San Diego Municipal Credit Union v. Smith

Opinion

LEWIS, J.

San Diego Municipal Credit Union (Credit Union) appeals a judgment in favor of Martin A. Smith based on equitable estoppel. We affirm.

[922]

I

Smith bought a Porsche automobile in September 1979. He borrowed $20,000 from Credit Union for that purpose and, on September 7, 1979, signed a promissory note and a security agreement in favor of Credit Union.

In November 1979, Smith proposed to sell the Porsche to Daniel Steele. Smith took Steele to Credit Union’s office on November 21, 1979, for the purpose of having the note paid off and transferring title of the Porsche to Steele. An employee of Credit Union determined the balance due on the note was $19,971.41. Steele gave the employee a check payable to Credit Union for that amount, and the Credit Union employee asked Smith to sign the title documents for the Porsche over to Steele, and other documents, and Smith did so. Smith assumed the Credit Union employee verified the check was good. Smith was given a copy of the promissory note and a copy of the security agreement, both stamped “Paid 11/21/79,” and initialed by the employee. Having signed over the title documents, Smith turned the Porsche over to Steele. Steele shortly thereafter sold the Porsche to a third party. Steele’s check was returned to the Credit Union marked “not sufficient funds” on December 7, 1979. Steele made five payments of $421.46, the amount of the monthly payment on Smith’s note, and then paid no more.

The Credit Union declared the entire unpaid balance immediately due and payable under the terms of Smith’s promissory note. Smith could not pay, and on September 26, 1980, Credit Union presented to him an “extension agreement” to pay interest only, which he signed.

On June 22, 1983, Credit Union filed a complaint for damages for default on promissory note and for money lent. Smith answered, alleging affirmative defenses of negligence and equitable estoppel of Credit Union to deny its representation to Smith that his note and loan were paid in full upon which Smith relied by delivering to Steele both title and possession of the Porsche.

The case came to trial on the short cause calendar on Friday, April 6, 1984, before the court without a jury. The court found in favor of Smith on the ground of equitable estoppel.