Luther Burbank Savings & Loan Ass'n v. Community Construction, Inc.

This is an appeal from a deficiency judgment entered after a lender judicially foreclosed on real property. In a judicial foreclosure action involving a transaction where a deficiency is not waived or legally prohibited, if the property is sold for less than the amount of the subject secured indebtedness, the creditor may seek a deficiency judgment based on the difference between the amount of the indebtedness and the “fair value” of the property at the time of sale or the actual foreclosure sale price, whichever is greater. The court determines “fair value.” (Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35, 43-44 [ 27 Cal.Rptr. 873 , 378 P.2d 97 ].) By paying the foreclosure sale price in a timely fashion, the debtor exercises a statutory right of redemption, an opportunity to regain ownership of the property from whoever purchased it at the foreclosure sale.

In the present case, the debtors/borrowers appeal, contending the amount of the deficiency judgment awarded runs afoul of the “fair value” requirements of Code of Civil Procedure section 726, subdivision (b), by accounting for an unpaid tax encumbrance on the property at the time of the foreclosure. We find the…