Jonathan Manor, Inc. v. Artisan, Inc.

California Court of Appeal Jan 6, 1967 No. Civ. 8154Published

Before: Whelan

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Holding. The court held that a promissory note given as part of the purchase price of real property, which includes a provision for partial payment upon the conveyance of the property, does not constitute an equitable mortgage under Section 580b of the Code of Civil Procedure.

Issues

Whether a promissory note given for the purchase of real property is an equitable mortgage under Section 580b of the Code of Civil Procedure.
Whether the individual signers of the note were liable as principals or protected by Section 580b.

Disposition. reversed

Quotations verified verbatim against the opinion

“The inclusion in an otherwise unsecured note given in payment of the purchase of real property of a condition that a payment on the note shall become due upon the sale of a portion of the property does not serve to convert the note”

WHELAN, J.

Plaintiff appeals from a judgment denying recovery on a promissory note, which was one of four in identical amount executed on January 17, 1963, by defendant corporation (Artisan) and defendants Smith (Smiths) and taken by plaintiff as part-payment for 52 subdivided lots that concurrently were transferred by plaintiff to Artisan.

The four notes were delivered in escrow under written instructions signed by Artisan and the Smiths that in three different places spoke of the notes as 11 unsecured

.”

Each of the four notes contained the provision that additionally to monthly installments of $250, there should be made a payment of $500 upon the conveyance of any one of the 52 lots described therein by lot number and subdivision. The notes bore no certificate of acknowledgment that would have permitted them to be recorded, and were not recorded.

Some five months after the notes were executed, plaintiff wished to sell three of them to a buyer who desired security.

Artisan at that time executed a trust deed covering the 52 lots to secure the three notes to be sold by plaintiff. In transmitting the trust deed to plaintiff, Artisan wrote: ‘ ‘ This Deed of Trust shall only be considered effective and delivered concurrently with the transfer of the three (3) Promissory Notes to be secured thereby to Joyce Branning Vanderbilt, and not otherwise. In other words, if the three (3) Promissory Notes are not transferred to Joyce Branning Vanderbilt on or before ninety (90) days from date, then this Trust Deed shall not be considered delivered as between us and shall be cancelled. If said Promissory Notes are so transferred within said time, then this Trust Deed may be recorded and considered delivered.”

This action is upon the fourth note, which had not been assigned by plaintiff.

The court made the following findings:

“2.

On or about January 17, 1963, Defendants made, executed and delivered to Plaintiff their promissory note in writing in the principal sum of $32,574.97, which said promissory note was payable

[653]

Jonathan Manor, Inc. v. Artisan, Inc.

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WHELAN, J.

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