Woman's Athletic Club v. Anglo California National Bank

DOOLING, J. Plaintiff corporation commenced a quiet title action against The Anglo California National Bank of San Francisco under its true corporate name and joined therein several corporations and individuals as defendants by fictitious names. The named defendant bank by answer and cross-complaint asserted an interest in the real property involved as successor trustee under a deed of trust securing a bonded loan of the plaintiff club. The appellant, American Agencies, Incorporated, a corporation, was served as a defendant sued by fictitious name. It filed an answer and cross-complaint in which it alleged that it was the owner of bonds [852]of the plaintiff club in the amount of $7,700, that these bonds were secured by the deed of trust aforementioned, that the bond payments were in default and that it had demanded of the trustee that it sell the property under the deed of trust and that said trustee had refused to act. It asked for a foreclosure and sale of the property to satisfy its claim under its bonds and those of all other unpaid bondholders. Plaintiff club moved for judgment on the pleadings against defendant and cross-complainant American Agencies, Incorporated. This motion was granted and from the judgment so entered against it American Agencies, Incorporated, appeals.

Respondent club takes the position primarily that appellant’s cross-complaint shows on its face that it has no proper case entitling it to cross-eomplain. Before considering this question we notice certain matters going to the sufficiency of the cross-complaint to state a cause of action in any event. A bondholder is entitled to maintain an action for foreclosure when his bonds are in default upon showing a demand upon the trustee to foreclose and his refusal to do so. (Citizens’ Bank v. Los Angeles etc. Co., 131 Cal. 187 [63 P. 462, 82 Am.St.Rep. 341]; California Safe etc. Co. v. Sierra etc. Co., 158 Cal. 690 [112 P. 274, Ann.Cas. 1912A, 729].) The cross-complaint shows that the trustee is not bound to proceed to sell unless the owners of 80 per cent of the outstanding bonds so demand. The failure of 80 per cent to make such demand does not prevent an individual bondholder from foreclosing. In Citizens’ Bank v. Los Angeles etc. Co., supra, the court said at pages 191-192 of 131 Cal.:

“Where the deed authorizes the trustee to proceed upon the written request of a majority of the bondholders, it is held in those cases that he cannot act without such petition. But the bondholder has a right of action upon showing that the trustee has refused to bring the suit, even though the trustee may have been justified, under the provisions of the deed, in refusing. If this were not so, it would . . . practically make it possible for a majority to deprive the minority of the remedy of foreclosure altogether.”