## Facts

- Citrus State Bank loaned William J. McKendrick $38,445, secured by a junior deed of trust on McKendrick’s residence.
- The bank’s deed of trust was subordinate to multiple senior encumbrances totaling about $154,000.
- A senior lienholder (the third trust deed holder) initiated a nonjudicial foreclosure; a trustee’s sale occurred on June 20, 1984.
- The bank bid at the sale to protect its junior interest, purchased the property for $45,132, and received a trustee’s deed.
- At the time of sale, total debts against the property were $192,386.38, including the bank’s debt (about $41,369.98 with interest).
- The bank later sold the property on May 29, 1985, for $146,500.
- On August 8, 1985 (more than 14 months after the trustee’s sale), the bank sued McKendrick for a deficiency on its note.
- The trial court granted McKendrick’s nonsuit motion, ruling the claim time-barred under Code of Civil Procedure § 580a’s three-month deadline.

## Issues

1. Whether Code of Civil Procedure § 580a’s three-month limitations period applies to a junior deed of trust holder that purchased the property at a senior lienholder’s nonjudicial foreclosure sale and later sued the trustor for a deficiency.

## Decision

- The Court of Appeal affirmed the judgment of nonsuit for McKendrick.
- Section 580a applies to a junior lienholder that purchases the property at a senior trustee’s sale and then seeks a deficiency on the junior note.
- Because the bank filed suit more than three months after the June 20, 1984 sale, the deficiency action was barred.

## Legal Principles

- Code of Civil Procedure § 580a requires that a deficiency action following a sale under a power of sale be filed within three months of the trustee’s sale, and it limits any deficiency by the property’s fair market value as of the sale date.
- Section 580a’s timing and valuation protections apply where the creditor, though junior, buys the property at the senior foreclosure sale and thus has the opportunity to bid and affect the sale price.
- The rationale distinguishing a “sold-out junior” (whose security is eliminated without acquisition of the property) does not extend to a junior lienholder that purchases the security at the foreclosure sale and later seeks to recover further on the note.
- Anti-deficiency statutes are construed to prevent a creditor from acquiring the property at a low foreclosure price and later obtaining an additional personal judgment inconsistent with sale-date valuation limits.

## Conclusion

The court held that a junior lienholder that buys the property at a senior nonjudicial foreclosure sale is subject to Code of Civil Procedure § 580a, including its three-month filing deadline, and the bank’s deficiency claim filed more than a year after the sale was time-barred.


Citrus State Bank v. McKendrick, 215 Cal. App. 3d 941 (Cal. Ct. App. 1989)