McConnell v. Herbert

SHENK, J.

The plaintiff recovered a judgment against the defendants on a promissory note for $9,000 executed and delivered by the defendants to the plaintiff. Prom that judgment the defendant Cyriacks alone appealed.

The defendants resisted the action on the plea that the note had been discharged by the application of the proceeds

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of a sale under a deed of trust given to secure a note for $36,000, and as to which the note sued on was claimed by the plaintiff to have been delivered as additional security.

In July, 1922, the Auburn Creek Farms Company, of which the defendants, at the time of the execution of the $9,000 note, were the sole stockholders and directors, negotiated a loan from the plaintiff Etta M. McConnell. To secure repayment of the loan the company executed its promissory note for $36,000 due in three years, and a deed of trust on land in Placer County. At the maturity of the note the company defaulted and in 1926 Mrs. McConnell proceeded to notice a sale of the property pursuant to the provisions of the deed of trust. In response to the company’s request for postponement of the exercise of the power of sale under the deed of trust, Mrs. McConnell by letter dated May 27, 1926, made to it the following proposition: “If you will pay on or before July 1st, 1926, the interest up to July 10th, 1926, and $1,000 on the principal, I will not proceed with the foreclosure of the Deed _ of Trust unless you make default in one of the following payments, that is to say: that you pay the semiannual instalment of interest due January 10, 1927, and that on or before July 1st, 1927, you pay $9,000 on the principal and the interest up to July 10th, 1927. In the meantime the $9,000 payment of July 1st, 1927, is to be covered by an individual joint and several promissory note of Mr. Herbert, Mr. Elliott, and Mr. Cyriacks, three of your stockholders, due on or before July 1st, 1927, with interest at 7 per cent, payable at maturity, and any payments made on the note to be credited on your indebtedness to me. Any payments made on the principal or interest on your indebtedness to me in the meantime, to be credited on the note of these three stockholders, except the July 1st, 1926, payment, and except that the interest of January 1st, 1927, if paid by you will pay interest on the $9,000 up to January 10th, 1927. If the $9,000 is paid on the principal and the interest paid on your notes on or before July 1st, 1927, then I will not enforce the foreclosure of said Deed of Trust before July 1st, 1928, unless you fail to pay the interest due in January, 1928.