Farmers' Etc. Bank v. De Shorb , 137 Cal. 685 ( 1902 )

Action to foreclose a mortgage. Plaintiff has judgment, from which and from the order denying a new trial this appeal is taken. The court found, as to the note and mortgage, that on March 24, 1896, J. de Barth Shorb and appellant, who were husband and wife, executed their joint and several promissory note to plaintiff for the sum of $164,000, and at the same time jointly executed the mortgage upon which this action is brought, for the purpose of securing the same; that the note and mortgage were executed freely and voluntarily by appellant, and for a valuable consideration; that appellant did not execute the note as surety for her husband, but it was intended to be, and was, the joint and several note of the said J. de Barth Shorb and appellant; and the same has not been paid nor any part thereof. The above findings support the judgment, and the evidence supports the findings.

The main contention of appellant is, that she signed the note and mortgage as surety for her husband, and by reason of undue influence, and that plaintiff took the note and mortgage with notice that she was such surety, and that the presumption as to undue influence gave notice to and binds the plaintiff. The court not only found against the contention, but we think the evidence fully supports the finding. It appears from the evidence and findings that appellant and Hellman, the president of plaintiff, had been friends from early youth. The husband of appellant, J. de Barth Shorb, was practically without property at the time of his marriage with appellant, and the property which was controlled and managed by appellant and her husband during their marriage and prior to his death was principally her separate property. Hellman, as president of plaintiff, extended to appellant and her husband many favors in the way of loaning them money, at appellant's urgent request. All the mass of letters and correspondence contained in this record shows that appellant always had the utmost confidence in the friendship, integrity, and business ability of Hellman. In March, 1884, appellant and her husband went to the business office of plaintiff and executed their joint and several note for $25,000, which amount was paid to them for the purpose of enabling the husband and plaintiff to purchase certain stock in the San Gabriel Wine Company. This note, with interest due, and an overdraft due, by appellant's husband, afterwards amounted to $28,000, for which a new joint and several note was executed and the old note canceled. In October, 1887, there was due plaintiff for sums advanced to appellant's husband, and in satisfaction of a previous note of the husband, the sum of $51,898.23, for which amount the appellant and her husband executed their joint and several note, and, to secure the same, they executed a deed of trust to Hellman for a portion of the lands involved in this suit. When appellant and her husband came to plaintiff's bank and the latter note was presented to appellant for her signature, and before she signed, she retired with her husband to a window and in a low tone of voice protested to her husband against signing the note, saying that she had already involved herself on his account, and that she was fearful of the consequences of signing the note. Her husband said to her that she might do as she pleased; that he had promised Hellman that she would sign it; that if she did not sign it she would have to take the consequences, and that he could not live to bear the disgrace. The above conversation was not in the presence or hearing of Hellman or any officer of plaintiff, and plaintiff never had any notice or knowledge of such conversation. After the conversation, and without further objection, appellant signed the note, and as security conveyed to Hellman a tract of land. She acknowledged the deed to this land before a notary public, separate and apart from the husband, as certified by the notary, who made her acquainted with the contents of the instrument, and she acknowledged that she executed the same and did not wish to retract such execution.

In February, 1889, the appellant and her husband executed a mortgage upon certain real property — including a large part of that here involved — to secure a loan negotiated with Balfour, Guthrie Company by the husband for $60,000. In December, 1887, the appellant individually procured a separate loan from plaintiff, and agreed that certain collaterals held by plaintiff should be additional security for said sum. In March, 1890, in settlement of the prior notes and indebtedness, appellant and her husband executed their joint note for $85,000, and at the same time executed a mortgage to secure the same upon the property described in the decree herein.

