Strike v. Trans-West Discount Corp.

• Decision Date: 03 May 1979
• Docket Number: TRANS-WEST
• Citation: 92 Cal.App.3d 735,155 Cal.Rptr. 132
• Court: California Court of Appeals Court of Appeals
• Parties: Clifford S. STRIKE et al., Plaintiffs and Appellants, v.DISCOUNT CORPORATION et al., Defendants and Respondents. Civ. 16904.

Page 132

155 Cal.Rptr. 132

92 Cal.App.3d 735

Clifford S. STRIKE et al., Plaintiffs and Appellants, v. TRANS-WEST DISCOUNT CORPORATION et al., Defendants and Respondents.

Civ. 16904.

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

May 3, 1979.

Hearing Denied June 27, 1979.

Luce, Forward, Hamilton & Scripps, Edgar A. Luce, Jr., and Craig S. Andrews, San Diego, for plaintiffs and appellants.

Gray, Cary, Ames & Frye, F. P. Crowell, and Brian L. Forbes, San Diego, for defendants and respondents.

STANIFORTH, Associate Justice.

Plaintiffs Clifford S. Strike and Marjorie Stanley Strike (Strikes) sought injunctive relief to prevent a non-judicial foreclosure of a deed of trust by Trans-West Discount Corporation (Trans-West) ¹ on the Strikes' Rancho Santa Fe residence. At the outset of these proceedings Strikes obtained a temporary restraining order preventing pendente lite a trustee's sale of the property. After a three-day trial, the court made appropriate findings and denied Strikes the relief sought. Specifically, the trial court set aside the temporary restraining order but vacated the prior notice of default to allow Strikes further opportunity to repay the money owed; the court decreed Trans-West was entitled to non-judicial foreclosure of its deed of trust with the right to credit bid the total amount owing by the Strikes. Strikes appeal this judgment.

FACTS

We view the evidence before the trial court as the law requires in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving any conflicts in support of the judgment (Crawford v. Southern Pacific Co., 3 Cal.2d 427, 429, 45 P.2d 183; Hasson v. Ford Motor Co., 19 Cal.3d 530, 544, 138 Cal.Rptr. 705, 564 P.2d 857); and stray not from the record before the trial court (Knapp v. City of Newport Beach, 186 Cal.App.2d 669, 679, 9 Cal.Rptr. 90).

The facts are: In 1974 the Strikes built a residence in Rancho Santa Fe, California. To finance the construction, they borrowed funds from Barclays Bank and gave in return a first deed of trust (deed of trust) on the residence property, securing a promissory note in the principal amount of $105,000.

Mr. Strike was a director, Chairman of the Board of Superior Coating and Chemical Company (Superior). Mrs. Strike and her brother owned 100 percent of the Superior stock. Superior contracted to pay Mr. Strike $12,000 per year in consulting fees. Mr. Strike had been owner and president of a New York engineering and construction firm for 33 years. He owned hotels in Montego Bay, Jamaica, and had done "millions of dollars of business" with Barclays Bank in New York, Montego and London.

Trans-West was a licensed personal property broker in the business of accounts receivable financing. It advanced funds to Superior on the strength of Superior's accounts receivable and personal guaranties of Superior's principals, including Mr. Strike.

On March 12, 1973, Mr. Strike signed a general continuing guaranty, personally guaranteeing the obligations of Superior to Trans-West. The continuing guaranty contained no limitation on Mr. Strike's liability. In April of 1974, Superior became insolvent and failed while indebted to Trans-West in the amount of $111,204.65.

On April 23, 1974, Mr. Strike acknowledged his obligation and, upon advice of his attorney, executed a confession of judgment in favor of Trans-West in the amount of $111,204.65. This confession of judgment was filed on April 25, 1974, in the Superior Court, Los Angeles, and judgment was entered thereon on May 9, 1974. Its validity and enforceability is not in question.

In June of 1975, Mr. Strike came to Trans-West asking for help. Barclays Bank had commenced foreclosure proceedings to satisfy the unpaid balance on their promissory note secured by the deed of trust on the Strikes property; the balance due on the note was $105,000 principal, and $20,711.24 of unpaid interest, taxes, trustee's fees, and costs, for a total of $125,711.24.

At Mr. Strike's request Trans-West agreed to purchase the note and deed of trust from Barclays Bank; the parties on June 27, 1975, entered into a comprehensive written agreement ("June agreement") whereby it was agreed Strikes would convey record title to the Rancho Santa Fe property to Trans-West, but Strikes had the right to a reconveyance upon the express conditions set forth in the written agreement. Pursuant to this "June agreement" Trans-West purchased for cash from Barclays Bank an assignment of the $105,000 note and deed of trust for $125,711.24, and Strikes executed and delivered to Trans-West a "grant deed" to the residence property; it was also agreed that Trans-West would postpone the pending foreclosure. Further, if Strikes paid $299,286.27 to Trans-West (the sum of the confession of judgment, plus Barclays Bank note, plus interest) by September 30, 1975, Trans-West would reconvey the Barclays Bank deed of trust, execute a satisfaction of judgment, and deliver a grant deed back to Strikes.

