Commercial Nat. Bank of Los Angeles v. Catron, 409.

• Decision Date: 01 July 1931
• Docket Number: No. 409.,409.
• Citation: 50 F.2d 1023
• Parties: COMMERCIAL NAT. BANK OF LOS ANGELES v. CATRON et al.
• Court: U.S. Court of Appeals — Tenth Circuit

50 F.2d 1023 (1931)

COMMERCIAL NAT. BANK OF LOS ANGELES v. CATRON et al.

No. 409.

Circuit Court of Appeals, Tenth Circuit.

July 1, 1931.

Thomas Keely, of Denver, Colo. (Wm. V. Hodges, D. Edgar Wilson, and H. C. Vidal, all of Denver, Colo., on the brief), for appellant.

C. C. Catron, of Santa F?, N. M., for appellees.

Before COTTERAL, PHILLIPS, and McDERMOTT, Circuit Judges.

COTTERAL, Circuit Judge.

The Commercial National Bank of Los Angeles appeals from a judgment of dismissal on demurrer to an amended complaint, in a suit it brought against John W. Catron and Virginia F. Catron, on two promissory notes, dated at Los Angeles, Cal., May 24, 1923, payable with interest and attorneys' fees to plaintiff at its banking house in that city. The first cause of action declared on a note for $5,000, credited with $87.50 as interest, and a further payment of $1,664.25, disclosing on its face that it was secured by a trust deed of real property. The second was on a note for $1,123.01, with like interest and attorneys' fees.

The defendants demurred to each count. The ground of demurrer to the first was it stated no cause of action, because under a statute of California but one action is allowed for recovery of debt or the enforcement of a mortgage and it did not accrue until the security was exhausted and then only as a demand on a deficiency judgment. The ground of demurrer to the second count was that there was not a sufficient jurisdictional amount in controversy.

The demurrer was sustained. Thereafter the plaintiff filed an amended complaint, further alleging that the defendants had executed the trust deed (a copy of which is exhibited) to trustees of real estate in Los Angeles, that the property had been sold to plaintiff pursuant to the deed, and that the net proceeds realized were shown by the larger credit on the note. The second note was again pleaded, showing the amount due as before, except a credit of $19.65 as interest.

The defendants renewed their demurrer, asserting that the trust deed was of the nature of a mortgage, that the sale of the property under it was void, and the plaintiff held the property as an involuntary trustee as under a mortgage, wherefore by the statute there was no right of action on the note. The former jurisdictional objection was taken to the second cause of action. This demurrer was sustained and the action dismissed.

The statute invoked by the defendants is section 726, Code Civ. Proc., which provides: "There can be but one action for the recovery of any debt, or the enforcement of any right secured by mortgage upon real or personal property, which action must be in accordance with the provisions of this chapter. In such action the court may, by its judgment, direct the sale of the encumbered property (or so much thereof as may be necessary), and the application of the proceeds of the sale to the payment of the costs of court, and the expenses of the sale, and the amount due plaintiff. * * *"

Counsel for appellant rightly maintain that the statute relates only to a remedy in the courts of California and does not affect a substantive right of contract, sought to be enforced in other courts, and that it has no application to a suit upon a note secured by a deed of trust.

In Maxwell v. Ricks (C. C. A.) 294 F. 255, where there was a suit upon two notes, the question arose whether the remedy was affected by a mortgage security. It was conceded that in the courts of California but one action was allowed to the creditor, but it was held that the right to subject the property to a debt was not so connected with the common-law right of action thereon as to exclude a remedy in other courts and that the statute did not purport to and did not impair the obligation or the transitory character of suit in a court possessing jurisdiction over the parties and subject-matter. There were citations not only to cases in point but to controlling authority from the Supreme Court of the United States, and the remedy on the notes was sustained. The principles announced in that case are sound and they afford a satisfactory precedent for the disposition of this case in favor of the bank. Like rulings were made in Dolbear v. Foreign Mines Development Co. (C. C. A.) 196 F. 646, and in Mantle v. Dabney, 47 Wash. 394, 92 P. 134.

It may well be added it is a general rule that in the absence of a restrictive statute in force where suit is brought, a secured creditor has a remedy on either his demand or security, or on both, and that the law of...