255 P. 188 | Cal. | 1927
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *762 By a stipulation of the parties the above-entitled causes were heard together in the court below, and while separate judgments were entered in each case and separate notices of appeal filed, still a consolidated record on appeal was prepared and the causes have been carried on our calendar under one number. They will, therefore, be considered and disposed of as one case.
This is appropriate, for the same basic questions underlie them and a determination thereof will guide our action in both causes. They will be known herein as cause one and cause two, respectively, following the order appearing in the caption. From the record it appears that the Los *763 Angeles Trust Savings Bank was succeeded by the Pacific Southwest Trust Savings Bank and they are in reality one; hence reference herein will be made to them as the "Los Angeles bank."
The amended complaint in cause one was by stipulation of the parties made the answer to the complaint in cause two and the court in its findings of fact and conclusions of law adopted said amended complaint as its findings of fact without any other material findings whatsoever. It is, therefore, necessary to briefly set forth the allegations of said amended complaint as follows:
That on the twenty-first day of September, 1921, plaintiff, W.C. Colley, was indebted to the Chowchilla National Bank in the sum of $5,300, evidenced by his promissory note, which, with accrued interest thereon, amounted on the fifteenth day of April, 1922, to the sum of $5,441.45; that at the same time he was also indebted to said bank as indorser upon a promissory note in the principal sum of $2,728, with interest, which said latter indebtedness, after deducting partial payments, amounted on the fifteenth day of April, 1922, to the sum of $1,615.37, said indebtedness totaling on that date the sum of $7,056.82.
That on the first day of May, 1920, Hope L. Colley, on behalf of herself and husband, entered into a written contract of sale and purchase with the Los Angeles Trust Savings Bank, a corporation, touching eighty acres of real property situate in the county of Madera, state of California, whereby the agreed purchase price of $18,000 was payable in installments covering a period of years and containing the usual covenants.
That on said fifteenth day of April, 1922, a refunding arrangement was entered into between said W.C. Colley and Hope L. Colley, his wife, and the said bank, whereby said indebtedness of W.C. Colley to appellant was subdivided by the execution of five promissory notes, as follows: One for the principal sum of $500, payable November 1, 1923; another for the principal sum of $1,500, payable November 1, 1924; another for the principal sum of $1,500, payable November 1, 1925, said three above-mentioned notes being signed by Hope L. Colley and indorsed by W.C. Colley; a fourth note in the sum of $1,500, due November 1, 1926, and a fifth in the principal sum of $2,059.75, payable *764 November 1, 1927, said two last-mentioned notes being executed by W.C. Colley and indorsed by Hope L. Colley; that interest provided for in said notes was eight per cent; that to secure the payment of said notes and each of them said Hope L. Colley made, executed and delivered to said bank an assignment of said contract of sale and purchase above referred to, said assignment being subordinate to a previous assignment which had been made by her to one A.F. Witesman.
Said amended complaint then further provides:
"That after said delivery of said second assignment of contract (meaning the assignment to defendant bank above described) to said defendant and on or about the 22nd day of April, 1922, the said defendant notified said plaintiff that if, at any time before payment of said five new promissory notes, said plaintiff and said Hope L. Colley, his wife, would execute a quitclaim deed of the said real property to Pacific Southwest Trust Savings Bank, a corporation (formerly the said Los Angeles Trust Savings Bank, a corporation), the same would operate in full payment of all of the aforesaid indebtedness of said plaintiff to said defendant and that concurrently with the execution of such quitclaim deed by said plaintiff and said Hope L. Colley, the said defendant would thereupon deliver up and surrender to said plaintiff all of the said promissory notes by the terms thereof payable to said defendant as aforesaid; that thereafter and on February 24th, 1923, said plaintiff and said Hope L. Colley executed to said Pacific Southwest Trust Savings Bank, a corporation, their quitclaim deed of all of said real property, and same was on last said date acknowledged and certified so as to entitle same to be recorded, and the same was on February 27, 1923, recorded in the Office of the County Recorder of the county of Madera, State of California, in Vol. 3 of `Official Records,' at page 16."
