122 P. 466 | Cal. | 1912
Appellant, California Fruit Exchange, a corporation, is the mortgagee of a recorded crop mortgage executed to it by respondent F.M. Buck. It claims priority of right and lien by virtue of this crop mortgage and by virtue of an unrecorded crop contract also executed to it by F.M. Buck, over a subsequent chattel mortgage executed by F.M. Buck to respondent Frank H. Buck Company, a corporation. The action was commenced by the Frank H. Buck Company to foreclose its chattel mortgage for the sum of fifteen thousand dollars and for a decree establishing its priority of right over the California Fruit Exchange contracts. Frank M. Buck suffered default, judgment passed for plaintiff as prayed for, and from that judgment and from the order denying its motion for a new trial the California Fruit Exchange appeals.
The facts disclosed are the following: In December, 1905, F.M. Buck executed to the appellant a mortgage upon the crops of fruit "now standing and growing and that may hereafter be grown upon my farm and orchard comprising 140 acres in Solano County." The mortgage was given to secure an indebtedness of twenty-five hundred dollars. It contained an added provision as follows: "Provided, nevertheless, and these presents are upon the express condition that if the said party of the first part, his heirs, executors, administrators or assigns, shall well and truly pay, or cause to be paid unto the said party of the second part, its successors or *302 assigns, all sums of money that are now due, or that may hereafter become due, from the party of the first part to the party of the second part, then these presents shall be void. It is the purpose of this mortgage to secure future advances to, as well as the present indebtedness of, the party of the first part." It likewise contained a covenant upon the part of the mortgagor to deliver the crops grown on the land to the mortgagee to be marketed. This mortgage was duly recorded. Under it appellant marketed the crops and credited them to the account of Buck, and also made numerous advances of money to Buck, many of which were evidenced by his promissory notes. In December, 1906, Buck requested appellant to assist him in obtaining a loan of three thousand dollars from the Fort Sutter National Bank of Sacramento, appellant did so assist and Buck secured the money upon the guaranty by the appellant of the loan. This note was a demand note. No part of the interest was paid by Buck. Appellant paid it all, and finally paid the principal on September 27, 1907. At the trial an expert employed to examine into and report upon the condition of Buck's account with appellant as disclosed by the appellant's books, reported in effect that the books showed a continuous balance against Buck, excepting that on September 15, 1907, there appeared upon the books a sum to the credit of Buck greater than the debits in the amount of $442.32, and on September 21, 1907, appeared an amount so in excess of the debits in the sum of $1,238.44. As between the parties, however, no balance had been struck by the appellant, no statement had been made to Buck, and there were promissory notes from Buck to appellant which were not yet due upon either of these dates. Buck continued as before to receive advances from and to request payments of money to be made by appellant, and the condition of the account from one of apparent credit to one of actual debit was speedily changed. Thus on September 27th there was the payment of three thousand dollars on the promissory note guaranteed by appellant. On October 4th following five hundred and fifty dollars was paid out by appellant on Buck's account, on October 8th in like manner seven hundred and fifty dollars, on October 25th, seventy dollars, and on October 26th, one thousand and seventy-eight dollars. Thereafter the transactions between Buck and appellant continued *303 apparently as before until October 27, 1908, when, by reason of such advances, Buck was indebted to appellant in the sum of $5,447.70. On May 19, 1909, Buck executed the chattel mortgage to the plaintiff in the sum of fifteen thousand dollars, for the foreclosure of which in the full amount this action was brought.
The court found the indebtedness from Buck to appellant of $5,447.70, above mentioned, but determined that this sum was not secured by appellant's mortgage. The soundness of this determination presents the principal question in controversy. The court's determination in this regard was based upon the language of the mortgage, "that if all sums due shall be paid, then these presents shall be void," taken with section
Aside from these general equitable considerations which forbid that the mortgage should be treated as extinguished, the same matter regarded from a narrower point of view equally establishes the unsoundness of the trial court's conclusion. Thus, it is shown that Buck had given a number of promissory notes to appellant which by their terms became *305
due after the date when, as the court found, there was a balance in favor of Buck and the mortgage lien therefore came to an end. Whatever moneys Buck may have had to his credit in the hands of the appellant could not be applied as an offset, without Buck's consent, to those notes before their maturity. (McKean v.German-American Bank,
No well-grounded reason can be advanced why the payment of the three thousand dollars to the Sutter National Bank under the appellant's guaranty should not be made a charge against Buck under the mortgage lien. The evidence discloses that Buck applied to appellant for this loan, that appellant felt unable to advance the money to Buck directly at that time, and secured the money for him from the Sutter Bank by guaranteeing his indebtedness. The guaranty was an independent obligation. The appellant did not become a mere surety and was in no sense a volunteer in paying the debt, the very interest upon which it had been compelled to meet. If the appellant had advanced the money directly to Buck no question would arise, but that the advancement would be secured under the terms of the mortgage. The advances thus indirectly made by the Sutter Bank and afterward taken over by appellant through its payment to that bank in no material sense changed the nature of the transaction.
Respondent contends that the mortgage is void in that it does not state the total amount of future advances for which it is to create a lien upon the mortgagor's property. This contention finds support in the language of Tully v. Harloe,
The foregoing renders unnecessary a discussion of any of the questions advanced upon the second branch of this case — that of the priority of the lien of the unrecorded crop contract over the subsequently executed chattel mortgage to plaintiff.
For the reasons already given, the judgment, in so far as it affects the California Fruit Exchange, appellant herein, is reversed and the cause remanded.
Lorigan, J., and Melvin, J., concurred.
*307Hearing in Bank denied.