## Facts

- South Bay Building Enterprises, Inc. held a junior deed of trust on borrower James Archer’s residence; Riviera Lend-Lease, Inc. held a senior deed of trust recorded first.
- Archer defaulted, and Riviera initiated a nonjudicial foreclosure; South Bay’s junior lien was at risk of being wiped out by the trustee’s sale.
- At the February 4, 1992 foreclosure sale, Riviera was the only bidder; South Bay received no proceeds and its lien was extinguished. Riviera later sold the property.
- South Bay alleged Archer and Riviera (and certain Riviera principals/manager) orchestrated a scheme to acquire the property while preventing competitive bidding and avoiding any surplus that could benefit South Bay.
- South Bay presented evidence that defendants repeatedly postponed the sale to deter competing bidders, that a potential purchaser once appeared with a $225,000 cashier’s check but the sale was postponed, and that Riviera overstated the amount of its lien to discourage bidding.
- South Bay sued for fraud and civil conspiracy; during trial it sought to amend to conform the pleadings to the proof and to better reflect a theory based on wrongful manipulation of the foreclosure process and statutory violations.
- The trial court denied leave to amend, granted a directed verdict for defendants after South Bay rested (finding no showing of essential fraud elements such as detrimental reliance), and denied South Bay’s new-trial motion.

## Issues

1. Whether South Bay presented substantial evidence of actionable wrongful conduct connected to the foreclosure sale sufficient to go to the jury, making a directed verdict improper.
2. Whether the trial court abused its discretion by denying South Bay leave to amend its complaint to conform to proof and reflect the theory actually tried, absent a showing of prejudice to defendants.

## Decision

- The Court of Appeal reversed the judgment for defendants and remanded for further proceedings.
- The court held South Bay introduced substantial evidence supporting liability, including a viable tort theory tied to misconduct during a nonjudicial foreclosure sale.
- The court held the directed verdict was improper because the evidence could support findings of wrongful bid-chilling conduct and resulting harm to the junior lienholder.
- The court held the trial court abused its discretion in denying amendment to conform to proof where the case was tried on the foreclosure-manipulation theory and defendants failed to show concrete prejudice.

## Legal Principles

- Deliberate manipulation of a nonjudicial foreclosure sale—such as strategic postponements to exclude bidders or misstatements about lien amounts to chill bidding—can support civil tort liability, including a “tort in essence” grounded in violations of foreclosure statutes.
- Fraud-based liability may be supported by a scheme aimed at third parties (e.g., potential bidders) when the foreseeable and intended consequence is economic harm to the plaintiff (e.g., loss of potential surplus and extinguishment of a junior lien).
- Amendments to conform to proof should be liberally allowed when they do not inject materially new facts and the opposing party cannot show prejudice such as surprise or inability to respond.

## Conclusion

The court reinstated South Bay’s case by holding that evidence of bid-chilling and statutory misconduct in a nonjudicial foreclosure could support tort liability and that the pleadings should have been amended to match the theory and facts actually litigated at trial.


South Bay Bldg. Enters., Inc. v. Riviera Lend-Lease, Inc., 72 Cal. App. 4th 1111 (Cal. Ct. App. 1999)