credit bid rule in California

2015(Alliance Mortgage, supra, 10 Cal.4th at pp. 1238, 1247; see Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 606-607 (Cornelison ) [full credit bid precludes lender from subsequently recovering on an action for waste because “a nonjudicial foreclosure sale, if regularly held, finally fixes the value of the property therein sold”]; Passanisi, supra, 190 Cal.App.3d at pp. 1503-1504 [“‘the full credit bid establishes the value of the property and the amount of the debt, the debt is fully satisfied, the lien is extinguished, and the beneficiary cannot pursue any other remedy regardless of the actual

2015These cases stand for the proposition that, except where a lender can allege it was fraudulently induced into making the initial loan, the full credit bid rule extinguishes “the lender’s only interest in the property, the repayment of its debt, has been satisfied, and any further payment would result in a double recovery.” (Alliance Mortgage, supra, 10 Cal.4th at pp. 1238-1239, 1247-1248; see Passanisi, supra, 190 Cal.App.3d at p. 1503 [full credit bid leaves no deficiency]; Cornelison, supra, 15 Cal.3d at p. 606 [full credit bid extinguishes the lien on the real property].) These cases dictat

2015(Alliance Mortgage, supra, 10 Cal.4th at pp. 1238, 1247; see Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 606-607 (Cornelison ) [full credit bid precludes lender from subsequently recovering on an action for waste because “a nonjudicial foreclosure sale, if regularly held, finally fixes the value of the property therein sold”]; Passanisi, supra, 190 Cal.App.3d at pp. 1503-1504 [“‘the full credit bid establishes the value of the property and the amount of the debt, the debt is fully satisfied, the lien is extinguished, and the beneficiary cannot pursue any other remedy regardless of the actual

2015These cases stand for the proposition that, except where a lender can allege it was fraudulently induced into making the initial loan, the full credit bid rule extinguishes “the lender’s only interest in the property, the repayment of its debt, has been satisfied, and any further payment would result in a double recovery.” (Alliance Mortgage, supra, 10 Cal.4th at pp. 1238-1239, 1247-1248; see Passanisi, supra, 190 Cal.App.3d at p. 1503 [full credit bid leaves no deficiency]; Cornelison, supra, 15 Cal.3d at p. 606 [full credit bid extinguishes the lien on the real property].) These cases dictat

2001(Id. at p. 960, 85 Cal.Rptr.2d 539 .) The Court of Appeal held that the appellants' action against the appraiser was barred by the full credit bid rule because they did not reasonably rely on his appraisal when they entered their full credit bid.

2001(Alliance Mortgage Co. v. Rothwell, supra, 10 Cal.4th at p. 1249 ; see also discussion, ante, at p. 365.) Michelson v. Camp (1999) 72 Cal.App.4th 955 [ 85 Cal.Rptr.2d 539 ] held that the full credit bid rule barred causes of action for, among other things, negligence and negligent representation, but the court did so because the plaintiffs did not rely on the defendant’s allegedly false representation at the time they made their full credit bid (an issue we discuss in the next section of this opinion), not because Alliance applied only to fraud causes of action.

2014In discussing the full credit bid rule, our Supreme Court has said, “ ‘[t]he purpose of the trustee’s sale is to resolve the question of value . . . through competitive bidding ....’” (Cornelison v. Kornbluth, supra, 15 Cal.3d at p. 607, quoting Hetland, Cal. Real Estate Secured Transactions (Cont.Ed.Bar 1970) p. 255.) In order to ensure that a “fair price” is obtained for the foreclosure property, it must be “sold at public sale to the highest bidder, and at least 20 days’ notice of the sale must be given.” (Smith v. Allen (1968) 68 Cal.2d 93, 96 [ 65 Cal.Rptr. 153 , 436 P.2d 65 ].) These pro

