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District Court of Appeal, Second District, Division 1, California.


Civ. No. 11923

Decided: September 20, 1940

Hill, Morgan & Bledsoe, Charles P. McCarthy, and William L. Baugh, Jr., all of Los Angeles, for appellant. William H.B. Haymond, Philip Grey Smith, and Judd Downing, all of Los Angeles, for respondent.

On September 27, 1926, respondent Metropolitan Trust Company of California, as trustee, and the National Thrift Corporation of America, hereinafter referred to as corporation, entered into a written trust indenture, designated as Trust No. PT–409, the purpose of which was to create and maintain “a trust and trust deposit for the equal and proportionate benefit and security of the holders of (corporation's) bonds and contracts and annuity agreements” which it was selling as investments and to secure to the respective holders thereof the fulfillment by said corporation of all its obligations thereunder.

Said trust indenture provided that the “trust deposit and pledge of moneys, or of interest-bearing first mortgages owned and held by it (corporation) upon improved real estate”, should be maintained “in an amount of principal thereof which is and at all times shall be not less than one hundred ten (110) per cent of the total aggregate amount of the principal of its said bonds and the cancellation value of its contracts (less loan or loans thereon by the corporation) and the redemption value of its annuity agreements, executed and outstanding, as therein respectively in said trust agreement declared and fixed”. Further, that corporation should maintain the trust estate held by the trustee in an amount of principal not less than one hundred ten (110) per cent of total aggregate principal of its outstanding obligations less the total amount of subsisting loans.

It was also provided that upon the execution of corporation's bonds, contracts and annuity agreements, the trustee should identify them when requested, provided “Corporation shall not then be under any default hereunder known to the Trustee”, with respect to the maintenance of the trust estate.

On February 1, 1927, corporation sold to one Ward Esplin a participation certificate for $1,000, secured by the trust indenture and duly identified by and registered with trustee thereunder. On November 1, 1933, before the commencement of the instant action, said certificate together with a purported assignment thereof to appellant National Reserve Company of America, dated July 8, 1933, were delivered to the defendant Mortimer, who had been appointed receiver of said trust estate on November 18, 1932, and to whom had been delivered the assets of said trust estate. On said November 1, 1933, E.S. Walker, as agent of Ward Esplin, the assignor, filed with said receiver a creditor's claim for $835.10 in connection with corporation's participation certificate.

This action was instituted on September 8, 1936, by appellant, as assignee, on behalf of itself and all other holders of participation certificates and contracts of corporation to recover damages from the trustee for breach of the trust indenture in that, in violation of the terms thereof said trustee knowingly “identified and certified certificates to be issued by” said corporation at various times prior to November 18, 1932, when there was on deposit in the trust estate collateral security of a face value less than 110 per cent of the total cancellation value of the participation certificates which corporation had issued and which were outstanding.

By stipulation it was agreed at the opening of the trial that before considering any other issue, evidence should be taken “as to whether any right to sue upon the cause or causes of action asserted by plaintiff in these proceedings was ever vested in plaintiff”. Said issue was determined in favor of respondent trustee, the court finding in effect that said Ward Esplin did not sell or assign his contract to appellant National Reserve Company of America and that said appellant was not the owner thereof.

The court also found: “VII. That no cause nor causes of action sued upon by the plaintiff herein was, or were, ever assigned or transferred to the plaintiff prior to the filing of this action, and never have been assigned or transferred to it or owned by it. That plaintiff has never had any interest in any such cause or causes of action in any capacity whatsoever. That plaintiff never had any right to sue upon any cause or causes of action asserted herein. That plaintiff does not have any right or title upon which to maintain any cause or causes of action asserted herein, and has no right to maintain any such cause or causes of action.”

From the judgment which was thereafter entered pursuant to such findings of fact, National Reserve Company of America, the alleged assignee, prosecutes this appeal.

The assignment which forms the basis of appellant's alleged interest entitling it to maintain the instant action reads as follows:

“Whereas, the undersigned having purchased of the National Reserve Company of America one of its investment certificates, hereinafter referred to as certificate, and

“Whereas, the undersigned is the owner of National Thrift Certificate ?36B Class B Series F having an estimated value of $835.10, and hereinafter referred to as property, and

“Whereas, the undersigned is desirous of having the cash value of said property applied, at the earliest possible moment, as a cash interest-bearing credit on said certificate,

“Now, Therefore, in consideration that National Reserve Company agrees to give an immediate conditional credit (not a credit on my certificate) of 100 per cent of the above estimated value, and of the company's further agreement to convert said credit to a cash interest-bearing credit on the certificate immediately as received by it in the form of cash or its equivalent in acceptable first mortgages, and that it further agrees to immediately pass to the cashable interest-bearing credit on the said certificate all such amounts received by it from or out of said property, the undersigned hereby assigns and transfers, for the purposes hereinabove stated, and for none other, all of his right, title and interest of, in and to the hereinabove described property, and hereby constitutes, appoints and empowers any duly qualified officer of said National Reserve Company in his name, place and stead, and as his attorney in fact, for said purposes.

