Williams v. Reed

Decision Date21 February 1957
Citation307 P.2d 353,48 Cal.2d 57
PartiesW. E. WILLIAMS, Plaintiff and Respondent, v. Glen E. REED et al., Defendants; Robert M. Calrns et al., Appellants. S. F. 19343.
CourtCalifornia Supreme Court

Athearn, Chandler & Hoffman, F. G. Athearn, Leigh Athearn, San Francisco, Theodore P. Lambros, Chicago, Ill., Carlson, Collins, Gordon & Bold, Richmond, and Roscoe E. Jordan, Oakland, for appellants.

Herron & Winn and John Wynne Herron, San Francisco, for respondent.

CARTER, Justice.

This is an appeal by defendants Arvidson, Carroll and Cairns, makers (with Reed who does not appeal) of a $30,000 promissory note, from a deficiency judgment, after sale under a securing chattel mortgage, in favor of plaintiff, payee of the note.

Two negotiable notes, one for $30,000, bearing 5% interest, and the other for $10,000, were dated June 14, 1950, the first became due in 60 days and the second on December 14, 1950, and named all the makers as such with plaintiff as payee. They recited that 'I' promise to pay the principal and interest. The notes were secured by a chattel mortgage executed by Reed covering property owned by him. After this case was reversed on an appeal by plaintiff from a summary judgment for all the makers but Reed, who defaulted, Williams v. Reed, 113 Cal.App.2d 195, 248 P.2d 147, plaintiff dismissed the portion of the action pertaining to the $10,000 note and the trial proceeded on the $30,000 note. The $10,000 note was given as a 'bonus' for the $30,000 loan, and was, therefore, usurious, hence the action thereon was dismissed. This action was commenced to foreclose the chattel mortgage and for a deficiency judgment for the balance due; the amount realized at the foreclosure sale ($687) was credited on the note. The judgment awarded interest and attorney's fees (provided for in the note) on the $30,000 note. Soon after the maturity of the notes, and on October 12, 1950, an agreement with reference to the notes was made between plaintiff and Reed and his wife. Before the instant action was commenced, plaintiff obtained judgment against Reed on that agreement, but the judgment has not been paid or satisfied.

The main defenses of defendants-makers, except Reed, were that the agreement made October 12, 1950, between Reed and his wife and plaintiff, wherein plaintiff agreed to accept and Reed to pay $35,000 on October 28, 1950, to discharge the two notes which had in effect extended the time for payment two and one-half months on the $30,000 note, and a novation a substitute for the notes, thus exonerating them; that they were accommodation makers only, having received no value, and under section 3110 of the Civil Code, 1 were liable only as sureties, and the October 12th agreement freed them from liability because it changed the obligation (see Civ.Code, §§ 2819, 2822); that the judgment for plaintiff in his action on the agreement achieved the same results and constituted an election of remedies; that the action will not lie because of failure to comply with section 726 of the Code of Civil Procedure. 2 The trial court found agaisnt all of these contentions.

Several matters are settled by the former decision on appeal. Williams v. Reed, supra, 113 Cal.App.2d 195, 248 P.2d 147. Reserving the question of whether defendants (other than Reed) were accommodation makers and entitled to the application of surety law which was said to be a factual question, it was held that the October 12th agreement showed no intent on its face for novation releasing such defendants; that the judgment on that agreement, there being no execution, was not an election which estopped plaintiff; that the security of the chattel mortgage was not waived to the prejudice of those defendants to render them not liable; that even if the agreement was a novation as to Reed it would not release the other defendants; and that the right of action was not controlled by section 726 of the Code of Civil Procedure. The opinion of the court closed with the statement that it did not intend to foreclose the determination of any issue of fact including novation.

Defendant Cairns (the other defendants filed no brief but join in Cairns' brief) contends that he was an accommodation maker, and under the laws of suretyship as applied to him, the October 12th agreement changed the obligation and released him from liability. 3 Assuming an accommodation maker is in such position, the basic question is whether there is sufficient evidence to support the trial court's finding that he and the other defendants were not accommodation makers because they received value. It will be recalled that under section 3110 of the Civil Code, supra, a maker is not an accommodation one unless he did not receive value for signing the instrument and defendant asserts that the value must have been from the consideration for the note from the payee (plaintiff) rather than from Reed, the accommodated maker, for lending his name to the instrument, citing Britton, Bills and Notes (1943), p. 365; 11 C.J.S., Bills and Notes, § 742. Accepting the foregoing premise as correct, it appears that the evidence is sufficient as to all the defendants.

