Gerson v. Kelsey

THOMPSON, J.

This is a suit on a $46,000 promissory note secured by a trust deed and a chattel mortgage on an apartment house and the furniture contained therein. The property was sold under the power of sale contained in the respective instruments for the net sum of $14,570, which was credited on the note. Judgment for the unpaid balance of the note, amounting to $31,430, was demanded. In reply to this demand, the answer alleged that an oral agreement was made waiving judgment for the deficiency which remained unpaid on the promissory note.

The defendants owned the Kenilworth apartments situated on Bush Street in San Francisco, subject to a first mortgage held by strangers to this action, in the sum of $52,000. October 17, 1930, the defendants executed a promissory note payable to the plaintiff and three other payees in one year

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for the principal sum of $46,000 with interest at the rate of twelve per cent per annum payable monthly. This note was secured by a trust deed containing the usual provision for the sale of the property in the- event of a failure to pay either the principal or interest as provided by the terms of the instrument. The note was further secured by a chattel mortgage on the household furniture and kitchen utensils contained in the various apartments of the building. Attached to this chattel mortgage there was an itemized list of all of the furniture and personal property mortgaged. This list did not contain bedding, linen, crockery, dishes, kitchen utensils or frigidaire equipment in -any of the apartments. The frigidaire equipment was added to the apartments after the note and mortgages were executed. The interests of the other payees of the note were subsequently assigned to the plaintiff. After the expiration of one year from the execution of this note and the mortgages the defendants were in default with respect to the payment of the principal sum. The husband of the plaintiff, Samuel Gerson, called on the defendants for the payment of the note. The defendants testified positively that the plaintiff’s husband then told them he considered the property worth $150,000, which was more than $50,000 in excess of the entire indebtedness against the property. The defendants also testified that they told Mr. Gerson they were financially embarrassed and were unable to pay the note; that there was a disagreement regarding the right of the plaintiff to immediate possession of the property on account of the lien of the first mortgage, and a dispute occurred regarding the personal property which was covered by the chattel mortgage; that the defendants then claimed the bedding, linen, crockery, dishes, kitchen utensils and frigidaire equipment were not included in the chattel mortgage, and that Mr. Gerson, as the agent for his wife, then orally agreed that if the defendants would abandon- all claim to the last-mentioned personal property and would deliver possession thereof, together with immediate conveyance of the real property, the plaintiff would waive her claim to any deficiency judgment which she might secure on account of the unpaid portion of the promissory note; that the plaintiff agreed to prepare and present defendants with the proposed deed of conveyance to the property, but failed to do so. Subsequently, on notice and de