Frank Ford v. Manufacturers Hanover Mortgage Corporation, Manufacturers Hanover Mortgage Corporation, Third Party v. Joan Kenegos, Third Party

NELSON, Circuit Judge:

Under a standard deed of trust on real property, the trustor is generally required to maintain fire insurance on the property. The trust deed often also provides that, in the event of a fire loss, the trust deed beneficiary has the option of (1) applying the insurance proceeds to the trustor’s outstanding indebtedness on the promissory note secured by the trust deed, or (2) allowing the trustor to use the proceeds to rebuild the fire-damaged property.

Under California law, however, “the right of a beneficiary to apply insurance proceeds to the balance of a note ... must…