## Facts

- DeBerard Properties, Ltd. sold a shopping center to Bun Raymond Lim and Myo Za Theresa Lim for \$3.2 million.
- The Lims made a \$1,120,000 down payment, assumed a bank loan secured by a first deed of trust, and executed a \$170,000 promissory note to DeBerard secured by a second deed of trust.
- After payment difficulties, the parties entered a post-sale forbearance agreement that reduced the Lims’ monthly payment and interest rate, and in which DeBerard agreed to forbear from foreclosure and to subordinate its junior lien to facilitate modification of the bank’s senior loan.
- In exchange, the Lims signed a contractual term purporting to waive the protection of California Code of Civil Procedure § 580b.
- The Lims later defaulted again; the bank foreclosed under the first deed of trust, extinguishing DeBerard’s junior security interest.
- DeBerard sued on the underlying \$170,000 note seeking a money judgment after its collateral was eliminated by the senior foreclosure.

## Issues

1. Whether a purchaser may contractually waive the anti-deficiency protection of Code of Civil Procedure § 580b in a post-sale forbearance agreement supported by new consideration.
2. Whether such a waiver can permit a vendor holding purchase-money junior security to obtain a deficiency judgment after a senior lienholder’s foreclosure eliminates the junior security.

## Decision

- The California Supreme Court affirmed the Court of Appeal.
- The Court held that § 580b’s purchase-money anti-deficiency protection could not be waived under these circumstances, even in a later forbearance agreement supported by consideration.
- The Court disapproved Russell v. Roberts to the extent it allowed such waivers.
- DeBerard could not recover a deficiency on the purchase-money note after the senior foreclosure extinguished its junior lien.

## Legal Principles

- Code of Civil Procedure § 580b bars deficiency judgments on covered purchase-money obligations; the statutory command that no deficiency “shall lie in any event” reflects a categorical limit on the creditor’s remedy.
- Section 580b serves public policy objectives (risk allocation to purchase-money lenders and market-stabilizing effects), not merely a private debtor protection, and therefore cannot be overridden by private agreement in the covered context.
- A post-default modification or forbearance agreement that adjusts payment terms and lien priority does not remove the purchase-money character of a vendor-financed obligation for purposes of § 580b.
- Even a voluntary, knowing, and intelligent contractual waiver is unenforceable when it conflicts with § 580b’s nonwaivable limitation on deficiency remedies in purchase-money transactions.

## Conclusion

The court held that a vendor’s purchase-money junior note remains protected by Code of Civil Procedure § 580b despite later forbearance concessions, and a borrower’s contractual waiver in that setting is unenforceable; accordingly, the vendor could not obtain a deficiency judgment after the senior lender’s foreclosure extinguished the junior security.


DeBerard Props., Ltd. v. Lim, 20 Cal. 4th 659 (Cal. 1999)