Summary
The California Supreme Court affirmed summary judgment for a successor owner in an action alleging breach of deed-of-trust covenants and waste. The court held that a nonassuming grantee was not personally liable for the deed-of-trust obligations absent a written assumption, although the grantee remained subject to a duty not to commit waste. It further held that antideficiency protections generally bar recovery for waste caused by market decline, but may not bar recovery for bad-faith waste; in any event, the plaintiff's full-credit bid at the trustee's sale precluded recovery on the record presented.
Topics
Practice areas
Questions Presented
- Whether summary judgment could be granted when the complaint alleged material factual issues but the plaintiff filed no counteraffidavits.
- Whether a successor grantee who did not assume a mortgage or deed-of-trust debt in writing is personally obligated to perform the deed-of-trust covenants.
- Whether a nonassuming successor in interest may be liable for waste impairing a mortgagee's or beneficiary's security after foreclosure under California's antideficiency statutes.
- Whether a beneficiary who acquired the property through a full credit bid at a trustee's sale may recover damages for waste.
Holdings
- A complaint's allegations do not create a triable issue of fact sufficient to defeat summary judgment; the opposing party must submit affidavits or other evidence showing facts that present a triable issue.
- When real property subject to a mortgage or deed of trust is transferred, the grantee is not personally liable for the secured indebtedness or for performing the mortgage or trust-deed obligations unless the grantee's written and subscribed agreement to pay or assumption of the indebtedness is contained in the conveyance or otherwise established in writing.
- A nonassuming successor in interest whose property interest remains subject to a mortgage or deed-of-trust lien owes a duty not to commit waste that impairs the mortgagee's security, but antideficiency protections bar recovery for waste caused by a general market decline and not committed in bad faith.
- A beneficiary or mortgagee that acquires property at a foreclosure sale by making a full credit bid equal to the secured obligation and foreclosure costs cannot recover damages for waste because the full credit bid establishes that the security was not impaired and extinguishes the lien.
Key quotations
“It is not the purpose of the procedure under section 437c to test the sufficiency of the pleadings.” (596)
“Upon the transfer of real property covered by a mortgage or deed of trust as security for an indebtedness, the property remains subject to the secured indebtedness but the grantee is not personally liable for the indebtedness or to perform any of the obligations of the mortgage or trust deed unless his agreement to pay the indebtedness, or some note or memorandum thereof, is in writing and subscribed by him or his agent or his assumption of the indebtedness is specifically provided for in the conveyance.” (597)
“If, however, he bids less than the full amount of the obligation and thereby acquires the property valued at less than the full amount, his security has been impaired and he may recover damages for waste in an amount not exceeding the difference between the amount of his bid and the full amount of the outstanding indebtedness immediately prior to the foreclosure sale.” (608)
Factual background
Cornelison sold a single-family dwelling to Maurice and Leona Chanon, taking a promissory note secured by a first deed of trust containing covenants requiring payment of taxes, maintenance of the property, and acceleration of the debt upon resale. The Chanons conveyed the property to Kornbluth, who later sold it to Richard Larkins; Kornbluth did not assume the secured indebtedness in writing or in the conveyance. After the property was condemned and the Chanons defaulted, Cornelison purchased the property at a trustee's sale for a full credit bid equal to the outstanding debt and foreclosure costs, then sued Kornbluth for breach of the deed-of-trust covenants and waste.
Procedural history
Cornelison sold a residence secured by a purchase-money deed of trust. After the property was transferred through defendant to another purchaser, condemned, and sold at a trustee's sale on Cornelison's full credit bid, she sued Kornbluth for breach of contract and waste. Kornbluth moved for summary judgment, submitted uncontroverted declarations and supporting documents, and prevailed. The Supreme Court of California affirmed.