## Facts

- Bank of America made two loans to the Simons secured by the same residence: a $1.2 million senior note and a $375,000 junior note, each secured by a separate deed of trust recorded the same day, with the senior lien recorded first.
- Neither deed of trust contained a dragnet clause making either deed security for other obligations.
- The Simons defaulted on the senior note, and the Bank conducted a nonjudicial foreclosure under the senior deed of trust’s power of sale.
- The Bank purchased the property at the trustee’s sale with a credit bid and later resold it to a third party.
- The senior foreclosure extinguished the Bank’s junior deed of trust, leaving the junior note unsecured.
- The Bank then sued the Simons for the unpaid balance allegedly due on the junior note, seeking a personal judgment.
- The trial court denied the Simons’ motion for summary adjudication and overruled their demurrer; the Simons sought writ relief.

## Issues

1. Whether Code of Civil Procedure § 580d bars a lender who holds both senior and junior deeds of trust on the same property from suing on the junior note after the lender nonjudicially forecloses under its own senior deed of trust and thereby eliminates its junior lien.
2. Whether the unpaid balance on the junior note constitutes a barred “deficiency” within the meaning of § 580d in these circumstances.

## Decision

- The Court of Appeal granted the petition for writ of mandate.
- The court held that § 580d barred the Bank from recovering any deficiency on the obligation secured by the junior deed of trust after the Bank elected nonjudicial foreclosure under its senior deed of trust on the same property.
- The court directed the trial court to vacate its order denying summary adjudication and overruling the demurrer and to enter new orders consistent with this interpretation of § 580d.

## Legal Principles

- After a nonjudicial foreclosure sale under a deed of trust, § 580d prohibits a creditor from obtaining a deficiency judgment for the remaining balance of the obligation secured by that deed of trust.
- When the same creditor holds both senior and junior deeds of trust on the same real property, the creditor’s nonjudicial foreclosure under the senior deed of trust triggers § 580d to bar a post-foreclosure action seeking the unpaid balance of the junior note, because the claim functions as a deficiency recovery.
- Courts construe antideficiency statutes to prevent circumvention through transaction structuring (e.g., splitting credit into multiple notes and liens) that would otherwise allow a creditor to obtain a nonjudicial foreclosure remedy and still recover personally for a shortfall.

## Conclusion

The court held that a single lender cannot nonjudicially foreclose on its senior deed of trust and then sue the borrower on a junior note secured by the same property; § 580d treats the junior-note balance as a barred deficiency and requires dismissal of that recovery effort.


Simon v. Superior Court, 4 Cal. App. 4th 63 (Ct. App. 1992)