Procedural Posture

Plaintiff bank appealed from the decision of the Superior Court of San Diego County (California) that dismissed its complaint after demurrers were sustained without leave to amend on its causes of action against defendant developer.

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Plaintiff bank loaned defendant developer money, secured by a trust deed, to build a condominium project. Defendant defaulted on his payments and plaintiff exercised its power of sale and purchased the property at the trustee’s sale. After purchase, plaintiff discovered a latent defect that caused them to incur repair damages. Plaintiff sued under various theories and all causes of action were dismissed. The breach of contract, fraud, waste, and violations of the Business and Professions Code claims were barred by plaintiff’s full credit bid at the trustee’s sale, negligence was barred because the bank purchased the property as is, strict liability was inapplicable because the purchaser was a lender-beneficiary buying at an involuntary foreclosure sale, and the alter ego claim failed to state a cause of action. The court agreed with all of the trial court’s conclusions, except for the negligence and alter ego claims. This court held that plaintiff, as a beneficiary-purchaser, could state a negligence claim against defendant, independent of an impairment of security claim. The trial court’s judgment was affirmed as to all causes of action except negligence and the alter ego claim.


Judgment dismissing plaintiff bank’s complaint against defendant developer was affirmed as to the dismissal of the causes of action for breach of contract, bad faith, waste, fraud, and violations of the Business and Professions Code because they were barred under the full credit bid rule and for strict liability because it was not applicable. Judgment was reversed as to the demurrer on the negligence action because plaintiff could state a claim.