Case Name: Bowman, et al. v. Rogers, et al.

Case No.: 1-10-CV-177296

Defendant/cross-complainant Magnate Fund #2, LLC (“Magnate”) moves for summary adjudication as to the breach of contract cause of action in its cross-complaint (“Cross-Complaint”) against defendant/cross-defendant James Rogers (“Rogers”).

Rogers’ request for judicial notice is GRANTED.  (Evid. Code, § 452, subd. (h); see Alfaro v. Committee Housing Imp. System & Planning Assn., Inc. (2009) 171 Cal.App.4^th 1356, 1382; Evans v. Cal. Trailer Court, Inc. (1994) 28 Cal.App.4^th 540, 549; see also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4^th 256, 264-265 [stating that “a court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in the recorded document, and the document’s legally operative language … [and,f]rom this, the court may deduce and rely upon the legal effect of the recorded document”].)

Magnate’s motion for summary adjudication of the first cause of action for breach of contract in its Cross-Complaint against Rogers is DENIED.  After full consideration of the evidence, the separate statements and authorities submitted by each party, the Court finds that Magnate has failed to demonstrate that it is entitled to all of the damages that it is seeking in this claim.

“In California, as in most states, a creditor’s right to enforce a debt secured by a mortgage or deed of trust on real property is restricted by statute.  Under California law, the creditor must rely upon his security before enforcing the debt. (Code Civ. Proc., §§ 580a, 725a, 726.)  If the security is insufficient, his right to a judgment against the debtor for the deficiency may be limited or barred by sections 580a, 580b, 580d, or 726 of the Code of Civil Procedure.”  (In re Marriage of Oropallo (1998) 68 Cal.App.4^th 997, 1003 (internal quotations and citations omitted).)

Code of Civil section 726 compels a creditor to exhaust its security before suing on the underlying debt.  (See Security Pac. Nat’l v. Wozab (1990) 51 Cal.3d 991, 997-999.)  Here, there is no indication from Magnate that it ever foreclosed on the Saratoga property that served as additional security for the funds loaned to Rogers to complete construction on the subject property and thus that is exhausted its security before filing suit as required.

Magnate has an additional barrier to its attempt to collect on the outstanding loan sums which were not paid by Rogers based on its foreclosure of the subject property via a trustee’s sale.  Pursuant to Code of Civil Procedure section 580d (“Section 580d”), no deficiency judgment may be obtained when a secured property has been foreclosed by a trustee’s private power of sale, i.e., a nonjudicial foreclosure (“No judgment shall be rendered for any deficiency upon a note secured by a deed of trust … in any case in which the real property … has been sold by the … trustee under power of sale contained in the … deed of trust).  Here, Magnate opted to foreclose on the subject property and thus forfeited the right to recover any deficiency that might otherwise be allowed under the law.  (See Code Civ. Proc., § 580d; Alliance Mortg. Co. v. Rothwell (1995) 10 Cal.4^th 1226, 1236; see also Cadlerock Joint Venture, L.P. v. Lobel (2012) 206 Cal.App.4^th 1531, 1540.)  The fact that Magnate does not appear to have foreclosed on the Saratoga property is of no consequence in this regard; having made the election to collect on the debt by nonjudicial foreclosure to any property servicing as security to the funds loaned, Section 580d precludes Magnate from seeking a personal money judgment based on the additional collateral.  (See e.g., In re Marriage of Oropollo, supra, 68 Cal.App.4^th at 1005-1006 [after foreclosing nonjudicially on several properties securing a single debt, creditor could not invoke various anti-deficiency rule exceptions in connection with other property securing the same debt, and thereby attempt to sue the obligor directly].)