2014In discussing the full credit bid rule, our Supreme Court has said, “ ‘[t]he purpose of the trustee’s sale is to resolve the question of value . . . through competitive bidding ....’” (Cornelison v. Kornbluth, supra, 15 Cal.3d at p. 607, quoting Hetland, Cal. Real Estate Secured Transactions (Cont.Ed.Bar 1970) p. 255.) In order to ensure that a “fair price” is obtained for the foreclosure property, it must be “sold at public sale to the highest bidder, and at least 20 days’ notice of the sale must be given.” (Smith v. Allen (1968) 68 Cal.2d 93, 96 [ 65 Cal.Rptr. 153 , 436 P.2d 65 ].) These pro

2001However, the junior lienholder, like any other successful purchaser, takes the property subject to the senior lien. ( Davidow v. Corporation of America (1936) 16 Cal.App.2d 6, 11-12 [ 60 P.2d 132 ] ...; see Brown v. Copp (1951) 105 Cal. App.2d 1, 6-8 [ 232 P.2d 868 ]....)" ( Romo v. Stewart Title of California (1995) 35 Cal.App.4th 1609, 1614 , 42 Cal.Rptr.2d 414 , fn. omitted.) Acknowledging the interrelationship between foreclosure and antideficiency statutes ( Alliance Mortgage Co., supra, 10 Cal.4th at p. 1236 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 ), the Supreme Court designed the full credi

2001However, the junior lienholder, like any other successful purchaser, takes the property subject to the senior lien. ( Davidow v. Corporation of America (1936) 16 Cal.App.2d 6, 11-12 [ 60 P.2d 132 ] ...; see Brown v. Copp (1951) 105 Cal. App.2d 1, 6-8 [ 232 P.2d 868 ]....)" ( Romo v. Stewart Title of California (1995) 35 Cal.App.4th 1609, 1614 , 42 Cal.Rptr.2d 414 , fn. omitted.) Acknowledging the interrelationship between foreclosure and antideficiency statutes ( Alliance Mortgage Co., supra, 10 Cal.4th at p. 1236 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 ), the Supreme Court designed the full credi

2001Moreover, the assumption, which was adopted in Pacific Inland Bank , that the "exception" carved out in Alliance was based on the extreme nature of the tortious conduct involved in that case, fraud, is problematical even apart from the court's misunderstanding of the full credit bid rule, because the term "fraud" may be used to describe not just an intentional misrepresentation but as well certain misrepresentations that are merely negligent, as the separate and distinct tort of negligent misrepresentation is "a species of the tort of deceit." ( Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370,

2001Moreover, the assumption, which was adopted in Pacific Inland Bank , that the "exception" carved out in Alliance was based on the extreme nature of the tortious conduct involved in that case, fraud, is problematical even apart from the court's misunderstanding of the full credit bid rule, because the term "fraud" may be used to describe not just an intentional misrepresentation but as well certain misrepresentations that are merely negligent, as the separate and distinct tort of negligent misrepresentation is "a species of the tort of deceit." ( Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370,

2001However, the junior lienholder, like any other successful purchaser, takes the property subject to the senior lien. ( Davidow v. Corporation of America (1936) 16 Cal.App.2d 6, 11-12 [ 60 P.2d 132 ] ...; see Brown v. Copp (1951) 105 Cal. App.2d 1, 6-8 [ 232 P.2d 868 ]....)" ( Romo v. Stewart Title of California (1995) 35 Cal.App.4th 1609, 1614 , 42 Cal.Rptr.2d 414 , fn. omitted.) Acknowledging the interrelationship between foreclosure and antideficiency statutes ( Alliance Mortgage Co., supra, 10 Cal.4th at p. 1236 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 ), the Supreme Court designed the full credi

2001However, the junior lienholder, like any other successful purchaser, takes the property subject to the senior lien. ( Davidow v. Corporation of America (1936) 16 Cal.App.2d 6, 11-12 [ 60 P.2d 132 ] ...; see Brown v. Copp (1951) 105 Cal. App.2d 1, 6-8 [ 232 P.2d 868 ]....)" ( Romo v. Stewart Title of California (1995) 35 Cal.App.4th 1609, 1614 , 42 Cal.Rptr.2d 414 , fn. omitted.) Acknowledging the interrelationship between foreclosure and antideficiency statutes ( Alliance Mortgage Co., supra, 10 Cal.4th at p. 1236 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 ), the Supreme Court designed the full credi

