Bridge Financial Corp. v. Bird

Filed 3/3/06 Bridge Financial Corp. v. Bird CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Robert D. Monarch, Judge. (Retired judge of the Orange Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Reversed with directions.

Law Offices of Paul A. Brennan and Paul A. Brennan for Cross-defendants and Appellants.

Ronald D. Steinbach and Robert K. Weinberg for Cross-Complainant and Respondent.

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Introduction

Following a bench trial, the court awarded Bridge Financial Corporation (Bridge) $300,000 in damages against B. J. Bird and Michael S. Armstrong for breach of completion agreements. Those agreements were made in connection with a construction loan made by Hammond Securities Company, LLC (Hammond), to Cornerstone Homes, Inc. (Cornerstone). The loan proceeds were to be used by Cornerstone to build houses on real property used to secure the loan.

Bridge too loaned Cornerstone money, and Bridge's loan was secured by a deed of trust junior to Hammond's. When Hammond instituted nonjudicial foreclosure proceedings, Bridge protected its junior position by acquiring Hammond's loan and first position deed of trust and obtaining an assignment of the completion agreements. Bridge purchased the real property at the trustee's sale with a bid of about $3.1 million, consisting of a credit bid of the amount of the Hammond loan and $90,000 cash.

Bridge sought to recover from Bird and Armstrong under the completion agreements the amount Bridge spent improving the property with finished lots ready for home construction. The trial court awarded Bridge $300,000--the difference between the amount the court calculated to be the value of the property with full performance, and the value of the property with the work actually performed by Cornerstone.

Bridge suffered no damages, however, because the amount of its bid at the trustee's sale exceeded the amount of indebtedness on the Hammond loan. The trial court's error, as revealed by the statement of decision, was combining the indebtedness on the Hammond loan and the indebtedness on the Bridge loan in finding the amount of indebtedness exceeded the property's fair market value on the date of the trustee's sale. Indeed, based on the trial court's findings of value, the property, with just the improvements completed by Cornerstone, was worth $600,000 more than the amount of Bridge's bid.

Since Bridge suffered no damages, we reverse with directions to enter judgment in favor of Bird and Armstrong.

Facts

This case arose out of a housing development in San Diego County called Hidden Hills. Cornerstone was to develop Hidden Hills. Cornerstone later became Waterford Homes, Inc. Bird was a shareholder of Cornerstone, and Armstrong was its executive vice-president in charge of construction and construction purchasing.

In March 2001, Cornerstone entered into a loan agreement with Hammond by which Hammond agreed to loan Cornerstone up to about $7.25 million to prepare the land and improvements and construct 15 houses. The loan was secured by a first position deed of trust on the property to be developed. In connection with the loan, Bird, Armstrong, and Steve Dalby (a Cornerstone executive) each signed a completion agreement. The completion agreements state they were entered into as of March 20, 2001.[1] In the completion agreements, Armstrong and Bird agreed to â€