Title Insurance & Trust Co. v. Bandini Estate Co.

WHITE, J. This is an action brought by plaintiff to recover judgment against defendant as the indorser of certain promissory notes secured by a deed of trust covering real estate in Los Angeles County. Plaintiff sought to recover the amounts remaining due on the notes after the security had been exhausted through a trustee’s sale.

Defendant demurred both generally and specially to the amended complaint filed herein, and this appeal is prosecuted from the judgment entered after an order made by the court below sustaining defendant’s demurrer without leave to amend.

The transaction by which the notes involved were issued is one in which the defendant negotiated a sale of certain real estate owned by it to 0. Nicholas Gabriel and Associates for the purpose of creating a subdivision trust to subdivide the property and sell it in lots at retail. Part of the purchase price was paid in cash and the remainder was to be paid out of the proceeds of the sale of lots after such subdivision. The amended complaint alleges:

“That-said 0. Nicholas Gabriel and Associates desired and requested that the unpaid portion of said purchase price of said real estate be secured by a payee’s interest under said trust declaration; that said Arcadia Bandini Baker Es-state Company refused so to do, and insisted that, if they had ‘to take the land back’, they wished to get it back in a definite and certain form, so that they could get title quickly, and insisted that a note and deed of trust be exe[159].cuted by a person designated to aet as dummy, evidencing the unpaid portion of the purchase price of said real estate. ’ ’

The trust declaration was prepared accordingly and expressly provided that the sole remedy against any persons interested in the property should be as provided in the declaration of trust, namely, by the application of release prices of lots sold under the unpaid purchase price, and as provided in the deed of trust executed by such “dummy”. From the foregoing it is apparent that respondent took the position of a creditor with a first lien and did not enter into a joint venture with the purchaser.

The transaction was consummated and the property was conveyed to the trustee subject to a deed of trust securing five promissory notes for $153,977 each, dated December 15, 1923, bearing interest at the rate of six per cent, one due January 1, 1926, and one due on the first day of January of each year thereafter to and including January 1, 1930. Two of the promissory notes were paid promptly when due, but in April, 1927, a change in selling conditions of such subdivisions came about, so as to make it quite probable, if not certain, that the remaining promissory notes could not be paid when due out of the sales of the lots. Confronted with this situation, the subdivider applied to respondent for an extension of time, which application was refused. Then the subdivider requested respondent to sell the notes, so that the assignee of them could grant such extension. In response to this request, respondent, under date of June 15, 1927, wrote appellant, making an offer to the latter to sell the notes, which writing was in words and figures as follows: