According to the provisions of the health & safety code 18038.7 the Californian law protects its citizens from any deficiency arising from a transaction involving sale of a manufactured home, truck camper, a floating home awaiting registration, a commercial coach or a mobile home. This provision aims to protect individuals who are unable to pay for the balance of the purchase price for the amount stated in sale contract regarding issued to a client with the aim of securing payment for a house. Deficiency judgement arises when the issuer of the funds to secure payment initiate a foreclosure or short sale to recover his money but the total amount is not settled. As a result, they sue for the balance of the secured amount in a court of law. This was initiated in a bid to prevent overvaluation of the secured amount and unfair gain. However, this code is not applicable if there is a considerable damage to the mobilehome, floating home, commercial coach or any other property provided for in this section except for the normal wear and tear that arises from normal use of the property.

Facts of the Case

In the case of Miss Baker and Loans-For-Anyone-Bank, the bank gave Miss Baker a loan to secure payment for the purchase of a mobile home purchase from Mr. Smith. After some years, Miss Baker is unable to meet however financial obligation with Loans-For-Anyone-Bank so the bank went on to initiate foreclosure proceedings. After the foreclosure there is still a deficiency of $ 50, 000 and the bank has moved to file a lawsuit to pick up the deficiency.

Advice on the Rights and Liabilities of Miss Baker and Loans-For-Anyone-Bank

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As per the provisions of the health & safety code 18038.7 there should be antideficiency statute for a mobile home unless there is contravention of the stated provisions within the code that will bar lenders from seeking deficiency judgement against Miss Baker. In the case of Bank of Sonoma County Vs Norman Dorries, the court ruled that the antideficiency statute Civil Code 2983.8 bars a deficiency judgement concerned with mobilehome purchase contract of sale or money agreement.

She should also be able to establish that she is an unprotected borrower as she relied on social security and the loan was not a “purchase money loan” that could be recovered through a judicial foreclosure. Miss Baker should also be in a position to establish that she has not acquired any home equity after buying the mobile home or entered into another pre-sale agreement without the approval of the bank.

It would have been a lot easier for the bank to institute a judicial foreclosure as opposed to a private right of sale that is subject to anti-deficiency law. A judicial foreclosure would have guaranteed the bank a considerable fair market value after the resale of the property. The bank should clearly establish the relationship between Miss Baker and itself before going for the deficiency judgement. This is due to the fact that a “seller or vendor” relationship has different implication with “lender” relationship in the interpretation of the code according to a judgement on the case of Security Pacific National Bank as respondent and plaintiff and Conrad H. Casavant. The bank can have a considerable exemption from the code if it can prove that it did not have any vendor relationship or selling assistance in the process. Alternatively, it can decide to clearly establish that there has been considerable damage on the mobile house over and above the conventional wear and tear. 

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