207 Cal. App. 4th 284
Cal. Ct. App.2012Background
- Buyers purchased property with a building, intending redevelopment requiring demolition.
- They defaulted on a purchase money note secured by a deed of trust; the holder foreclosed and bought back at sale for less than the debt.
- Foreclosure plaintiffs sued for waste and impairment of security based on demolition and tax nonpayment.
- Trial court granted summary adjudication; court held demolition not ‘bad faith’ waste under Cornelison.
- Appellate court held bad faith waste is not limited to reckless/destructive acts and remanded for trial on triable facts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether antideficiency statutes bar waste recovery | Cornelison allows waste claims unless caused by market downturn. | Antideficiency provisions block waste claims when tied to foreclosure. | Not barred; bad faith waste exception exists unless market depression caused impairment. |
| Scope of ‘bad faith’ waste under Cornelison | Waste not solely due to market pressures; demolition can be bad faith. | Waste is only bad faith if caused by economic pressures; demolition for development is not. | Bad faith waste includes non-market-depression causes; triable issues exist on facts. |
| Intentional impairment of security standard | Intent to harm is not required; impairment can be intentional regardless of motive. | No evidence of intentional harm; claims must fail as derivative. | No requirement of ‘intent to harm’; liability can arise without explicit intent, so issue remains triable. |
| Negligent impairment of security and non-borrower liability | Non-borrowers may be liable for negligent impairment; agents acted in demolition process. | Innocent agents cannot be liable for borrower’s torts; no direct wrongful conduct shown. | Evidence supports potential liability of non-borrower defendants; not entitled to summary adjudication. |
Key Cases Cited
- Cornelison v. Kornbluth, 15 Cal.3d 590 (Cal. 1975) (defines bad faith waste and the antideficiency interplay with §580b and §580d)
- Nippon Credit Bank v. 1333 North Cal. Blvd., 86 Cal.App.4th 486 (Cal. Ct. App. 2001) (supports bad faith waste where taxes not paid; not depressed-market-driven)
- Hickman v. Mulder, 58 Cal.App.3d 900 (Cal. Ct. App. 1976) (bad faith waste framework; clarifies Cornelison scope)
- Easton v. Ash, 18 Cal.2d 530 (Cal. 1941) (impairment of security without necessity of intent to harm)
- U. S. Financial v. Sullivan, 37 Cal.App.3d 5 (Cal. Ct. App. 1974) (negligent impairment of security doctrine for developers and contractors)