Court Opinion

ID: 9725651
Source: CourtListenerOpinion
Date Created: 2023-08-26 11:58:01.504468+00
Date Added: 2024-06-11T18:25:17.545430
License: Public Domain

SIMS, J.
I respectfully dissent.
Transamerica advised Cale that his loss could not be determined until he completed nonjudicial foreclosure proceedings. Cale did what Transamerica requested. His foreclosure left him with the extinguishment of his lien, the elimination of further remedies to collect his note, and property nobody else was willing to buy. Transamerica then told him he was still not damaged.
1 think Transamerica was right the first time. For reasons that follow, I believe the foreclosure sale made out a prima facie case of damage and loss to Cale which was unrebutted on summary judgment, so that the summary judgment was erroneously granted.
*429Cale contends he was damaged as of the time of the foreclosure sale, when he obtained no money to satisfy his lien. Cale correctly notes that his nonjudicial foreclosure extinguished his lien (Civ. Code, § 2910; Ralph C. Sutro Co. v. Paramount Plastering, Inc. (1963) 216 Cal.App.2d 433, 437-438 [31 Cal.Rptr. 174]) and barred further attempts to collect the underlying note. (See Code Civ. Proc., § 580d; Roseleaf Corp. v. Chierighino (1963) 59 Cal.2d 35, 43 [27 Cal.Rptr. 873, 378 P.2d 97].) Because the foreclosure sale had no effect on prior liens (Streiff v. Darlington (1937) 9 Cal.2d 42, 45 [68 P.2d 728]; Bernhardt, Cal. Mortgage and Deed of Trust Practice (Cont.Ed.Bar 1990) § 2.27, p. 90) any purchaser of the property would take title subject to the prior liens not disclosed by Transamerica, thereby decreasing the price a purchaser was willing to pay. In essence, Cale argues that, but for Transamerica’s undisclosed liens, somebody would have bought the property, thereby generating cash to be applied at least in partial satisfaction of his secured note.
I think Gale’s theory of damage is essentially correct. In my view, in order to show that Transamerica’s undisclosed liens caused him loss or damage, Cale must prove at trial the following as of the date of foreclosure:
(1) That the value of the subject property was less than the total of Gale’s lien plus all prior liens. This is so because if the value of the subject property, obtained at foreclosure, was sufficient to satisfy all liens, including Gale’s, he would suffer no damage.
(2) That the value of the subject property (exclusive of all liens) was more than the amount of the disclosed first lien. If the value of the property (exclusive of all liens) did not exceed the amount of the disclosed first, then Cale would not have recovered on his lien even if Transamerica’s undisclosed liens had not existed. Thus, Cale cannot make Transamerica pay for his bad investment judgment in securing his loan with a hovel whose value would not satisfy even the first lien.
Cale adequately pleaded these matters by alleging that, as a consequence of Transamerica’s undisclosed prior liens, the equity in the subject property was made insufficient to secure or discharge Gale’s note. The burden was therefore upon Transamerica (see Pultz v. Holgerson (1986) 184 Cal.App.3d 1110, 1114 [229 Cal.Rptr. 531]) to show that, at the time of the foreclosure sale, either (1) the value of the subject property was equal to or greater than all liens, including Gale’s, or (2) the value of the property (exclusive of all liens) was less than the amount of the first.
We may make short shrift of requirement (2), because there was no evidence before the court, from any source, tending to show the value of the property was less than the first.
*430This leaves the question of the effect of the foreclosure sale. I think the foreclosure sale sufficiently established the value of the property was less than that necessary to satisfy Gale’s lien. This is so for two reasons.
