Schneider v. Ampliflo Corp.

Opinion

KINGSLEY, J.

Plaintiffs appeal from an order denying a preliminary injunction in an action for declaratory and other relief. We affirm.

Plaintiffs sold to defendant Ampliflo Corporation, two adjoining unimproved lots, taking back two notes one for $130,000 and one for $69,584.17, secured by deeds of trust on the two lots. The complaint alleges that the agreement between plaintiffs and the buyer was that the buyer would improve the property as a motor home park. The escrow instructions provided that plaintiffs would, on request, agree to subordinate their trust deeds to trust deeds securing loans to the buyer for the money to be used for development of, and construction on, the property. However, the trust deeds themselves contained only a brief reference to such subordination. The language, contained at the end of a long paragraph dealing with the terms of payment of the purchase money loans, was as follows: “Subordination clause, Note will subordinate to first, a Development Loan or a Construction Loan either or both upon request of the buyer.”

[639]

Thereafter, the buyer secured the loan herein involved, in the amount of $110,000, secured by another trust deed on the property. This subsequent loan was obtained, only on the agreement that the buyer would secure a subordination of plaintiffs’ trust deeds to the trust deed securing the additional loan. At the request of the buyer, plaintiffs executed two subordination agreements, only the last of which is herein relied on. The subordination agreement executed by plaintiffs contained, in its body, no limitation on use of the money borrowed; it did contain, at the end, immediately above the signatures, and in capital letters, the following:

“Notice: This Subordination Agreement Contains a Provision Which Allows the Person Obligated on Your Real Property Security to Obtain a Loan a Portion of Which May Be Expended for Other Purposes Than Improvement of the Land.”

The buyer is in default on the later loan, notice of default has duly been given, and the lender proposes to foreclose. Plaintiffs have sued seeking various relief, including a request for a temporary injunction which was denied. Plaintiffs have appealed from that denial. We affirm.