Weiss v. Brentwood Sav. & Loan Assn.

• Decision Date: 24 February 1970
• Citation: 84 Cal.Rptr. 736,4 Cal.App.3d 738
• Court: California Court of Appeals Court of Appeals
• Parties: Robert WEISS et al., Cross-Complainants and Appellants, Cross-Defendants and Respondents, Edward Puskin, Cross-Complainant and Appellant, v. BRENTWOOD SAVINGS AND LOAN ASSOCIATION, Cross-Defendant and Respondent. Civ. 34355.

Page 736

84 Cal.Rptr. 736

4 Cal.App.3d 738

Robert WEISS et al., Cross-Complainants and Appellants, Cross-Defendants and Respondents Edward Puskin, Cross-Complainant and Appellant, v. BRENTWOOD SAVINGS AND LOAN ASSOCIATION, Cross-Defendant and Respondent.

Civ. 34355.

Court of Appeal, Second District, Division 4, California.

Feb. 24, 1970.

David S. Smith, Beverly Hills, Smith, Beverly Hills, for appellants-respondents Weiss.

Sidney Broffman, for appellant Puskin.

David K. Golding and C. Fred Cassity, San Franciso, for respondent Brentwood Savings and Loan Ass'n.

DUNN, Associate Justice.

There are two appeals before us and we will first discuss the appeal of Robert and Lillian Weiss in their capacities as cross-complainants.

APPEAL OF WEISS

As gleaned from the clerk's partial transcript constituting the record on this appeal, the dispute arises from the following circumstances: Robert and Lillian Weiss, husband and wife, owned four lots. They sold these to Joseph Asher through an escrow requiring payment of cash to the sellers together with Asher's execution of separate notes secured by purchase-money trust deeds for the remainder of the purchase price due on each lot. The trust deeds were to be subordinated to loans thereafter to be obtained by Asher. Asher arranged to borrow $158,000 from Brentwood Savings and Loan Association secured by notes and trust deeds on each lot, each being senior to those subordinated. Brentwood actually disbursed $148,061.38 at Asher's request, retaining $9,938.62 undisbursed.

The legal phase of the dispute began when Wilshire National Bank filed a complaint ¹ naming Brentwood as defendant. Robert and Lillian Weiss, through The second, third and fourth causes of action of appellants' cross-complaint are based upon the subordination agreement made a part of the Weiss-Asher escrow and repeated in clauses in their trust deeds. In part, this reads:

some method unexplained by the record, filed a cross-complaint framed in four causes of action naming Brentwood, among others, as a cross-defendant. The first cause of action sought $9,938.62 (being the undisbursed money) under a common count for money. Brentwood apparently by interpleader procedures, deposited that sum with the court and the first cause of action is not involved in the Weiss' appeal.

'This deed of trust * * * is hereby made subject and subordinate to a deed of trust to be hereafter executed by the trustors. * * * From and after the recordation of such deed of trust to which this deed of trust is hereby made subject and subordinate as above provided, such hereafter executed deed of trust shall at all times * * * constitute a lien or charge on said land prior and superior to the lien or charge of this deed of trust as to any and all loans or advances which shall be made under such hereafter executed deed of trust * * * and without regard to the application or use of the proceeds of such loan or advances insofar as the validity of this subordination is concerned. (Emphasis added .)

'After completion of the improvements on said land, as evidenced by a recorded notice thereof, a new deed of trust may be placed thereon * * * which new deed of trust * * * shall constitute a lien or charge on said land prior and superior to the lien or charge of this deed of trust. * * *

'Beneficiary declares and acknowledges * * * that he understands that in reliance upon, and in consideration of, this waiver, relinquishment and subordination, specific loans and advances will be made * * * by third parties which would not be made or entered into but for said reliance upon this waiver, relinquishment quishment and subordination.' (Emphasis added.) ²

In the second cause of action appellants allege that Asher orally represented to them that all money obtained would be used for constructing a residence upon each lot, that the money would be reasonable as to construction costs and that Brentwood would supervise the expenditures to insure proper use of the funds. It is further alleged that a Brentwood representative orally informed appellants that Brentwood would so supervise. Appellants allege they agreed to subordinate ³ their trust deeds in reliance upon these oral representations. Thereafter, Brentwood advanced money to Asher for construction at the rate of $15 per square foot but, according to the plans and specifications, the reasonable cost and value of construction was only $10 per square foot and Brentwood permitted Asher to use the excess for purposes other than construction. The lots were thereby surcharged with an over-loan of $54,000 not reflected in the enhanced value of the security brought about by the constructed improvements. Appellants seek both compensatory and punitive damage, claiming Brentwood's conduct was fraudulent and malicious.

