Ralph C. Sutro Co. v. Paramount Plastering, Inc.

SHINN, P. J.

Plaintiff, Ralph C. Sutro Company, brought suit in interpleader. The interpleaded fund of $10,910.39 represents the balance of moneys held by plaintiff pursuant to a construction loan agreement between plaintiff and Hindry Properties, Inc. Western Investment and Title Company (Witco), claims the interpleaded fund under contractual rights and is opposed by the remainder of the defendants, respondents herein, all of whom rendered services or delivered materials on behalf of said construction. The trial court, after deducting Sutro’s costs and attorney’s fees, ordered the fund distributed on a pro rata basis to respondents. Witco appeals.

The facts pertinent to a decision herein are as follows: On November 15, 1957, plaintiff, Sutro Cq., entered into a loan agreement with Hindry Properties, Inc., whereby Hindry as the owner of certain property was to borrow $60,000 from or through Sutro for the construction of a 15-unit two-story apartment building thereon. The loan agreement further provided that the loan proceeds were to be used exclusively for the express purpose of paying bills and claims for labor and materials with respect to the construction. On the same date Hindry Properties, Inc. executed a deed of trust and note in the same amount pursuant to such loan agreement. The deed of trust was recorded on January 20, 1958, and thereafter construction commenced upon said apartment building. On March 5, 1958, Sutro Co. sold and assigned the note and trust deed to a third party who, in turn, sold and assigned same to the appellant Witco on May 26, 1959, for the sum of $61,947.90. Notice of default and intention to sell under the trust deed had been recorded by the trustee, Title Insurance and Trust Company, on February 19, 1959. On June 25, 1959, Witco purchased the property at the foreclosure sale for the sum of $53,600. At that date the total indebtedness on the property was shown to be $62,223.06. The question raised by this appeal is whether the trial court was justified in finding that the interpleaded amount constituted a trust fund held for the benefit of respondents and that said respondents have a claim and lien in equity against said fund to the exclusion of appellant Witco. We find that it was.

It is stipulated that the respondents’ services, the claims

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for which being duly recorded, were fully performed previous to the foreclosure sale on June 25, 1959, and the trial court found that they were completed prior to the commencement of said foreclosure proceedings on February 19, 1959. The loan agreement provided for payment in seven installments with the last to be drawn and paid when Hindry had established that all costs of labor and material and other expenses had been fully paid. In this Hindry had defaulted. In spite of attempts by the appellant to distinguish the cases on the facts the reasoning in the