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Enloe v. Kelso

California Court of Appeals, Second District, Sixth Division

July 3, 2013

JAMES ENLOE et al., Plaintiffs and Appellants,
v.
CASEY LEE KELSO et al., Defendants and Respondents.

Superior Court County of San Luis Obispo No. 118183 Dodie A. Harman, Judge.

Christian E. Iversen for Plaintiffs and Appellants.

Duggan Smith & Heath LLP, Jane E. Heath, Janet L. Wallace for Defendant and Respondents.

GILBERT, P. J.

When sellers of real estate accept a deed of trust from the purchasers to secure the purchase price, Code of Civil Procedure section 580b prohibits the sellers from obtaining a deficiency judgment in the event the purchasers default. [1] It matters not that such a trust deed is given to sellers after the close of escrow. Timing does not change its character. We affirm the trial court's summary judgment in favor of purchasers and against the sellers.

FACTS

James and Margaret Enloe owned a single family residence in Templeton. They agreed to sell it to Casey Lee Kelso and Joseph R. Jaeger (hereafter collectively Kelso) for $1.9 million. The Enloes agreed to carry back a second deed of trust in the amount of $93, 750. For reasons not disclosed, Kelso's lender, Washington Mutual, decided to fund its portion of the purchase price with two loans secured by two deeds of trust. This would make the sellers' proposed second deed of trust, a third deed of trust.

Washington Mutual refused, however, to fund its loans if there would be a third deed of trust in favor of the sellers. In response to Washington Mutual's refusal, the Enloes and Kelso agreed that the Enloes would carry back a third deed of trust to record ''[i]mmediately [a]fter" the close of escrow. They amended escrow instructions to delete reference to the sellers' carry-back loan.

Prior to close of escrow, Kelso executed a note in favor of the Enloes secured by a deed of trust on the subject property in the amount of $93, 750. Margaret Enloe tendered to escrow a personal check to Kelso in the amount of $93, 750. The check contained the notation, "for 3rd Deed of Trust of Santa Rita." Because escrow would not accept a personal check, the check was cancelled and marked void.

Escrow then closed. On the same day, escrow issued a cashier's check to the Enloes in the amount of $1, 530, 044.66. The escrow closing statement also showed a debit in the amount of $372, 779.70 for a payoff of an existing loan, commissions and fees, amounting to a total payout of $1, 902, 824.36. The additional $2, 824.36 over the $1.9 million purchase price represented a credit to the Enloes for a pro-rata portion of the property taxes.

On the same day escrow closed, the Enloes issued a cashier's check to Kelso in the amount of $93, 750. The deed of trust was recorded a few days later.

Five years later, Kelso entered into a "short sale" agreement with a third party; that is, an agreement in which the sales price is insufficient to pay off the entire balance of all loans secured by the property. The Enloes consented to the sale. They received $22, 500 in exchange for the release of their trust deed. They brought this action to recover the balance of the $93, 700 loaned to Kelso.

DISCUSSION

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