Without going into further details as to other transactions, it appears that in March, 1892, the appellant and her husband executed to plaintiff their joint note for $117,500. The items going to make up the said note were as follows: —

"The note of herself and J. de Barth Shorb, of date March 17, 1890 ............................. $85,000.00 Note of the appellant, Mrs. Shorb, dated September 26, 1891 .............................. 3,000.00 Note of appellant, dated September 18, 1891 ....... 500.00 Interest on the above ............................. 3,230.14 ------------ Total indebtedness discharged ................. $91,730.14 Balance left to her credit ........................ 25,760.86 ------------ Total ......................................... $117,500.00"

This note was secured by mortgage upon the property described in the decree of foreclosure. Finally, on March 24, 1896, the statement of the amount due by appellant and her husband to plaintiff was as follows: —

"Note of herself and husband of March 1, 1892, secured by mortgage ............................. $117,500.00 Note of July 13, 1893, of Mrs. Shorb .............. 5,000.00 Note of Mrs. Shorb, dated June 12, 1895, secured by certain collaterals .................. 10,800.00 Note of Mrs. Shorb for ............................ 36.99 Interest on above sums ............................ 47,627.00 ------------ Total indebtedness paid off ................... $180,963.99 Balance left to her credit with plaintiff after paying the above ................................ 1,673.00 ------------ Total ......................................... $182,636.99"

For the above sum two notes were given, — one for $18,636.99, secured by collaterals, and the one upon which this action is brought for $164,000, secured by the mortgage herein described. It will thus be seen that the transactions leading up to the note in contest cover many years.

In April, 1896, J. de Barth Shorb died intestate, leaving no estate. This action was commenced in January, 1899. No claim is made as to the fact hat the amount of the note is the correct sum that was due by appellant and her husband to the plaintiff at the time of the execution of the note and mortgage. It was never claimed by appellant during the lifetime of her husband nor prior to the commencement of this action that she executed the note and mortgage by reason of the undue influence of her husband. It is now claimed that she executed the note by reason of undue influence, of which the plaintiff had notice, and that she was a surety as to a large part of the note, of which fact the plaintiff also had notice. In other words, the contention of appellant is, that the joint and several note executed by herself and husband to plaintiff was executed by her as surety, and under such circumstances that it is void as to the indebtedness of her husband. If such rule should be declared law, it would make a radical change in the business of banking and loaning money. If appellant's contention is correct, the joint note, signed by the husband and wife for money advanced to either or both of them, with no notice to the party advancing the money of any coercion or undue influence on the part of the husband, would nevertheless be void as to the wife unless the holder of the note should prove affirmatively that the wife was not in any manner influenced by the husband to sign the note. The party advancing the money might act in the utmost good faith, and yet if the wife should testify that while alone with her husband, and with no knowledge of the party advancing the money, she was unduly persuaded to sign the note or other security, the transaction might be declared void. The money might be retained for years, and used for the support and education of the family, and yet the wife escape liability by swearing to facts which could not be controverted. Such is not the law. To allow such rule would be to treat a woman as an infant or an non compos mentis. It is the policy of our law to treat a married woman as competent to contract, and of equal dignity with man as to her separate property and her dealings with it. In the case at bar there is no claim that the appellant was not of sound mind. On the other hand, she had the control and management of a large estate. She borrowed in her own right large sums of money and drew checks into the hundreds of thousands of dollars. Her husband does not appear to have been a very successful business man, but she never during his lifetime repudiated any act of hers by which he was benefited. She will not now be allowed to do so under the circumstances of this case. It is provided in the Civil Code (sec. 2832) as follows: —

"One who appears to be a principal, whether by the terms of a written instrument or otherwise, may show that he is in fact a surety, except as against persons who have acted on the faith of his apparent character of principal."

In Farmers' National Gold Bank v. Stover, 60 Cal. 392, this court in construing the above section, said: —

"The allegation of the answer is, that the defendants executed the note as sureties of Stover, and for his accommodation, which fact the plaintiff well knew. That is not an issuable averment that the defendants contracted with the bank at the time of the execution and delivery of the note in the capacity of sureties for their co-obligor. The mere fact that the bank knew that the relation of principal and surety existed between them and Stover does not in itself show that the bank consented to deal with them in the capacity of sureties. According to the face of the note, the bank dealt with them as principals only; for as such they apparently executed and delivered the note. If in fact the bank dealt with them in a different capacity, — as sureties, and not as principals, — it is incumbent upon them where they seek under section 2832 of the Civil Code to set up as defense to an action upon the note that they executed it as sureties, to aver and prove that the payee of the note not only knew of the fact of suretyship between them and their co-obligor, but consented to deal with them in that capacity. That all the parties to a contract must agree upon the same thing in the same sense. (Civ. Code, sec. 1580) In the absence of issuable averments of fact showing such a contract between them and the plaintiff, the pleading is demurrable." (See, to the same effect, Harlan v. Ely, 55 Cal. 340; Chase v. Evoy, 58 Cal. 353; Leeke v.Hancock, 76 Cal. 129; California Nat. Bank v. Ginty, 108 Cal. 148. )

