Birman

I. Introduction

This case presents the question whether a creditor can set off a debt owed to the debtor against a deficiency remaining after nonjudicial foreclosure under a purchase money trust deed. Plaintiffs, Ben Zion Birman, Israel Birman, and Switch Construction Co., Inc., appeal from an order granting an equitable setoff to defendants, Stanley I. Loeb and Jerri Loeb. The Loebs had been sued individually and as trustees of the Stanley I. Loeb and Jerri Loeb Revocable Trust. Plaintiffs had purchased real property from defendants who took back a promissory note secured by a trust deed. Plaintiffs brought an action against defendants for fraud or negligent misrepresentation and failure to disclose in connection with the purchase and sale of the property. Plaintiffs prevailed, and a judgment including an attorney’s fees and costs award was entered in their favor. Defendants subsequently reacquired the real property from plaintiffs at a nonjudicial foreclosure sale by way of a $2 million credit bid. The unsecured debt remaining after foreclosure was for more than $2 million. The trial court granted defendants an equitable setoff against the unsecured deficiency in the…