American City Bank v. Zetlen

• Decision Date: 15 August 1967
• Citation: 253 Cal.App.2d 548,61 Cal.Rptr. 311
• Court: California Court of Appeals Court of Appeals
• Parties: AMERICAN CITY BANK, Plaintiff and Respondent, v. Robert ZETLEN and Jacqueline R. Zetlen, Defendants and Appellants. Civ. 31442.

Page 311

61 Cal.Rptr. 311

253 Cal.App.2d 548

AMERICAN CITY BANK, Plaintiff and Respondent, v. Robert ZETLEN and Jacqueline R. Zetlen, Defendants and Appellants.

Civ. 31442.

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

Aug. 15, 1967.

Hearing Denied Oct. 11, 1967.

Harold Rubins, Beverly Hills, for appellants.

Gerald Lipsky, Beverly Hills, for respondent.

FOURT, Associate Justice.

Robert and Jacqueline Zetlen appeal from a summary judgment granted on plaintiff's motion in an action to recover the balance of money due and owing on a promissory note.

American City Bank alleged in its complaint that on July 20, 1964, it loaned the Zetlens $122,850; that the entire amount, together with interest, was due and payable on or before May 15, 1965; that the promissory note had been secured by a deed of trust, but the bank had executed a full reconveyance before filing the complaint; that the unpaid balance at the time of filing the complaint was $6,296.84, plus attorney's fees.

The Zetlens, by unverified answer, generally denied the indebtedness and, as an affirmative defense, alleged that the deed of trust referred to in the complaint was a purchase money security instrument, hence the bank's claim for a deficiency was barred by Code of Civil Procedure, section 580b. The bank thereupon filed a motion for summary judgment, supported by the declaration of a bank officer, Joseph J. Digange, to which were attached copies of various loan documents and agreements which were executed by the Zetlens at the time the loan was made. The Zetlens filed no declarations in opposition to this motion nor did they challenge the genuineness or due execution of any of these documents. The Zetlens' motion to amend their answer to raise additional affirmative defenses, which are considered in this appeal, was denied by the trial court on the ground that the amendment did not state facts sufficient to constitute defenses to the bank's claim.

Appellants contend that the motion for summary judgment should have been denied because the documents disclosed a triable issue of fact as to whether the loan was completely satisfied by the reconveyance; the loan agreement did not give the bank the right to reconvey its trust deed, apply the proceeds of the take-out financing and then sue for a deficiency; and the bank's right to a deficiency is barred by Code of Civil Procedure, section 726. An examination of the record discloses no dispute between the parties regarding any material issue of fact; all questions presented to the trial court were purely questions of law and the judgment was proper under the circumstances.

The bank, on July 20, 1964, entered into a loan agreement with the Zetlens wherein the sum of $122,850 was to be loaned to them for a period of approximately 10 months to enable them to purchase certain commercial property. Appellants executed a promissory note agreeing to repay the entire sum on or before May 15, 1965, with monthly installments of interest beginning August 20, 1964, and providing that in the event interest installments were not paid when due the bank could elect to consider the principal sum immediately due and payable. The documents constituting the transaction are appended to the Digange declaration, including particularly the promissory note, the deed of trust, the bank's loan agreement specifying in elaborate detail the terms and conditions upon which the loan was made, an assignment executed by the Zetlens wherein they assigned to the bank as additional security all of their rights under a take-out commitment from Gibraltar Savings and Loan (hereinafter called Gibraltar), and an 'Irrevocable Power of Attorney' authorizing the bank to act as the Zetlens' agent in exercising the take-out commitment. These documents were executed concurrently and must be construed together as part of a single transaction.

Gibraltar in its take-out commitment agreed to lend the Zetlens the sum of $136,500 between April 15 and June 15, 1965, on the security of the commercial property which the Zetlens acquired with the proceeds of the bank loan. The Zetlens defaulted in the payment of monthly installments of interest due on the bank loan and finally in May of 1965 the bank elected to consider the entire obligation due and payable on account of appellants' default and chose to exercise its rights with respect to the take-out commitment from Gibraltar. Using the irrevocable power of attorney granted to it in connection with the loan agreement, the bank reconveyed its security interest in the commercial property so that a new first trust deed thereon could be conveyed to Gibraltar as security for its loan. The net proceeds of the Gibraltar loan were thereupon paid to the bank and credited to the Zetlens' account, leaving an unpaid balance of $6,296.84 on their loan. The trial court entered judgment for this sum according to the prayer, together with interest from the date of maturity and attorney fees as provided in the instrument.

Appellants emphasize that the printed trust deed form which they executed in favor of the bank provides that the trustee may, upon receipt of a request for full reconveyance, rely upon the truthfulness of the recitals therein contained to reconvey the property and destroy the note and trust deed. The printed form request for reconveyance utilized by the bank, in turn, contains a recital that 'All sums secured by * * * (the deed of trust) have been fully paid and satisfied; * * *.' Appellants contend that these...