This action was brought by the plaintiffs as parties beneficially interested in certain mining property in Calaveras County, for an accounting and to enjoin a scheduled sale by the trustee under two deeds of trust. Plaintiff Roesch is the beneficiary under a junior deed of trust held by her, and which was foreclosed. At the foreclosure sale John S. DeLancey bought the property and holds title for the benefit of plaintiffs and Calaveras Central Mining Corporation and Calaveras Central Gold Mining Co., Ltd., as their interests may appear. The other two plaintiffs are judgment creditors of the defendants Calaveras Central Mining Corporation and
On December 19, 1923, Victor as the owner of the mining property obtained a loan from the Manuel Estate Company, a corporation, in the sum of $15,000 and executed a promissory note in thаt amount, secured by a deed of trust on the property. The note is admittedly usurious. It called for interest at the rate of 1 per cent per month, compounded. After the maturity of that note, which was in default, Victor obtained a second loan from the Manuel Estate Company and executed another note of date January 5, 1925, for $4,500, also secured by a deed of trust, and also usurious.
On March 6, 1926, Victor, whose affairs had become financially precariоus, entered into an agreement with Harry Sears, whereby he obtained an option for four months to purchase and acquire at “the times and for the considerations and upon the terms and conditions as hereinafter stated” all the right, title, interest and estate of Victor in and to the land and personal property of the mine. One of the terms and conditions was that Sears organize a corporation under the laws of Delaware with a capitalizаtion of $1,000,000, divided into one million shares of the par value of $1.00 each, of which Victor was to receive 150,276 shares. Another term of the agreement was that Sears.would within four months “pay and discharge or secure the complete release and discharge of all indebtedness now owing by the corporation [Victor] ... to the Manuel Estate Company, a corporation . . . and being the indebtedness now due and owing from two promissory notes executed by thе said corporation [Victor] ... to the said Manuel Estate Company” [describing
them];
“that there is now accrued and unpaid upon said promissory notes not only the full amount of the said principal sums of said indebtedness but also interest thereon
The corporation was organized as provided for in the agreement, and is the defendant Calaveras. On April 15, 1926, Sears made a written offer to assign the option agreement to Calaveras in exchange for the balance of its stock and $20,000 of its 8 per cent convertible notes. Calaveras accepted the offer, and Sears’ rights in the agreement vested in the corporation. In March, 1927, Victor deeded the property to Calaveras, and Sears and Victor received the stock of Calaveras, in the proportiоns set forth.
In October, 1928, the defendant Clara P. De Mota became the holder of the two notes originally given by Victor to Manuel Estate Company, which notes were then in default. Proceedings to foreclose the deeds of trust were instituted, whereupon this action was brought by plaintiffs. Victor admitted the allegations of the complaint and filed a cross-complaint seeking the same relief as the plaintiffs, and setting up the defense of usury. In its cross-complaint Viсtor al
The trial court found that the notes were usurious, that the defense of usury was available to the plaintiffs, and that no payments had been made on the notes. It enjoined the trustee, Erickson, from selling the property under the deeds of trust for amounts in excess of the face value of the notes plus charges and feеs stipulated to be in the sum of $3,750, or a total of $23,250. All of the parties appealed from the judgment. Plaintiffs and the defendants Calaveras appealed on the ground that the court erred in finding that no payments had been made on the $15,000 note; Victor as cross-complainant appealed on the ground that the court erred in finding that the defense of usury was not available to it as an original borrower still interested in the property by reason of its shareholdings in Calaveras; Erickson, the trustee, appealed on the ground that the defense of usury was not available to any of the parties.
The questions on this appeal are (1) whether the evidence is sufficient to support the trial court’s finding that no payments had been made on the notes; and (2) whether the defense of usury was available to the plaintiffs, Victor or the corporations Calaveras.
With reference to the first point the state of the pleadings and the proof are of vital importance. The execution of the notes for the principal sums of $15,000 and $4,500 with interest was alleged by the plaintiffs. They also alleged that Calaveras and Sears had paid thereon in excess of $15,000. Victor alleged that Calaveras and Sears had paid thereon in excess of $10,000 and that the defendants De Mota knew of such payments when the notes were purchased in 1928. Calaveras, in its verified answer, admitted the allegations of plaintiffs’ complaint that over $15,000 had been paid by Calaveras and Sears and prayed that the court determine the
The defendant Erickson was requested by the plaintiffs to stipulate with reference to the items on the statement showing payment. He agreed to do so on condition that opposing counsel would also stipulate to the correctness of the other items on the statement. This the plaintiffs refused to do.
After interrogating Mr. Manuel the plaintiffs did not offer the statement in evidence. The defendant Ericksоn called Mr. Manuel as his own witness and offered the memorandum in evidence in order that the trial court might have the document as a whole before it. The plaintiffs objected on the ground that the statement “expresses the opinion and conclusion of the witness.” The objection was overruled and the document was received in evidence. No records of the Manuel Estate Company were produced and no proof was tendered that any аttempt had been made to find, examine or produce its boobs or records. All that was elicited on this subject was the statement of Mr. Manuel: “I don’t know whether I have them [the company’s records] in detail or not—I don’t know whether I could find them, it is so long ago.”