2001As stated in Cale v. Transamerica Title Insurance (1990) 225 Cal.App.3d 422 , 275 Cal.Rptr. 107 , Cornelison holds only that "a nonjudicial foreclosure sale under the statute is determinative of the value of the property as between the lender and borrower under a deed of trust. [Citation.]" (Id. at p. 428, fn. 1, 275 Cal.Rptr. 107 , italics added.) The explanation in Cornelison of the relationship between the full credit bid rule and the antideficiency statutes was not disturbed by the opinion in Alliance Mortgage Co. v. Rothwell, supra, 10 Cal.4th 1226 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 , wh

2001As stated in Cale v. Transamerica Title Insurance (1990) 225 Cal.App.3d 422 , 275 Cal.Rptr. 107 , Cornelison holds only that "a nonjudicial foreclosure sale under the statute is determinative of the value of the property as between the lender and borrower under a deed of trust. [Citation.]" (Id. at p. 428, fn. 1, 275 Cal.Rptr. 107 , italics added.) The explanation in Cornelison of the relationship between the full credit bid rule and the antideficiency statutes was not disturbed by the opinion in Alliance Mortgage Co. v. Rothwell, supra, 10 Cal.4th 1226 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 , wh

2015(White v. Seitzman (1964) 230 Cal.App.2d 756, 765 ; see Passanisi v. Merit-McBride Realtors, Inc. (1987) 190 Cal.App.3d 1496, 1503 (Passanisi) [“[i]f the creditor-beneficiary makes a ‘full credit bid’ for the property and is the successful bidder, then the proceeds from the trustee’s sale are exactly sufficient to satisfy the debt [fn. omitted],” and “[i]n that case, there is no deficiency and no surplus”].) In the absence of any amount due on the note, there is no remaining balance to which Saleh’s guaranty can apply. 5 The full credit bid rule also precludes a lender from later claiming that

2015(Alliance Mortgage, supra, 10 Cal.4th at pp. 1238, 1247; see Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 606-607 (Cornelison ) [full credit bid precludes lender from subsequently recovering on an action for waste because “a nonjudicial foreclosure sale, if regularly held, finally fixes the value of the property therein sold”]; Passanisi, supra, 190 Cal.App.3d at pp. 1503-1504 [“‘the full credit bid establishes the value of the property and the amount of the debt, the debt is fully satisfied, the lien is extinguished, and the beneficiary cannot pursue any other remedy regardless of the actual

2014Co. (2002) 98 Cal.App.4th 857, 864 [ 120 Cal.Rptr.2d 228 ] (Track Mortgage); accord, Cornelison v. Kornbluth, supra, 15 Cal.3d at p. 606 [full credit bid at foreclosure sale “establishes the value of the [liened property] as being equal to the outstanding indebtedness” and “the nonexistence of any impairment of the security”]; Countrywide Home Loans, Inc. v. Tutungi (1998) 66 Cal.App.4th 727, 731 [ 78 Cal.Rptr.2d 203 ] [“Under the full credit bid rule, a foreclosing lender that has purchased the real property security for such a bid is precluded from pursuing further claims to recoup its debt,

2014Co. (2002) 98 Cal.App.4th 857, 864 [ 120 Cal.Rptr.2d 228 ] (Track Mortgage); accord, Cornelison v. Kornbluth, supra, 15 Cal.3d at p. 606 [full credit bid at foreclosure sale “establishes the value of the [liened property] as being equal to the outstanding indebtedness” and “the nonexistence of any impairment of the security”]; Countrywide Home Loans, Inc. v. Tutungi (1998) 66 Cal.App.4th 727, 731 [ 78 Cal.Rptr.2d 203 ] [“Under the full credit bid rule, a foreclosing lender that has purchased the real property security for such a bid is precluded from pursuing further claims to recoup its debt,

