Campbell v. Sutton

PEEK, J.

The plaintiff, as assignee of the Bank of America National Trust and Savings Association, brought an action to collect a note dated October 19, 1936, in the amount of $775, and to foreclose a crop and chattel 'mortgage of March 30, 1935, which mortgage secured said promissory note but had become worthless. A demurrer to the complaint was overruled and defendants answered, alleging in effect that the note sued upon was executed by mistake; that there was no consideration therefor in that it had been given in renewal of certain notes which had been paid and discharged through the proceeds of a loan made to defendants by the Federal Land Bank, and therefore such note was against public policy.

At the conclusion of the hearing the court found that defendants were indebted to plaintiff in the sum of $975.78. It is from such judgment that defendants now appeal.

The record discloses that the note in question was a renewal of two previous notes dated March 18, 1933, in the

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amounts of $200 and $575 respectively, which in turn had been executed in renewal of the balance due on a note of March 21, 1928, secured by a crop and chattel mortgage of even date in the amount of $900. Defendants were also indebted to the bank in the sum of $3,575, secured by a deed of trust on defendants’ farm. In order to refinance their indebtedness the defendants made application to the Federal Land Bank for a loan under the Emergency Farm Mortgage Act (12 U.S.C.A. § 1016).

The Land Bank, in its “notice of approval of loan,” informed the defendants, “your application . . . has been approved in the amount of . . . $3,800.00. ...” The notice also stated “. . . within six months from the date your loan is closed, furnish the Commissioner an itemized statement of purposes for which your loan funds have been used. Tour acceptance of this loan is an agreement to that effect.” On the reverse side of said notice appeared what was entitled “acceptance notice” which was dated approximately one month after the notice of approval, and contained the following: “I accept -the loan and agree to conditions as above. (Signed) Adelaide M. Sutton—Thos. Sutton.”

Also as a part of said notice of approval appeared the following: “Please give us the following information concerning all creditors, secured and unsecured, whose loans are to be paid by the funds received from this loan. ...” The defendants appealed to Mr. Raffetto, assistant cashier of the Sonora Branch of the Bank of America, to assist in filling out this information. This he did but listing the Bank of America as a secured creditor in the amount of $3,500, and unsecured as to the $575 and $200 notes. On the reverse side of said notice of approval appeared the notation: “Approved on condition that you are able to arrange a scale down of all liens against this farm to an amount not to exceed $3,800. This will call for cooperation on the part of your creditors, and in view of the importance of this scale-down, it is required that releases or other definite evidence be furnished from your creditors as an indication that the indebtedness has been irrevocably compromised. ’ ’ The notice of acceptance was returned to the Land Bank together with a letter which had been dictated by said assistant cashier of the Bank of America to his stenographer and signed by the defendants, which letter in part, stated: “. . . Our debts are listed on