Bank of Balboa v. Benneson

NOURSE, P. J.

Plaintiff sued to foreclose a mortgage upon real property and had judgment. Defendant has appealed upon typewritten transcripts.

The facts are simple. The defendant executed and delivered the note and mortgage to one Mathews in the sum of $5,000. Before maturity, Mathews sold the note and mortgage to plaintiff and, after maturity, plaintiff commenced this action. The defendant defended the action on the ground that the note and mortgage were procured from her by Mathews through fraud—that the only consideration was $5,000 par value of stock in a corporation which was issued in violation of the Corporate Securities Act and which was of no value. Defendant also claimed that plaintiff was not an innocent purchaser for value. The trial court found that plaintiff was an innocent purchaser for value and without notice of any of the infirmities of the note.

In reference t'o the facts it is sufficient to say that there is no substantial conflict in the evidence. That the note and mortgage were procured through the fraud of Mathews and that the consideration was stock in a corporation which was illegally issued may be conceded. But the evidence unmistakably supports the findings that respondent was an innocent purchaser for value and that it took the note and mortgage without notice of any of the infirmities.

The findings are, of course, of legal value only in the event that the note which was secured by a mortgage

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is a negotiable instrument under the terms of section 3265 of the Civil Code.

It is not necessary to go into the history of the litigation and legislation covering this debated subject; it is sufficient that the existing statute now provides that such a note shall not lose its negotiability because secured by a mortgage. But appellant insists that the statute is unconstitutional because it is self-contradictory and repugnant to other statutes relating to negotiable instruments. Section 3265 of the Civil Code reads: “Promissory Note Defined.' A negotiable promissory note within the meaning of this title is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer but the negotiability of a promissory note otherwise negotiable in form, secured by a mortgage or deed of trust upon real or personal property shall not be affected or abridged by reason of a statement therein that it is so secured nor by any conditions contained in the mortgage or deed of trust securing the same. Where a note is drawn to the maker’s own order it is not complete until indorsed by him.” We find nothing contradictory in the section. It defines a negotiable promissory note as an unconditional promise to pay and then states an exception to this general definition when the note is secured by a mortgage or deed of trust containing conditions. Exceptions of this character are common in statutes and appellant does not cite any authorities holding that they affect their constitutionality. The fact that some of the provisions of this section are repugnant to other statutes does not touch the question of the constitutionality of the section—the single question is—are they effective or do the other statutes control?