COPP v. MILLEN (1937)

Because of doubt in the minds of some of the members of this court as to the correctness of the conclusion reached by the District Court of Appeal in this cause (65 P.(2d) 362) it was transferred to this court for further consideration. After such examination and study we are satisfied with the conclusion reached, and therefore adopt as the decision of this court the opinion prepared by Mr. Associate Justice pro tempore White for and as the opinion and decision of this court:

‘This is an action to foreclose a mortgage, dated September 10, 1929, which was executed by defendant Vellzora Millen to secure a note for $1,458.41 in favor of appellant as wife of Andrew J. Copp, Jr. The mortgage was recorded October 15, 1929, with instructions that when recorded it be returned to Andrew J. Copp, Jr. The defendant Vellzora Millen became the owner of the real property in question, under grant deed from said Andrew J. Copp, Jr., on July 15, 1923; the latter at the same time taking back from the purchaser, as security for the purchase price, a mortgage and trust deed covering the property in the respective amounts of $1,250 and $885.58. Both of these last-named instruments were recorded September 8, 1923. Thereafter, on November 1, 1923, the defendant Vellzora Millen entered into a contract with respondent Winfield Russell, under the terms of which Vellzora Millen agreed to sell the property to respondent Russell for the sum of $3,500, payable $750 upon execution of the agreement and $35 or more monthly until the entire sum of $3,500 had been paid. This agreement was never recorded. Respondent Russell went into possession of the property about January 1, 1924, remaining in possession thereof continuously, with the exception of several months in 1929, when he was in the East, but during his absence the property was rented by him. Respondent Russell complied with the terms of his contract and made payments thereunder in full, completing said payments on May 4, 1931.

‘On May 7, 1927, Andrew J. Copp, Jr., the holder of defendant Vellzora Millen's notes, mortgage, and deed of trust, assigned the same to his wife, Cora Lord Copp, appellant herein. The record indicates that Mrs. Millen failed to make her payments, and, when the statute of limitations was about to bar the two notes, appellant, in September, 1929, agreed with Mrs. Millen to renew said notes. Accordingly, on October 15, 1929, appellant caused a satisfaction of said mortgage and a reconveyance under said deed of trust to be recorded, taking from defendant Mrs. Millen on the same day a new note, which appellant contends was for the unpaid balance due on the purchase price notes, in the amount of $1,458.41; this last-mentioned note being secured by a mortgage on the real property here in question which was recorded October 15, 1929. The satisfaction and reconveyance, it will be noted, were recorded nearly six years after the execution of the unrecorded contract of sale and purchase between defendant Mrs. Millen and respondent Russell. The recitals in the release of the mortgage and the reconveyance under the deed of trust declared that the debts due under the mortgage and deed of trust were paid. Appellant produced testimony at the trial that such recitals were made by mistake and inadvertence on the part of the parties signing the instruments, and that the new note of September 10, 1929, upon which this lawsuit was predicated, was for the balance remaining unpaid on the original two notes, and was executed for the purpose of granting to defendant Mrs. Millen an extension of time within which to liquidate said obligations. The action now before us, instituted May 25, 1934, was commenced to foreclose the last-named mortgage of September 10, 1929. The trial court rendered a personal judgment in favor of plaintiff and against defendant Vellzora Millen, the maker of the note, but denied to plaintiff the right to foreclose her mortgage as against defendant Russell, decreeing that the right of defendant Russell to possession and ownership of the real property in question was superior to and prior to any rights of plaintiff by virtue of her last-named mortgage, of September 10, 1929. From the judgment rendered in favor of defendant Russell plaintiff prosecutes this appeal.

‘In urging a reversal of the judgment, appellant presents several grounds, but we shall first consider her claim that the trial court erred in holding that at the time she satisfied the original mortgage and trust deed and accepted the note and mortgage sued upon, she had actual notice of the unrecorded contract of sale of the property in question between defendant Mrs. Millen and respondent Russell, and that said contract was binding upon appellant. We do this because, in our opinion, if such holding of the trial court finds legal support in the evidence, it is determinative of this appeal. Section 1217 of the Civil Code declares: ‘An unrecorded instrument is valid as between the parties thereto and those who have notice thereof.’ In the matter before us we have the simple and familiar case of the owner of real property executing two conflicting instruments affecting it, both for a valuable consideration; the latter of which instruments in date of execution is recorded before the former. The statutory rule in such cases is that the right of the holder of the second instrument, first recorded, is superior, unless the holder of the second instrument had notice of the existence of the rights of the holder of the first, unrecorded, instrument. (Randall v. Allen, 180 Cal. 298, 299, 300, [180 P. 941]). It is apparent from the foregoing facts that the all-important and controlling point in the case was that of notice on the part of appellant of the rights of respondent under his prior but unrecorded sale agreement. If appellant had such notice, then respondent's contract would be superior to the former's mortgage, otherwise it would not.

‘We have examined the record and find therein evidence of sufficient substantiality * * * to amply support a finding that appellant did have actual notice of respondent's rights under his contract. * * * That respondent had no actual notice of any rights or interests claimed by appellant or her husband is manifest from his testimony, as follows: ‘The first that I heard that Mr. Copp claimed an interest in this property was when I made my last payment on my contract.’ And again, ‘I do not know anything about the execution of this mortgage or its recordation. I never recorded my contract; it was left at the bank. * * * I never received any word from either Mr. Copp or Mrs. Millen about the claim made here, until after I demanded my deed.’

‘The foregoing conclusions at which we have arrived make it unnecessary to discuss or decide other points raised.’

The judgment appealed from is affirmed.

PER CURIAM.