Vandewater v. McRae

By the Court, Shafter, J. The defendants are charged by the complaint as indorsers of a promissory note. The following facts are set forth in the agreed statement on motion for new trial: “ On the fifteenth day of December, 1858, the plaintiff loaned to the French Town Canal and Mining Company, the sum of fifteen thousand dollars, for which sum the said company made their promissory note payable to the order of the above named defendants, who indorsed the same for the accommodation of the said makers, the French Town Canal and Mining Company; and, after such indorsement, said note, so indorsed, was delivered to the plaintiff. “ That at the maturity of said note, the same was duly presented to said makers, for payment, at the office of E. E. Brewster & Co. in the City of San Francisco (being the place named in said promissory note,) and payment thereof demanded and refused, and that the above named defendants were duly notified of such demand and non-payment. That there was [600] due on said promissory note, and unpaid, the sum of fifteen thousand four hundred and seventy-five dollars and ninety-one cents, after deducting all payments, and that the plaintiff is the owner and holder of said note. “ That simultaneously with the making, indorsing and delivery of said promissory note, the said makers, the French Town Canal and' Mining Company, made, executed and delivered to the plaintiff a mortgage, conditioned for the payment of said sum of fifteen thousand dollars and interest, so loaned, as above set forth, to said company, according to the terms of said promissory note, and as security therefor; by which said mortgage said company mortgaged to the plaintiff certain real estate and premises in the County of Butte, known as the French Town Canal and Mining Company Water Ditch. “ That on the 13th day of January, 1862, said plaintiff instituted suit in the District Court of the Fourth Judicial District of the State of California, in and for the City and County of San Francisco, wherein the said French Town Canal and Mining Company, and the defendants in this suit, and others, were defendants, to foreclose said mortgage and sell said mortgaged premises to satisfy said note and for judgment and payment against the said French Town Canal and Mining Company, and the defendants in this suit, for the amount which might be found to be due to the plaintiff for principal and interest upon the said note and mortgage, after applying the proceeds of sale of the mortgaged premises toward the payment of the same, and the costs of the said action. “ That on the first day of September, 1862,- said last named Court made an order sending said cause to the County of Butte, in the then Fifteenth Judicial District of this State, for trial in the said County of Butte, on the fourth day of November, 1862 ; and at the trial of said cause said action was, on motion of counsel for plaintiff, dismissed as to the said defendants herein, and brought on for trial against said French Town Canal and Mining Company and others; and judgment was rendered in said cause that there was due to plaintiff therein, [601] on said note secured by said mortgage, on the 4th of ¡November, 1862, the sum of ten thousand seven hundred and fifty-five dollars and fifty-four cents, with interest at the rate of two and a half per cent per month; that said mortgaged premises be sold, and in case of deficiency in the proceeds of such sale to satisfy said debt, interest and costs and expenses, on the coming in and confirmation of the Sheriff’s report of such sale, that the said French Town Canal and Mining Company should pay to plaintiff such deficiency, with interest aforesaid; and that said judgment remains in full force, unreversed and not appealed from.” It is insisted on behalf of the appellants that this action cannot be maintained against them in view of the two hundred and forty-sixth section of the Practice Act as amended in 1860, and in 1861. The section is as follows : “ There shall be but one action for the recovery of any debt, or the enforcement of any right secured by mortgage or lien upon real estate or personal property; which action shall be in accordance with the provisions of this chapter. In such action, the Court shall have power by its decree or judgment, to direct a sale of the encumbered property (or of such part thereof as shall be necessary) and the application of the proceeds of the sale to the payment of the costs and expenses of sale, the costs of suit, and the amount due to the plaintiff. If it shall appear from the Sheriff’s return that there is a deficiency of such proceeds, and a balance still due to the plaintiff, the judgment shall then be docketed for such balance against the defendant or defendants personally liable for the debt, and shall from the time of such docketing be a lien upon the real estate of the judgment debtor, and an execution may thereupon be issued by the Clerk of the Court, in like manner and form as upon other judgments, to collect such balance or deficiency from the property of the judgment debtor.” There are but two views possible, as to the meaning of this section—first, that the inhibition contained in it, is limited to the case where the mortgage given is collateral to the particular right which the action is brought to enforce; or, second, [602] that the inhibition not only extends to cases of that class, but comprehends cases also where the mortgage is not collateral to that right. The question has been argued, to some extent, on considerations of convenience; but the intention is to be sought for primarily in the language of the section quoted, subjéct to the settled rules of interpretation and construction. There may be a question, as suggested by respondent’s counsel, as to whether the liability of an indorser sounds in “ debt,” in the common law sense of that term. But it is unnecessary to determine the point, for the word ‘‘right” is used in the same connection as the “ debtand whatever material element there may be, not included within the latter term, would of course be comprehended by the former. If an indorser does not owe a “ debt” to his indorsee technically considered, there can be no doubt that the indorsee has, as against the indorser, ail the “ rights ” of a promisee. For all the purposes of discussion, then, the words “for the recovery of any debt” may be eliminated, leaving the section to read as follows: “ There shall be but one action for the enforcement of any right secured by mortgage,” etc. The right referred to, is obviously, not the right of a mortgagee as such, but a right existing independently of the mortgage, and which the mortgage is given to secure—a right, in short, the correlative of which is a liability in personam; and it results, that the provision may be paraphrased as follows : “ There shall be but one action for the enforcement of a personal liability secured by mortgage,” etc. The words “ secured by mortgage” are descriptive of the right or personal liability, contemplated by the section, and any personal liability not so secured is manifestly without its purview. This action is brought for the enforcement of a personal liability, and-if that liability is not secured by mortgage, then the action can be maintained. On what may be called the question of fact involved in this proposition, it would seem that opinions could not be divided. The mortgage given in this case, was executed by the makers of the note, and the only personal liability secured by it, or [603] intended to be secured by it, was that of the makers of the note—as such; or to use the language of the section, the only “ right,” secured by the mortgage, was the right of the plaintiff, as indorsee of the note, to call upon the makers to fulfil their personal promise. The promise of a maker of a note is one thing, and the promise of an indorser is another. One is primary and the other is secondary; one is absolute, the other turns upon conditions ; each may be secured by a separate mortgage, or one mortgage may be so framed as to secure them both. But a mortgage which by its terms is made applicable to the promise of the maker only, can in.no just sense be regarded as collateral either to the personal liability or to the “ right” of which the contract of indorsement is the source. On the ground, then, that'the right which this action is brought to enforce is unsecured by mortgage, we consider that the plaintiff is at liberty to pursue the defendants in personam on their contract of indorsement. The order granting a new trial is affirmed.