Title Insurance & Trust Co. v. Graham

McCOMB, J. Prom a judgment in favor of plaintiff after trial before the court without a jury in an action to recover the balance due upon a note after sale of real property, pursuant to the power contained in a deed of trust, defendants appeal.

There is also a purported appeal from an order denying a motion for a new trial.

Viewing the evidence most favorably to plaintiff (respondent), the facts are:

[661]February 2, 1932, defendants executed in favor of Western Mortgage Corporation a promissory note in the principal amount of $37,000 and also as security for the promissory note a deed of trust upon certain real property located in the city of Los Angeles. March 30, 1932, Western Mortgage Corporation indorsed and delivered the aforementioned promissory note and deed of trust to plaintiff pursuant to a trust agreement for first mortgage assignments between plaintiff and the Western Mortgage Corporation. The assignment of the promissory note and deed of trust to plaintiff was not placed of record nor did defendants know thereof until November 27, 1937.

Upon the deposit with plaintiff of the note and trust deed, Western Mortgage Corporation issued evidence of ownership of interests in said note and trust deed, which were called First Mortgage Assignments. These were sold to the public. The entire principal on the promissory note remained unpaid at the maturity date thereof, August 2, 1933. March 27, 1934, defendants entered into a release agreement with Western Mortgage Corporation, whereby defendants conveyed title to the property covered by the trust deed to a nominee of the Western Mortgage Corporation, in consideration of which the Western Mortgage Corporation released a second trust deed on the property and released defendants from any deficiency judgment that could arise by virtue of the promissory note above mentioned. November 27, 1937, plaintiff delivered to defendants a declaration of default and election to cause a sale to be made pursuant to the provisions of the trust deed. April 15, 1938, a sale of the property covered by the trust deed was made and July 13, 1938, the present action was instituted for a deficiency judgment.

Defendants urge for reversal of the judgment the following propositions:

First: The promissory note which is the basis of the present action was transferred to plaintiff by a restrictive indorsement and, therefore, the release of March 27, 1934, by Western Mortgage Corporation of defendants from any deficiency judgment was a valid defense to the present action.