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

STEIN et al. v. SIMPSON et al.

Civ. 17598.

Decided: November 21, 1950

Joseph D. Taylor, and John W. Hill, Los Angeles, for appellant. Cobb & Utley and Ernest R. Utley, all of Los Angeles, for respondents.

This is an appeal from the judgment also from an order directing the payment of money. The appeal from the order appears to have been abandoned. The briefs refer to the judgment only.

It is contended on appeal that the evidence does not sustain certain findings; that plaintiffs ‘have failed to perform the condition of the judgment’ and, ‘that the judgment should be amended so that plaintiffs will clearly obtain no relief except upon the condition of doing equity, to wit, payment of $28,911.87’ which, it is contended, ‘the maxim ‘He who seeks equity must do equity’ requires.'

The record fails to support appellant's contention. Judge Curler who tried the action, in a memorandum opinion clearly sets forth the facts and the law which are supported by the record. It is as follows:

‘In plaintiffs' first cause of action they seek to set aside the sale of their home made under the trust deed on the ground that before the sale was made the trust deed and chattel mortgage had been discharged by tender of payment; ask for exemplary damages; and in addition ask for $100 and attorney fees as provided for by section 2941 of the Civil Code. In the second cause of action plaintiffs seek to have the sale set aside on the ground that it was not fairly made, and in addition ask that the Court determine the amount legally due to defendant, Russell Brown Simpson, and in the third cause of action seek to have their title quieted and defendants enjoined from evicting them and that plaintiffs be declared to be the legal owners of all the property free and clear of any liens and encumbrances of any kind in favor of defendants. This third cause of action was dismissed as to defendant, Realty Title Company, Ltd., a California Corporation, and defendants Hollywood State Bank, a California Corporation, and Harry Bassett, filed disclaimers.

‘Plaintiffs were transacting two businesses in Los Angeles County under the names of ‘Metal Service and Supply’ and ‘Coast Craft Distributors', and these businesses were in need of additional capital. They desired to borrow $20,000 from Russell Brown Simpson, one of the defendants, and were told by him that the only way he would make the loan was for Mr. Stein and his wife to make two notes, each in the sum of $22,000, one secured by a trust deed on their home and the other secured by a chattel mortgage on their furniture and furnishings; that these two notes should be made in favor of some friend of plaintiffs and that defendant would then buy the two notes from this person for the sum of $20,000, which money the friend could turn over to plaintiffs. They were told by Simpson that the two notes would be considered as only evidencing one loan of $22,000. The Steins had a friend by the name of Simons and were able to get him to act as the intermediary, and on the 24th of July, 1946, the plaintiffs made and executed two promissory notes, each in the sum of $22,000, one of which was secured by a trust deed on the home of plaintiffs, and the other was secured by a chattel mortgage on plaintiffs furniture. These notes, trust deed, and mortgage were made payable to one Jerome Simons, a friend of plaintiffs, and by him were assigned to Russell Brown Simpson, one of the defendants in this case. The notes were payable six months after date and bore interest at the rate of 7 per cent per annum. By a non-negotiable writing it was agreed that the two notes represented only one obligation, to-wit, the sum of $22,000. The notes, trust deed, and mortgage were prepared by defendant Simpson or under his direction and the whole transaction took place in the offices of the Hollywood State Bank in Los Angeles. After Simons had received the money he returned it over to plaintiffs. On or about the 1st of October, 1946, an extension agreement was executed by the plaintiffs and was given to the defendant Simpson. Subsequent to the execution of the extension agreement plaintiffs paid $8,000 on account of the obligation. The notes, trust deed, and mortgage in favor of Simpson became in default and on the 31st of March, 1947, the defendant Simpson acting by and through the Realty Title Company, Ltd., a corporation, his agent, the holder of the escrowed notes, trust deed, and mortgage, filed a notice of default and election to sell. The sale of the property was noticed for July 23, 1947, but at Simpson's directions was continued until September 10, 1947. Prior to the notice of sale plaintiffs advised the trustee i.e. Realty Title Company, Ltd., a corporation that they stood ready to redeem the property and asked how much was due on it and were informed the total amount was something less than $17,000. This amount in cash was tendered on behalf of plaintiffs to Simpson's agent, Realty Title Company, Ltd., a corporation, prior to the time of the sale but was refused. At the sale one Harry Bassett, the father-in-law of plaintiff Jack R. Stein, bid $50,000 on behalf of plaintiffs for the real property upon which defendant Simpson had a trust deed and was the highest bidder. At this time defendant's agent, Realty Title Company, Ltd., demanded that the bidder exhibit to them the $50,000 in cash and upon being shown that he only had $17,000 the said title company declared all bids off and stated that the sale would start over. However, before again going ahead with the sale, the said title company announced that the defendant Russell Brown Simpson had just purchased the first trust deed on the property from the Hollywood State Bank and that the sale was being made for the amount represented by both trust deeds. Bassett then demanded that the sale be postponed for twenty-four hours to permit him to get the necessary amount to bid on the property but this was refused and after bidding the $17,000, which was the total amount he had in cash, he was out-bid by defendant Russell Brown Simpson who became the purchaser of the property for the sum of $18,000. The property upon which the trust deed stood was worth $50,000 or more and it appears that a very reasonable rental for said property would have been $500 per month. On the 12th day of August, 1946, in order to better secure the Hollywood State Bank upon the trust deed they held plaintiff Jack R. Stein made an assignment to said bank in which it was alleged that he was doing business under the names of ‘Metal Service and Supply’ and ‘Coast Craft Distributors'. By said assignment he assigned to them ‘all moneys now due or to become due from any source whatsoever, all accounts receivable, book accounts, claims, debts, and rights of action, whether matured or nonmatured, limited or nonlimited, absolute, fixed, or contingent, arising out of the operation of the above businesses or either of them or otherwise.’

