Flint v. Rutherford

GIBSON, C. J. Plaintiffs, Mr. and Mrs. Earl Flint, seek to enjoin the sale under a deed of trust of certain real property belonging to them, and they have appealed from a judgment entered in favor of defendants.

The Flints and Mr. and Mrs. John Frazier borrowed $40,000

[204]from Mrs. Iris Kewin in order to finance the acquisition of a sawmill. The indebtedness was evidenced by a promissory note which was executed by the Flints and the Fraziers as comakers. The note was secured by a chattel mortgage on personal property in the sawmill and by a trust deed covering a tract of land owned by the Fraziers and a house and lot owned by the Flints. As a part of the transaction, Mrs. Kewin, as first party, and the Flints and Fraziers, as second parties, entered into a supplemental agreement which provided that all contracts with respect to the sale of any real property described in the trust deed should be deposited in escrow, and that all payments on account of the purchase price of any of the property should be credited on the note and deed of trust.

The land owned by the Fraziers was being subdivided, and the proceeds from the sales of lots were applied in payment and reduction of the note until the balance due on account of the principal was approximately $8,400. Thereafter the Fraziers and Mrs. Kewin, without the knowledge or consent of the' Flints, instructed the escrow company to accumulate and hold the proceeds from the sales of subdivision property and not to credit the note with any further payments from such proceeds. These instructions were followed by the escrow holder, and the sum of $5,085.99 was accumulated. In the meantime, installments on the note became overdue and were not paid.

At about this time the Fraziers, Mrs. Kewin and a Mr. Rutherford executed certain agreements between themselves and opened another escrow without the consent of the Flints. In these transactions Mrs. Kewin assigned the Flint-Frazier nóte, together with the trust deed and chattel mortgage, to Rutherford who took with knowledge of the facts stated above. Rutherford released the subdivision property from the trust deed, and it was reconveyed to the Fraziers. He also released the chattel mortgage on the personal property in the sawmill. The Fraziers executed a new note to Mrs. Kewin for approximately $8,400, being the unpaid principal and interest due on the Flint-Frazier note, and as security therefor gave a new trust deed on the subdivision tract. The money which had accumulated in the first escrow was released by Rutherford and divided between Mrs. Kewin and the Fraziers. As a result of these transactions Rutherford held the Flint-Frazier note for $40,000, on whibh about $8,400 remained due, secured only by the. lien of the trust deed on the Flint home.-