“Provided, that, at any time upon the determination and conclusion that it is or will be unable to collect further proceeds out of said property, said National Reserve Company may, or upon the written request at any time of the undersigned shall, reassign and transfer to the undersigned, said property depleted by the amount of the aforesaid receipts arising out of said property and credited as aforesaid to said certificate, whereupon this agreement shall become automatically terminated and cancelled. Executed and acknowledged by Ward H. Esplin * July 8, 1933.”

Appended to said assignment is a receipt of said thrift certificate executed by National Reserve Company of America stating, among other things, “which property is this day delivered to the undersigned under an express agreement respecting the handling and return of same.” (Emphasis added.)

In the words of appellant:

“The only issues tried in the court below and before this court on this appeal are:

“First: Whether said Ward Esplin, to whom said certificate was originally issued, transferred and assigned said certificate to this plaintiff, and, second: Whether the plaintiff at the commencement of this action had the right to sue upon the cause of action set forth in the complaint.”

Appellant urges that the assignment to it was complete, unlimited and unconditional and that the cause of action sued upon passed by such assignment as incidental thereto.

Respondent maintains that the assignment was solely for the limited purpose of giving the appellant authority to collect on behalf of Esplin such dividends as he might receive on his certificate through a liquidation of the trust collateral, and consequently the cause of action was not assigned.

“An assignment will, ordinarily, be interpreted or construed in accordance with the rules of construction governing contracts generally, the primary object being always to ascertain and carry out the intention of the parties.

“This intention is to be derived from a consideration of the whole instrument, and is to be sought in the words and language employed; and, if the words are free from ambiguity and express plainly the purpose of the instrument, there is no occasion for interpretation. Where necessary, however, the words must be interpreted in the light of the particular subject matter, and surrounding circumstances may be considered in order more perfectly to understand the intention of the parties. Thus, the object to be accomplished through the assignment, and the relations and conduct of the parties may be considered in construing an assignment.” 6 Cor.Jur. Secundum, Assignments, § 83, p. 1138.

“The assignment must be construed as a whole, and words or phrases which are wholly inconsistent with its nature or the main intention of the parties are to be rejected. But the language of an assignment must be construed with reference to the facts and circumstances of the particular case. If the intention of the parties is fairly evident and they have actually given expression to it, no matter how inapt that expression may be, effect must be given to their intention. And the circumstances under which an assignment was made may be considered in order to determine its meaning and scope, where the terms are uncertain or ambiguous.” 3 Cal.Jur. 282.

It is apparent from the terms of the document here under consideration that the assignor Esplin had purchased from appellant one of its investment certificates and that he owned a National Thrift certificate having an “estimated value of $835.10”, which he desired to have applied immediately as a cash interest-bearing credit upon the newly purchased investment certificate. With this purpose in mind, and in consideration of appellant's proceeding to collect such amounts as it was able from the receiver of the National Thrift Corporation and crediting the same upon the investment certificate, said assignor assigned and transferred “for the purposes hereinabove stated and for none other”, all of his right, title and interest of, in and to the said National Thrift certificate. After appointing appellant his attorney in fact, assignor then provided that at any time when appellant determined and concluded it was or would be unable to collect further proceeds from the receiver on account of the National Thrift certificate, appellant should reassign and transfer the same to the assignor depleted by the amounts so received and credited on the investment certificate. Moreover, appellant receipted for and accepted the National Thrift certificate “under an express agreement respecting the handling and return of the same”.

The language of the instrument manifests a conditional delivery of the National Thrift certificate and an intention to pass to appellant the sole right to receive such proceeds as it could obtain from the receiver of the National Thrift Corporation of America and to credit the same upon the purchase price of the investment certificate. Nothing could be clearer than that appellant accepted the assignment upon the understanding that it was to be restricted in its operation to the collection of the natural proceeds of the National Thrift certificate, and that, failing in this, appellant should reassign and return the said certificate to the assignor.

This being so, the cause of action herein sued upon, namely, damages for breach of the original trust agreement which breach occurred prior to the execution and delivery of the assignment in question, was not acquired by appellant under the terms of the said assignment.

For the reasons stated, the judgment is affirmed.

YORK, Presiding Justice.

We concur: DORAN, J.; WHITE, J.