2001However, the junior lienholder, like any other successful purchaser, takes the property subject to the senior lien. ( Davidow v. Corporation of America (1936) 16 Cal.App.2d 6, 11-12 [ 60 P.2d 132 ] ...; see Brown v. Copp (1951) 105 Cal. App.2d 1, 6-8 [ 232 P.2d 868 ]....)" ( Romo v. Stewart Title of California (1995) 35 Cal.App.4th 1609, 1614 , 42 Cal.Rptr.2d 414 , fn. omitted.) Acknowledging the interrelationship between foreclosure and antideficiency statutes ( Alliance Mortgage Co., supra, 10 Cal.4th at p. 1236 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 ), the Supreme Court designed the full credi

2001However, the junior lienholder, like any other successful purchaser, takes the property subject to the senior lien. ( Davidow v. Corporation of America (1936) 16 Cal.App.2d 6, 11-12 [ 60 P.2d 132 ] ...; see Brown v. Copp (1951) 105 Cal. App.2d 1, 6-8 [ 232 P.2d 868 ]....)" ( Romo v. Stewart Title of California (1995) 35 Cal.App.4th 1609, 1614 , 42 Cal.Rptr.2d 414 , fn. omitted.) Acknowledging the interrelationship between foreclosure and antideficiency statutes ( Alliance Mortgage Co., supra, 10 Cal.4th at p. 1236 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 ), the Supreme Court designed the full credi

1995(Commonwealth Mortgage Assurance Co. v. Superior Court (1989) 211 Cal.App.3d 508, 518-521 [ 259 Cal.Rptr. 425 ]; Sumitomo Bank v. Taurus Developers, Inc. (1986) 185 Cal.App.3d 211, 220 [ 229 Cal.Rptr. 719 ].) The rule has also been applied to fraud actions against third parties.

1989We conclude that Financial Code section 779 does not impact the full credit bid rule (Sumitomo Bank v. Taurus Developers, Inc., supra, 185 Cal.App.3d 211, 221, fn. 4 ), and the rule’s effect of destroying both the lender’s and insurer’s causes of action for fraud.

2014(Kolodge, supra, 88 Cal.App.4th at p. 359 .) Although the Kolodge court purported to disagree with Romo—stating that whether the more senior liens were extinguished should be analyzed under the doctrine of merger rather than the full credit bid rule—the court also declared this issue “moot” in the absence of a full credit bid.

2001Code, §§ 1710, subd. 2, 1572, subd. 2; 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 720 et seq., p. 819 et seq.) See discussion in Kolodge v. Boyd (2001) 88 Cal.App.4th 349, 369-372 [ 105 Cal.Rptr.2d 749 ], Kolodge v. Boyd, supra, 88 Cal.App.4th 349 , involving an action by a lender against an appraiser, likewise held “[w]hat the Alliance court said about a suit for intentional misrepresentation can be said with equal force about a suit for negligent misrepresentation.” (Id. at p. 365.) Kolodge concluded the negligent misrepresentation claim was not barred by the full credit bid rule.

2001(See Bank of America etc. Assn. v. Reidy [(1940)] 15 Cal.2d [243,] 248 [ 101 P.2d 77 ] [`not unusual for a mortgagee to make a bid for the property in the amount owing on the debt' when it cannot recover a deficiency].) Hence, the full credit bid rule would not apply." ( Alliance, supra, at p. 1247 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 .) In other words, "in order to avoid the full credit bid rule, the lender must have been induced to enter into the loan by the false representation, and still be under the mistaken belief that the representation was true at the time it makes the full credit bid."

