## Facts

- The Laus’ debt to Florio and McConnaughey arose from a stipulated settlement obligation to pay MetLife $280,000 plus interest, with Florio and McConnaughey retaining the right to cure any default and seek reimbursement.
- The Laus defaulted; Florio and McConnaughey paid MetLife and sued the Laus for judicial foreclosure and a deficiency judgment.
- The obligation was secured by mixed collateral: Fresno real property, Visalia Racquet Club stock, and the Laus’ partnership interest in M.D. Properties.
- On June 17, 1996, the trial court found the Laus owed $350,000 plus interest, ordered foreclosure sales, ruled creditors were entitled to a deficiency judgment, and reserved jurisdiction to determine the deficiency amount after all security was sold.
- The real property sold at a sheriff’s sale on October 9, 1996, for $50,000; the stock was sold back to the club for $83,000.
- An attempted sheriff’s sale of the M.D. Properties partnership interest on December 10, 1996, received no bids.
- On March 10, 1997, Florio and McConnaughey moved for a deficiency judgment; the Laus argued the motion was untimely under Code of Civil Procedure § 726 because it was filed more than three months after the real property sale.
- The trial court rejected the § 726 defense and granted the deficiency judgment; the Laus appealed.

## Issues

1. In a single debt secured by both real and personal property, does Code of Civil Procedure § 726 bar a deficiency motion filed more than three months after the real property foreclosure sale when personal property collateral has not yet been sold?
2. How should Code of Civil Procedure § 726 be construed in relation to former California Uniform Commercial Code § 9501(4) governing mixed collateral?

## Decision

- The Court of Appeal affirmed the deficiency judgment.
- In a mixed-collateral case governed by former UCC § 9501(4), the debtor could not use § 726’s three-month limitation to bar a deficiency motion filed after the real property sale while the personal property collateral remained to be disposed of.
- The reservation of jurisdiction in the foreclosure judgment to compute the deficiency after disposition of all collateral supported allowing the later deficiency determination.

## Legal Principles

- When a single obligation is secured by mixed collateral (real and personal property), former UCC § 9501(4) governs coordination of remedies and permits disposition of the collateral in a manner accounting for both types of security.
- Code of Civil Procedure § 726’s three-month deadline for seeking a deficiency after a real property foreclosure sale does not operate to cut off a deficiency determination where the foreclosure judgment has already established entitlement to a deficiency and expressly reserved jurisdiction to fix the amount after all collateral is disposed of.
- Statutes addressing real property foreclosure and mixed-collateral secured transactions must be harmonized so the deficiency reflects proceeds from the entire security package, not solely the real property sale.

## Conclusion

The court held that, for a debt secured by both real and personal property, § 726 did not bar a deficiency motion filed more than three months after the real property sale where the trial court had reserved jurisdiction to determine the deficiency after completion of sales or attempted sales of the personal property collateral under the mixed-collateral framework.


Florio v. Lau, 68 Cal. App. 4th 637 (Ct. App. 1998)