The third cause of action nearly duplicates the second, but alleges Brentwood was negligent in failing carefully to supervise use of the loan proceeds. The fourth Before trial, Brentwood filed a motion for a partial summary judgment in its favor as to all sums in excess of money deposited, as claimed by the Weiss' in the second, third and fourth causes of action of their cross-complaint. That motion was granted, it being ordered that such claims be severed, the action to proceed for a determination of the various parties' rights in the sum deposited with the court. The court further specified that its order would become part of any final judgment in the case. ⁴

cause of action differs materially only in its allegations[4 Cal.App.3d 742] that a conspiracy between Brentwood and Asher was formed to induce appellants to subordinate the trust deeds.

The action went to nonjury trial resulting in a judgment awarding Robert and Lillian Weiss $9,418.83 against Brentwood and awarding $519.79 to Edward Puskin, ⁵ making a total money judgment of $9,938.62 which equalled the amount on deposit. Judgment was in Brentwood's favor as to all other of the numerous party claimants. The formal judgment incorporated the court's prior ruling regarding summary judgment and it is from that part of the judgment, only, that this appeal is taken.

In support of its motion for summary judgment, a declaration filed by respondent Brentwood recites testimony given by Robert Weiss in a deposition, wherein he admitted that he had spoken to no one at Brentwood before the close of escrow and, indeed, first spoke to someone there only after receiving notice from Brentwood that Asher was in default on the senior encumbrances held by Brentwood. At that time, construction on the lots was 97% Completed. No one at Brentwood ever told him that Brentwood would supervise the construction on the lots. 'They didn't say this, nor were they asked.'

Second Cause of Action--Misrepresentation.

Nowhere in the five declarations appellants filed in opposition to the motion do they contest respondent's declaration. While it may be that Asher made the misrepresentations alleged, and that they were relied on by appellants, it was not alleged that Asher did so as agent of respondent. Thus, it is established without dispute that Brentwood made no oral representations or misrepresentations to the Weiss', on which they relied or otherwise.

In their briefs, appellants depart from their allegation that respondent made oral misrepresentations, and seek to hold respondent liable on another theory. This seems to be that respondent supplied the written language used in the Weiss-Asher escrow, that such language inferentially required all proceeds of forthcoming loans to be devoted exclusively to constructing improvements and that appellants relied on such inferred terms in subordinating their own security.

The second paragraph of the subordination begins, 'After completion of the improvements on said land * * * a new deed of trust may be placed thereon. * * *' Appellants seize upon the term 'improvements' as indicating the parties' intention that all sums provided for in the first paragraph should be devoted to construction. While the quoted phrase may indicate that the parties planned for improvements to be constructed on the properties Aside from the deficiency just noted and the failure to plead such theory, other shortcomings in it are insuperable. First, since Brentwood was not a party to the Weiss-Asher escrow, the language used by them was that, irrespective of its source, chosen or adopted by the parties, who were free to express themselves as they saw fit. Second, Robert Weiss' declarations as to the claimed source of the language are ineffectual. Thus, he states: 'Declarant was informed in said Escrow proceedings that * * * BRENTWOOD desired a Subordination Clause', which is pure hearsay as it stands and would be inadmissible as evidence at a trial. In another declaration subsequently filed, he baldly states 'said subordination agreements were prepared by BRENTWOOD', but in the light of the record before us this is, at best a conclusion based upon inadmissible hearsay.

it nowhere indicates what portion of the anticipated loans would be so used nor does it require the lender, in contradiction or modification of the express terms of the first paragraph, to monitor use of the funds for that purpose. Thus, it is the meaning the language conveyed to the prospective lender with which we are concerned and not the significance attached to it by appellants.

Third, the language used in the escrow agreement and repeated in the trust deeds provides for subordination '* * * without regard to the application or use of the proceeds of such loans or advances insofar as the validity of this subordination is concerned.' This language, plus other differences of both substance and procedure, clearly distinguish the agreement from Handy v. Gordon, 65 Cal.2d 578, 55 Cal.Rptr. 769, 422 P.2d 329, 26 A.L.R.3d 848 (1967); Miller v. Citizens Sav. & Loan Assn., 248 Cal.App.2d 655, 56 Cal.Rptr. 844 (1967); Joanaco Projects, Inc. v. Nixon & Tierney Constr....