Meyers

Statement Of The Case And Facts

In May 1973 appellants John and Claire Meyers borrowed $20,000 from respondent Guarantee Savings and Loan Association. The terms and conditions of the loan were contained in a building loan agreement. The loan was secured by a deed of trust. In addition, appellants signed an authorization to disburse and acknowledged receipt of copies of Penal Code sections regarding offenses involving construction funds. The borrowed money was to be used to construct a house on property owned by appellants in Mariposa County. The appellants hired Francis Asbury, a licensed contractor, to build the house.

The financing procedure worked as follows; the loan proceeds were deposited in a special account bearing no interest and retained by respondent although owned by appellants. The loan funds were disbursed to contractor Asbury under a “voucher system.” Respondent was required to pay Asbury money from the loan account when he submitted signed vouchers indicating certain work had been done on the house. Under the terms of the agreement, appellants promised .to make inspections of the property and notify respondent if the construction was not satisfactory.…