In the first place it should be observed that the defendants appear as ordinary joint makers of a negotiable note and thus 'Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.' Civ.Code, § 3105. This clearly means that everyone who appeared to be a party to the instrument (defendants appeared as makers here) were presumed to have received value from the loan of money made by the plaintiff payee; a presumption of consideration arose, Weiss v. First Savings Bank, 28 Cal.App.2d 140, 146, 82 P.2d 45, 83 P.2d 35. Among the presumptions also is the rebuttable one 'That a promissory note or bill of exchange was given or endorsed for a sufficient consideration' Code Civ.Proc. § 1963(21), and 'That there was a good and sufficient consideration for a written contract' Code Civ.Proc. § 1963(39). '(T)he writing (promissory note) itself carries the presumption of consideration, which is evidence to be weighed against this defendant's testimony. With this conflict, the finding of the trial court that a consideration passed should not be disturbed.' Rodabaugh v. Kauffman, 53 Cal.App. 676, 679, 200 P. 747, 748; see, also, Moore v. Gould, 151 Cal. 723, 726, 91 P. 616; Pacific Portland Cement Co., Consolidated v. Reinecke, 30 Cal.App. 501, 158 P. 1041; Ellington v. Freer, 111 Cal.App. 651, 295 P. 857. Hence it follows that there was a presumption that defendants all received value from the plaintiff's loan of money. Moreover, it may be inferred from the evidence that defendants received some benefit from the loan.

Defendants and Reed had known each other for some time prior to the execution of the note and were enjoying business relations. Reed agreed to assist them in organizing various projects and foundations in which they were interested. Those projects were beneficial to defendants, and Reed purported to be able to obtain funds for them from eastern capital. Defendant Cairns testified that plaintiff was assisting him in organizing Cairns' Agricultural Research Foundation to study and develop plant nutrition and soil in which he had long been interested; that the foundation was not philanthropic; that he would realize gains from it by selling products from the research; that he had no funds to finance such a foundation but Reed told him he could obtain them from the east, and advance the project for him; that he would install in irrigation system on Reed's ranch for the latter's services in obtaining finances for the foundation; that he wanted Reed to get the $30,000 for his financial difficulties so he could continue performing for his interests in the foundation; that he said nothing when he signed the note concerning the capacity in which he signed it, indicating that he was an ordianry comaker. Plaintiff testified (Cairns also) that before Cairns signed the note he telephoned Reed to see if time enough was allowed for repayment and if it was all right, indicating Cairns' interest in Reed receiving the loan to benefit Cairns.

Reed testified by deposition, 'There is no question but that all three of these men and I am referring to Arvidson, Carroll and Cairns were to benefit, either directly or indirectly from the $30,000.00 loan; is that correct? Answer: That is right'; that an automobile Reed got from Cairns was in part payment for his services; that he had 'obligations' on his ranch that must be met and the ranch was to go into the defendants' foundations; that 'In addition, prior to June 14, 1950, I had formed for Carroll and Arvidson and the company, which is known as West Coast Industrial Engineers. This operating company was set up with Carroll and defendant Arvidson as officers and managers. In addition, on or about June 14, 1950, I had created an agricultural research foundation for defendant Robert M. Cairns and also an operation company for this foundation. Defendant Cairns and his wife were officers in said organization. These organizations were designed so that a profit would be made by defendants Carroll, Arvidson and Cairns in accordance with their duties as officers of organization. At the time of the execution of the subject notes, there was yet no work to be done by me to get said foundation and operating company in operation. In addition, money was needed to get said organization into operation. On June 14, 1950, I had an interest in a valuable farm at Walnut Creek, which interest I had acquired by means of a written contract of sale. It was agreed by the defendants and myself that said farm would become an asset of the foundation and operating company. However, on June 14, 1950, at the time said notes were executed I was in default on the contract of sale and...

To continue reading

Request your trial
34 cases
  • Gottlieb v. Kest
    • United States
    • California Court of Appeals Court of Appeals
    • 10 d1 Julho d1 2006
    ...64746 [husband and wife who file joint tax returns are not in privity because tax liability is joint and several]; Williams v. Reed (1957) 48 Cal.2d 57, 64-65, 307 P.2d 353 [judgment against one of several obligors is not a bar to an action against remaining obligors]; Rest.2d Judgments, § ......
  • Kawauchi v. Tabata
    • United States
    • Hawaii Supreme Court
    • 30 d3 Março d3 1966
    ...from defending under the usury statute in a law action or from exercising other rights given him by statute. Cf. Williams v. Reed, 48 Cal.2d 57, 307 P.2d 353, 359; Stock v. Meek, 35 Cal.2d 809, 221 P.2d 15, 21; Jue v. Bass, 299 F.2d 374, 378 (9th Cir.); MacRackan v. Bank of Columbus, 164 N.......
  • Winnett v. Roberts
    • United States
    • California Court of Appeals Court of Appeals
    • 8 d2 Abril d2 1986
    ...usurious, the creditor is entitled to repayment of the principal sum only. He is entitled to no interest whatsoever. (Williams v. Reed (1957) 48 Cal.2d 57, 68, 307 P.2d 353; Stephans v. Herman (1964) 225 Cal.App.2d 671, 673, 37 Cal.Rptr. 746.) Prior to the hearing on the preliminary injunct......
  • DKN Holdings LLC v. Faerber
    • United States
    • California Supreme Court
    • 13 d1 Julho d1 2015
    ...was explored in some detail in Williams v. Reed (1952) 113 Cal.App.2d 195, 248 P.2d 147 (Williams I ) and Williams v. Reed (1957) 48 Cal.2d 57, 307 P.2d 353 (Williams II ). In the Williams litigation, defendant Reed and three others promised to pay a debt totaling $40,000. (Williams I, supr......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT