California Thorn Cordage, Inc. v. Diller

At the time of filing the amended complaint in this action (March 31, 1928), the defendant William Diller was a stockholder and director of plaintiff corporation, and also was a creditor of plaintiff. As such creditor he held several notes of the corporation, some of which were secured by mortgage and others were unsecured. Although Elizabeth Diller is named as a defendant, she had no part in the transactions now to be considered, and it will be convenient and sufficient to refer to William Diller as the defendant, or as the appellant, and to describe the plaintiff and respondent as the Corporation.

At the time above mentioned there were pending in the Superior Court of Los Angeles County several actions of Diller against the Corporation, as follows: No. 240962, on a note for the principal sum of $6,873,90; No. 240963, on a note for the principal sum of $23,041.50; No. 240964, for the foreclosure of a chattel mortgage given to secure a note of which the principal sum was $15,000; No. 240965, for the foreclosure of a real property mortgage given to secure a note of which the principal sum was $60,000.

The objects of the present action as set forth in the prayer of the complaint (so far as pertinent to this appeal), were: 1. That an account be taken, etc., and that it be adjudged that said loans are usurious, and that the true amount thereof be determined. 2. That the defendant be enjoined from slandering the credit and good reputation of the plaintiff. 3. That the defendant be enjoined from conveying information or trade secrets of the plaintiff to its competitors in business. 4. That said actions be consolidated and that the defendant be enjoined from bringing any other suits against the plaintiff for the purpose of harassing or oppressing it or in contravention of a certain “agreement of December 2, 1926” (set out in the complaint). 5. That defendant be temporarily enjoined from prosecuting his said pending actions. 6. For general relief, as equity might require.

The complaint herein contains allegations of fact which may be described in general terms as charging that the notes were usurious; that the defendant, contrary to his duty as a director and at one time president of the Corporation, and also in violation of certain duties of management assumed by him under said agreement of December 2,

Pursuant to the findings of fact and conclusions of law as determined by the trial court, the principal terms of the judgment and decree are substantially as follows: The defendant is enjoined and restrained from slandering the credit or good reputation, etc., of the plaintiff. The de

The decree (entered January 4, 1929), next finds and declares the amount that will be due on January 30, 1929, upon the obligations included in the foreclosure actions; and declares the several amounts of indebtedness upon the obligations described in actions 240962 and 240963, as well as upon the said several promissory notes upon which no action has yet been brought.

The decree then proceeds as follows: “It is further ordered, adjudged and decreed that the amount so due on said mortgage indebtedness, to-wit: the sum of $49,505.25, shall be, and the same is hereby declared to be a first lien upon all the real estate belonging to the plaintiff and described as follows, to-wit: (description) and a first lien upon all the following described personal property of the plaintiff, to-wit: (description). Provided, however, that the defendants shall dismiss said foreclosure suits and surrender up to the clerk of this court for cancellation, the said mortgages and said mortgage notes before this decree shall become final; it is further ordered, adjudged and decreed, that the amount of said indebtedness so due and to become due the defendant William Diller from the plaintiff, to-wit: (stating the sums found to be due in actions 240962 and 240963, and said other unsecured notes), shall be and the same is hereby

Prior to the filing of his answer, defendant demurred to the complaint, and this demurrer was overruled. The grounds of demurrer were that the complaint did not state facts sufficient to constitute a cause of action, and also that the complaint was in certain respects uncertain, and for like reasons ambiguous. This demurrer should have been sustained. We so decide, primarily because the facts alleged do not justify the maintenance of a suit in equity for the purpose of obtaining the demanded relief.

The complaint does not state a case authorizing an injunction against prosecution by appellant of his pending actions against respondent Corporation, nor against the commencement by appellant of actions to recover judgments on any other notes held by him. If any action is prematurely commenced, that fact may be asserted by way of defense in the action itself. Or if obligations are tainted with usury, any defense arising out of that fact may likewise be presented. As to such defenses, there is not any sufficient reason for equitable relief by way of injunction. Moreover, the answer of a defendant, claiming that an action has been commenced prematurely is a dilatory plea, not

To meet this obstacle to the relief demanded in this ease, respondent relies chiefly upon the proposition that the facts allged show not only that by virtue of said agreement of December 2, 1926, the maturity of the indebtedness represented by the notes was postponed for two years, but also that appellant by reason of his conduct in his relations with the corporation and its affairs, was estopped to deny that the time of such maturity of the notes was so extended. Both contentions are without merit. The said agreement of December 2, 1926, did contain a provision for renewal, or extension of time for payment, of all obligations then owing by the Corporation to Diller, “for a period of time not to exceed two years from the date hereof, as in the judgment of said Finance Committee may be necessary”, etc. (The finance committee was provided for in the agreement, to act on behalf of the Corporation.) The complaint does not show any further action by way of agreement extending time of maturity of the notes. The allegations that thereafter the defendant neglected to perform his duties as a member of said finance committee, and has prevented the Corporation from obtaining loans by slandering the credit and business of the Corporation, etc., are too indefinite to present any question of estoppel as against defendant’s rights to enforce payment of his notes whenever they became due. (We need not now seek to determine the merits of the suggestion that said agreement, being an attempted abdication of the authority of the board of directors, is void.)

