' Appeal from the District Court, Fourth Judicial District, City and County of San Francisco.
The facts are stated in the opinion of the Court.
By the Court, Sawyer, J. Appellant relies principally upon the cases of Lord v. Morris, 18 Cal. 484, and McCarthy v. White, 21 Cal. 501. Respondents insist that there are elements in this case which distinguish it from the cases cited, and withdraw it from the operation of the Statute of Limitations as construed in those cases. If mistaken in this, respondents’ counsel then earnestly insist that those decisions are erroneous, and urge the Court to re-examine the questions decided, and if found to be so, to overrule the cases.
Mr. Justice Norton, in McCarthy v. White, said: “ I concur in the decision of this case upon the ground that both the questions upon which there could be any argument upon principle have been decided by this Court in the case of Lord v. Morris, and that these are questions of that character that, once deliberately decided, and after having stood for several years as rules to govern transactions, they should not be opened merely to consider again the weight of conflicting decisions and opposing reasons.” These considerations operate with still greater force now. The questions arise upon the construction of a statute of very extended and general application, and frequently set up as a defense in this State. Lord v. Morris was decided three years ago. Three sessions of the Legislature have been held since the announcement of the decision, and no amendment of the Act upon the point decided has been made. Both the Courts and the Legislature have acquiesced in the principles announced in the decision. Important rights may in many instances have accrued under it, and for this reason we should not feel at liberty to overrule the case, even if we should arrive at a different conclusion from that attained by the learned Justices who decided it. Entertaining these views, we do not feel it incumbent on us to re-examine the reasons upon which the decisions are based.
[366]The right of action as to defendant Grogan was barred by the statute, as construed in Lord v. Morris, and McCarthy v. White, before referred to, and in Low v. Allen, ante, 141. The only question is whether the statute was allowed to run till the action was barred in consequence of a breach of trust on the part of Grogan, by which such a fraud was practiced by him upon the rights of Lent, as to render it inequitable to permit him to avail himself of the fruits of his breach of trust and fraud by setting up the bar as a defense. The facts are as follows:
On the 30th of July, 1853, defendant Shear executed to Hadder a note for two thousand dollars, payable three months after date, and secured it by a mortgage on the'lands described in the complaint, which note and mortgage were assigned to plaintiff on the 30th of May, 1854.
On the 22d of August, 1853, said Shear executed to defendant Grogan a note for four thousand dollars, payable six mouths after date, and secured it by a mortgage on the same land.
On the 1st of April, 1854, said Shear executed to plaintiff another note for two thousand five hundred dollars, payable one year after date, also secured by a mortgage on the land.
Soon after the purchase of the Hadder note and mortgage, plaintiff left California for Hew York, his permanent residence. Before his departure for Hew York he placed the two notes and mortgages Mn the hands of defendant Grogan, together with a power of attorney authorizing Grogan to collect the interest on said mortgages. The Court finds that soon afterwards, to wit: before the 16th day of October, 1854, qalaintiff “gave him (Grogan) power by parol to enforce the collection of said notes by foreclosure of the mortgages,” to which latter finding ajipellants except, as not being supported by evidence. Defendant Grogan retained the notes in his possession till February, 1858, collecting interest from time to time and remitting it as collected, charging commissions. But no interest appears from the evidence to have been collected or received by Grogan after the spring of 1855. Ho suit had been commenced to foreclose the Hadder mortgage, and no [367]written acknowledgment by Shear had been obtained or requested by Grogan when the four years had elapsed after the note fell due. Grogan, without giving notice to plaintiff, commenced suit to foreclose his own mortgage, on the 7th of December, 1857, before it was barred, but after the bar of the statute had attached to the Hadder note and mortgage. In February, 1860, Shear paid to plaintiff on the Hadder note, one hundred dollars, and fifty dollars more on the 5th of March, 1863, and on the latter date gave a written acknowledgment of such payments, signed by him.
Upon these facts found by the Court, the conclusion of law was deduced, “ that, in equity, the defendant Grogan is not permitted to set up the Statute of Limitations against the plaintiff” and that plaintiff is entitled to have the amount due on the Hadder mortgage first satisfied out of the proceeds ot the sale of the mortgaged premises, before the payment of the mortgage of defendant Grogan; and a decree was entered in accordance writh this conclusion, from which decree and the order denying a new trial, Grogan appeals.
