Klingele v. Engelman

Opinion

CHANNELL, J.

After a court trial, judgment was granted for respondents Theodore Engelman and others on appellant Eugene H. Klingele’s action for foreclosure of La Honda real property. Klingele appeals, contending (1) that because Engelman’s cross-complaint was barred by the statute of limitations, his answer to Klingele’s complaint was also barred; (2) that the trial court’s findings were inconsistent; and (3) that a subordination agreement was void. We affirm the judgment.

I. Facts

In March 1980, E. Lee and Kathie Troutman executed promissory notes for $30,000 and $10,000 in favor of appellant Eugene H. Klingele. These notes were secured by two deeds of trust on real property on La Honda Road in La Honda. In November 1980, the Troutmans sought to borrow an additional $126,000 against this property from respondent Theodore Engelman, who agreed to the loan if his deed of trust had priority over Klingele’s existing trust deeds.

The same month, Klingele agreed to and did execute a subordination agreement. However, while the agreement was clear as to lien priorities, it incorrectly listed the value of Klingele’s note as $126,000. Relying on the executed subordination agreement, Engelman loaned the Troutmans $126,000 in exchange for a promissory note and deed of trust, recorded in late November 1980 against the La Honda property. With the proceeds of the loan, Troutman paid off Klingele’s $10,000 note, leaving only the $30,000 note yet to be paid. In December 1980, Engelman assigned part of

[1484]

his interest to persons who, along with Engelman himself, are the respondents on appeal.

In April 1981, the Troutmans defaulted on the Engelman promissory note. In a nonjudicial foreclosure, the trustee filed a notice of default and sent a copy of it to Klingele. Soon after, Engelman discovered the error in the subordination agreement. Klingele agreed to correct the agreement, but never did. After the trustee’s sale, a new deed was recorded in September 1981, giving respondents title to the La Honda property. By October 1981, Klingele learned that the Troutmans were in bankruptcy.