Pepitone v. Russo

In Pepitone v. Russo (1976) 64 Cal. App. 3d 685, the plaintiff exchanged her real property for a motel. The defendant real estate broker failed to disclose a second trust deed with a clause accelerating the due date if the property was sold. The plaintiff was unable to pay off the encumbrance and a foreclosure resulted. The Court of Appeal held she was entitled to the market value of the motel plus her costs incurred in opposing the foreclosure, not merely her out-of-pocket expenditures. (Id. at pp. 688-689.) In Pepitone v. Russo, supra, 64 Cal. App. 3d 685, which the First Opinion endorsed as being "instructive" (Denzler v. Gellman, supra, G018647 at p. 5), the court held the faithless fiduciary must "make good the full amount of the loss of which his breach of faith is a cause ." (Pepitone v. Russo, supra, 64 Cal. App. 3d at p. 688.) The court calculated loss as (1) the fair market value of the motel lost by reason of the breach and (2) plaintiff's expenses incurred in forestalling foreclosure. (Id at p. 689.) The court made no deduction for costs of sale.