‘In his defense defendant Russell Brown Simpson not only denied that there existed any unfairness on his part in connection with the sale, but in addition, claims that plaintiffs in this action are not the real parties in interest by reason of the assignment made to the Hollywood State Bank, and that the action should be instituted by that bank. The Hollywood State Bank was made a party defendant by plaintiffs and filed a disclaimer denying that they had any interest. If the assignment to the Hollywood State Bank conveyed to them the chose in action or right of suit which the plaintiffs are exercising in this action then the mere fact that they filed a disclaimer would not revest title to said chose in action in plaintiffs. According to the language of the assignment all rights of action, whether matured or nonmatured arising out of the operation of either of plaintiffs' businesses or otherwise were assigned to the Hollywood State Bank. From the bare wording of the assignment it might appear that it was the intention of the parties that all rights of action regardless of the manner in which they might have accrued were intended to be assigned. However, upon a careful examination of the assignment it is plainly evident that it was intended that only rights of action which might arise out of the operation of plaintiffs' businesses were assigned. There was no attempt by the assignment to cover any real estate and it would not seem logical to contend that although plaintiffs' home was not covered by the assignment that any suit involving its repossession or the quieting of title to the same was so covered. Under such a construction had the Hollywood State Bank forced a sale of plaintiffs' home under their trust deed, even though such sale might have been conducted in a manner that would violate all the legal rights of plaintiffs, nevertheless, they could not have brought suit to set aside the sale because the right to bring the action would have been assigned to the Hollywood State Bank. Also, unless the assignment is interpreted to cover only rights of action arising out of the operation of plaintiffs' businesses it would cover personal injuries received by plaintiffs, and clearly the intention of the assignment was not to include such matters.

‘Defendant, Russell Brown Simpson, in having plaintiffs make the trust deed, chattel mortgage and two promissory notes in favor of Jerome Simons, instead of himself did this so that he could claim that he bought them from Simons, and thus evade the operation of the usury law. That the whole transaction was in violation of this law, is transparently clear. On or about the 28th of June, 1947, there was tendered to Simpson on behalf of plaintiffs in full settlement of the promissory notes, trust deed, and chattel mortgage the sum of $12,978.84. Whether or not the check with which the tender was originally made was good or not is immaterial in as much as the employee of the Hollywood State Bank, Catherine Sutter, Manager of the Collection Department, testified that she showed the check to defendant Simpson together with the letters which accompanied it and offered to give him in lieu of the personal check, if that was not satisfactory, either a bank check or green-backs. The tender was not accepted by defendant Simpson as he claimed that it was not as much as was owed him at the time. Shortly before July 10, 1947, Bassett on behalf of the plaintiffs offered to pay Simpson the actual money he had paid out plus 5 per cent interest which was also refused by Simpson. On or about the 23rd day of July, 1947, a cash tender in the sum of $13,000 was made on behalf of the plaintiffs to the Realty Title Company, Ltd., the agent of Simpson, and was by them refused, the reason for the refusal, as stated by the title company, was they were solely interested at the time in conducting the sale, nor did the title company specify the amount that was necessary for the full payment of the indebtedness. During the latter part of August, 1947, a fourth tender was made on behalf of the plaintiffs Steins in the sum of $16,000. This tender was also made to the title company and was refused with the simple statement that it could not be accepted. On the 10th of December, 1947, just prior to the sale of the property a tender of $17,000 cash was made to the defendant Simpson which was refused.

‘Coming back to the points involved in the suit, in the first place, the tender of payment which was made on the 28th day of June, 1947, stopped the running of all interest. Furthermore there is no reason shown why it was necessary for the defendant Simpson to buy the trust deed of the Hollywood State Bank to protect this loan. The sale was conducted in what would appear to be a very unfair manner and the property was sold for many times less than its value which would justify the Court in this case in declaring the sale null and void.

‘The effect of the tender made on behalf of plaintiffs not only stopped the running of interest, but in addition, extinguished the lien of defendants trust deed and also the lien of the chattel mortgage. Therefore, when defendants paid off the trust deed of the Hollywood State Bank he held no lien against the property to which it could be added, and therefore, in this respect he was merely a volunteer. In this suit plaintiffs appeal to the equity side of the Court in asking that the sale be set aside and it would appear that it would only be equitable in granting that relief to hold that the defendant is entitled to repayment to him of the $18,000 paid to the Hollywood Bank. In addition defendant is entitled to $12,000 being the balance without interest of the money he loaned to the plaintiffs.

‘Plaintiffs ask $10,000 exemplary damages but the Court feels that the provisions of Section 3294 of the Civil Code do not authorize such relief. Also defendant asks for $300 on the theory that this relief is contemplated by Section 2941 of the Civil Code. It is the Court's opinion that this relief is not justified in cases where a lien is extinguished by operation of law. Plaintiffs are also entitled to an injunction restraining defendant Russell Brown Simpson from attempting to oust them from the peaceful possession of the home, the title of which is involved in this suit. In addition to holding the sale void as being unfair and unequitable it is the Court's opinion that plaintiffs are entitled to a decree quieting their title, free from any lien or incumbrance of any kind in favor of defendants herein.

‘The Court further holds that the tender of payment made to defendants operated to discharge the chattel mortgage which they held.’

The judgment and order are affirmed.

DORAN, Justice.

WHITE, P. J., and DRAPEAU, J., concur.