In Schoolcraft v. Ross (1978) 81 Cal. App. 3d 75, the plaintiffs purchased a home from the defendant for $ 14,500 and executed a promissory note secured by a deed of trust naming the defendant as beneficiary. (Id. at pp. 77-78.) The plaintiffs purchased a fire insurance policy that provided two options upon a loss: collecting the cash value of the house at the time of the loss, or rebuilding the house and receiving reimbursement from the insurance company of up to $ 14,100. (Id. at p. 78.) The house was thereafter destroyed by fire and the plaintiffs decided to rebuild it. At the time, the remaining debt was $ 13,585.01. They received a check from the insurance company for $ 8,250 payable to the plaintiffs and the defendant and were informed the balance of the $ 14,100 would be paid upon completion of the new house. (Schoolcraft, supra, 81 Cal. App. 3d at p. 78.) However, the defendant refused to permit the proceeds to be used for rebuilding the house, invoking a clause in the trust deed giving her the option to apply the insurance proceeds to the indebtedness. The plaintiffs thereafter ceased payment on the note, and foreclosure proceedings were instituted. The property was sold to the defendant at a private sale for $ 600, and later resold by her for $ 6,000. (Id. at pp. 78-79.) The plaintiffs filed suit against the defendant for the damages incurred due to the defendant's refusal to permit the rebuilding of the home. They introduced evidence that a new home could have been constructed for $ 14,100 and would have had a fair market value of $ 20,000. They expressed a willingness to sell the new home upon completion and to remit the balance of the note to the defendant. The trial court found a breach of the covenant of good faith and fair dealing under these circumstances and awarded damages of $ 4,500. (Schoolcraft, supra, 81 Cal. App. 3d at p. 79.) The Court of Appeal affirmed. The court held that the contractual right of the trust deed beneficiary to apply insurance proceeds to the balance of a note must be exercised in good faith and that to the extent the security is not impaired, the beneficiary must permit the proceeds to be used to rebuild the home. (Schoolcraft, supra, 81 Cal. App. 3d at p. 77.) The court found substantial evidence to support the trial court's conclusion that the security was not impaired and that the beneficiary failed to act in accordance with the implied covenant. (Id. at pp. 80-81.) In reaching this conclusion, the court relied in substantial part on Milstein v. Security Pac. Nat. Bank (1972) 27 Cal. App. 3d 482. In Schoolcraft, the court concluded that the same principle adopted in Milstein should apply because "while the language in the deed of trust in Schoolcraft differs slightly from the instrument in Milstein, in both situations the provisions were designed to accomplish the same ends." (Schoolcraft, supra, 81 Cal. App. 3d at p. 80.) The court continued: "The purpose of a deed of trust is that the borrower will have the use of funds loaned on specific terms and the lender will have the right to a specified repayment that is secured by the deed of trust . The lender does not have the right to unilaterally cut off the borrower's right to use the loaned funds unless he can show that his security is impaired. Here there is no evidence that the security was impaired by the fire nor is there any evidence that plaintiffs were unwilling or unable to continue making payments on the property. The sole reason advanced for defendant Ross's conduct was that she was old and sick and needed the money immediately to take care of her medical needs." (Id. at pp. 80-81.)