Berrington v. Williams

• Citation: 52 Cal.Rptr. 772,244 Cal.App.2d 130
• Court: California Court of Appeals
• Decision Date: 09 August 1966
• Parties: Howard T. BERRINGTON, Plaintiff and Respondent, v. Halsey L. WILLIAMS, Defendant and Appellant. Civ. 29996.

Page 772

52 Cal.Rptr. 772

244 Cal.App.2d 130

Howard T. BERRINGTON, Plaintiff and Respondent, v. Halsey L. WILLIAMS, Defendant and Appellant.

Civ. 29996.

District Court of Appeal, Second District,

Division 1, California.

Aug. 9, 1966.

Halsey L. Williams, in pro. per.

W. Claude Fields, Jr., Los Angeles, for respondent.

LILLIE, Justice.

Plaintiff sued defendant, maker of a promissory note payable to Crocker-Citizens National Bank to recover the amount his assignor, as guarantor, was compelled to pay the bank on the note after defendant defaulted. Defendant appeals from order granting motion for summary judgment (under § 437c, Code Civ.Proc.) and for summary judgment.

Complaint on Note Paid by Guarantor, After Default By Payor seeks recovery of the principal sum of $11,000, interest, costs and reasonable attorney's fees. It alleges that on December 3, 1963, defendant executed his promissory note to the bank for $11,000 due and payable on April 1, 1964 (Exh. A attached to Complaint); at defendant's request and without consideration therefor, and solely to assist defendant in procuring the loan from the bank, Burdick F. Williams, defendant's brother and plaintiff's assignor, signed the note as endorser and guarantor; on April 1, 1964, the note became due, and demand was made by the bank on defendant who refused to pay the same, whereupon Burdick was compelled to and 'did pay said note' to the bank on April 1, 1964; no part of this has been paid by defendant to Burdick, and on April 28, 1965, he assigned 'said note and all of his rights thereunder to plaintiff'; up to the time of assignment the assignor duly performed all conditions called for in the note; 'no part of said note' has been paid either to plaintiff or plaintiff's assignor although demand has been made; and 'by the terms of the note' defendant became liable for all expenses in the collection thereof, attorney's fees and costs.

The answer admits all but one of the basic allegations of the complaint; defendant denies that reimsursement is now due. Defendant admits the execution of the note on December 3, 1963; that he borrowed the money to relieve 'financial pressure' on him caused by his 'divorce situation,' and the bank would not have loaned him the funds without the signature of the guarantor Burdick F. Williams; that Burdick paid the note to the bank and he (defendant) 'has an obligation to the guarantor to reimburse him in the amount of the principal and interest on the said note signed by (him) and made good by the guarantor' (Par. IV(6)); and that Burdick has made assignment to plaintiff--But defendant alleges 'that no part of said obligation (to reimburse the guarantor) has become due, that the proceeds from the sale of (certain) lots were understood by and between defendant and guarantor to furnish the funds to liquidate said obligation of the note, and that there has not as yet been any proceeds from the sale of said lots.' (Answer, par. VII(1).) In explanation, defendant further alleges a series of previous notes resulting in the promissory note herein sued upon, his reasons for borrowing the money and a private oral agreement between him and the guarantor, who was aware of his depleted financial condition, whereby the guarantor would pay the note to the bank for him when the same became due and later he 'defendant) would reimburse him out of the proceeds of the sale of three lots; that accordingly, he will reimburse Burdick or his assignee as soon as the lots have been sold; and that efforts have been made to sell them but without success.

Defendant's declaration in opposition to plaintiff's motion for summary judgment sets out 'the chain of notes' culminating in the present promissory note, the circumstances under which the notes and renewals were made and the terms of his agreement with Burdick that the latter would accept reimbursement from him out of proceeds of the sale of certain lots.

The declaration of Burdick F. Williams (guarantor and plaintiff's assignor) in support of motion for summary judgment, alleges that he was induced without any consideration to guarantee defendant's note, and that the bank loaned defendant money without spelling out in the note any conditions or qualifications or funds from which payment was to be made; that the bank relied solely on the general credit of defendant and, in the event of defendant's default, on his general credit; that any agreement or scheme whereby he was to look for reimbursement from proceeds of the sale of any real estate was unknown to him; that at no time was it ever agreed by the bank or by him, as guarantor, that the loan was to be paid from proceeds of the sale of any of defendant's lots; that for valuable consideration he made an assignment to plaintiff; that defendant has had offers by third persons to purchase the lots but defendant has refused to sell them; and that the sale of the lots is not and has never been a consideration for the payment of the note, nor the source from which payment was to be made either to the bank or to him.

The complaint, plaintiff's moving papers and respondent's brief clearly show that his action is on the promissory note. He argues that 'the note sued on was a negotiable promissory note. It carried no conditions or qualifications whatsoever as to the methods by which payment was to be made'; thus, any agreement between his guarantor and defendant relative to the funds out of which reimbursement is to be made, is no defense. (Resp.Br. p. 3). It is apparent that plaintiff's recovery on the note is predicated on the theory that he is a holder standing in the position of the bank, his assignor having paid off the note. Appellant, appearing in propria persona, offers no assistance to this court simply urging a reversal that the matter may be heard on the merits.

The remaining rights of an endorser and guarantor on a promissory note, under the circumstances herein alleged, are those given by the law of suretyship which include contribution from other sureties, if any, and reimbursement from the principal debtor. The surety is not a purchaser and cannot sue on the instrument as a holder. (Yule v. Bishop, 133 Cal. 574, 579, 62 P. 68, 65 P. 1094; Bailes v. Keck, 200 Cal. 697, 700, 254 P. 573, 51 A.L.R. 930.

When a surety pays a debt for which he is liable as such surety, he thereby extinguishes the debt, and his remedy is not on the original obligation but against the principal upon his implied obligation to reimburse him. (Johnson v. Mortgage Guarantee Co., 117 Cal.App. 416, 420, 4 P.2d 208; W. H. Marston Co. v. Fisheries Co., 201 Cal. 715, 722, 258 P. 933; Merner Lumber Co. v. Brown, 218 Cal. 136, 140, 21 P.2d 590.) This was firmly established in 1901 in the leading case of Yule v. Bishop, 133 Cal. 574, 62 P. 68, 65 P. 1094; 'In this state, therefore, is (sic) seems to be well settled, both by the language of the code, and by the decisions of this court under it, that full payment and performance by the surety extinguishes the primary obligation; that new rights and liabilities then arise,--upon the part of the principal, to reimburse the surety for the moneys expended, with legal interest, though not according to the terms of the primary obligation, and, upon the part of the surety, the right to an action in Assumpsit upon the implied promise of the principal to make him whole. Since the principal obligation is thus extinguished, it cannot be with us, as it may be elsewhere, that the original obligation is kept alive, and passes to the surety by equitable assignment or subrogation.' (P. 579, 62 P. p. 70.) (See W. H. Marston Co. v. Fisheries Co., 201 Cal. 715, 722--723, 258 P. 933; Bailes v. Keck, 200 Cal. 697, 700, 254 P. 573; Booth v. Friedman, 82 Cal.App. 174, 179, 255 P. 222.) Thus, no right of action on the principal obligation ordinarily will pass to the surety since it is deemed extinguished by...