Kehrlein v. Builders Mortgage Co.

THE COURT.

This action was brought by plaintiff to restrain the sale of property under a second deed of trust and to recover the sum of $45,000 alleged to have been paid thereon by her. At the trial defendants objected to the introduction of any evidence upon the ground that the complaint did not state facts sufficient to constitute a cause of action, and this objection being sustained a judgment dismissing said action was thereupon entered. From this judgment plaintiff appeals.

[715]

The complaint contains three counts, the first of which alleges that in 1925 Kathryn Elliott and Karl Elliott became associated in the building of a hotel in the city of Los Angeles; that in order to obtain the necessary funds to construct and furnish said hotel they executed first mortgage gold bonds, secured by deed of trust, for the sum of $280,000; that permit therefor was obtained from the commissioner of corporations; that it became necessary to raise an additional sum to complete and furnish the said hotel, and said parties arranged a further issue of securities to the amount of $100,000 to be secured by a junior deed of trust on said hotel. This second or junior deed of trust was executed to respondent Title Guarantee and Trust Company, as trustee, to secure notes aggregating $100,000. It recites an indebtedness of $40,000 to respondent Christ Thoren, and provides for securing loans from others from time to time. Then follows a list of notes for loans from others aggregating, with the Thoren indebtedness, something less than $100,000. It is further alleged that no permit was ever obtained from the commissioner of corporations for the issuance of any of the evidences of indebtedness covered by this second or junior deed of trust; that the said Elliotts were acting as promoters of the Normandie Corporation, organized in 1925, in the execution of the said deed of trust and in issuing the said evidences of indebtedness; that the execution of the deeds of trust and issuance of the evidences of indebtedness by the said Elliotts were for the sole benefit of the Normandie Corporation, and that the said evidences of indebtedness that were issued to said Kathryn Elliott or Christ Thoren were issued to said payees as agents of said Elliotts if the same were actually issued prior to the organization of said Normandie Corporation, or as agents of said corporation if actually issued after its formation; that said hotel building was completed and furnished about May, 1926, and thereafter the said hotel building, including its furnishings, was conveyed to appellant and Emil Kehrlein, Jr., and subsequently the said Emil Kehrlein, Jr., conveyed his interest therein to appellant, said conveyances being made subject to the said two deeds of trust; that default was made upon the first mortgage bonds and, agreeably to the provisions of the deed of trust securing them, S. W. Straus & Co. took over the opera