Bauman v. Castle

Decision Date12 March 1971
Citation93 Cal.Rptr. 565,15 Cal.App.3d 990
CourtCalifornia Court of Appeals Court of Appeals
PartiesJohn F. BAUMAN, Plaintiff and Appellant, v. Edward CASTLE, William Dias, and Samuel Stewart, Defendants and Respondents. Civ. 27048.

Robert O. Wilhelm, Redwood City, for plaintiff-appellant.

Regalado & Lindquist, Redwood City, for William Dias and Samuel Stewart.

Edward Castle in pro. per.

SHOEMAKER, Presiding Justice.

Plaintiff brought this action against the guarantors of a promissory note following a nonjudicial sale under a second deed of trust of the property securing the note. Judgment was entered for defendants and plaintiff appeals.

The facts are essentially without dispute. Plaintiff John Bauman was the owner of an interest in an apartment building located in Redwood City, and in March 1964 the building was sold. For his interest in the property, plaintiff received $16,000 in cash, an assignment of the promissory note involved herein in the face amount of $40,000 which was secured by a second deed of trust on an apartment building in Mountain View, and a guaranty of said note executed by defendants William Dias, Samuel Stewart and Edward Castle.

The promissory note assigned to plaintiff had originally been executed in December 1963 as part of the purchase price paid when Cornelius and Elena Gillespie bought the Mountain View apartment building from Robert and Eileen Gronachon. The Gillespies were the trustors under the note and the Gronachons were the beneficiaries. The note was subsequently assigned by the Gronachons to New Castle Realty and in turn by it to defendants Dias, Stewart and Castle, who were all employees of New Castle Realty. In March 1964, when plaintiff sold his interest in the Redwood City apartment building, defendants Dias, Stewart and Castle assigned the note with recourse to plaintiff and also executed a written guaranty and promise with respect to the note. The guaranty limited Castle's liability to 25 percent, Dias' liability to 37 1/2 percent, and Stewart's liability to 37 1/2 percent. The guaranty and promise contained a waiver of defendants' right to require plaintiff to proceed against the security provided by the principal debtors, and defendants agreed that plaintiff 'may proceed against the undersigned directly and independently of the makers * * *.'

Contemporaneous with the execution of the guaranty, defendants received from John Minor and William Norton, two other employees of New Castle Realty, a guaranty and promise that Minor and Norton would reimburse defendants to the extent of 30 percent of any loss which defendants might suffer as a result of their guaranty to plaintiff.

In November 1965, the Gillespies ceased making the monthly payments called for. In January 1966, plaintiff also learned that the Gillespies were in arrears on the payments due under the first deed of trust on the Mountain View property.

In August 1966, proceedings were commenced to foreclose under the power of sale in the second deed of trust, and defendants were given notice of the trustee's sale. The amount due and owing on the note secured by the second deed of trust was $38,337.11. The trustee's sale was held on December 30, 1966. None of the defendants were present, and plaintiff was the only bidder. He purchased the property for $5,000. Plaintiff thereafter commenced the instant action against defendants, as guarantors, to recover the balance due under the promissory note.

At the conclusion of the trial, the court indicated in a memorandum decision that it had decided the case in favor of plaintiff. However, the court subsequently issued a 'memorandum decision after reconsideration' in which it determined that the recent case of Union Bank v. Gradsky (1968) 265 Cal.App.2d 40, 71 Cal.Rptr. 64, compelled a decision in favor of defendants.

Judgment for defendants was accordingly entered.

In Union Bank v. Gradsky, supra, plaintiff bank made a construction loan to a property owner and took back a note secured by a first deed of trust on the property. As additional security for the construction loan, defendant Gradsky, the general contractor, guaranteed the note. When the note was not paid on the maturity date, the bank caused the security to be sold at a trustee's sale and the bank bid in the property. The bank then brought suit against Gradsky on his guaranty to recover the amount remaining unpaid on the note. The trial court sustained a demurrer to the complaint without leave to amend and entered a judgment of dismissal. The appellate court affirmed the judgment on the ground that the bank was estopped from seeking a deficiency judgment against the guarantor because the bank had elected to pursue the remedy of a nonjudicial sale of the security and had thereby destroyed the guarantor's right to obtain reimbursement from the principal debtor. The court pointed out that Code of Civil Procedure, section 580d, prohibits a deficiency judgment where property has been sold under a power of sale contained in a deed of trust. The court noted that the bank had three options when the principal debtor defaulted on the note: (1) it could have brought a judicial foreclosure action against the principal debtor and the guarantor; (2) it could have sued the guarantor for the full amount due under the note; or (3) it could have realized upon the security by way of a nonjudicial sale. If the bank had chosen the first remedy, the bank could have obtained a deficiency judgment against the principal debtor, and the principal debtor would have had a statutory right of redemption. If the bank had chosen the second remedy, the guarantor would have been subrogated to all the bank's rights against the principal debtor and could have pursued either judicial sale...

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7 cases
  • Union Bank v. Wendland
    • United States
    • California Court of Appeals Court of Appeals
    • January 16, 1976
    ...Cal.Rptr. 873, 378 P.2d 97; Indusco Management Corp. v. Robertson, 40 Cal.App.3d 456, 460--461, 114 Cal.Rptr. 47; Bauman v. Castle, 15 Cal.App.3d 990, 993, 93 Cal.Rptr. 565; Kass v. Weber, 261 Cal.App.2d 417, 421--422, 67 Cal.Rptr. 876; Loretz v. Cal-Coast Dev. Corp., 249 Cal.App.2d 176, 17......
  • In re Prestige Ltd. Partnership-Concord
    • United States
    • U.S. Bankruptcy Court — Northern District of California
    • January 29, 1997
    ...87 P.2d 724, 726 (1939) (reh'g denied); and Westinghouse Credit Corp. v. Barton, 789 F.Supp. at 1045, citing, Bauman v. Castle, 15 Cal.App.3d 990, 994, 93 Cal.Rptr. 565 (1971). Prestige cites to California Corp.Code § 15015,3 which provides that a partner is jointly liable for the debts of ......
  • Kahn v. Lasorda's Dugout, Inc.
    • United States
    • California Court of Appeals Court of Appeals
    • June 16, 2003
    ...obligation. (Consolidated Capital Income Trust v. Khaloghli (1986) 183 Cal.App.3d 107, 112, 227 Cal.Rptr. 879; Bauman v. Castle (1971) 15 Cal.App.3d 990, 994, 93 Cal.Rptr. 565.) ...
  • Westinghouse Credit Corp. v. Barton
    • United States
    • U.S. District Court — Central District of California
    • April 20, 1992
    ...a primary obligor or debtor, there is no such prohibition on recovery against a true guarantor of the loan. See Bauman v. Castle, 15 Cal.App.3d 990, 994, 93 Cal.Rptr. 565 (1971). However, the statutes will prevent a deficiency judgment against a "guarantor" who is also a principal It is wel......
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