580b and construction loan

Plaintiffs are the owners in fee of certain real property upon which they executed a deed of trust, in favor of defendant Bank of America as beneficiary, to secure payment of a construction loan made by the bank to them for the purpose of financing the erection of a residence on the property. The residence was built and completed with the proceeds of the construction loan, but was demolished as the result of a natural disaster. In this action, thereafter commenced against the bank and the trustee under the deed of trust (defendant Continental Auxiliary Company), plaintiffs sought a declaratory judgment to the effect that Code of Civil Procedure section [37 Cal.App.3d 433] 580b barred the bank from recovering a deficiency judgment in the event of their default and a Judicial foreclosure and sale under the deed of trust. 2

After a nonjury trial, the court found in favor of plaitiffs and entered a declaratory judgment substantially as prayed. Defendants appeal from the declaratory judgment.



Prunty v. Bank of America, 112 Cal.Rptr. 370, 37 Cal.App.3d 430 (Cal.App. 1 Dist., 1974)