With the foregoing evidence before it the trial court found “that there is considerable doubt as to what if any payments were made on account of the aforesaid promissory notes or either of thеm and the court therefore finds that nothing has been paid on account of the aforesaid notes or either of them.”
In substance the trial court found and concluded that' the plaintiffs and those equally charged with them in sustaining the burden had not proved payment by a preponderance of evidence. The problem here is not whether the appellants . on the issue of payment failed to prove their case by a pre
But the plaintiffs and the appellant corporations assert that the memorandum was introduced in evidence by the trustee; that although they objected to its introduction on other grounds no objection was made on the ground that it was secondary evidence or that a proper fоundation had not been laid, and that therefore the trustee was" bound by it. However, a reference to the circumstances of its receipt in evidence, above narrated, discloses at least two reasons why the trial court was not bound to apply the rule invoked or itself be required to hold the evidence sufficient to constitute proof of payment. One was the uncertain and unsatisfactory character of the testimony of Mr. Manuel and the other was the secondary character of the memorandum introduced. No other evidence on the issue of payment was offered. In view of this uncertainty and of the weakness of the memoran
As to the second point, it is conceded that the question of usury was not in the minds of any of the parties at the time of the acquisition of the interests of Victor and Sears by Calaveras. It was not until some time after the decision of this court in the case of
Haines
v.
Commercial Mortgage Co.,
The trial court found that the defense of usury was available to the plaintiffs. The defendants Victor and Calaveras contend that the defense should have also been found available to them.
Victor claims the right to assert the defense of usury on the ground that it is the original borrower and still interested in the property by reason of its interest in Calaveras, and Calaveras asserts its right as the successor of the original borrower. The consideration for the transfer of the property from Victor and Sears to Calaveras was the issuance to them of the shares of stock of Calaveras, and the assumption of Victor’s obligations. Victor did not receive a cash consideration for the property, but accepted shares of stock. This distinguishes the case from those in which the seller accepted a price for the property from which was deducted the amount due under the obligation, thereby waiving the defense of usury, аnd requiring the purchaser to pay the agreed price.
(Ames
v.
Occidental Life Ins. Co.,
Defendant Erickson contends that Victor did not allege in its cross-complaint that it still owned the shares of stock of Calaveras issued to it. The evidence showed and the court found that the 150,276 shares “were issued and delivered” to Victor in accordance with the contract of March 6, 1926, and the remainder to Harry Sears. One witness (counsel for Victor) testified that Victor was still interested in Calaveras and in the property. There is nothing in the record to indicate that Victor was not the owner of the stock at the time of the commencement of the action. Under such circumstances we think it is sufficiently established that it was the owner of the stock at the time. As such a shareholder in Calaveras, there can be no question but that a sale of the property for the amount of the notes and usurious interest would adversely affect Victor through a reduction in the value of its stock. By the agreement, Calaveras had the right to settle, discharge, compromise, or in any other manner adjust the creditors’ claims “so as to avoid any proceeding that may otherwise be taken by said creditors against the said corporation or its said properties for the collection of said creditors’ claims, or any of them.” Any settlement or adjustment made by the new company with the creditors of
The plaintiffs Montreeville and Anderson are judgment creditors of Victor and Calaveras, respectively, and the indebtedness represented by the judgments was incurred prior to the execution of the deeds of trust sought to be foreclosed. The obligations were included in the list of creditors of Victor. The judgments in favor of these plaintiffs provided that the payment of either judgment should be payment
pro tanto
of the other. These creditors never lost the right to look to Victor or to its properties for payment. If these plaintiffs are permitted to assert the defense of usury it will be to the immediate benefit of the original borrower, Victоr. By the agreements with Sears and Calaveras, plaintiffs Montreeville and Anderson were brought into privity with Victor and Calaveras, and to that extent the agreement was for the benefit of these creditors. It is established law that one not a party to an usurious contract may not attack it unless he is injured by it.
(Zimmerman
v.
Boyd,
Defendant Erickson claims that under the contract Calaveras was to pay the obligation with interest, and that this provision would exclude the right to assert the defense of usury. It has been shown, however, that the agreement also provided that Calaveras should have the right to negotiate with any of the creditors to settle, discharge, compromise or in any other manner adjust the creditors’ claims. Taken as a whole, the agreement served to list the obligations of Victor and to authorize Calaveras to contest any or all of them. It did not deprive Calaveras of the right to assert any defense to any of those obligations. It is therefore concluded
The judgment is affirmed.
Gibson, C. J., Curtis, J., Edmonds, J., Carter, J., Tray-nor, J., and Sehauer, J., concurred.