Opinion ID: 1246793
Heading Depth: 1
Heading Rank: 4

Heading: The Fraud Charge

Text: The record supports the district judge's finding that the named defendants were not chargeable with fraud as alleged in the Utleys' first cause of action. The thrust of the Utleys' argument is that any loan obtained by Pirtle under the subordination provision of their $16,500 deed of trust was subject to their prior approval and to be used only for interim financing to build the multiunit apartment building on the property sold to Pirtle. The respondents agree that there was in the two documents  the Receipt and Purchase Agreement and the escrow instructions  an understanding between the Utleys and Pirtle for subordination, but that the purpose of subordination, that of interim financing, was not expressed, if that was the purpose, and that the first expression of the purpose of subordination for interim financing is contained in the $16,500 deed of trust that was unilaterally executed by Pirtle. Respondents concede that there is a conflict in the evidence, but assert that the Receipt and Purchase Agreement and the escrow instructions support the lower court's finding that the subordination was unrestricted, which finding may not be disturbed on appeal. We agree. Interim financing, by its very terms, means temporary financing, as C.W. Baker, a mortgage banker, builder and developer, who was examined by Mr. Jensen, testified in response to counsel's question. Q [by Mr. Jensen] Well, if somebody indicated to you that they had interim financing, what does that mean in your business? A It would be interim financing for construction of a residence, or a building, whereby the final loan was going to a permanent investor. In the instant case the purported interim financing was for a loan not to exceed $150,000, payable in 29 years at 10% interest. The Utleys argue that they had no knowledge of the Airoso note and deed of trust; yet the record shows that the $16,500 deed of trust that the Utleys received recited that it was  junior and subordinate to certain deed of trust recorded concurrently herewith and any other deed of trust    not to exceed an aggregate of $150,000.00    (Emphasis added.) The closing escrow statement that the Utleys received identified the $16,500 balance of their purchase price as being evidenced by a  2nd Note and Trust Deed  16,500.00. (Emphasis added.) The title policy issued by Kansas City Title insuring the Utleys' $16,500 deed of trust, the issuance of which they acknowledge in paragraph IV of their second cause of action in their complaint verified by Mr. Utley, [4] clearly sets forth in Schedule B of the policy the Airoso deed of trust as being prior to the Utley security. We conclude that there is substantial evidence in the record to support the district judge's ruling in denying the Utleys' claim set forth in their first cause of action.