Nippon Credit Bank, Ltd. v. 1333 N. Cal. Boulevard

Defendants 1333 North California Boulevard, a limited partnership (the Partnership), Sunset Ridge, Co., Inc. (Sunset) and Sanford Diller (Diller; the Partnership, Sunset and Diller are referred to collectively as Borrowers) appeal from the order denying their motion for judgment notwithstanding the verdict after a jury found them liable to plaintiff The Nippon Credit Bank, Ltd., Los Angeles Agency (Bank) for bad faith waste. Bank appeals from the order granting a new trial, and Borrowers appeal from a subsequent order involving the order for new trial.

The principal issues are whether a lender can recover for waste when the lender’s security is substantially impaired by the borrower’s bad faith failure to pay real property taxes, and whether that failure in this case supports an award of punitive damages. We answer both of those questions in the affirmative in the published portion of this opinion.

I. Background

Sunset and Diller were the general and managing partners, respectively, of the Partnership, which developed, owned and operated a two-building office complex in Walnut Creek (the Project). Diller owned Sunset and, through Sunset and the DNS Trust (DNS), a…