The "June agreement" obligated Strikes in the interim to make all payments on senior deeds of trust, real property taxes, and the Rancho Santa Fe (homeowner's) Association assessments, with the additional payment of two percent interest per month if Trans-West had to pay those items. Strikes were to retain possession of the property and pay for maintenance, utilities, and fire insurance.

The trial court found this "June agreement" was entered into with the intent of consolidating and extending the maturity date of Strikes' underlying obligations to Trans-West; neither party to the agreement was guilty of bad faith or overreaching; nor was the agreement procured by fraud, oppression, economic duress or mistake.

Upon Strikes' failure to comply with the terms of the "June agreement," Trans-West gave Strikes two extensions of time to repay the underlying obligations and to reacquire their title. The last extension expired March 31, 1976. Thereafter, Trans-West, relying on its recorded "grant deed," filed an unlawful detainer action in San Diego Superior Court seeking to evict Strikes. A final judgment on the merits was entered in that action denying the requested eviction on the ground the "June agreement" and "grant deed" constituted only a security device in favor of Trans-West.

Trans-West then instructed the trustee to proceed with a trustee's sale under the deed of trust which Trans-West had acquired by assignment from Barclays Bank. The trustee gave notice of the contemplated sale, scheduled it for September 3, 1974. Strikes then brought this action and obtained a temporary restraining order preventing the trustee's sale.

While denying Strikes the relief sought and authorizing Trans-West's non-judicial foreclosure, the court concluded the "June agreement" violated statutory proscriptions pertaining to security agreements and usury, therefore was unenforceable, yet held it did not affect the validity and enforceability of their assigned trust deed and note or their confession of judgment. A declaration of rights was entered conformable with the court's findings and conclusions.

Strikes assert a multitude of errors were committed by the trial court. After analysis of both the factual and legal bases for Strikes' contentions, we conclude they are without merit and affirm the judgment. We detail and analyze the contentions in order of their presentation.

DISCUSSION

I

Strikes argue Trans-West was incapable of taking an assignment of the Barclays Bank deed of trust since it had a lien on the property, to-wit: a recorded abstract of judgment. They cite California Civil Code section 2904 ² and 2876 ³ and case authorities. Where the holder of a junior lien on property pays off the debt secured by a senior lien "to protect his interest," the junior lienholder thereby becomes subrogated to the rights of the senior lienholder "even though he takes no assignment of the senior lien." (Stein v. Simpson, 37 Cal.2d 79, 84, 230 P.2d 816, 820.) In Snider v. Basinger, 61 Cal.App.3d 819, 822-823, 132 Cal.Rptr. 637, the appeal court held tender of payments due on trust deed notes entitled Snider to an equitable lien by subrogation against the defendant Basinger's interest in the real property but Snider could not compel an assignment of the deeds of trust. From these sound legal premises, Strikes argue that Trans-West could obtain only an equitable lien (as opposed to an actual assignment) and therefore could not rely on the power of sale in the Barclays Bank trust deed. This reasoning is flawed for it departs from the facts in this case.

Substantial evidence here supports the trial court's conclusion that Trans-West did not act was not compelled to protect its position but rather to accommodate Strikes. Here, Trans-West Purchased and Recorded an assignment of Barclays Bank's trust deed.

In Stein, supra relied upon by Strikes, on payment of the indebtedness owed on the first trust deed "Simpson did not secure from the bank an assignment of said indebtedness . . . ." (Stein v. Simpson, supra, 37 Cal.2d 79, 82, 230 P.2d 816, 819.)

From the sound legal premise that a junior lienholder who makes payments due on the senior lien May not compel assignment rights from the senior lienholder (Snider v. Basinger, supra, 61 Cal.App.3d 819, 132 Cal.Rptr. 637), Strikes would draw conclusions which do not follow as a matter of law or reason. Trans-West as a junior lienholder was under no legal or equitable disability preventing its acquisition of the Barclays Bank trust deed by assignment, together with all of Barclays' rights and remedies including the right to exercise the power of sale. This Trans-West did. The limits on power of sale contained in Civil Code section 2924 have no application. We repeat: Because the trust deed here foreclosed upon was Assigned upon consideration by Barclays Bank to Trans-West, the equitable mortgage principles requiring judicial foreclosure under Code of...