The amended complaint further alleges that at the time said quitclaim deed was made the property covered by said contract was of the reasonable value of $64,000, and the amount due on account of the purchase price thereof, including interest, was not to exceed the sum of $30,000; and that said respondent, Hope L. Colley, owned an equity in said real property which was far in excess of the claims *765 of said bank; that after the execution of said quitclaim deed the Colleys made demand upon defendant bank to surrender and deliver up to them the two notes first described in said amended complaint, and also the five notes executed later in lieu of said two first-mentioned notes; but that said bank refused to surrender or deliver up any of said notes or to acknowledge payment of all or any or either of them; that, however, no payment had been made on account of said indebtedness except by the execution of said quitclaim deed; that the respondents were not informed as to whether any of said notes had been negotiated; that defendant claimed none of said notes had been paid or in any manner discharged; that great and irreparable damage would be suffered should said notes remain outstanding.
The prayer of said amended complaint was that defendant bank be ordered to deliver up said notes and each of them; that in case it failed to deliver them up, plaintiff have judgment for the principal sum mentioned therein, with interest thereon from and after the fifteenth day of April, 1922, and for general relief.
As above stated this amended complaint was by stipulation of the parties made the answer to the complaint in cause two, which said cause is an action to recover from the Colleys the principal and interest of one of the five promissory notes involved in cause one and interest on two other of said notes.
The court found that all of the allegations of said amended complaint were true and that all of the allegations of the answer of defendant bank were untrue except that defendant bank was a national institution organized under and by virtue of the laws of the United States of America, with its principal place of business at Chowchilla, in the county of Madera, state of California.
Accordingly, in cause one, pursuant to said findings, the court gave judgment in favor of the plaintiff, W.C. Colley, to the effect that said note for $5,300, dated September 21, 1921, be adjudged and declared canceled and no longer an obligation of said plaintiff; that the note in the principal sum of $2,728, bearing the same date, be likewise adjudged and declared canceled and no longer an obligation of said plaintiff, either in whole or in part; and as to the later notes it was adjudged that said defendant bank be ordered and *766 required to deliver up each of said five promissory notes set forth in said amended complaint, or in case delivery of any of said promissory notes could not he had, that plaintiff recover from said defendant the principal sum named therein, together with interest on said sum from April 15, 1922, to date of judgment.
In cause two the court likewise adopted the allegations of said amended complaint as its findings and adjudged each of said notes sued upon in said cause two to have been paid and discharged in full and gave judgment for the defendants accordingly. The appeal in cause one is by defendant bank from the judgment in favor of plaintiff and in cause two by plaintiff bank from the judgment in favor of defendants therein.
It is clear from the foregoing that the legal effect of these findings is that the indebtedness to the appellant has been satisfied by the execution of the quitclaim deed to the Los Angeles bank, and that respondents should have a release therefrom in the form of surrender of both said series of notes (Epstein v. Gradowitz,
In 34 Cyc. 1050, the rule is stated as follows: "A consideration for a release moving from a third person on behalf of the releasee, to the releasor or from the releasee to a third person at the request or by the acquiescence of the releasor is as adequate as a consideration moving directly from the releasee to the releasor." (To the same effect see Midland Trust Sav.Bank v. Nagle,
In Rucker v. Bolles, 80 Fed. 504, 513 [25 C.C.A. 600], it is said: "If one party to a contract agrees to release the opposite party therefrom in consideration of his doing some act which he is under no obligation to do, the doing *767 of that act is a sufficient consideration for the release, altho it was not beneficial to the first party."
But notwithstanding the above set forth principle, we must here deal with a corporation whose powers are circumscribed by the statutes of the United States. In short, we have as the alleged releasor a national banking association which has in practical effect agreed to give a satisfaction of the debt without special benefit of any kind to itself. The legal consequence of the promise as found by the court is that the corporation has covenanted to make a gift of its capital assests for the doing of an act, detrimental to the doer, it is true, but without benefit to itself, and beneficial only to a third party, whose connection, if any, with appellant does not appear from the record. In other words, may a national bank under its powers as defined by the law be held to such a covenant? Appellant insists that such a contract, if proved, would be ultra vires the power of the corporation, and we think this contention must be sustained. We must look to the statutes of the United States as construed by the supreme court of the United States for a determination of this question. (Chemical National Bank v.Havermale,
In the early California case of Miners' Ditch Co. v.Zellerbach,
This definition of ultra vires and this classification of the types thereof was adopted by the supreme court of the United States in the case of National Bank Loan Co. v. Petrie,
We think that the agreement here involved comes clearly under the first subdivision of the subject and is ultra vires in the first or proper sense. In Central Transp. Co. v. Pullman CarCo.,
The power of a national bank to deal in shares of stock or shares in a partnership was before the supreme court of the United States in the following cases: National Bank of Ottawa
v. Converse,
The rule as laid down in 7 Corpus Juris, page 784, is as follows: "The officers of a national bank cannot bind it by contracts or acts which are not within the scope of the business which the bank is authorized to transact, such as . . . agreeing to receive anything but money in payment of a non-negotiable note endorsed to the bank, or making donations to a charity or to public or private enterprises."
