LaTelle v. American Trust Co.

PETERS, P. J.

This action involves a dispute between the plaintiffs and cross-defendants Mr. and Mrs. LaTelle and the cross-defendant Santa Fe Lumber Company over the sum of $1,836.45 held by the American Trust Company as a portion of an undisbursed building loan made by the bank to the LaTelles. The lumber company was awarded the money by the trial court. The LaTelles appeal.

This controversy involves a somewhat complicated set of facts. In 1938 the LaTelles purchased a lot in Redwood City on which they desired to build a house. The Redwood City branch of the American Trust Company agreed to lend them $7,700 on an F.H.A. insured construction loan. The loan was to be paid to the LaTelles in four installments of $1,925 each at designated points in the construction. The third payment was payable upon filing the notice of completion and the fourth became payable at a designated period thereafter if no mechanics’ liens were filed, and if the house passed F.H.A. inspection. The LaTelles signed a promissory note for the amount of the loan secured by a deed of trust on the real property on which the house was to be constructed.

The contractor—A. J. Wilbe—agreed to construct the house for $7,700. The bank made two of the $1,925 payments to the LaTelles, who in turn paid them over to Wilbe. On June 16 or 17, 1939, the LaTelles moved into the house after having been notified by Wilbe that the house was completed. On June '18, 1939, Wilbe presented for their signatures a notice of completion which averred, among other things, that the house was “actually” completed. The LaTelles were reluctant to sign the notice because they contended that the house was defective in several respects. Wilbe assured them that he would remedy the defects. The LaTelles, nevertheless, refused to sign the notice of completion as it was presented to them. Mr. LaTelle drew a pencil line through the word “actually” and printed in ink above it the word “virtually.”

[832]

The LaTelles then signed and acknowledged the notice, and Mrs. LaTelle took it to the bank to deliver it and to get the third installment of the loan. There is a dispute as to what happened at the bank. The testimony most favorable to the respondents is that the branch manager told Mrs. LaTelle that the notice could not be recorded as changed, and that Mrs. LaTelle agreed that he might change the wording by erasing the pencil line through the word “actually” and blacking out the word “virtually.” Mrs. LaTelle testified that she did not consent to the change. This conflict was for the trial court. At any rate, the notice of completion was filed with the words “actually completed” contained therein, and the third installment of $1,925 was paid to Mrs. LaTelle. She indorsed the check and delivered it to Wilbe.