Stradley v. Tout

Plaintiff instituted this action against the defendants to recover the amount due on a promissory note, executed by defendant Tout, and indorsed and payment thereof guaranteed by defendants Albert and Valencia.

It is the contention of plaintiff that the findings show that he was the bona fide holder of the note sued on in due course under the so-called “Uniform Negotiable Instruments Law”; that he held the note as pledgee, and that he had the right to enforce payment thereof from all parties liable thereon, including Albert and Valencia, and to apply the proceeds upon the indebtedness owing to him by Valencia, and that the court therefore erred in granting judgment in favor of the defendants Albert and Valencia.

Reliance is placed by plaintiff, in support of his contention, upon two sections of the Civil Code which were adopted in 1917, at the time of the enactment of the so-called Uniform

‘ ‘ Section 3108. Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien.” “Section 3138. A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among therm selves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.” Plaintiff concedes that prior to the enactment of the above sections of the code the decisions of the supreme court of this state were adverse to his contention, at least in so far as the defendant Valencia is concerned. In the case of Sparks v. Caldwell, 157 Cal. 401 [ 108 Pac. 276 ], the supreme court stated that: “The one question presented is whether or not a pledgee can sue a pledgor as guarantor of a collateral security in the nature of a negotiable instrument.” It was held that no such action could be maintained for the reason that the title to the pledged security was still in the pledgor and that by his indorsement thereof to the pledgee, even when such indorsement contained (as it'does in the present case) an express guaranty for the payment of this pledged security, he only gave to the pledgee authority to collect the amount due from the maker of the pledged security, and to apply such sum to the payment of his own debt. The court held that this was so by virtue of section 2888 of the Civil Code, which provides that “Notwithstanding an agreement to the contrary, a lien, or a contract for a lien, transfers no title to the property subject to the lien.” [1] Plaintiff contends that section 2888 is inconsistent with the provisions of 3108 of the Civil Code, and that as the latter section was enacted long subsequent to the adoption of section 2888, it repealed the latter section by implication. We are unable to agree with .plaintiff in his contention that the terms of these two sections are inconsistent with each other. Section 2888 provides simply that no title to property, subject to a lien, is transferred by a lien or by a contract for a lien, notwithstanding any agreement to the contrary. Section 3108 provides that where the holder has a lien on a negotiable instrument he is deemed a holder for value to the extent of his lien. Nothing is said in said

[3] Nor is appellant supported in his claim for a judgment against defendant Valencia by the provisions of section 3138 of the Civil Code. It is true that by the terms of this section “a holder in due course [and plaintiff is such a party] may enforce payment of the instrument °. . . against all parties liable thereon,” but we have already seen that Valencia is not one of the parties liable for the payment of the instrument. Therefore, no right is given plaintiff by this section to recover against him. The judgment, therefore, in favor of defendant Valencia, the pledgor of said note, was correct and should be affirmed.

The defendant Albert occupies a different position, however. At the time plaintiff acquired the note from Valencia the name of defendant Albert appeared thereon as an indorser and guarantor. While the court found that he was the owner of one-half of said note, it further found that plaintiff had no knowledge of such ownership at the time he acquired the note. The plaintiff was, therefore, .as far as the defendant Albert was concerned, a holder for value and in due course of business. He held it free from any defects of title of any prior party thereto and free from any and all defenses available to any prior party, and was

That part of said judgment in favor of defendant Valencia is affirmed, but that part of said judgment in favor of defendant Albert is reversed, with directions to the trial court to modify said judgment by causing judgment to be entered against said defendant Albert for the amount found to be due on said promissory note.

Conrey, P. J., and Houser, J., concurred.