First, because the insurance policy fails to specify how “loss” or “damage” is to be calculated, the policy is to that extent ambiguous. “It is a basic principle of insurance contract interpretation that doubts, uncertainties and ambiguities arising out of policy language ordinarily should be resolved in favor of the insured in order to protect his reasonable expectation of coverage. [Citations.]” (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986)41 Cal.3d 903, 912 [226 Cal.Rptr. 558, 718 P.2d 920], original italics.) Here, the policy was obtained expressly to insure a lien of a second deed of trust. That was the very purpose of the insurance, well known to Transamerica. In this context, both the insured and insurer would reasonably expect the upper value of the subject property to be set by a proper trustee’s sale under the deed of trust, especially since “ ‘[T]he purpose of the trustee’s sale is to resolve the question of value and the question of potential forfeiture through competitive bidding . . . .’ (Hetland, Cal. Real Estate Secured Transactions (Cont.Ed.Bar 1970) p. 255.)” (Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 607 [125 Cal.Rptr. 557, 542 P.2d-981].) Moreover, allowing a proper trustee’s sale to fix the upper limit of value would provide a clear standard to the industry, thereby avoiding the kind of dispute at issue here.
However, even assuming for the sake of argument Cale must show the fair market value of the property was less than the total of all liens as of the date of the foreclosure, and that fair market value is different from the value upon foreclosure (see Rainer Mortgage v. Silverwood, Ltd. (1985) 163 Cal.App.3d 359, 366 [209 Cal.Rptr. 294]),1 the summary judgment was still erroneously granted. There was no evidence of the fair market value of the property at the time of foreclosure other than the one dollar Cale paid. Transamerica made no showing that the fair market value of the property was greater than the sum total of all liens.
Transamerica relies upon Gale’s deposition, where he was asked, “[D]o you believe that if the property were now sold there would be insufficient money generated to pay you back all those amounts?” And Cale replied, “It is pretty close. Very close, I would say.”
*431There are two problems with Transamerica’s reliance on this testimony. First, it tenders no opinion of the value of the property at the time of the foreclosure, when Cale claims he was damaged. Gale’s statement is evidence of value only at the time his deposition was taken in the ensuing lawsuit. An insurer cannot avoid paying an insured for damage or loss when it is incurred and escape its obligation by taking advantage of later appreciation in the value of real property. Second, even assuming the relevancy of the testimony, Cale testified only that the value of the property was then “very close.” As has been said, “close” counts in horseshoes but not upon a summary judgment.
Various authorities relied upon by Transamerica and the majority are inapposite because, in each case, the value of the property obtained by the insured by foreclosure (or deed in lieu thereof) was shown to be sufficient to satisfy the insured’s lien. (See CMEI, Inc. v. American Title Ins. Co. (Fla.App. 1984) 447 So.2d 427; First Commerce Realty v. Peninsular Title Ins. (Fla.App. 1978) 355 So.2d 510, 511; Green v. Evesham Corp. (1981) 179 N.J.Super. 105 [430 A.2d 944, 949].) No such showing has been made in this case. Similarly, in Lawrence v. Chicago Title Ins. Co. (1987) 192 Cal.App.3d 70 [237 Cal.Rptr. 264], the insureds were made whole when they actually resold the subject property and received additional payments from the insurer. (Id. at p. 73.) That has not happened here, either.
It is wholly immaterial that Transamerica continues to provide insurance against loss. Plaintiff has made a prima facie showing (insufficiently rebutted by Transamerica) that he was damaged and suffered loss when he foreclosed on the property. Transamerica cannot avoid its obligations under the policy by offering to continue to insure him.
The summary judgment should be reversed.

 It has been suggested that a judicial foreclosure sale does not establish the fair market value of property because (if a deficiency judgment is sought) the trustor has a year after the sale in which to redeem the property, thereby depressing its value on an otherwise open market. (See Code Civ. Proc., §§ 729.010-729.090; Rainer Mortgage v. Silverwood, Ltd., supra, 163 Cal.App.3d at p. 367.) However, “A trustee’s sale is not subject to postsale redemption rights [citations] and will therefore often command a higher price from a third party, so that the creditor has a better chance of being paid in full. . . (Bernhardt, Cal. Mortgage and Deed of Trust Practice, supra, § 2.3, p. 53.)