Wood v. Franks

The Court. 1. The complaint is not subject to general demurrer. (Wood v. Franks, 56 Cal. 217.)

2. It is contended that plaintiff acquired no rights through the mortgage, because no consideration passed for the transfer of the note from Wood, Dutcher & Co. to the plaintiff; in other words, that the plaintiff was not the actual owner of the promissory note which the mortgage was given to secure, or of the indebtedness by it represented.

There was evidence tending to prove that prior to the making of the note by Heron to the partnership, Wood, Dutcher & Co., it was agreed, between plaintiff and other members of the firm, that plaintiff should take an assignment of the note, and that its amount should be charged against him. The note was indorsed to plaintiff before the mortgage, was executed; but he did not charge himself with it, on the books of the firm, until several [34]hours afterward. By reason of his promise that he would take the note and charge the amount of it against himself, he became liable to the firm for that amount when he, in the name of the partnership, indorsed it to himself. The entry in the firm books was but further evidence of an indebtedness to the firm already existing.

3. If the instrument, executed and. delivered by Heron to the plaintiff, had beeen made to secure only, first, the payment of the note to the Salinas City Bank, made by Heron and plaintiff, the latter as surety, and second, the debt from Heron to Wood, Butcher & Co., assigned to plaintiff, it would not have been an attempted “assignment,” within the meaning of the word as used in part ii., title iii., of the Civil Code; nor could , it have been an attempt to create a trust for the use of the mortgagor, such as is prohibited by the statute of frauds. (Dana v. Stanfords & Deitz, 10 Cal. 269.) The statutes were not intended to prevent a debtor, admittedly insolvent, from transferring his property directly to his creditor, either absolutely in payment of his debts, or as security by way of mortgage.

In Lawrence v. Neff, 41 Cal. 566, it was held that the instrument therein spoken of, if considered a mortgage, was valid as to creditors not referred to in it, at least to the extent of creating a lien in the amount of the debt due to the mortgagee, although it was given as appears on its face, to secure other creditors than the mortgagee. This much is involved in the decision of that case, even if those parts of the opinion which in terms declare that the instrument was not an “ assignment,” under section 39 of the Insolvent Law of 1852, should be disregarded as mere dicta.