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Schoolcraft v. Ross

Court of Appeals of California
146 Cal. Rptr. 57 (1978)


The Schoolcrafts (plaintiffs) bought a house from Maude Ross (defendant), with the purchase price to be paid in monthly installments. The Schoolcrafts executed a promissory note secured by a deed of trust that named Ross as the beneficiary of the monthly installments and Modesto Title Guaranty (Modesto) (defendant) as the trustee. Under the deed of trust, the Schoolcrafts agreed to restore any building that might be damaged or destroyed and pay the restoration costs. The deed of trust also provided that Ross could apply the amount collected under a fire insurance policy to any indebtedness secured by the deed. The house was later destroyed by a fire. Under the fire insurance policy, the Schoolcrafts could rebuild the house and receive reimbursement from the insurer. The insurer issued a check for an initial amount, payable to Ross and the Schoolcrafts, with the balance to be paid upon the completion of the new house. However, Ross refused to allow the money to be used to rebuild the house and kept the money under the terms of the deed of trust. The Schoolcrafts could not afford to pay the monthly installments while renting another home and stopped making payments to Ross. Ross instructed Modesto to begin foreclosure proceedings against the Schoolcrafts. The property was later sold at a private sale to Ross. The Schoolcrafts sued Ross. The trial court entered judgment in favor of the Schoolcrafts, finding that Ross had breached the implied covenant of good faith and fair dealing. Ross appealed.

Rule of Law


Holding and Reasoning (Hopper, J.)

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