Jonathan Manor, Inc. v. Artisan, Inc.

• Citation: 56 Cal.Rptr. 14,247 Cal.App.2d 651
• Court: California Court of Appeals Court of Appeals
• Decision Date: 06 January 1967
• Parties: JONATHAN MANOR, INC., Plaintiff and Appellant. v. ARTISAN, INC., a California corporation, Ed W. Smith and Enid M. Smith, Defendants and Respondents. Civ. 8154.

Page 14

56 Cal.Rptr. 14

247 Cal.App.2d 651

JONATHAN MANOR, INC., Plaintiff and Appellant. v. ARTISAN, INC., a California corporation, Ed W. Smith and Enid M. Smith, Defendants and Respondents.

Civ. 8154.

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

Jan. 6, 1967.

[247 Cal.App.2d 652] Rubin, Seltzer & Solomon and Robert Caplan, San Diego, for plaintiff and appellant.

Donald Jay Solomon, San Diego, for defendants and respondents.

OPINION

WHELAN, Justice.

Plaintiff appeals from a judgment denying recovery on a promissory note, which was one of four in identical amount executed on January 17, 1963 by defendant corporation (Artisan) and defendants Smith (Smiths) and taken by plaintiff as part-payment for 52 subdivided lots that concurrently were transferred by plaintiff to Artisan.

The four notes were delivered in escrow under written instructions signed by Artisan and the Smiths that in three different place spoke of the notes as 'unsecured.'

Each of the four notes contained the provision that additionally to monthly installments of $250, there should be made a payment of $500 upon the conveyance of any one of the 52 lots described therein by lot number and subdivision. The notes bore no certificate of acknowledgment that would have permitted them to be recorded, and were not recorded.

Some five months after the notes were executed, plaintiff wished to sell three of them to a buyer who desired security.

Artisan at that time executed a trust deed covering the 52 lots to secure the three notes to be sold by plaintiff. In transmitting the trust deed to plaintiff, Artisan wrote:

'This Deed of Trust shall only be considered effective and delivered concurrently with the transfer of the three (3) Promissory Notes to be secured thereby to Joyce Branning Vanderbilt, and not otherwise. In other words, if the three (3) Promissory Notes are not transferred to Joyce Branning Vanderbilt on or before ninety (90) days from date, then this Trust Deed shall not be considered delivered as between us and shall be cancelled. If said Promissory Notes are so transferred within said time, then this Trust Deed may be recorded and considered delivered.'

This action is upon the fourth note, which had not been assigned by plaintiff.

The court made the following findings:

'2. On or about January 17, 1963, Defendants made, executed and delivered to Plaintiff their promissory note in writing in the principal sum of $32,574.97, which said promissory note was payable in monthly installments of $250.00, including interest at seven per cent (7%) per annum, and that additional payments of $500.00 were required by the terms of said promissory note upon the conveyance of any of the following parcels of property: Lots 1, 3, 4, 5, 6, 9, 10, 12, 13, 15, 18, and 20 of Valle Del Norte Unit No. 1, and Lots 22 to 38 inclusive and 40 to 62 inclusive of Valle Del Norte Unit No. 2.

'3. Said promissory note was executed pursuant to escrow instructions executed by Plaintiff as seller, and Defendant ARTISAN, INC. as buyer, as a portion of the purchase price of said fifty-two (52) subdivision lots. Upon the close of said escrow, the fifty-two lots were conveyed by grant deed executed by Plaintiff in favor of Defendant ARTISAN, INC. '* * *fif

'6. Defendants ED W. SMITH and ENID M. SMITH executed said promissory note as principals and not as guarantors.'

Upon the basis of those findings, the court concluded:

'1. Said promissory note constitutes an equitable mortgage upon said fifty-two (52) lots in that the property itself was serving directly as a security for the payment of a portion of the balance due on the purchase price of the property, and is within the purview of the provisions of Section 580b of the Code of Civil Procedure.'

Judgment was in favor of defendants.

Reformation was not sought of either the note sued upon or of the trust deed given to secure the other three notes.

The sole issues are of law, (a) whether the note upon its face, in light of the admitted fact that it was given in part payment of the purchase price of real property, was a deed of trust or mortgage given to secure such payment, within the meaning...