Union Bank v. Brummell

McCABE, P. J.

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.

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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 personally endorsed the note and, in addition, executed continuing guarantees.

On November 12, 1965, at the trustee’s sale, the bank purchased the encumbered property for $1.614,000. After certain adjustments, a claimed deficiency of $182,447.89 remained 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 whether the defendants were within the protective blanket of the antideficiency law.

In the joint pretrial statement signed 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, defendants set forth as issues in dispute: whether Efficient Investments, Inc. was formed by defendants only to take title to the land given as security; and, whether defendants were the sole owners of the stock of Efficient Investments, Inc.

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At trial herein, defendants offered 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 mortgage 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.