Alvord v. Spring Valley Gold Co.

Van Fleet, J. This was an action to foreclose a mortgage alleged to have been given by the Spring Val [551] ley Hydraulic Gold Company, a New York corporation, on its mining property in California, to secure payment of certain bonds of that corporation. The court below held the mortgage invalid for want of a compliance with the act of April 23, 1880 (Stats. 1880, p. 131), which requires the ratification of the holders of at least twothiras of the capital stock. Many interesting questions have been argued by counsel, but only one of them need be considered. The complaint contained, among other things, the following allegations: “That on or about the 23d day of July, 1886, the said Spring Valley Hydraulic Gold Company duly granted and conveyed unto the defendant, the Spring Valley Gold Company, all of the property described in said indenture of mortgage, together with other property, in consideration of which grant and conveyance the Spring Valley Gold Company assumed, undertook, and bound itself to pay, and agreed to pay, all of the indebtedness then existing of the Spring Valley Hydraulic Gold Company, and particularly the indebtedness represented by the aforesaid bonds, and secured as aforesaid by the said indenture of mortgage; and undertook and agreed to assume toward all the creditors and obligees of said Spring Valley Hydraulic Gold Company the position of debtor and obligor, and to be substituted in the place and stead of said Spring Valley Hydraulic Gold Company as such debtor and obligor.” This allegation was not denied by the answer, but the execution of the mortgage therein referred to was put in issue. The evidence showed that in July, 1886, a deed was executed from the Spring Valley Hydraulic Gold Company to the defendant, the Spring Valley Gold Company (which is a California corporation), for the property in question, which deed was executed by both of the parties thereto, and contained the following clause: “ Subject, nevertheless, to a certain mortgage or deed of trust on said premises, bearing date May 14, 1881, made by [552] the said Spring Valley Hydraulic Gold Company to William Alvord, F. F. Low, and Henry B. Laidlaw, trustees, to secure the payment of $200,000, and interest thereon, and recorded in the office of the recorder of Butte county, California, June 3,1881, in Book M of Mortgages, pages 773 to 782, and subject also to an indebtedness of the said the Spring Valley Hydraulic Gold Company of about $165,000, in addition to the above-mentioned indebtedness of $200,000, secured by said mortgage, or deed of trust, as aforesaid. “And the party of the second part, in consideration of the conveyance to it of the property aforesaid, does hereby agree and undertake and bind itself to pay all present indebtedness of the party of the first part above specified, and all other indebtedness whatsoever of the party of the first part, and to perform and discharge all the liabilities and lawful obligations now incurred by or imposed upon the party of the first part; and the party of the second part does hereby further undertake and agree to assume toward all the creditors and obligees of the party of the first part the position of debtor and obligor, and to be substituted in the place and stead of the party of the first part, as such debtor and obligor.” The action of the board of directors of the Spring Valley Gold Company, in executing and accepting that deed, was expressly approved and ratified by the unanimous vote of the stockholders of that company, cast at a meeting at which the entire subscribed capital stock was duly represented. Conceding, then, that the act of 1880 applied to foreign corporations, and that a compliance with its provisions on the part of the New York company was not proven (on which points we express no opinion), we are nevertheless of opinion that neither the Spring Valley Gold Company nor the other defendants who claim under that company by title subsequent are in a position to avail themselves of that defense. The deed referred to contains an unequivocal recognition of the [553] mortgage in question as a valid and subsisting obligation and lien on the property, and a promise to pay it as a part of the consideration for the conveyance. It is settled by an almost unanimous line of decisions in this country, approved by all text-writers, that such a recital in a deed, even when the deed is not executed by the grantee, is conclusive evidence in favor of the mortgagee and against the grantee in the deed of the existence and validity of the mortgage. The effect of such a recital is to charge the land with the lien as effectually as if the purchaser had himself executed a mortgage of that purport. It is contended by respondents that the case of Biddel v. Brizzolara, 64 Cal. 354, is in conflict with this rule, but we are unable to perceive any such conflict. The judgment in that case was in accordance with section 1559 of the Civil Code, which section, however, does not appear to have been there brought to the attention of the court. (See, also, Flint v. Cadenasso, 64 Cal. 83.) Under that section it is clear that the mortgagee has the right to enforce such a contract as was contained in the deed in question, and the grantee is estopped by its recitals. The estoppel being by deed, it was not necessary to plead it. Respondents contend that the effect of the covenants in the deed in question is to be limited to “ lawful obligations ” of the grantor, and such was the construction adopted by the court below. Such a construction is contrary to the plain meaning of the language used. The deed recites the existence of a specific bonded indebtedness, and that it is “ subject to ” a specific mortgage given to secure that indebtedness, and contains a covenant on the part of the grantee “to pay all of the present indebtedness of the party of the first part, above specified,” and also all other indebtedness. This specific language cannot be controlled by the general language following, by which the grantee undertakes to perform all the “ lawful obligations ” of the grantor. The latter expression must be taken to constitute a cov [554] enant additional to the specific covenant with relation to this mortgage, and not as in any way limiting it. The deed itself was put in evidence, and was competent, and, as we have seen, conclusive evidence as against the grantees and those claiming under them of the due execution and validity of the mortgage. The finding of the court, therefore, that the mortgage was never executed was against the evidence, and the judgment must for that reason be reversed. As the matters assigned as errors of law will probably not arise on another trial, we need not notice them. It is, however, proper to remark that secondary evidence of the contents of a missing document not in the possession of the adverse party cannot be given when the proof shows that there is a person who might probably have it, and of whom no inquiry has been made. The preliminary proof should show that inquiry has been made, without result, of every person who, according to the evidence, would be likely to have the document, or to know of its whereabouts. The judgment appealed from is reversed, and the cause remanded for a new trial. Garoutte, J., Harrison, J., McFarland, J., and Beatty, C. J., concurred.