BAD INVESTMENT SPURS RULING ON LIABILITY AFTER FORECLOSURE.

Byline: Gregory J. Wilcox Real Deal

All that Bun Raymond Lim wanted to do was reap a tidy return on his $3.2 million investment in a Van Nuys strip mall. Thanks to some bad timing - he bought when prices peaked and just before the economy headed south - he lost the shopping center.

But he ended up winning a case before the state Supreme Court that is setting a precedent for all California property owners.

It involves what are known as ``anti-deficiency'' protections that can come into play in both commercial and residential sales. The court ruled that those protections cannot be waived and the buyers of property cannot be held responsible if a foreclosure sale results in a shortfall in the balance owed on a loan.

And Lim's story illustrates how complicated what start out as straightforward transactions can become.

Lim, a La Canada Flintridge resident, bought the mall in the 7000 block of Van Nuys Boulevard in early 1991 from DeBerard Properties Ltd. of Los Angeles. Lim put down $1.2 million, DeBerard carried a $170,000 second trust deed. What used to be Glendale Federal Bank financed the balance.

Lim did not pick the best time to speculate in the San Fernando Valley's real estate market. It had peaked by the time Lim plunked down his cash and the region's defense sector was starting to implode.

``As the market went down from '91 on, the property values started to drop very substantially. When the Northridge Earthquake came, it really exasperated his ability to rent to retail businesses,'' said Paul T. Suzuki, Lim's lawyer.

Eventually, Lim's financial plight worsened, and he could not make the payments because of his cash flow situation. The note holders wanted their money, but Lim also wanted to try to work the situation out.

Lim was eventually able to refinance and lower the payment, but that lender would have been a second-trust deed holder, not the first. This means that in case of a foreclosure sale, the proceeds would first be used to satisfy DeBerard's $170,000 note and what was left would go the mortgage company.

Since the mortgage company had the biggest exposure, it wanted to maintain the original order in the payment food chain.

It would refinance only if Lim could get a subordination agreement with DeBerard, which kept the seller's position behind the mortgage company.

DeBerard said that would be OK, but it also asked Lim to waive his anti-deficiency protection. Simply put, this protection keeps sellers from suing buyers if a foreclosure sale results in the incomplete payment of the balance of the loan.

Ralph Weiss, a Century City attorney who represented DeBerard, said his client also agreed to cut the interest rate and monthly payments by half and deferred a number of payments.

It seems that everyone was trying to make the best of what was turning out to be a bad deal. Everyone agreed to terms and documents were signed.

Unhappily, Lim eventually lost the property and the resulting foreclosure sale paid off the note held by the mortgage company. Nothing was left to satisfy DeBerard's $170,000 note.

But since Lim had waived his anti-deficiency protection, DeBerard was able to sue in an attempt to get the money.

Lower courts supported DeBerard's position.

But the state Supreme Court, in a unanimous decision earlier this month, ruled that sellers (in this case DeBerard) cannot require buyers (Lim) to waive the anti-deficiency protections. And the court said that Lim was not required to pay the deficiency.

``The problem . . . is that by not allowing a waiver you do exactly what the statute was not intended to do. You force the lender to foreclose on the borrower,'' Weiss said.

He said that the court's decision is binding on any similar cases now working their way through California's court system.

A footnote: Shortly before the court handed down its ruling, Suzuki said that his client offered to settle for $150,000.

The offer was rejected. More bad timing.

BROKER BUZZ

Gregory S. Vorwaller has been named president of the Investment Properties Group at CB Richard Ellis. The 300-employee unit specializes in buying and selling income producing properties. Before joining Ellis, Vorwaller was vice president in the real estate finance department the First National Bank of Chicago.

The owners of Performance Products, distributors of auto parts, tools and accessories, paid $3.2 million for a 57,859-square-foot building in Van Nuys that it will use for a new headquarters. The building is at 8000 Haskell Ave., just south of the company's current headquarters. Scott Caswell of Delphi Business properties represented the building's seller, the Ruth Liberman Trust. Ron Feder of R.J. Feder and Associates represented the buyers.

Accelerated Networks Inc., a Moorpark-based provider of telecommunications networking products, has leased 15,000 square feet of high-tech industrial space in the Simi Valley Business Park. The company's new facility is at 94 W. Cochran St. The deal means that the park is now 97 percent occupied. Tony Principle and Jeff Steinberg of Westcord Commercial Real Estate Service represented Tyler Development Co., owner of the business park. Metrospace represented Accelerated Networks. Terms were not disclosed.

Buy a house, and the lender will throw in a free hotel room. That's what you get when you partner Countrywide Home Loans Inc., the nation's largest independent residential mortgage lender, with Hilton HHonors, a frequent-stayer program.

Hilton HHonors members in the United States now get 2,500 bonus points for every $10,000 financed by Countrywide. And 6,000 bonus points are awarded for opening a home equity line of credit with the lender.

The bonus points can be redeemed for free hotel nights at more than 450 Hilton and Conrad International hotels worldwide. They can also be used to redeem vacation packages and other merchandise from major retailers.

THQ Inc., Ta developer and publisher of interactive entertainment software for the home video game market, leased 32,500 square feet of space on the second and third floors in the Corporate Point at Calabasas owned by Lost Hills Office Partners.

Terms were not disclosed.

CB Richard Ellis brokers Michael Slater, Chuck Engel and Tom Dwyer of the company's Ventura County office represented the property owner. Julien J. Studley Inc. brokers Seth Dudley and David Kimball represented THQ. The company publishes videogame titles for PlayStation, Nintendo 64, Game Boys and personal computers.