Portuguese American Bank v. Schultz

This is an appeal from a judgment in favor of plaintiff and against defendant upon three promissory notes given by the latter as the purchase price of an interest in a garage in Oakland.

On November 18, 1918, defendant Schultz and Mrs. M. E. Farrell, wife of F. M. Farrell, were copartners in a garage and automobile repair-shop in Oakland, and on that day Schultz purchased Mrs. Farrell’s interest in the garage, including a lease of the premises where the business was conducted, for the price of nineteen hundred dollars. Schultz paid five hundred dollars in cash and gave three promissory notes for the remainder of the purchase price of the property. These notes were not delivered directly and at once to Mrs. Farrell, but were deposited by Schultz with the Portuguese American Bank of Oakland, as it is said “in escrow,” under instructions from the parties to deliver them to the payee, Mrs. Farrell, upon the written order of both Schultz and Mrs. Farrell; it being further stated in these instructions that such written order would be given whenever the conditions of the bill of sale of the property from Mrs. Farrell

There was at the time of the sale a mortgage upon the premises occupied by the business, which if foreclosed would oust Schultz from the leasehold; and the delivery of the notes by the bank to Mrs. Farrell was accordingly conditioned in the bill of sale upon Schultz remaining in undisturbed possession of the premises; and the delivery was also conditioned upon the delivery to Schultz of certificates of registration of an Overland ear and truck which were included in the property carried by the bill of sale. The registration certificates were never delivered by the seller or her husband to Schultz, but the latter, subsequently, by his own efforts, procured that for the truck in February, 1919, and for the car in April, 1919. Schultz claims that he could not use the truck or car until he received these registration certificates. He remained in undisturbed possession of the property and premises until October 25, 1919, when he sold the property to G. S. Held, although meantime there was a squabble between Schultz and Brien, the landlord, about the amount of the rent. This dispute arose out of the refusal of the landlord to recognize' or live up to the agreement between himself and Farrell made on April 29, 1918, providing for a reduction of the rent; and although a foreclosure proceeding was meantime started upon the second mortgage, still Schultz’s possession while he owned the garage was not disturbed.

At the time of the sale of the garage to Schultz, F. M. Farrell, husband of Mrs. M. E. Farrell (who may be suspected of being the real party in interest in the garage), owed the Portuguese American Bank one thousand dollars, and two days after the deposit of the notes with the bank Mrs. Farrell indorsed them to the bank as security for her husband’s debts. Schultz was, however, apprised of this before the assignment, and being asked by an official of the bank if the notes were good, he made no objection to the indorsement, but stated that the notes were good if he was permitted to continue to occupy the premises.

On December 12, 1918, however, Schultz served a writing upon the bank, in which he notified the latter in general language that the conditions of the instructions upon which

The notes not being paid at maturity, the bank instituted suits for their collection, and from judgments in its favor the defendant prosecutes this appeal.

[1] It is claimed by appellant on these facts that the notes were never delivered. But they were delivered, subject to the conditions stated in the directions which accompanied them when they were placed with the bank. All that remained to be done to entitle the payee to their possession was compliance with these directions, to wit: That defendant should remain in possession of the garage and should be put into possession of the registration certificates of the truck and car. He did remain in possession and he procured the certificates. The fact that they were procured by himself instead of by the payee of the notes for bim did not avoid the notes. It must be held that the finding of delivery is sustained by these facts. The fact that no written directions for the delivery of the notes were given by Mrs. Farrell or Schultz does not alter the case, for “that which ought to have been done is to be regarded as done in favor of him to whom and against him from whom performance is due.” (Civ. Code, sec. 3529.) And upon the performance of the two conditions specified in the escrow directions, the holder of the notes had the absolute right to the execution upon the part of Mrs, Farrell and Schultz of the direction to deliver.

[3] Closely associated with this contention of defendant is the offer made by him at the trial to prove that Farrell had deceived him at the sale by including therein many articles not owned by Mrs. Farrell, and by delay in procuring the registration certificates of the truck and the Overland car. If it was intended by this claim to avoid total payment of the notes upon the ground that they were procured by fraud, it should have been so pleaded, which was not done. But as we understand defendant’s contention, they were not so offered, but only in proof of damages sustained as an offset to the payment of the notes, and against the balance of the purchase price represented by them. The court at the trial excluded the evidence and rejected offers of proof of such facts upon the ground that they were not pleaded. There is no pleading of this damage; and no defense of partial or total failure of consideration is pleaded. Conceding, but not deciding, that these claims, if true, would have constituted a defense or a partial defense to the notes, still it was not available to defendant in the absence of allegations informing the plaintiff of defendant’s claims. The burden of proving fraud, if he relies upon it, is upon defendant in such cases as this. (Wilson v. White, 84 Cal. 239 , [ 24 Pac. 114 ].) And the burden of showing failure of consideration for a written contract is upon him who asserts it. (Cuthill v. Peabody, 19 Cal. App. 304 , [ 125 Pac. 926 ].) It follows that he who would assert failure or partial failure of .consideration for a promissory

[4] Defendant claims that there is no finding that the escrow conditions were complied with. But the court found that the defendant remained in undisturbed possession of the premises as set forth in the bill of sale, and received the registration certificates for the trucks as in the bill of sale referred to. This finding, it is claimed, does not meet the issue of nonperformance of the escrow directions given to the bank. While the finding might have been more artfully drawn, we think it sufficient on the point. The defendant is found to have had undisturbed possession of the property, and to have received the registration certificates. It is true the certificates are not in terms found to have been for the truck and the touring car, but for “said trucks,” which are, however, also described in the findings as the ones referred to in the bill of sale. The ears are also referred to in a letter attached to the complaint, and the reference is sufficient to identify the machines for which the certificates were received. At least the ease should not be reversed for failure to more specifically identify the Overland ear in the findings. (Code Civ. Proe., see. 475.)

The findings are also attacked because it is not stated therein that the direction to the bank to deliver the notes was given by Mrs. Farrell or Schultz. But even so, in our view the allegation, proof, or finding of this direction was not necessary to plaintiff’s case, for the reason that upon performance of the conditions precedent to the right to delivery, the plaintiff had the right to the delivery of the notes, regardless of whether the formal order for delivery Was given or not.

[5] At the expense of some repetition another point must be mentioned. In an attempt to prove the damage above referred to and the nonperformance of the conditions precedent contained in the directions to the escrow-holder, defendant’s counsel, upon cross-examination of defendant Schultz, who had been called -as a witness for plaintiff,

The question whether the defendant had been defrauded by the misrepresentations of Farrell as to title to the property sold had no bearing upon the terms of the escrow directions, nor was fraud in this respect pleaded as a defense to the notes. The cross-examination was not unduly curtailed by these rulings.

From the record it appears that the motion for a nonsuit was properly decided.

The judgment is affirmed.

Waste, P. J., and Richards, J., concurred.

A petition for a rehearing of this cause was denied by the district court of appeal on November 5, 1920, and a petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on December 6, 1920.

All the Justices concurred.