Schoolcraft v. Ross

The Schoolcrafts (plaintiffs) bought a house from Ross (defendant) on an installment contract secured by a deed of trust, under which they agreed to restore any damaged building and Ross could apply fire-insurance proceeds to the outstanding debt. After fire destroyed the house, the insurer issued a check payable to both parties to fund rebuilding, but Ross refused to let the funds be used for reconstruction and instead kept the money under the deed of trust's terms. Unable to afford both rent elsewhere and the monthly installments, the Schoolcrafts stopped paying, and Ross directed the trustee to foreclose; the property was eventually sold at a private sale to Ross himself. The Schoolcrafts sued, and the trial court found Ross breached the implied covenant of good faith and fair dealing.