San Paolo U.S. Holding Co. v. 816 South Figueroa Co.

I

Introduction

Code of Civil Procedure section 726, subdivision (b) provides that following a judicial foreclosure of real property, the secured creditor may bring a motion to determine the amount, if any, of a deficiency judgment. The measure of the deficiency will be the amount by which the indebtedness exceeds the “fair value” of the real property.

The issue in this appeal is the definition of the term “fair value.”

We define “fair value,” within the context of section 726, subdivision (b), as the fair market value of the real property, as of the date of the foreclosure sale, without any reduction for the adverse impact of the foreclosure and the one-year right of redemption that would temporarily lower the market value of the real property.

The 816 South Figueroa Company (the Company) defaulted on a bank loan. The San Paolo U.S. Holding Company, Inc. (the Bank), as successor in interest to First Los Angeles Bank, foreclosed on the real property collateral and obtained a $1,541,727.58 deficiency judgment.

The Bank appeals from the judgment entered following the section 726, subdivision (b) valuation hearing, and challenges the trial court’s determination of the…