2001(See Bank of America etc. Assn. v. Reidy [(1940)] 15 Cal.2d [243,] 248 [ 101 P.2d 77 ] [‘not unusual for a mortgagee to make a bid for the property in the amount owing on the debt’ when it cannot recover a deficiency].) Hence, the full credit bid rule would not apply.” (Alliance, supra, at p. 1247 .) In other words, “in order to avoid the full credit bid rule, the lender must have been induced to enter into the loan by the false representation, and still be under the mistaken belief that the representation was true at the time it makes the full credit bid.” (Michelson v. Camp, supra, 72 Cal.Ap

2001Moreover, the assumption, which was adopted in Pacific Inland Bank , that the "exception" carved out in Alliance was based on the extreme nature of the tortious conduct involved in that case, fraud, is problematical even apart from the court's misunderstanding of the full credit bid rule, because the term "fraud" may be used to describe not just an intentional misrepresentation but as well certain misrepresentations that are merely negligent, as the separate and distinct tort of negligent misrepresentation is "a species of the tort of deceit." ( Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370,

2001Moreover, the assumption, which was adopted in Pacific Inland Bank , that the "exception" carved out in Alliance was based on the extreme nature of the tortious conduct involved in that case, fraud, is problematical even apart from the court's misunderstanding of the full credit bid rule, because the term "fraud" may be used to describe not just an intentional misrepresentation but as well certain misrepresentations that are merely negligent, as the separate and distinct tort of negligent misrepresentation is "a species of the tort of deceit." ( Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370,

2001The risk inherent in secured land transactions will remain on the mortgagee, but that risk should not be expanded to include the assumption of damages resulting from *765 a fiduciary's negligence or fraud." (Id. at pp. 870-871, 161 Cal.Rptr. 342 .) Because negligence or fraud claims against third parties do not compromise any of the policies reflected in the antideficiency statutes, we held in Critchfield that such claims were also not barred by the full credit bid rule.

1994As explained by the court: “ ‘[T]he purpose of the trustee’s sale is to resolve the question of value and the question of potential forfeiture through competitive bidding . . . .’ [Citations.] In Smith v. Allen (1968) 68 Cal.2d 93, 95-96 [ 65 Cal.Rptr. 153 , 436 P.2d 65 ], this court held that a nonjudicial foreclosure sale, if regularly held, finally fixes the value of the property therein sold.” (15 Cal.3d at pp. 606-607.) *1806 In Brown v. Critchfield (1980) 100 Cal.App.3d 858 [ 161 Cal.Rptr. 342 ], the court applied the full credit bid rule to an action by the seller/lender against a real

2014(Id. at pp. 363, 372.) As the court in Track Mortgage later observed, Kolodge “stand[s] for nothing more than that the full credit bid rule is inapplicable where the lender is fraudulently or negligently induced to make the bid.” (Track Mortgage, supra, 98 Cal.App.4th at p. 866 .) Appellants also purport to rely on the decision in Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540 [ 33 Cal.Rptr.2d 646 ] (Evans).

2014(Id. at pp. 363, 372.) As the court in Track Mortgage later observed, Kolodge “stand[s] for nothing more than that the full credit bid rule is inapplicable where the lender is fraudulently or negligently induced to make the bid.” (Track Mortgage, supra, 98 Cal.App.4th at p. 866 .) Appellants also purport to rely on the decision in Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540 [ 33 Cal.Rptr.2d 646 ] (Evans).

2001As the United States Supreme Court has pointed out, bids at foreclosure sales often bear little relationship to the fair market value of security property ( BFP v. Resolution Trust Corp. (1994) 511 U.S. 531, 538 , 114 S.Ct. 1757 , 128 L.Ed.2d 556 ["`fair market value' presumes market conditions that, by definition, simply do not obtain in the context of a forced sale."].) While the fiction serves a useful purpose as between a lender and a borrower, because it is a useful way in which to enforce the policies reflected in the antideficiency statutes, it can be very troublesome when applied in ot

2001As the United States Supreme Court has pointed out, bids at foreclosure sales often bear little relationship to the fair market value of security property ( BFP v. Resolution Trust Corp. (1994) 511 U.S. 531, 538 , 114 S.Ct. 1757 , 128 L.Ed.2d 556 ["`fair market value' presumes market conditions that, by definition, simply do not obtain in the context of a forced sale."].) While the fiction serves a useful purpose as between a lender and a borrower, because it is a useful way in which to enforce the policies reflected in the antideficiency statutes, it can be very troublesome when applied in ot

