Darrough v. Herbert Kraft Co. Bank

GRAY, C. A demurrer to the complaint, as amended, was sustained; plaintiff refused to further amend his complaint, and the judgment was entered against him, from which he appeals.

From the complaint and amendments thereto it appears that on May 13, 1893, the defendant Halley executed a note for one thousand and fifty dollars to the defendant Bank of Tehama County, and on the same date, to secure the payment of said note, said Halley executed a trust deed of certain real estate to the defendants Brown and Cahoone, as trustees. Thereafter, and on the 26th of April, 1895; Herbert Kraft recovered and docketed a judgment against said Halley for six hundred and eleven dollars and seventy-one cents. On April 29, 1895, this [274]judgment was assigned to defendant Kraft Company Bank. On the 13th of May, 1895, appellant purchased from Halley his equitable interest in said real estate for one hundred and twelve dollars, receiving a grant deed therefor, under which he has been in possession of said premises ever since. On May 15, 1895, appellant paid the balance due to the Bank of Tehama County on said note, amounting to upward of eleven hundred dollars, and the said trustees named in said deed of trust made a deed of reconveyance of sa'id real estate to appellant, and appellant had the same duly recorded and the note was marked paid by the bank and surrendered to Halley. Appellant paid this note and took this deed under a mistake of fact; he, knowing nothing of the judgment of Kraft, believed the premises to be free from that encumbrance. Had he known of the judgment he avers that he would have taken an assignment of the note and directed the trustees to sell the said real property to satisfy the same. Appellant seeks in this action to be treated as the equitable assignee of said note and to be subrogated +n all the rights that the Bank of Tehama County had therein and in said trust deed, to have the said real property sold to satisfy said note, and to have the rights under the aforesaid judgment subordinated to appellant’s rights under the trust deed and promissory note, and also to have the Herbert Kraft Company Bank enjoined from selling said real property under execution under said judgment. It appears further that the said real property is of less value than the amount claimed to be due to appellant as equitable assignee of said note.

I am of opinion that the facts stated bring the case within the principles laid down by this court in Matzen v. Shaeffer, 65 Cal. 81; Shaffer v. McCloskey, 101 Cal. 576; and Hines v. Ward, 121 Cal. 115, and that the demurrer should have been overruled. The above cases seem to hold that a junior lienholder shall derive no advantage over a senior lien where such senior lien has been paid off and canceled by the owner of the premises to which the liens attached without actual knowledge, on the part of such owner, of the existence of such' junior lien; and that it will be presumed that such owner made the payment for his own benefit and not for the benefit of'the junior lienholder, and for the protection of his interests equity will treat such