LOEB v. CHRISTIE (1935)

This is an appeal by defendant from a judgment in favor of plaintiff after trial by the court without a jury.

The complaint alleges an unconditional guarantee by defendant, executed May 19, 1930, of a promissory note payable to plaintiff. It is conceded that the note was secured by a trust deed and that plaintiff had not resorted to the power of sale given therein.

Defendant relies for reversal of the judgment on the following propositions:

First. An action will not lie against a guarantor of a secured obligation until the security has been exhausted.

Second. The economic depression constituted an equitable defense to the action.

Third. Section 7 of chapter I of an act of the extra session of the 1934 California Legislature, effective September 15, 1934, commonly known as the Moratorium Act of 1934, is a bar to the present action.

Defendant's first contention is untenable, in view of the holding in Withers v. Bousfield, 42 Cal.App. 304, at page 319, 183 P. 855, 862, where in a suit upon a contract guaranteeing the payment of a promissory note secured by a trust deed, the court said:

“This case presents no different aspect from the foregoing, and numerous other cases, decided by the courts of last resort of this state, in which it has been held that, regardless of the necessity for exhausting the security given, before resorting to the personal liability of the maker of a note, nevertheless an indorser, or guarantor, may be sued upon his personal liability before, and without, such action having been taken.”

Turning to the second question, the economic depression does not constitute an equitable defense to a suit to enforce an obligation. California Securities Company v. Grosse (Cal.Sup.) 46 P.(2d) 170.

Appellant's final contention may not be sustained for the reason that the Moratorium Act of 1934 (St. 1934, Ex.Sess., p. 1) does not apply to obligations incurred prior to the effective date of the act. To hold otherwise would impair the obligation of a contract and render this act unconstitutional. Bankers Life Company v. Canterbury (Cal.App.) 50 P.(2d) 83; Brown v. Ferdon (Cal.App.) 46 P.(2d) 218. In the instant case the guarantee, which is the basis of the act, was executed May 19, 1930, while the act relied upon as a defense did not become effective until September 15, 1934.

The judgment is affirmed.

McCOMB, Justice pro tem.

We concur: CRAIL, P. J.; WOOD, J.