This is аn action to foreclose a mortgage given to secure the payment of a promissory note for ten thousand dollars executed by the' defendants, A. F. Mack and Wm. Seitz, Jr., and to enforce the payment of a written guaranty for the payment of said note subsequently executed by the defendant, Wm. Seitz, Sr. The note was executed and delivered to the Blochman Banking Company, a eo *355 partnership cоnsisting of L. A. Blochman and J. A. Heap. This bank was subsequently incorporated under the name of Blochman Commercial & Savings Bank, and thereafter the name was changed by a decree of court to Security Commercial & Savings Bank of San Diego, the plaintiff and. respondent herein.
The circumstances surrounding the execution of the note and mortgage are as follows:
One del Fungo, a real estate opеrator, induced the defendants, Mack and Seitz, Jr., to purchase some ninety acres of land situated in San Diego County at the agreed price of twenty-two thousand five hundred dollars. Payment therefor was madе by these defendants by the execution and delivery of three promissory notes, dated November 15, 1912; one for six thousand dollars, which was delivered directly to del Fungo; one for six thousand five hundred dollars, due in six months; and оne for ten thousand dollars, due in two years. The two latter notes were executed in favor of and delivered to the Blochman Banking Company. The one for six thousand five hundred dollars was unsecured and has been paid, and the one for ten thousand dollars was secured by a mortgage on the land purchased, and is the subject of this litigation. At the time of this transaction del Fungo was indebted to the Blochman Banking Company in the sum of $14,520. When the notes above mentioned were executed they were deposited in escrow with a trust company in San Diego, together with the evidences of indebtedness of del Fungo to the bank, an аdditional cash advance from the bank to del Fungo and the deed of del Fungo, the owner, conveying the property to Mack and Seitz, Jr., with instructions to the trust company to deliver the documents to the pаrties entitled thereto upon the deposit of the respective evidences of indebtedness. Through this transaction the indebtedness of del Fungo to the bank was canceled. In lieu thereof the bank toоk the two notes, amounting to sixteen thousand five hundred dollars, and Mack and Seitz, Jr., took a deed transferring the title of the property to them.
The note for six thousand five hundred dollars was not paid when due, and the Blochman Commercial & Savings Bank, as assignee, commenced an action to enforce its collection against Mack and Seitz, Jr., on the tenth day of March, 1914. On the twenty-seventh day of March, 1914, Wm. Seitz, *356 Sr., guarantеed in writing the payment of both notes. In consideration of this guaranty the action on the six thousand five hundred dollar note was dismissed and the bank agreed to extend for one year the time of payment of the tеn thousand dollar note, provided certain other conditions were complied with. On the day before this guaranty was made the title to the land covered by the mortgage passed by regular transfer to the guarantor, Wm. Seitz, Sr. The trial court found that the guaranty was given in consideration of the dismissal of the action mentioned, and. that Wm. Seitz, Sr., received adequate consideration therefor. Judgment went for plaintiff agаinst all three defendants, from which they gave notice of their desire to severally and separately appeal.
No answer appears in the record,' but by way of cross-complaint defendаnts set up fraud in the purchase of the land, asked damages against Blochman and Heap, who composed the copartnership known as the Blochman Banking Company, and demanded the canсellation of the note and mortgage as against the plaintiff, Security Commercial & Savings Bank of San Diego. The allegations of fraud are that del Fungo took defendants Mack and Seitz, Jr., out to see the land sold and pointed out to them other and better land than that described in the deed and mortgage. It was also alleged that del Fungo represented to said defendants that the land he was offering them for twenty-two thousand five hundred dollars was worth more than fifty thousand dollars, whereas in fact the land actually conveyed was worth much less than twenty-two thousand five hundred dollars, the purchase price paid by defendants. In оrder to state a case against the cross-defendants, Blochman and Heap, it was alleged that del Fungo was their agent and employee, that the false representations were made in their behalf, and that they knew they were false.
Treating the alleged cross-complaint as an equitable defense to plaintiff’s cause of action because of the allegations of fraud in the execution and delivery of the note and mortgage (and we assume this was what was done by the trial court, although the record is silent upon this point), it is evident that this defense rests entirely upon the proposition that del Fungo was the agent of Blochman and Heap, that the false representations were made in their behalf, and that they knew them to be false. The trial court found against *357 defendants on all of these allegations, and this finding is amply supported by the evidence.
Appellants’ position seems to be that, the note being nonnegotiable, the respondent is charged with knowledge of all of the legal defenses avаilable to the mortgagors. In support of this they cite numerous authorities holding that one who is about to take the assignment of a mortgage is bound to inquire of the mortgagor if he has any legal defenses to the mоrtgage, and that if he fails to do this, he takes the mortgage subject to all legal objections or infirmities which could have been set up against it in the hands of the original mortgagee, being charged with all facts which such an inquiry would have disclosed.
All that has been said herein regarding the defense of fraud has been said on the assumption that the alleged fraud was properly pleaded. But the cross-complainants in the same pleading and in the same cause of action set up the alleged fraudulent representations and the damages resulting therefrom, seeking a rescission or cancellatiоn of the note and mortgage as against one cross-defendant and damages for the fraud as against the others. They alleged that they did not discover the fraud until more than three years after it was committеd, but did not explain why an earlier discovery was not made.
For the reasons given the judgment is affirmed.
Brittain, J., and Langdon, P. J., concurred.