There is no finding as a fact that Grogan intentionally allowed the plaintiff’s cause of action to be barred for the purpose of enabling himself to take advantage of the bar to acquire the first lien on the property, or that he acted in any respect with a fraudulent motive; nor does the testimony appear to us to justify such a finding.
We cannot perceive that the facts of this case present a stronger case-against defendant, Grogan, than that of McCarthy v. White et al. presented against Kelly. In some respects that case presented stronger equities in favor of the plaintiff than this; for in that case the plaintiff was ignorant of the adverse interest of his agent, Kelly, whereas in this, the plaintiff was perfectly aware of the mortgage of Grogan, and that not only the principal, but the interest, was longer in arrears than on his own. Besides, there is nothing in the findings, or even in the evidence to show that any discretion was given to Grogan as to bringing suit or enforcing payment, or that he had any instructions, or made any promise to bring suit with[368]out further consulting with plaintiff. The finding only extends to the power to collect. On the contrary, upon looking at the evidence, which is all in the record, to see its bearing upon points not embraced in the finding, we find from the letters of the plaintiff, and evidence in which there is no conflict, that plaintiff had himself the question of the expediency of foreclosing under consideration. In a letter to Grogan,.plaintiff stated that he would express his views upon the question in his next, and suggested that Grogan should urge the prompt-payment of his own (Grogan’s) interest. This is the last that is heard of him in the evidence. It is not found, nor does the evidence show, that plaintiff relied upon Grogan to take legal measures to enforce the collection of the notes, or that it was incumbent on Grogan to do so. The note was some seven months overdue when plaintiff purchased it and when it was left with Grogan. Although long overdue, it was evidently purchased with an intent to allow it to run at interest. It was not left with Grogan for immediate collection. He was not an attorney at law. But the object, as expressed in the power of attorney, was “ to demand, collect and receive the monthly interest as the same shall become due and payable.” Had plaintiff expected Grogan to institute suit, he would scarcely have tolerated a delay of years, without taking the matter out of his hands—certainly not without remonstrance. It would seem from the evidence that whatever “power” Grogan may have been invested with, plaintiff exercised his own judgment as to whether payment should be enforced or not. He had been in California, purchased the note and mortgage while here, and he must be presumed to know the law with reference to the limitation of actions. Like the case of McCarthy v. White, there is no finding as to the duties or undertakings of Grogan; the finding is limited to the fact that he had “power in writing” to collect the interest, and “power by parol ” to collect the principal; but it is not clear upon what evidence the latter finding was based, unless it was inferred from the acts of Grogan. There is no direct evidence to support it, while there is the positive testimony of Grogan [369]to the contrary; and soon after giving the written power he left the State and does not appear to have ever returned. The case is clearly within the principle of McCarthy v. White, on the question growing out of the agency.
But there is another view which seems to be entitled to weight. The plaintiff has sustained no injury in consequence of the neglect of defendant Grogan to commence suit against Shear. Shear has not set up the Statute of Limitations, and the plaintiff has obtained, by his decree foreclosing the mortgage as to Shear, precisely the same relief as against Shear, and Shear’s interest in the land, that he would have obtained had the suit been commenced within four years after the right of action accrued. The postponement of the Hadder mortgage to Grogan’s, by reason of the bar of the Statute of Limitations, results from the failure of Grogan to commence suit against himself, and not his failure to commence suit against Shear, or to procure a written acknowledgment of indebtedness from Shear. Upon the principles of the decision of Lord v. Morris, 18 Cal. 484, and Low v. Allen, (ante,) neither an acknowledgment of the indebtedness in writing by Shear, nor the commencement of a suit to foreclose the Hadder mortgage against Shear would have prevented the running of the statute as against Grogan, unless he also should be made a party. The Hadder mortgage was due on the 3d of November, 1853, and a right of action to foreclose the mortgage against Grogan—whose mortgage bears date August 22, 1853 —accrued on that day. A suit against Shear would not prevent the statute from running upon a cause of action against Grogan, even if dependent upon the same instrument. The mortgage is not a conveyance under our system; it gives no estate in the land, or interest available otherwise than by suit of foreclosure, judgment and sale. In other words, it only creates a lien, a cause of action to be enforced against the land. Under the decisions in Lord v. Morris, and Low v. Allen, the mortgage is an instrument within the meaning of the Statute of Limitations, distinct from the instrument constituting the evidence of the debt; and under the nineteenth section of the [370]Statute of Limitations, if not under the fourteenth, the cause of action founded upon the mortgage is barred in four years, the same time as the cause of action founded upon the note. On the theory of these cases, when the mortgagor conveys the equity of redemption, (if, indeed, this term may be used under our system to designate the estate of his mortgagor) the debt and the security, and consequently the causes of action founded on them, respectively, became separated—the cause of action upon the note continuing against the maker and mortgagor, and the cause of action upon the mortgage against the property following the property, and attaching itself to the grantee. Henceforth no act of the mortgagor, and no proceeding against him alone, can affect the cause of action following the land conveyed and attaching itself to the grantee, or can affect such grantee. And upon this theory defendant, Grogan, set up the bar to the cause of action existing against * himself, and not the bar to the cause of action existing against Shear, even though the action may be barred as to both.