2001As stated in Cale v. Transamerica Title Insurance (1990) 225 Cal.App.3d 422 , 275 Cal.Rptr. 107 , Cornelison holds only that "a nonjudicial foreclosure sale under the statute is determinative of the value of the property as between the lender and borrower under a deed of trust. [Citation.]" (Id. at p. 428, fn. 1, 275 Cal.Rptr. 107 , italics added.) The explanation in Cornelison of the relationship between the full credit bid rule and the antideficiency statutes was not disturbed by the opinion in Alliance Mortgage Co. v. Rothwell, supra, 10 Cal.4th 1226 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 , wh

2001As stated in Cale v. Transamerica Title Insurance (1990) 225 Cal.App.3d 422 , 275 Cal.Rptr. 107 , Cornelison holds only that "a nonjudicial foreclosure sale under the statute is determinative of the value of the property as between the lender and borrower under a deed of trust. [Citation.]" (Id. at p. 428, fn. 1, 275 Cal.Rptr. 107 , italics added.) The explanation in Cornelison of the relationship between the full credit bid rule and the antideficiency statutes was not disturbed by the opinion in Alliance Mortgage Co. v. Rothwell, supra, 10 Cal.4th 1226 , 44 Cal.Rptr.2d 352 , 900 P.2d 601 , wh

2014In discussing the full credit bid rule, our Supreme Court has said, “ ‘[t]he purpose of the trustee’s sale is to resolve the question of value . . . through competitive bidding ....’” (Cornelison v. Kornbluth, supra, 15 Cal.3d at p. 607, quoting Hetland, Cal. Real Estate Secured Transactions (Cont.Ed.Bar 1970) p. 255.) In order to ensure that a “fair price” is obtained for the foreclosure property, it must be “sold at public sale to the highest bidder, and at least 20 days’ notice of the sale must be given.” (Smith v. Allen (1968) 68 Cal.2d 93, 96 [ 65 Cal.Rptr. 153 , 436 P.2d 65 ].) These pro

2014In discussing the full credit bid rule, our Supreme Court has said, “ ‘[t]he purpose of the trustee’s sale is to resolve the question of value . . . through competitive bidding ....’” (Cornelison v. Kornbluth, supra, 15 Cal.3d at p. 607, quoting Hetland, Cal. Real Estate Secured Transactions (Cont.Ed.Bar 1970) p. 255.) In order to ensure that a “fair price” is obtained for the foreclosure property, it must be “sold at public sale to the highest bidder, and at least 20 days’ notice of the sale must be given.” (Smith v. Allen (1968) 68 Cal.2d 93, 96 [ 65 Cal.Rptr. 153 , 436 P.2d 65 ].) These pro

2014Co. (2002) 98 Cal.App.4th 857, 864 [ 120 Cal.Rptr.2d 228 ] (Track Mortgage); accord, Cornelison v. Kornbluth, supra, 15 Cal.3d at p. 606 [full credit bid at foreclosure sale “establishes the value of the [liened property] as being equal to the outstanding indebtedness” and “the nonexistence of any impairment of the security”]; Countrywide Home Loans, Inc. v. Tutungi (1998) 66 Cal.App.4th 727, 731 [ 78 Cal.Rptr.2d 203 ] [“Under the full credit bid rule, a foreclosing lender that has purchased the real property security for such a bid is precluded from pursuing further claims to recoup its debt,

2014Co. (2002) 98 Cal.App.4th 857, 864 [ 120 Cal.Rptr.2d 228 ] (Track Mortgage); accord, Cornelison v. Kornbluth, supra, 15 Cal.3d at p. 606 [full credit bid at foreclosure sale “establishes the value of the [liened property] as being equal to the outstanding indebtedness” and “the nonexistence of any impairment of the security”]; Countrywide Home Loans, Inc. v. Tutungi (1998) 66 Cal.App.4th 727, 731 [ 78 Cal.Rptr.2d 203 ] [“Under the full credit bid rule, a foreclosing lender that has purchased the real property security for such a bid is precluded from pursuing further claims to recoup its debt,