Opinion ID: 269904
Heading Depth: 1
Heading Rank: 2

Heading: Priority of First State Equity's trust deed

Text: 13 First State Equity is the beneficary of a deed of trust on the subdivision property executed in its favor by Sand Lake Construction Co., Inc. Australaska is the assignor of a later trust deed on the same property executed by Sand Lake in favor of Knik Plumbing and Heating Company, Inc. Australaska claims priority for the Knik trust deed on the basis of an agreement by First State Equity to subordinate its trust deed to the Knik trust deed. However, the district court found 'that the said subordination agreement was procured by fraud, involved interlocking and interested corporate officers, that it was procured without adequate consideration, and was made in violation of the order of the Superior Court of the State of Alaska which was supervising the activities of First State Equity Company through a trustee on the pertinent dates; Australaska participated in the obtaining of the subordination agreement and is not therefore an innocent partner.' 14 The record as a whole discloses a scheme by certain individuals, acting through corporations which they dominated, to defraud the public in and about Anchorage. First State Equity was employed as an instrumentality to secure funds from public depositors and investors. Four hundred thousand dollars of the funds thus obtained was transferred by First Equity to participants in the scheme on the security of the deed of trust issued to First Equity by Sand Lake. There was evidence from which the trial court could conclude that the subordination agreement was part of a plan by the same individuals to secure additional funds from Australaska; that the agreement conferred no substantial benefits upon First Equity; that it was in fraud of First Equity's public investors; and that it was executed by First Equity only because of the control which the individuals involved in the scheme exercised over First Equity through interlocking corporate officers and other means. 15 Australaska argues that there is no evidence implicating it in the fraud, or establishing any interlocking relationships between its officers, directors, or owners and those of the other corporations. The district court did not find to the contrary. Rather, the court's judgment was based upon a finding that Australaska was not an innocent purchaser, and therefore took the trust deed from Knik subject to First Equity's defenses against the subordination agreement. The district court's finding of notice has sufficient support in the record. 2 16