Pacific Loan Management Corp. v. Superior Court

—We have consolidated for decision two petitions for writs of mandate or prohibition arising out of the same lawsuit and presenting the issue, apparently of first impression in this state, whether a junior lienor loses his right to the surplus proceeds of an out-of-court foreclosure sale when he himself purchases the property at the sale. We have concluded that he does not, for reasons we shall state. We also have concluded that the trial court should have granted the request for interpleader by the trustee who conducted the foreclosure sale (petitioner Pacific Loan Management Corporation, hereafter PLMC) since PLMC is a mere stakeholder in the dispute between the junior lienor, petitioner United States Small Business Administration (SBA), and the trustors, real parties Dennis and Nina Armstrong (Armstrong). Accordingly writs of mandate shall issue compelling summary judgment in favor of both petitioners.

PLMC, acting as trustee on behalf of the holder of a senior lien, conducted an out-of-court foreclosure sale on Armstrong’s real property located at 15450 Stetson Road, Los Gatos, in Santa Clara County. Armstrong had defaulted on an $86,000 loan due July 1, 1985. At the…