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GREENZWEIGHT v. TITLE GUARANTEE & TRUST CO. ET AL.*
This action is one for declaratory relief. It is sought thereby to have canceled a trust deed reconveyance and the indorsement of payment upon the trust deed note, and also to have both instruments reinstated in full force and effect. There is practically no dispute as to the facts.
Plaintiff deposited with the Belvedere State Bank in escrow his executed request for reconveyance of the trust deed and note mentioned. The escrow involved the refinancing of a loan upon defendant Levy's dwelling. Plaintiff held the then existing incumbrance thereupon, a trust deed, defendant Title Guarantee & Trust Company being the trustee thereof, which it was contemplated was to be paid off by funds derived from a new loan to be made by defendant Fidelity Savings & Loan Association and likewise secured by a trust deed. To consummate the refinancing, an escrow was opened at Belvedere State Bank into which plaintiff deposited his trust deed, his trust deed note, and an executed request for reconveyance by the Title Guarantee & Trust Company, all pursuant to a letter of instructions to said bank to which reference is hereinafter made. About the same time defendant Fidelity Savings & Loan Association transmitted to said State Bank, as said escrow agent, its instructions with reference to securing the new loan upon the said dwelling, and, on November 25, 1930, similarly delivered to the said bank its check in the sum of $2,425.87 to be used in accordance with its given instructions. Defendant Levy and his wife executed and delivered to the said bank in said escrow a new trust deed and a trust deed note in favor of defendant Fidelity Savings & Loan Association and also deposited therein a check for $161.98, being the excess amount required to make up the payment due the plaintiff. The Belvedere State Bank had a separate escrow department, which department carried a separate commercial checking account with the Belvedere State Bank. The checks so received were credited to the escrow account in the commercial department of the Belvedere State Bank. This bank was not a member of the Los Angeles Clearing House Association, but it maintained a commercial account with the Bank of America through which it cleared its checks. The checks so received were sent to the Bank of America for clearance. They were paid, and credit was given by that institution to Belvedere State Bank account. At this time there was standing to the credit of Belvedere State Bank with Bank of America a deposit of over $18,000. On the 3d day of December, 1930, Belvedere State Bank delivered the reconveyance executed by plaintiff, and caused the trust deed note to be canceled and the reconveyance recorded. It also caused to be recorded a deed of trust against said dwelling in favor of defendant Fidelity Savings & Loan Association. Thereafter it transmitted to said defendant its new trust deed note secured by the deed of trust, and on December 13, 1930, mailed to the plaintiff the check of the escrow department drawn on said department's account in the Belvedere State Bank for the amount due him under his instructions. December 13th was a Saturday. Plaintiff received the check the evening of December 15th, and deposited it with his bank for collection on the morning of December 16th. On the following day, before the check had cleared, the Belvedere State Bank was closed by order of the superintendent of banks. At the time of its closing, the Belvedere State Bank had in its vaults the sum of $8,250.73. No part thereof, however, was held for plaintiff, but was subject to the use of the closed bank for its general business, including the payment of presented checks upon depositors' accounts. On the same day the Bank of America exercised its banker's lien on all the credits of the Belvedere State Bank on deposit with it.
It was plaintiff's claim at the trial that the Belvedere State Bank did not hold for him the moneys, as required by his instructions, at the time it delivered the reconveyance and canceled the note and trust deed, that therefore such delivery and cancellation were void and of no effect, and that his note therefore still remained in force and he retained his first lien upon the property as against the trust deed of defendant Fidelity Savings & Loan Association. Judgment went in favor of plaintiff. A motion for a new trial was made and denied. This is an appeal from the judgment.
Plaintiff, respondent herein, presents the same argument here as he did below in support of his judgment. The argument is based upon the fact that plaintiff's escrow instructions did not authorize the Belvedere State Bank to hold or accept checks in lieu of money, but, on the contrary, they provided money alone was to be held. The law is well established that a delivery by an escrow agent contrary to the terms of a deposit in escrow is void and of no force or effect. Los Angeles City High School District v. Quinn, 195 Cal. 377, 234 P. 313. Appellants do not question this rule, but they contend that the escrow instructions permitted the Belvedere State Bank to accept checks for sums of money to be paid to it, because known usages are incorporated in every contract without specific mention thereof being made therein. The sole issue therefore, as agreed by the parties, is, Did Belvedere State Bank violate the terms and conditions of the escrow agreement? In other words, did the bank at the time it made use of plaintiff's documents hold for him the required sum of money? Plaintiff's instructions on this subject provided: “These documents you are authorized to use when you can hold for me the sum of $2,450.00, and interest on $3218.84, from August 1st, 1930, to date money is received by me.” The law is also well settled that parties who contract as to a subject–matter concerning which known usages prevail incorporate such usages in their agreements by implication (Luckehe v. First Nat. Bank of Marysville, 193 Cal. 184, 223 P. 547), but by express Code provision stipulations which are necessary to make a contract conformable to usage are implied only in respect to matters concerning which the contract manifests no contrary intention. Civ. Code, § 1655; Andrews v. Waldo, 205 Cal. 764, 770, 272 P. 1052. In other words, custom or usage cannot vary the terms of a written instrument. The instructions given by plaintiff were clear and unequivocal. They required the bank to hold the money for plaintiff. Moreover, there was no evidence of custom or usage in this respect received or offered, and the pleadings were silent thereon. Assuming, however, that the court might take judicial notice of the fact that checks and drafts are usual and ordinary means of transacting business and transferring money in all business transactions (California Stearns Co. v. Treadwell, 82 Cal. App. 553, 559, 256 P. 242), still the fact remains that the escrow instructions called for the holding of the money and not a credit, and this express provision could not be varied by custom or usage. Here the credit of the Belvedere State Bank proved to be not even a true credit. It was subject to a banker's lien which was in fact exercised and the purported credit was wiped out.
The trial court found that the condition of the escrow, upon which the deposit of plaintiff had been based, had not been complied with at the time the Belvedere State Bank delivered the reconveyance, and it rightfully canceled the new note and trust deed. The evidence supports the finding that the money was not held as required by the instructions, which did not authorize the escrow holder to collect the money and cause it to be deposited in a bank where it had a doubtful credit, and which credit subsequently became exhausted before the check could be collected. The effect of such a transaction was to subject plaintiff's money to the obligations of the Belvedere State Bank, and this in the face of the positive instructions that the money was to be held by it. Had the State Bank accepted checks and then cashed them and held the money, and then delivered the instruments, the instructions would have been complied with. This, as indicated, it did not do, and the court properly so found. A deed delivered by an escrow agent in violation of the conditions under which it was deposited in escrow vests no title in the grantee, nor in an innocent third person to whom the property is subsequently transferred. Such delivery is void, and has no force or effect whatsoever. Los Angeles City High School District v. Quinn, supra; Gould v. Wise, 97 Cal. 532, 32 P. 576, 33 P. 323; Promis v. Duke, 208 Cal. 420, 281 P. 613; Brown v. Wilson, 89 Cal. App. 764, 265 P. 351; Bingham v. Taylor (C. C. A.) 12 F.(2d) 15.
The judgment is affirmed.
TYLER, Presiding Justice.
We concur: KNIGHT, J.; CASHIN, J.
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Docket No: Civ. 8962.
Decided: January 10, 1934
Court: District Court of Appeal, First District, Division 1, California.
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