Tripler v. MacDonald Lumber Co.

MELVIN, J.

Defendant appeals from the judgment and from an order denying its motion for a new trial.

Plaintiff is the trustee in bankruptcy of Little & Walpert, a corporation. He sued to quiet title to certain real property in the county of San Mateo. MacDonald Lumber Company (a corporation) answered, setting up a promissory note executed by Fannie E. Little and Walter J. Little, her husband, and a mortgage on the property here involved to secure payment of said note. Defendant also pleaded that in another action between the Littles and the MacDonald Lumber Company there had been a judgment that the said promissory note was a good and valid promissory note constituting a good, valid, and binding obligation upon Fannie E. and Walter J. Little, and that the said mortgage was a good, valid, and legal one and a subsisting lien upon the property.

The cause was duly tried and the court found, among other things, that plaintiff became trustee in bankruptcy of the estate of Little & Walpert, Inc., a corporation, on May 4,1910; that on the 19th of June, 1907, Burlingame Realty Company, a corporation, then the owner of the real property which is the subject of this litigation, entered into a written agreement with Fannie E. Little, by which the said corporation agreed to sell and Mrs. Little promised to buy the land at a total purchase price of one thousand eight hundred dollars, plus certain interest and taxes; that on June 29, 1910, this agreement was transferred by Mrs. Little to plaintiff as trustee in bankruptcy of the estate of Little & Walpert, Inc.; that up to said date last specified Walter J. Little, president of Little & Walpert, paid $1,346.10 on account of the purchase price" of the land; that said money was drawn without authority from the funds of the corporation; that the corporation received no consideration for it; and that no charge was made against any person

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or persons whomsoever for the sums so withdrawn. It was also found that on August 29,1910, plaintiff paid $674.30, the balance due on the purchase price of said .property to the successor of the Burlingame Realty Company’s interest and received a deed which was placed of record October 27, 1910; that between June 19, 1907, and August 29, 1910, Walter J. Little caused a building to be erected on the property at a cost of approximately four thousand dollars; that this building was paid for, in the same manner as payments had been made on Mrs. Little’s behalf on the purchase price of the land by moneys drawn without authority and without charge from the funds of Little & Walpert, Inc.; that none of the moneys drawn for either purpose from the treasury of said corporation had ever been repaid; that on February 26., 1910, the Littles gave their promissory note to MacDonald Lumber Company for $3,315, secured by their mortgage on said real property, which said mortgage was duly recorded in the following month; that the note and mortgage were executed to.secure the payment of an existing indebtedness then owned and held by MacDonald Lumber Company against Little & Walpert, Inc., and MacDonald Lumber Company, in consideration of the execution and delivery of the note and mortgage extended the time of payment of the indebtedness for a period of two years; that the mortgage was executed within four months prior to the adjudication of Little & Walpert, Inc., as a bankrupt; that the lumber company had knowledge of the insolvency of the other corporation; that there was no valuable consideration for the execution of the mortgage; that the said mortgage was not accepted by the MacDonald Lumber Company in good faith to the existing creditors of Little & Walpert, Inc., but said mortgage was executed by the mortgagors with intent to prefer the lumber company over the other •creditors of the insolvent corporation. The court found also that the Littles on the eleventh day of March, 1910, brought an action whereby they sought to have the note and mortgage canceled; that plaintiff had actual knowledge of the pendency of said action; that said action had.been prosecuted to a final judgment between the parties thereto; and that by said judgment it was determined “that said promissory note, was a good and valid promissory note, and that the same constitutes a good, legal and binding obligation of Fannie E. Little and Walter J. Little, her husband, and that the aforesaid mort