## Facts

- A trust sold commercial property to entities including New Faze Holdings, LLC and Soul First Properties, LLC, which planned to redevelop the site and demolish the existing building.
- The purchasers financed the acquisition with a promissory note and deed of trust in favor of the seller’s trust; the note was later assigned to Donna Fait and the Glenn Fait 2005 Trust (lenders).
- The building was demolished, and the purchasers later defaulted on the loan and allegedly failed to pay property taxes.
- After default, the lenders foreclosed and alleged that defendants’ conduct materially impaired the value of the collateral securing the loan.
- The lenders sued multiple defendants (including New Faze Development, Inc.; Allen Warren; Wendy Saunders; and Jay Rivinius) asserting: (1) bad faith waste; (2) intentional impairment of security; and (3) negligent impairment of security.
- Defendants moved for summary judgment, contending the demolition was undertaken in good faith for redevelopment, that antideficiency statutes barred recovery absent bad faith waste, and that the impairment-of-security claims rose and fell with the waste claim.
- The trial court granted summary judgment for New Faze Development, Warren, Saunders, and Rivinius on the waste and impairment-of-security claims, and the lenders appealed.

## Issues

1. Whether demolition undertaken for redevelopment can constitute “bad faith waste” not barred by California antideficiency statutes.
2. Whether evidence on summary judgment eliminated triable fact disputes as to bad faith waste and related liability of the defendants.
3. Whether intentional and negligent impairment of security are independent causes of action or merely derivative of a bad faith waste claim.

## Decision

- The Court of Appeal reversed the summary judgment for New Faze Development, Warren, Saunders, and Rivinius.
- The court held defendants failed to meet their summary-judgment burden because triable issues existed on whether the demolition (and related conduct, including nonpayment of taxes) constituted bad faith waste.
- The court also held triable issues existed on intentional and negligent impairment of security and rejected the contention that these claims were necessarily derivative of the waste theory.

## Legal Principles

- “Bad faith waste” includes waste not caused primarily by economic pressures associated with market conditions; redevelopment motives do not categorically preclude bad faith waste liability.
- California antideficiency statutes limit deficiency recovery on the debt after foreclosure but do not bar claims for bad faith waste that impairs a lender’s security.
- Claims styled as intentional or negligent impairment of security may proceed as independent theories and are not automatically subsumed within a bad faith waste analysis.
- On summary judgment, the moving defendant must show the absence of triable issues of material fact; failure to conclusively negate bad faith waste or negligence requires denial of summary judgment.

## Conclusion

The court reversed summary judgment because factual disputes remained as to whether defendants’ demolition and related actions impaired the lenders’ security in a manner constituting bad faith waste, and because the intentional and negligent impairment-of-security claims could proceed independently despite antideficiency limitations.


Fait v. New Faze Dev., Inc., 207 Cal. App. 4th 284 (Cal. Ct. App. 2012)