Loeb v. Christie

Defendant appeals from a judgment entered against him in an action based on an unconditional guarantee of a promissory note payable to plaintiff, which guarantee was executed May 19, 1930. The note so guaranteed by defendant was secured by a trust deed and at the time of this suit the power of sale therein given had not been exercised by the plaintiff.

Appellant urges that the decision in the case last cited antedated our determination of Bank of Italy Nat. T. & S. Assn. v. Bentley, 217 Cal. 644 [ 20 Pac. (2d) 940 ], In the Bentley case we merely held, in effect, that as in the case of a mortgage, the land is intended under a trust deed to constitute the primary fund to secure the debt,, thereby requiring a valid sale of the land as a prerequisite to the maintenance of a suit

Nor do we find anything in section 2809 of the Civil Code that requires a result different from that herein announced. The section reads: “The obligation of a guarantor must be neither larger in amount nor in other respects more burdensome than that of the principal; and if in its terms it exceeds it., it is reducible in proportion to the principal obligation.” This section has been in the code since 1872 and its presence there in no way influenced the disposition of the several cases above referred to wherein it was held that an action would lie against the guarantor of a note secured by mortgage without the necessity of first foreclosing the mortgage. It is no answer to say that the section was overlooked in the decision of the above cases, for this argument would appear to be refuted by the reference to the section in Cook v. Mesmer, supra, p. 334. Moreover, in Adams v. Wallace, supra, p. 69, wherein it was urged upon appeal by the guarantor that the trial court erred in rejecting evidence tending to show that the guaranteed note was secured by mortgage, this court held that the guarantor “had bound herself for the payment of the note, and not for the payment of any deficiency which might result after the exhaustion of other security”.

Our conclusion does not cause the guarantor’s obligations to be any heavier or more burdensome than that of the principal or maker of the note. The fallacy in appellant’s theory is traceable to the erroneous premise upon which it is based. He confuses the obligation of the principal or maker of a mortgage or trust deed note with the remedy to enforce such obligation. The liability of the principal or maker of a note secured by mortgage or trust deed is for the face amount of the note and is not simply for any deficiency

Appellant’s contention that the economic depression constitutes an equitable defense to the action is adversely disposed of by the decision in California Securities Corp. v. Grosse, 3 Cal. (2d) 732 [ 46 Pac. (2d) 170 ].

It is also urged by appellant that section 7 of chapter I of an act of the extra session of the 1934 legislature, effective September 15, 1934, commonly known as the Moratorium Act of 1934, is a bar to this action. Since the filing of appellant’s briefs in this cause we have handed down our decision in the case of Brown v. Ferdon, 5 Cal. (2d) 226 [ 54 Pac. (2d) 712 ], and companion cases. Our holdings in these cases necessarily preclude the retroactive application of section 7 of the Moratorium Act of 1934, which undertakes to prohibit the commencement of an action against the guarantor “of any note secured by a mortgage or deed of trust upon real property in any case while by virtue of any law no sale may be made under any power of sale contained in such mortgage or deed of trust”. To hold otherwise would be to impair the obligation of a contract and render the act unconstitutional. The

The judgment is affirmed.

Shenk, J., Langdon, J., Curtis, J., and Thompson, J., concurred.