It is the well-settled rule that a married woman may mortgage her separate property for the debts of the husband. (2 Kent's Commentaries, marg. p. 167, note a; Connecticut Life Ins. Co. v.McCormick, 45 Cal. 580; Goad v. Moulton, 67 Cal. 539; Bull v.Coe, 77 Cal. 56;¹ Swan v. Wiswall, 15 Pick. 126.)

It is earnestly urged that as section 158 of the Civil Code makes transactions between husband and wife subject to the general rules which control the actions of persons occupying confidential relations with each other, as defined by the title on trusts, and as section 2235 of the Civil Code, under the title on trusts, provides, "All transactions between a trustee and his beneficiary during the existence of the trust, or while the influence acquired by the trustee remains, by which he obtains any advantage from his beneficiary, are presumed to be entered into by the latter without sufficient consideration, and under undue influence," that this case comes within the true intent and meaning of the said sections. The case, in our opinion, does not involve a transaction between a trustee and his beneficiary within the meaning of section 2235 It involves a transaction between plaintiff on the one side and the parties who occupied confidential relations with each other on the other side. The plaintiff was not a trustee, nor a beneficiary, within the meaning of said section. The transactions between husband and wife are not material here, unless we hold that plaintiff was a trustee or beneficiary. If it be conceded that the section applies to the note and mortgage in controversy here, and that appellant is the beneficiary, then the transaction is presumed to be without consideration and under undue influence. There is no question but that the consideration is fully proven.

This dispenses with all presumptions as to the consideration. If we then begin with the presumption that the transaction was the result of undue influence, the finding of the court is, that appellant executed the note and mortgage freely and voluntarily, and the finding is fully supported by the evidence.

There is no pretense that Hellman, or any officer of the corporation, knew of any undue influence. There is no suggestion that at the time the note involved here was given that appellant signed it with reluctance. The statement being made to her of the entire indebtedness of herself and husband, and the amount being placed to her credit, after she voluntarily signed the note and mortgage, entirely overcomes any presumption of undue influence. Appellant does not say that at the time of the making of this note she was acting under any undue influence. The conversation she had with her husband at the window, when she objected to signing, relates entirely to the $51,000 note. This was in October, 1887, nearly nine years before the note in controversy was given, and nearly twelve years before this suit was commenced. Even as to the $51,000 note the evidence of appellant does not show the exertion of such undue influence as destroyed her will and made the transaction void. She testified that her husband was a man of strong will; that after signing the $51,000 note she never made any serious objection to signing anything, "because I had become so much involved that I felt that I had to do all that I could — that I had assumed those things, or had signed those notes, and we — he was trying to gain time all the time, hoping to pay off all the indebtedness in his own way, and wanted my assistance to help him do so. . . . To me he was always pleasant — always pleasant to me. My husband was never anything but a gentleman to me. . . . He never coerced me or forced me to do anything, except in the most gentlemanly and persuasive manner. Whatever he asked me to do he persuaded me to do."

In the face of this testimony we are asked to presume that the transaction in question was entered into under undue influence. To so hold, would be to hold that if a husband in a gentlemanly and persuasive manner asked his wife to join him in a note to a bank, and the bank knew nothing as to the husband's "gentlemanly" request, the note would be void for undue influence.

The court found that the trust deed to one Alexander was never delivered with intent to take effect, and was never recorded. The finding is fully supported by the evidence. The facts that the father of appellant, when objections were made to the trust deed, made a different one conveying the property to appellant absolutely, that the trustee never entered into possession or made any claim to the property, that appellant always enjoyed it and claimed it as her own, show that the idea of the deed of trust was never carried out.

The findings cover all the material issues.

We have examined the other alleged errors, but find nothing that would justify a reversal of the case.

The judgment and order are affirmed.

¹ 11 Am. St. Rep. 235.