A further claim is made by respondent that, as alleged in the complaint, the said actions were instituted by appellant not merely to obtain payment of the notes, but for the purpose of wrecking the Corporation and driving it into bankruptcy, by overwhelming it with numerous foreclosures and attachments of its property. And it is argued that by reason of these facts, respondent became entitled to an injunction, and to a determination of the entire controversy in one action. In other words, the Corporation, made defendant in four actions on four separate obligations, and threatened with other actions on other separate obligations, claims the right by a suit in equity, to obtain from

Of course, if appellant was prosecuting several actions where one would be sufficient, and if the several actions were such that they might be consolidated and tried as one action, there is an appropriate procedure for that purpose. (Sec. 1048, Code Civ. Proc.) The obvious and direct method in that situation would take the form of a motion made in those actions, or in some one of them, with due notice to all interested parties, for an order of consolidation. If the eases were open to that procedure, a separate action like the present action would not be necessary. And if the cases were not so related to each other that their consolidation could be demanded as of right, it would be equally true that the debtor could not, for his mere convenience, require that they be absorbed into a suit of his own creation.

“In an action of equitable cognizance, it is the policy of our law to allow a party to obtain in one action all the relief to which he may be entitled on account of a single transaction, although such relief may be of a character that would require several suits under the strict rules relating to the forms of common-law actions prior to the adoption of the codes. (Murphy v. Crowley, 140 Cal. 141 , 145 [ 73 Pac. 820 ].) Equity does not deal with cases piecemeal, and in a proper case, it may give other and different relief justified by the circumstances.” This quotation is from the very late case, California Trust Co. v. Cohn, 214 Cal. 619 [ 7 Pac. (2d) 297 , 300]. But there must be “a proper case” before the rule can apply. Two of the pending actions described in respondent’s complaint are mortgage foreclosures, which must be conducted according to the statutory procedure provided for such cases. (Code Civ. Proc., sec. 726.) The others are actions at law, arising out of different transactions wholly separate from those of the mortgages, and with additional parties defendant, and resting entirely in the law side of the court. It is, indeed,

In addition to the demand for an injunction against further prosecution of defendant’s actions against the plaintiff, the complaint asked that defendant be enjoined from slandering the credit and good reputation of the plaintiff. The demurrer for uncertainty in regard to the allegations on this topic should have been sustained. The allegations concerning the conveying of trade secrets of plaintiff, by defendant, to its competitors in business, were likewise insufficient; but this point needs no further attention, since the court by its findings determined that the defendant “has not conveyed information and trade secrets of the plaintiff to its competitors in business”.

The demurrer to the amended complaint having been overruled, and the defendant having filed his answer, the case was tried before the court. At the beginning of the trial, counsel for defendant objected to the introduction of any evidence, upon the ground that the complaint failed to state a cause of action, and failed to state facts sufficient to entitle the plaintiff to any relief. This objection was overruled.

Appellant has presented for consideration sundry other assignments of error, to the effect that certain findings are not sustained by the evidence, and that some of the findings are in themselves defective, and that wrong conclusions of law were drawn from the findings, and that the decree is erroneous as a whole and in various provisions thereof. We find that it is not necessary to enter into a discussion of all of the questions thus raised. In addition to the statements which have been made, and the opinions expressed, in the preceding paragraphs, a statement concerning a few vital errors in the decree will be sufficient.

As we have seen, two of the defendant’s pending actions were for the foreclosure of mortgages upon property of the Corporation. By virtue of those mortgages defend

We have not undertaken at this time to verify the claim of appellant that the amount of indebtedness of respondent to appellant as found by the court is less than the total amounts admitted by the complaint, and also less than the amounts unquestionably established by the evidence. If we are to accept the results of the record of the evidence as summarized in tabulated form in the brief for appellant, it would appear that the amounts of such indebtedness as

The judgment is reversed.

Houser, J., concurred.

York, J., deeming himself disqualified, took no part in this decision.

A petition for a rehearing of this cause was denied by the District Court of Appeal on April 6, 1932, and an application by respondent to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on May 9, 1932.