Bill Text: CA SB1069 | 2011-2012 | Regular Session | Amended

California Senate Bill 1069 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Deficiency judgments.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2012-07-09 - Chaptered by Secretary of State. Chapter 64, Statutes of 2012. [SB1069 Detail]

Download: California-2011-SB1069-Amended.html

BILL NUMBER: SB 1069	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MARCH 15, 2012

INTRODUCED BY   Senator Corbett

                        FEBRUARY 13, 2012

   An act to amend Section 580b of the Code of Civil Procedure,
relating to deficiency judgments.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1069, as amended, Corbett. Deficiency judgments.
   Existing law provides that no deficiency judgment shall lie
following a judicial foreclosure with respect to, among other things,
a deed of trust or mortgage given to the vendor to secure payment of
the balance of the purchase price of real property, or under a deed
of trust or mortgage on a dwelling to secure repayment of a purchase
money loan which was in fact used to pay all or part of the purchase
price of that dwelling. 
   This bill would additionally provide, as defined, that a purchase
money loan does not lose that status and the protection from
deficiency liability, if, among other things, it is renewed,
refinanced, consolidated, restructured, modified, assigned, or
assumed on or after January 1, 2013. The bill would also provide,
however, that the protection from deficiency liability for a purchase
money obligation extends only to the outstanding amount of the
purchase money obligation, and that the obligor has the burden of
establishing that amount, as specified. The bill would provide that a
deficiency judgment may lie in certain circumstances where a vendor
has subordinated its loan to a construction loan for a commercial
project, the construction loan has funded a substantial portion of
the project, and the construction lender has foreclosed on the
property, extinguishing all or part of the vendor's subordinated
lien.  
   The bill would state the intent of the Legislature in amending
these provisions to codify the holding in Spangler v. Memler (1972) 7
Cal.3d 603, as construed by DeBerard Properties, Inc. v. Lim (1999)
20 Cal.4th 659.  
   This bill would additionally provide that no deficiency judgment
shall lie in any event on any loan, refinance, or other credit
transaction that is used to refinance a purchase money loan, as
defined, or subsequent refinances of a purchase money loan, except to
the extent that the lender or creditor advances new principal which
is not applied to any obligation owed or to be owed under the
purchase money loan, or to fees, costs, or related expenses of the
refinance. The bill would provide, for purposes of these provisions,
that any payment of principal for a refinanced purchase money loan
would be deemed to be applied first to the principal balance of the
purchase money loan, and then to the remaining principal balance, as
specified. The bill's provisions would apply to a loan, refinance, or
other credit transaction used to refinance a purchase money loan
which is executed on or after January 1, 2013. 
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 580b of the Code of Civil Procedure is amended
to read:
   580b.  (a) No deficiency judgment shall lie in any event 
after (1)   for the follo   wing: 
    (1)     After  a sale of real property
or an estate for years therein for failure of the purchaser to
complete his or her contract of  sale, or (2) except as
provided in subdivision (e), under   sale.
    (2)     Under  a deed of trust or
mortgage given to the vendor to secure payment of the balance of the
purchase price of that real property or estate for years therein
 , or (3) under a purchase money obligation  . 
   (3) Under a deed of trust or mortgage on a dwelling for not more
than four families given to a lender to secure repayment of a loan
which was in fact used to pay all or part of the purchase price of
that dwelling, occupied entirely or in part by the purchaser. 

   (b) For purposes of subdivision (c), a loan described in paragraph
(3) of subdivision (a) is a "purchase money loan."  
   (c) No deficiency judgment shall lie in any event on any loan,
refinance, or other credit transaction (collectively, a "credit
transaction") which is used to refinance a purchase money loan, or
subsequent refinances of a purchase money loan, except to the extent
that in a credit transaction, the lender or creditor advances new
principal (hereafter "new advance") which is not applied to any
obligation owed or to be owed under the purchase money loan, or to
fees, costs, or related expenses of the credit transaction. Any new
credit transaction shall be deemed to be a purchase money loan except
as to the principal amount of any new advance. For purposes of this
section, any payment of principal shall be deemed to be applied first
to the principal balance of the purchase money loan, and then to the
principal balance of any new advance, and interest payments shall be
applied to any interest due and owing. The provisions of this
subdivision shall only apply to credit transactions that are executed
on or after January 1, 2013.  
   (b) A purchase money obligation does not lose its status as such
in any of the following circumstances:  
   (1) The collateral securing the purchase money obligation also
secures an obligation that is not a purchase money obligation.
 
   (2) The purchase money obligation has been renewed, refinanced,
consolidated, restructured, modified, assigned, or assumed on or
after January 1, 2013.  
   (c) The protection against deficiency liability provided by this
section with respect to a purchase money obligation extends only to
the amount of the purchase money obligation remaining outstanding
against a qualified dwelling. An obligor seeking that protection has
the burden of establishing the amount of the purchase money
obligation remaining outstanding against a qualified dwelling. Any
payments that have been applied to the principal balance due on any
loan for which that protection is sought shall be deemed to first
have reduced the outstanding principal balance of the obligor's
purchase money obligation, and then to have reduced the remaining
outstanding principal balance of the loan.  
   (d) For purposes of this section, a "purchase money obligation"
means an obligation secured by a deed of trust or mortgage on a
qualified dwelling. For purposes of this section, a "qualified
dwelling" means a dwelling for not more than four families as to
which a deed of trust or mortgage has been given to a lender to
secure repayment of a loan which was in fact used to pay all or part
of the purchase price of that dwelling occupied, entirely or in part,
by the purchaser. A loan that is used to refinance a purchase money
obligation is a purchase money obligation for all amounts used to
reduce or discharge the then-outstanding principal of the original
purchase money loan or a subsequent purchase money loan, so long as
the loan is secured by the qualified dwelling.  
   (e) A deficiency judgment may lie if all of the following occur:
 
   (1) The vendor has contractually subordinated his or her lien to
the lien of a construction lender.  
   (2) The construction loan involves a commercial project that
contemplates a material change in the use of the real property, or a
material increase in intensity of the existing use of the real
property.  
   (3) The construction lender has funded a substantial portion of
the project.  
   (4) The construction lender has foreclosed on the property,
extinguishing all or part of the lien held by the vendor. 

   (f) 
    (d)  Where both a chattel mortgage and a deed of trust
or mortgage have been given to secure payment of the balance of the
combined purchase price of both real and personal property, no
deficiency judgment shall lie at any time under any one thereof if no
deficiency judgment would lie under the deed of trust or mortgage on
the real property or estate for years therein. 
  SEC. 2.    It is the intent of the Legislature in
amending Section 580b of the Code of Civil Procedure in this act to
codify the holding in Spangler v. Memler (1972) 7 Cal.3d 603, as
construed by DeBerard Properties, Inc. v. Lim (1999) 20 Cal.4th 659.