This is an action for a deficiency after non judicial sale against defendants alleging them to be guarantors of a secured note. On February 12, 1964, Efficient Investments, Inc. 1 by its president, defendant Ira Brummell, and secretary, defendant Max Dillman, executed in favor of Union Bank a note in the amount of $1,700,000 secured by a deed of trust. The trust deed encumbered property appraised by the bank at $2.100,000. This appraisal was made by the bank in December 1963. Defendants personаlly endorsed the note and, in addition, executed continuing guarantees.
On November 12, 1965, at the trustee’s sale, the bank рurchased the encumbered property for $1.614,000. After certain adjustments, a claimed deficiency of $182,447.89 remainеd unpaid. The bank subsequently brought action on the defendants’ continuing guarantees, and, after trial by the court, was awarded judgment in the sum of $182,447.89 principal, plus interest of $18,097.19, and attorney fees of $2,272.24.
The sole issue on appeal is whethеr the defendants were within the protective blanket of the antideficiency law.
In the joint pretrial statement signеd by the respective attorneys, one of the listed issues in the case was whether defendants were insulated from liability by virtue of the provisions of Code of Civil Procedure, section 580d. In a supplemental pretrial statement, defеndants set forth as issues in dispute: whether Efficient Investments, Inc. was formed by defendants only to take title to the land given as sеcurity; and, whether defendants were the sole owners of the stock of Efficient Investments, Inc.
*838 At trial herein, defendants оffered to prove that: originally the property given as security was to be purchased by the individual defendants; the bank advised or required them to transfer title to the property to a corporation; and, the bank intended by this device to avoid the antideficiency statutes. Also, at trial the evidence reflected the corporation was in existence at the time of the execution of the note and deed of trust, was not formed for the purpose of taking title in its name, and the stock was solely owned by defendants.
Section 580d of the Code of Civil Procedure provides in pertinent part: "No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property hereafter executed in any ease in which the real property has been sold by the mortgagee or trustee under power of sale contained in such a mortgagе or deed of trust. ’ ’ It has long been settled that the provisions of this section may not be waived in advance by the prospective debtor.
(Freedland
v.
Greco,
The above cited cases may be factually distinguishable from the сase at bench, but the legal principle involved remains the same. The legislative purpose against defiсiency judgments may not be subverted by use of a corporation with the true principal obligor relegated to the position of guarantor. The contentions filed at pretrial when coupled with defendants’ offer of proоf sufficiently raised this issue.
Moreover, even if defendants were unable ultimately to prove their unity of interest theory, we conclude the recent appellate opinion in
Union Bank
v.
Gradsky,
In applying the options which the plaintiff bank had upon Bess’s default, the appellate court decided plaintiff bank, by its failure to bring a judicial foreclosure naming Bess аnd Max as defendants or to sue Max for the full amount of his guarantee without proceeding against Bess or the security, could not maintain the action against Max for what amounted to a deficiency. The theory was one of estoppel with the court concluding that the bank, by proceeding as it did, had exercised an election of remedies which destroyed the guarantor’s subrogation rights against the principal debtor.
In the case at bench, plaintiff bank brought its action against defendants upon their continuing guarantees after exercising its right to have a non judicial sale of the security. On this appeal plaintiff bank insists the defendants are “true” guarantors and not principal obligors on the note which was secured by the trust deed. If this insistence be a fact, then the Gradsky opinion is controlling.
Plaintiff urges that the guarantee agreеment herein contains a waiver of the rights delineated in
Gradsky.
However, after a careful examination of this instrument, wе must conclude that it does not contain an “explicit waiver” and like the court in
Gradsky, ‘ ‘
[W] e shall not strain the instrument to find that wаiver by implication.” (
The judgment is reversed with directions to the trial court to enter judgment for defendants.
Kerrigan, J., and Tamura, J., concurred.
Respondent’s petition for a hearing by the Supreme Court was denied April 17,1969.