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Alliance Mortgage Co. v. Rothwell

Supreme Court of California

August 28, 1995, Decided

No. S043065.

Opinion

 [*1231]  [***354]  [**603]    ARABIAN, J. 

We here determine whether a lender's acquisition of security property by full credit bid at a nonjudicial foreclosure sale bars the lender as a matter of law from maintaining a fraud action against third party nonborrowers who fraudulently induced [****2]  the lender to make the loans. The Courts of Appeal are in conflict on this issue. We granted review to resolve the conflict, and now conclude that such an action is not precluded. We therefore affirm the judgment of the Court of Appeal.

I. FACTS AND PROCEDURAL BACKGROUND

This matter reaches us following plaintiff Alliance Mortgage Company's (Alliance) successful appeal from a judgment on the pleadings dismissing all  [*1232]  of its causes of action against defendants Pioneer Title Company of California, now known as North American  [**604]   [***355]  Title Company (North American), and Ticor Title Insurance Company, Inc. of California (Ticor). Accordingly, for purposes of this opinion, ] we treat the properly pleaded allegations of Alliance's complaint as true, and also consider those matters subject to judicial notice. ( Sullivan v. County of Los Angeles (1974) 12 Cal. 3d 710, 714-715, fn. 3 [117 Cal. Rptr. 241, 527 P.2d 865]; Hunt v. County of Shasta (1990) 225 Cal. App. 3d 432, 440 [275 Cal. Rptr. 113]; April Enterprises, Inc. v. KTTV (1983) 147 Cal. App. 3d 805, 815 [195 Cal. Rptr. 421].) "Moreover, the allegations must be liberally construed with [****3]  a view to attaining substantial justice among the parties." (Guild Mortgage Co. v. Heller (1987) 193 Cal. App. 3d 1505, 1508 [239 Cal. Rptr. 59] (Guild Mortgage).) "Our primary task is to determine whether the facts alleged provide the basis for a cause of action against defendants under any theory." (Ibid.)

From 1983 through 1985, defendant Laurie Samuel Rothwell (Rothwell), a real estate appraiser and broker, and other defendants including North American and Ticor, devised and implemented an elaborate scheme to fraudulently induce Alliance, then known as Charter Mortgage Company of Florida, to lend money for the purchase of nine Bay Area residences. In furtherance of this plan, two fictitious, nonexistent companies, American Medical Laboratories and American International Savings and Loan, were created to falsely verify employment of and deposits by purported loan applicants. Defendants committed some or all of the following fraudulent acts regarding each property: prepared false residential purchase agreements and loan applications in the names of fictitious borrowers, deliberately inflated "fair market value" property appraisals and invented "comparable" property [****4]  values to support the inflated and fraudulent appraisals, falsified employment and deposit verifications, tax returns, credit histories, and W-2 wage/income statements, drafted inaccurate title reports that contained misleading descriptions of the properties, and falsely represented that the escrow instructions had been followed and the required cash deposits and disbursements made.

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10 Cal. 4th 1226 *; 900 P.2d 601 **; 44 Cal. Rptr. 2d 352 ***; 1995 Cal. LEXIS 4789 ****; 95 Daily Journal DAR 11688; 95 Cal. Daily Op. Service 6825

ALLIANCE MORTGAGE COMPANY, Plaintiff and Appellant, v. LAURIE SAMUEL ROTHWELL et al., Defendants and Respondents.

Prior History:  [****1]  Superior Court of the City and County of San Francisco, No. 880354, Raymond J. Arata, Jr., Judge.

Disposition: Affirmed the court of appeals and reversed the trial court.

CORE TERMS

full credit bid, damages, lender, Mortgage, bid, loans, foreclosure, defendants', fiduciary, misrepresentation, antideficiency, out-of-pocket, properties, nonjudicial foreclosure sale, trust deed, fraudulent, measure of damages, foreclosure sale, third party, losses, fraud claim, inducing, fraudulently induce, fraud action, impairment, repurchase, purchaser, borrower, outstanding indebtedness, security property

Civil Procedure, Judgments, Pretrial Judgments, Judgment on Pleadings, Evidence, Judicial Notice, General Overview, Appeals, Notice of Appeal, Contracts Law, Types of Commercial Transactions, Negotiable Instruments, Real Property Law, Financing, Mortgages & Other Security Instruments, Definitions & Interpretation, Satisfaction & Termination, Merger, Governments, Legislation, Statutory Remedies & Rights, Foreclosures, Deficiency Judgments, Business & Corporate Compliance, Default, Foreclosure & Repossession, Redemption, Judicial Foreclosures, Redemptions, Statutory Redemption, Private Power of Sale Foreclosure, Personal Property, Bona Fide Purchasers, Trusts, Holding Trusts, Courts, Authority to Adjudicate, Torts, Business Torts, Fraud & Misrepresentation, Release Payments, Criminal Law & Procedure, Acts & Mental States, Mens Rea, Knowledge, Affirmative Defenses, Fiduciaries, Standards of Care, Reasonable Care, Reasonable Person, Remedies, Damages, Judgment Interest, Prejudgment Interest, Types of Damages, Property Damages, Measurements, Punitive Damages, Negligent Misrepresentation, Remedies, Costs & Attorney Fees, Punitive Damages, Enforcement, Duties & Liabilities of Parties, Forgery, Fraud & Mistake