Silverstein v. Oakland Title Insurance & Guaranty Co.

THE COURT.

Preliminarily it is to be noted that since the appeal herein respondent Whitehead has died and Clin D. Jacoby and Rowena C. Martin, the duly appointed executors of the last will and testament of said decedent, have been by order of court substituted for said respondent. The nature of the action and the scope of the review - will more fully appear from a recital of the facts.

On and prior to June 18, 1928, defendant Porter was indebted to Central National Bank in the sum of $1650 and was also indebted to appellants in the sum of $2,500, Porter owned at that time certain real property in Alameda

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County. She owned one house and lot on Grand Avenue, ' subject to an $8,000 encumbrance, and another property referred to as the apartment house property, which' was subject to a first encumbrance of $24,000 and a second of $2,500. Defendant Whitehead was the holder and owner of a note in the sum of $22,500, secured by a deed of trust on certain property in Sonoma County. On June 19, 1928, a transaction of exchange was effected between Porter and Whitehead whereby Porter purchased the said note and deed of trust on the following terms: Porter agreed to give Whitehead a note for $10,000 secured by a second deed of trust on the apartment house and subject only to the first $24,000 encumbrance; Porter also to convey to Whitehead the Grand Avenue house and lot, subject to the $8,000 encumbrance

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the equity of Porter to be accepted at an agreed value of $10,000. In addition, Porter was to pay Whitehead $2,500 in cash, making the total of $22,500 the face of the exchange note. Porter was to secure a loan on the note, which loan was to realize $7,500 and the note and deed of trust was to be delivered as security for the new loan. Accordingly, transfers were made between the parties. Porter borrowed from Whitehead the said $7,500 and evidenced the loan with a promissory note to secure which he made an assignment to Whitehead of the $22,500 note and trust deed. This assignment provided also that the said $22,500 note should be held by Whitehead as additional security for the payment of the $10,000 note hereinbefore mentioned and which was secured by a junior encumbrance upon the apartment house. The foregoing reflects the contractual relationship between Porter and Whitehead.