The reason for the rule is found in McCormick v. MarketNational Bank,
Respondents, however, practically conceding the force of the above authorities, vigorously contend that the pleadings, proof, and findings warrant the conclusion that respondents are entitled to the relief given them by the court because of a novation of the contract wherein and whereby respondents were released from their obligation to appellant and a new contract was made between appellant and the Los Angeles bank, whereby said latter bank assumed and agreed to pay the indebtedness of respondents to appellant.
We have been cited to no evidence nor can any be found to sustain this contention of respondents. The legal principles comprising the doctrine of novation as far as the same are here involved may be stated as follows:
Civil Code, section
Civil Code, section
In 20 Cal. Jur., page 250, it is said: "But when it is clear that a new contract has been entered into without fraud and upon the understanding and with the intent that it shall be substituted for a former one, a novation is affected and the former agreement is extinguished. For example, it is said that where a bank to which checks on another bank are sent for collection, accepts credit from the drawee bank instead of requiring payment, such acceptance of the obligation of the drawee bank in discharge of the check amounts to novation between the two banks."
Novation must be pleaded either expressly or by unequivocal implication (Trabucco v. Collins,
In 20 Ruling Case Law, at page 367, we find the following rule announced: "An essential element of every novation is a new contract to which all the parties concerned agree . . . It is essential then, in order to constitute a novation, by which the original debtor is released, the creditor being bound thereby to discharge the debt as to him and look to another for the payment of his demand, that a contract be made between the new debtor and the creditor by which the claim can be enforced against such new debtor, and if the new debtor enters into no contract with the creditor by which he becomes the debtor of the creditor, so that the creditor may maintain an action against him, there is not a novation."
In 29 Cyc., at page 1136 and page 1139, the rule is again stated: "The most frequent novation is the substitution of a new debtor. To constitute this kind of a novation, there must be a mutual agreement among three parties, the creditor, his immediate debtor and the intended new debtor, *771 by which the liability of the last named is accepted in the place of the original debtor in discharge of the original debt. . . . The burden of proof rests upon him who asserts that there has been a novation to establish it."
While it is true that a novation may be established by implication, nevertheless "such implication cannot arise until there is evidence showing facts and circumstances from which it may reasonably be inferred that such was the intention." (20 Cal. Jur. 258, People's State Bank v. Penello, supra, andAnglo-California Trust Co. v. Wallace, supra.)
A discussion to be made later herein of the evidence will disclose that the record contains no facts whatsoever from which it can be said that a new contract was made between the Los Angeles bank and appellant for payment of said indebtedness, with the intention of releasing and discharging the old obligation existing on the part of respondents or any agreement whatsoever to assume or pay the same.
Respondents also insist that under the principle announced in section
In the foregoing and subsequent discussions we have assumed that action by the several presidents of the appellant bank was in each case action by the bank itself, for we conclude that the president and such officers who acted herein had actual or ostensible authority to bind the bank in every way that it could be bound under the law. (4 Cal. Jur. 158; Jennings v. Bank ofCalifornia,
Appellant further insists that the findings hereinabove discussed are without support in the evidence, and we agree also with that contention. The most that can be claimed under the evidence is that the appellant bank, in order to get security for the pre-existing loan made to respondent W.C. Colley, promised the respondents that if the new notes were executed by them and the contract of sale and purchase assigned as security therefor, that if and when the land covered by said contract was sold, the bank would look to the purchase price received for payment of the loan, and if it became necessary on account of untoward circumstances for respondents without a sale to quitclaim or release their equity back to the legal owner, that appellant should and would release respondents from personal liability on said notes. And that after said new notes were executed and the security given this promise was renewed and was relied upon when the quitclaim deed was executed and delivered.
