Sumitomo Bank v. Taurus Developers, Inc.

The Sumitomo Bank of California (Bank or Sumitomo) appeals from a judgment of dismissal after demurrers were sustained without leave to amend on its causes of action against Taurus Developers, Inc. We affirm the portion of the judgment dismissing the causes of action for breach of contract, bad faith waste, fraud, and violations of the Business and Professions Code, since they are barred under the full credit bid rule; and for strict liability since it is not applicable to a lender in a real estate transaction who purchases a defective construction project. We reverse the portion of the judgment dismissing the negligent construction cause of action since we find a beneficiary-purchaser at a trustee’s sale may state a negligence claim against a builder, independent of an impairment of security claim.

I

On appeal, we regard the allegations of the complaint as true and disregard any defect in the pleadings that does not affect the substantial rights of the parties. (Fundin v. Chicago Pneumatic Tool Co. (1984) 152 Cal.App.3d 951, 955 [ 199 Cal.Rptr. 789 ].)

In November 1979, Sumitomo loaned Taurus money, secured by a trust deed, to build a condominium project. Taurus…