California Standard Finance Corp. v. Cornelius Cole, Ltd.

EDMONDS, J., pro tem. Plaintiff appeals from a judgment against it in an action brought by it upon a promissory note. The record shows that the note was made by Cornelius Cole, Ltd., a corporation, in favor of plaintiff, and was guaranteed by Cornelius Cole, Edwin Ca.rewe and Doris Kenyon Sills. Plaintiff had judgment against the corporation and Cole upon their default. On trial of the action against the other defendants, a jury returned a verdict in favor of plaintiff against Carewe, and in favor of Mrs. Sills against the plaintiff.

Appellant’s first point on appeal concerns the sufficiency of respondent’s answer. This answer presents what the pleader evidently intended to be denials of the allegations of plaintiff’s complaint, followed by six separate affirmative defenses. In the first of these defenses, respondent alleges upon information and belief that at the time of the execution of the note its maker owed the payee $10,000; that the payee knew that the business was insolvent and could not pay the amount of the indebtedness, or the note; that it therefore "engaged and induced Cornelius Cole, who was at that time president of Cornelius Cole, Ltd., a corporation, to act for plaintiff and to be plaintiff’s agent in obtaining the signature of defendant, Doris Kenyon Sills, to the guaranty” sued on. She then alleges that Cole, "so engaged and induced by plaintiff, and then and there acting as agent for plaintiff, secured this defendant’s signature to said guaranty” by misrepresenting the nature of the instrument. She also alleges that at the time her signature was secured by Cole he "so covered up and concealed the writing of said guaranty and rushed this defendant into signing the same, that this defendant had no knowledge that she was signing a guaranty or any instrument other than a statement as to the good character and integrity of the said Cornelius Cole”; that she was recovering from shock and nervous breakdown following the death of her husband; and that the appellant accepted the guaranty knowing the misrepresentations which had been made to her. Following these allegations respondent alleges the untruth of the representations, her reliance upon them, and that she would not have signed the guaranty had she known the true nature [576]of the instrument or the financial condition of the maker of the note.

The second affirmative defense alleges that the note guaranteed by the respondent was given by the maker without consideration for a preexisting debt, and that respondent received no consideration therefor. The next defense alleges that appellant, in accepting the note did not cancel or surrender certain security it had, and did not thereafter pursue its rights thereunder. In the fourth defense respondent alleges that the note was executed by Code under “menace and threats of duress”, in that he was told “that unless he executed said note on behalf of the defendant company and secured two guarantors acceptable to plaintiff on said note, that he would be prosecuted for a criminal offense”. For a further defense respondent again alleges most of the charges previously pleaded, and that appellant knew, before receiving the note signed by respondent as guarantor, that Cole had previously attempted to secure other persons as guarantors and had misrepresented the facts to them. The final defense urged is that appellant as part of the transaction in which the note was given, took over the business of the Cole corporation and collected money belonging to it which should have been applied as payment on the note but which was diverted to other purposes.