There is no evidence that the bank agreed to cancel the indebtedness outright, nor is there any evidence that it promised to release or forego the security afforded by the assignment of the contract. The assignment of this contract gave the appellant an equitable lien or mortgage upon said real property, enforceable against the property in the hands not only of the original contractor, but also in the hands of his heirs, administrators, executors, voluntary assignees, and purchasers or encumbrancers with notice, actual or constructive (17 Cal. Jur. 734, secs. 38-40; Title Ins. Trust *773 Co. v. California Dev. Co.,
Neither is there any evidence whatsoever that the Los Angeles bank assumed or agreed to pay or to become personally liable or liable in any other way for said indebtedness. There is likewise no evidence whatsoever of a substitution of the said bank in the place and stead of the respondents with intent to release them from the obligation of their notes.
The evidence further shows that the respondents were in default both to the Los Angeles bank and upon their other obligations; that they were threatened with and were themselves threatening bankruptcy at the time said quitclaim deed was executed. It is true that at the time said deed was made it was done on the advice and at the instigation of Mr. Witesman, the then president of appellant bank, but, as above pointed out, nothing was said or done by any representative of appellant which indicated an intention to release and satisfy said indebtedness. On the contrary, the clear inference is that appellant bank in so advising said quitclaim deed did not intend to satisfy said indebtedness, but doubtless thought that its rights would remainin statu quo or probably be benefited by execution thereof. There is, not one word of evidence that at the time of making the deed, or any other time, appellant promised to forego and surrender the security given it by the execution of said assignment.
Summing up the whole situation, the inference is clear that at most the bank was moving in its own interests in trying to get security for its obligation and later to realize upon it, and was not in any sense intending to satisfy said indebtedness altogether, but was willing to release respondents from *774
personal liability only upon said notes and surrender them only when said security had been exhausted. Had the court made findings and given judgment in accord with this construction of the effect of the evidence, we would have been constrained to hold that such an agreement would have been within the power of the appellant to make, for in our opinion such an act on the part of appellant would have been at most ultra vires under the second subdivision of the doctrine announced in Miners' DitchCo. v. Zellerbach, supra, and the appellant in such event would have been estopped from setting up this defense. This observation is also pertinent in the consideration of the appeal in cause two, for, as we have observed, the court found said notes sued upon had been paid and gave judgment accordingly for respondents, who were defendants in the court below in cause two. The defense that the bank had waived personal liability of defendants on the notes was not made. Neither was the defense that an independent action would not lie under section
As the cause may be retried, we feel called upon to say that under the general powers of the appellant as a national banking corporation, and under Revised Statutes of the United States, section 5136, which grants "all such incidental powers as shall be necessary to carry on the business of banking," and section 5137, which confers the power to take, hold and convey real property mortgaged to secure a pre-existing indebtedness, together with the right to convey or expose same to sale and purchase it thereat, appellant would be estopped to deny its power, in getting security for a pre-existing, unsecured debt, to make a valid agreement to release the respondents from personal liability on same where they had in good faith executed to their detriment their covenants under such a contract. (See Ohio Mississippi Ry. Co. v. McCarthy,
In First Nat. Bank v. National Exch. Bank,
In Teele v. Rockport Granite Co.,
We deem it unnecessary to consider the further point raised by appellant that because the covenants claimed were not contained in the contemporaneous written instruments, evidence in respect thereto would be inadmissible, for we have held, treating the evidence as admissible, that it is insufficient to support the findings.
The judgment of the court in cause one in declaring the notes paid and in ordering them to be delivered up for *776 cancellation is clearly in excess of any relief warranted by the findings or the evidence. This observation is also true of the provisions authorizing, in case of nondelivery, a judgment against appellant bank for the principal sums mentioned in said notes with interest from the fifteenth day of April, 1922.
In cause two the judgment was to the effect that the notes had been satisfied and discharged. The said judgment is likewise, for the reasons hereinabove pointed out, clearly in excess of any relief warranted by the evidence in the case; however, upon the facts as shown by the record here presented the effect of this decision is to hold that respondents are entitled to be released from personal liability upon said obligations sued upon herein.
It therefore becomes necessary to reverse the judgment in both cases, and it is so ordered, with instructions to the court below to take such further proceedings in them as may be deemed advisable, not inconsistent with the views herein expressed.
Curtis, J., Shenk, J., Richards, J., Seawell, J., Langdon, J., and Waste, C.J., concurred.