Woodruff v. California Republic Bank

Opinion

THOMPSON, J.

*

Plaintiff, Roland S. Woodruff, appeals from the granting of a motion for summary judgment and the judgment entered thereunder.

[110]

Plaintiff is the assignee of Leo Meek and in the interest of clarity we will refer to Meek as the real party in interest unless a different context is required.

Léo Meek and his wife in 1970 executed a promissory note secured by a deed of trust upon certain real property in Tulare County. No substantial payments were made upon the note and as of the date of its maturity in 1974 there was a balance of approximately $23,361.60 in principal plus accrued interest at the rate of 10 percent.

In June of 1974 by successive levies defendant seized $5,235.61 from Mr. Meek’s account which he had on deposit in defendant bank, presumably through the device of the so-called and miscalled banker’s lien. No action had been brought to foreclose upon the deed of trust.

Mr. Meek assigned his claim to plaintiff herein who thereupon brought this action. Plaintiff’s motion for summary judgment was denied and defendant’s summary judgment motion was granted.

The resolution of this case requires no extended discussion.

It is beyond dispute that the holder of a note secured by á deed of trust must first exhaust his security before any action may be taken against the debtor and until a judgment for a deficiency has been secured. At 2 Summary of California Law (8th ed. 1973) Negotiable Instruments, section 129, page 1387, Witkin states: “If the obligation of the depositor is represented by a note secured by a mortgage, C.C.P. 726 prevents the bank from satisfying it by exercising its setoff; it must exhaust the security.” (Citing cases.)

One of the cases cited by Witkin is

Gnarini

v.

Swiss American Bank

(1912) 162 Cal. 181, 184 [121 P. 726], wherein the court states: “ ‘The plaintiff contends that the indebtedness represented by the note was secured by this mortgage, and that therefore the bank had no right to charge this note to the deposit account. It seems to be conceded—as indeed it must be—that if the mortgage given by Cain and his wife still subsists, and is security for the indebtedness represented by the second note, the bank had no right to apply the deposit to its payment.’ ” In further support of the above declaration the court cited the case of