July 17, 2012
Plaintiffs sold a parcel of property and carried back a note secured by a deed of trust to finance the balance of the purchase price. The purchaser demolished a building on the property to make way for new development, but was unable to complete the development and defaulted on the loan. Plaintiffs foreclosed non-judicially and purchased the property at the foreclosure sale. They then sued for waste and impairment of security based on the demolition of the building and the resulting loss of value. Defendants claimed that the action was barred by California's antideficiency laws. The court held that the antideficiency laws bar recovery for waste only if it is caused by the economic pressures of a depressed market, such as where an owner is compelled as a result of an economic downturn to forego the general maintenance and repair of the property in order to keep up with payments on the mortgage debt. But antideficiency laws do not preclude this action because defendants' demolition of the building was not induced by an economic downturn.
Cal.App. 3rd Dist. (C067630) 6/27/12