Obtaining a written acknowledgment of the indebtedness from Shear, or commencing suit against him would, therefore, have been of no avail to prevent the bar of the statute as to Grogan, without Grogan himself becoming a party to the renewal of the contract, or to the proceedings for foreclosure. Unless it was clearly the duty of Grogan, as agent of Lent, to commence suit against himself to foreclose the Hadder mortgage, there was no such fraud on his part as would preclude him from availing himself of the defense set up. Undoubtedly, if he undertook the trust and assumed the duty of enforcing the demand against himself, or even generally, and the plaintiff relied on him to do it, he was bound to execute the trust in good faith. But the Court has not found, and in our opinion the evidence would not justify a finding, as a fact, that he assumed this duty, or that plaintiff relied on him to enforce collection at all, either as against Shear or himself, or that there was any fraud. We are not satisfied, from the evidence, which is all in the record, that the discretion was left with Grogan. To our minds, the contrary is the more reason[371]able inference from the evidence. Shear was a cousin of plaintiff, and this may be the reason of his leniency. The interest on the note due him was payable monthly, and more than two years had elapsed since the last payment of interest before the bar of the statute attached. He was informed by Grogan of the exact condition of affairs—knew of Grogan’s mortgage, and that the interest on it was longer in arrears than on his own—never gave any instructions to foreclose, but on the contrary had the expediency of foreclosing himself under advisement the last time he was heard from, so far as is shown by the evidence. It seems impossible to come to any other conclusion from the evidence in the record, than that Lent exercised his own discretion and did not expect or rely upon Grogan to commence suit even against Shear, and much less against himself without special instructions. But the Court has not passed upon these points, or found that there was, in fact, any fraud on the part of Grogan. Without a direct finding upon points, then, and without some evidence more satisfactory than is found in the record, we cannot conclude that there was a fraudulent neglect on the part of Grogan. The presumption will not be lightly indulged, that the plaintiff, under the circumstances disclosed by the record, and knowing, as he did, the adverse interest of Grogan, would employ Grogan as agent to prosecute a suit against himself, or that Grogan would accept such a trust, or that plaintiff would rely upon him to perform such service without specific instructions, or a special agreement to do so.
The case of McCarthy v. White was not decided till after the judgment was entered in this case, consequently the Judge who tried it did not have that decision before him.
The judgment must be reversed, but that the question as to fraudulent neglect of duty on the part of Grogan may be more fully investigated, we think there should be a new trial—and it is so ordered.
Mr. Justice Shatter, having been of counsel, did not participate in the decision of this case.
AI Brief
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Holding. The court held that an agent is not precluded from asserting the Statute of Limitations as a defense against his principal absent a specific finding of fraudulent intent or a clear duty to initiate legal action against himself. The court further reaffirmed that a mortgage constitutes a distinct cause of action subject to the statute of limitations, independent of the underlying debt.
Issues
Whether an agent's failure to initiate foreclosure proceedings against himself on behalf of a principal constitutes a fraud that estops the agent from asserting the Statute of Limitations.
Whether a mortgage constitutes a separate cause of action from the underlying debt for the purposes of the Statute of Limitations.
Disposition. reversed and remanded
Quotations verified verbatim against the opinion
“There is no finding as a fact that Grogan intentionally allowed the plaintiff’s cause of action to be barred for the purpose of enabling himself to take advantage of the bar to acquire the first lien on the property”
“The mortgage is an instrument within the meaning of the Statute of Limitations, distinct from the instrument constituting the evidence of the debt”
“The judgment must be reversed, but that the question as to fraudulent neglect of duty on the part of Grogan may be more fully investigated, we think there should be a new trial”