Wayne A. McFadden - Page 12




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          sale of the Oakland home would be exempt from Stephanie’s                   
          creditors.  Petitioner also had conversations with David about              
          the debt.  Petitioner felt that David honestly wanted the loan to           
          be paid but concluded that David was not in a position to make              
          payments.                                                                   
               In August 1995, after consulting with a real estate agent              
          about the value of the Atascadero property, petitioner accepted a           
          deed in lieu of foreclosure to the Atascadero property from David           
          and Stephanie to avoid losing his security interest.  The deed              
          states that it is in full satisfaction of the obligations secured           
          by the first deed of trust in favor of Great Western.  The deed             
          was executed by David on August 11, 1995, and by Stephanie on               
          August 21, 1995.  The fair market value of the Atascadero                   
          property was $207,500 at the time the deed was executed.  The               
          outstanding balances on the loans from Great Western and                    
          petitioner’s profit-sharing plan were $168,957 and $170,371,                
          respectively.  At the time the deed was conveyed to petitioner,             
          neither Stephanie nor David had made any principal payments on              
          the Atascadero loan.  Petitioner did not pursue a judgment in the           
          California courts for the balance of the loan because he believed           
          that California’s antideficiency statute, section 580b of the               
          California Civil Procedure Code (2002), precluded any recovery.             
               Petitioner made the monthly payments on the Great Western              
          loan from September 1995 through December 1995.  Petitioner paid            






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