants interposed the defense of the anti-deficiency provision of Code of Civil Procedure section 580b (hereafter referred to as section 580b or the statute). After the trial court granted plaintiff’s motion for summary judgment on the ground that section 580b applies only to loans to finance the purchase of a dwelling and not to loans for the construction of a swimming pool, defendants appealed.

Issue On Appeal and Holding

The question presented on appeal is whether section 580b bars a deficiency judgment against a lender who loaned a borrower money for the purpose…