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Wong v. 396 Investment Co.5/17/2005
lculated as $10,377,181 in damages minus a $1,291,172 offset), plus $1,462,863 in interest, attorney and other fees, and costs, to 396. The judgment does not explain the manner in which either the total damages or the offset were calculated.
Anaheim states that the damage award includes a $506,965 amount in connection with the Friedman and Salyer promissory notes that were assigned to 396. That amount purportedly represents the total of the balances of the Friedman and Salyer promissory notes after the partial payments by 396 to the lenders in exchange for the releases of the security interests and the assignments of the promissory notes. Although we are unable to determine whether the judgment does in fact include a $506,965 amount in respect of the balances on those two assigned, unsecured promissory notes, 396 agrees that the judgment does include some amount of damages in respect of the same. Inasmuch as the parties agree that damages in respect of those two assigned, unsecured promissory notes are included in 396's judgment, we address the propriety of that inclusion.
Anaheim insists that the court erred in awarding 396 damages in respect of the assigned, unsecured promissory notes. According to Anaheim, the promisees under those notes had an opportunity to pursue impairment of security claims against Anaheim as long as they maintained their security interests in the Friedman and Salyer properties. However, once those promisees voluntarily released their security interests in consideration of payments received from 396, they lost their rights to proceed on the impairment of security claims.
396 disagrees, citing Los Angeles T. & S. Bk. v. Bortenstein (1920) 47 Cal.App.421. In Bortenstein, an owner of mortgaged property obtained a judgment against a public entity for damage to real property sustained in a flood. A lender holding a mortgage against the real property filed a subsequent judicial foreclosure action to liquidate its lien, and named both the public entity and the property owner as defendants in the suit. The judgment in the judicial foreclosure proceedings provided that, to the extent the amount the lender received on foreclosure was insufficient to cover the amounts due under the mortgage, the lender was entitled to collect a portion of the proceeds of the property owner's judgment against the public entity.
396 emphasizes that the judgment in favor of the lender in Los Angeles T. & S. Bk. v. Bortenstein, supra, 47 Cal.App.421 permitted the lender to collect with respect to its impaired security even after the lien was extinguished through the judicial foreclosure proceeding. By analogy, 396 argues that, in the case before us, it should be able to collect from Anaheim even after the release of the lenders' liens. We are not convinced. What 396 overlooks is that, in Bortenstein, the deficiency judgment was awarded in the judicial foreclosure action, which was an action on the lien itself. In the case before us, however, 396 seeks legal redress for impairment of security after the security has been released voluntarily. It cites no authority for the proposition that a claim for impairment of security survives the voluntary relinquishment of the security. We decline to create a new rule of law to that effect.
We remand the judgment in favor of 396 to the trial court for a determination of the amount of damages included in the judgment with respect to the balances of the assigned, unsecured Friedman and Salyer promissory notes. The court shall modify the judgment and reduce the damage award by that amount as so determined.
(b) Reimbursements Under Sliding Scale Settlement Agreements
Anaheim claims that, unde
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