Soundlite Systems, Inc. v. Superior Court

Opinion

KINGSLEY, J. The real party in interest is a director of petitioner corporation. On August 28, 1972, petitioner issued to real party in interest its demand promissory note in the amount of $50,000. On February 28, 1973, petitioner issued another demand promissory note, payable to real party in interest, for the additional sum of $50,000.1 Thereafter, in November of 1975, the corporation arranged to borrow a substantial sum of money from City National Bank. In connection with that negotiation, real party in interest executed and delivered to the bank a subordination agreement, to which petitioner consented. The pertinent portions of that agreement are as follows:

“1. The Undersigned hereby postpones and subordinates any and all indebtedness of Borrower to the Undersigned to any and all indebtedness of Borrower to Bank, and agrees that no payment of or on account of the indebtedness so subordinated shall be made, or any security therefor given, unless and until all indebtedness of Borrower to Bank has been paid in full, and further agrees not to demand, receive or accept any such payment or security. The term ‘indebtedness,’ as used herein includes any and all obligations and liabilities of Borrower, including interest thereon, whether now or hereafter existing, absolute or contin[80]gent, secured or unsecured, due or not due, joint or several, and however arising.

“2. Should any payment, distribution or security or proceeds thereof be received by the Undersigned upon or with respect to any indebtedness of Borrower to the Undersigned prior to the satisfaction of all indebtedness of Borrower to Bank, the Undersigned shall forthwith deliver the same to Bank in the form received (except for endorsement of assignment by the Undersigned where required by Bank), for application of any indebtedness of Borrower to Bank, and, until so delivered, the same shall be held in trust by the Undersigned as the property of Bank.”

Pursuant to those arrangements, the bank has loaned to petitioner approximately $100,000.2 On July 15, 1976, real party in interest, having made demand on petitioner for payment of the two $50,000 notes, filed suit to collect them. Real party in interest then sought and, after opposition from petitioner, secured the issuance of a writ of attachment, in the amount of $50,000, running against all of the corporate property. Petitioner seeks from this court a writ of mandamus to vacate that attachment. We issued our alternative writ.3 The matter has been briefed and argued. We direct the issuance of a peremptory writ as prayed.