Daniels v. Williams

WOOD (Fred B.), J.

Plaintiffs brought this action to annul a promissory note and deed of trust which they had executed, claiming fraud in the procurement thereof.

As defendants, they joined Ben Melmet, the payee of the note, James A. Williams, allegedly active in procuring the note, Milton N. Owens, allegedly engaged by Melmet to sell the note, and Walter E. McMannis, the present holder of the note.

Upon application of the plaintiffs, a preliminary injunction was issued restraining McMannis, during the pendency of the action, from disposing of the note or the deed of trust

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or from causing the sale of the real property covered by the deed of trust, conditioned upon the filing of a $3,000 corporate surety bond by the plaintiffs.

McMannis has appealed from the order for this injunction, lie contends it was an abuse of discretion, a reversible error, to make the order because, according to his view of the evidence and the law, (1) there was no evidence to support the order and (2) the order was based upon the mere allegations of the complaint which were fully and specifically t:< ntroverted by verified answer and sworn testimony.

(1)

Our examination of the record convinces us that the evidence adequately supports the order.

The evidence consists of the verified complaint and the testimony of McMannis and one Rudy Washburn. McMannis did not file an answer until after the injunction had been granted.

McMannis claims he is a holder in due course but has adduced no evidence tending to prove that any prior holder had a good title to the note. He testified that prior to purchasing the note he had no knowledge at all of any of the dealings between any of the other parties to the action in connection with this transaction.

Accordingly, the following facts stated in the complaint are uncontradicted: Plaintiffs own certain real property subject to a secured indebtedness of $4,187.15. Plaintiffs requested defendant Williams to procure a purchaser. He later informed them he had a purchaser but represented that, to consummate the sale, it would be necessary to extinguish the existing loan and for that purpose execute and sell a new note and deed of trust for $4,000. Relying upon his representations, they executed the note and deed of trust in suit, which Williams without plaintiffs’ knowledge or consent sold to Melmet, taking the proceeds for his own use and not extinguishing the original indebtedness of $4,187.15. Melmet was at all times aware of Williams’ plan to defraud plaintiffs and convert the proceeds to his own use, and purchased the note with knowledge of Williams’ defective title. Melmet employed Owens to sell the note and Owens knew or had sufficient cause for knowing that Melmet’s title was defective.