Hunstock v. Royal Securities Corp.

JAMES, J.

This action was brought and recovery allowed upon a bond executed by one Ruben with the appellant corporation as surety, and in favor of the plaintiff. Judgment was in accordance with the prayer of the complaint and from that judgment this appeal is taken.

As to the main facts no dispute is shown in the record. It appears that in November, 1916, Ruben was desirous of purchasing from the plaintiff a lot in the city of Los Angeles upon which to erect an apartment house. The price of the property, as agreed upon ■ between plaintiff and Ruben, was the sum of fifteen thousand dollars. Ruben had not the money to pay the whole of the purchase price, or in fact, as appears later, any part of it. However, it was agreed that four thousand dollars in cash should be paid to the plaintiff and that the balance of the price, to wit, eleven thousand dollars, was to be evidenced by two notes, one for one thousand dollars and another for ten thousand dollars, which notes were to mature in ten and twenty months respectively and to be secured by a trust deed which was to be second in priority to another debt which

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is hereinafter referred to. In order to secure funds with which to pay to plaintiff the four thousand dollars and to erect the apartment house, it was necessary for Ruben to borrow forty-five thousand dollars. Plaintiff understood this and agreed that a trust deed might be given by Ruben to secure payment of the forty-five thousand dollars, which deed plaintiff agreed might be first in point of security to the trust deed made in his favor, which has just been referred to; with the condition, however, that Ruben should secure a bond running to the plaintiff, the penalty of which was to be the sum of ten thousand dollars and which bond would guarantee that Ruben would erect and complete the apartment house in accordance with the plans and specifications already prepared, and which had been approved by the plaintiff. The various documents were executed simultaneously, the initial payment on the purchase price was made, and the transaction was closed. Ruben commenced the erection of the building and continued the same for a number of months, when he ceased work, leaving the structure uncompleted. He had not only failed to discharge his interest obligations to the beneficiary under the first trust deed, but also to the plaintiff. Before proceeding with a necessary statement of further facts, we here quote the material portions of the bond instrument: