## Facts

- Real property was encumbered by a first deed of trust held by Modesto Savings and Loan Association and junior liens held by Nomellini Construction Company, including a third deed of trust and a junior judgment lien.
- The property owners defaulted on the obligations secured by the first deed of trust and on the junior obligations held by Nomellini.
- The trustee under the first deed of trust noticed a nonjudicial foreclosure sale stating the property would be sold “at public auction to the highest bidder for cash.”
- At the sale, Reeser and Hellbaum submitted the highest all-cash bid of $68,000.
- Nomellini submitted a bid consisting of $65,000 cash plus a cancellation (credit) of up to $10,000 of its own junior debt.
- The trustee accepted the $68,000 all-cash bid and rejected Nomellini’s mixed cash-and-credit bid.
- Nomellini sued the senior beneficiary and purchasers to set aside the sale or have the sale treated as made to Nomellini; the trial court granted summary judgment for defendants, and Nomellini appealed.

## Issues

1. Whether, at a trustee’s sale noticed as being to the highest bidder “for cash,” a junior lienholder may make a bid partly in cash and partly by canceling its own junior indebtedness.
2. Whether the trustee must treat such a partial credit bid as the “highest bid” when its nominal value exceeds the top all-cash bid.
3. Whether the trustee’s rejection of the partial credit bid created a triable issue precluding summary judgment.

## Decision

- The Court of Appeal affirmed summary judgment for defendants.
- A junior lienholder’s bid that is part cash and part credit, where the cash component is less than a competing all-cash bid, is a lower bid and does not comply with a noticed “cash” sale.
- The trustee properly accepted the $68,000 all-cash bid and rejected Nomellini’s mixed bid.
- Because the dispute turned on the legal effect of the “cash” requirement, there was no justiciable issue requiring trial.

## Legal Principles

- When a deed of trust and trustee’s sale notice specify a public auction “to the highest bidder for cash,” the trustee may require cash (or its equivalent) and reject bids that include cancellation of junior debt as consideration.
- A junior lienholder cannot augment a lower cash bid by adding a “credit” component based on its own junior claims to outbid a higher all-cash bidder at a cash-noticed trustee’s sale.
- Requiring trustees to evaluate junior “credit bids” would force them to assess validity and amount of junior claims and expose them to potential personal liability if the credit is overstated.
- Allowing junior credit bids at a cash auction risks chilling participation by cash bidders and undermining the function of a public auction.

## Conclusion

The court upheld a trustee’s rejection of a junior lienholder’s partial credit bid at a nonjudicial foreclosure sale noticed as a cash auction, holding that only compliant cash bids control and that the trustee had no duty to treat cancellation of junior debt as cash consideration.


Nomellini Constr. Co. v. Modesto Sav. & Loan Ass’n, 275 Cal. App. 2d 114 (Cal. Ct. App. 1969)