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ALEXANDER R. KELLEY, Respondent, v. WILLIAM A. UPSHAW et al.,
Defendants; CODY W. HOWARTH, Appellant
L. A. No. 22187
Supreme Court of California
39 Cal. 2d 179; 246 P.2d 23; 1952 Cal. LEXIS 248
July 7, 1952
PRIOR-HISTORY: APPEAL from a the Upshaws and Howarth jointly and
judgment of the Superior Court of Los severally became indebted to Kelley Angeles County. Leo Freund, Judge pro for $ 17,600 which they promised in tem. * writing to pay. They discharged part of their obligation, but refused upon * Assigned by Chairman of demand to pay the balance due. Judicial Council. As a second cause of action, Kelley Action on an extension agreement alleged that in 1947 he loaned the for payment of a promissory note. Upshaws $ 17,900. They executed and delivered to him a promissory note COUNSEL: John M. Davenport for payable in installments of $ 200 per Appellant. week, with interest at the rate of 6 per cent. The note provided that, in Sampson & Dryden and Jacob Swartz for the event of default in any payment, Respondent. the entire amount of principal and interest should become due. JUDGES: In Bank. Edmonds, J. Gibson, Later, Kelley pleaded, after the C. J., Shenk, J., Carter, J., Traynor, note was in default, he agreed in J., Schauer, J., and Spence, J., writing to extend the time for payment concurred. and to forbear to sue. In consideration of the extension the OPINION BY: EDMONDS defendants executed a contract promising to pay Kelley $ 8,800 by OPINION June 1, 1948. If the payment was not Alexander R. Kelley loaned made, then they agreed to pay $ William A. and Othelia A. Upshaw $ 17,600, the full amount unpaid upon 17,900. Thereafter, he entered into the note, with interest. Kelley an agreement executed by the Upshaws alleged his compliance with the and Cody W. Howarth which agreement and the failure of the conditionally reduced the amount of defendants to make the required the indebtedness and extended the time payment. He acknowledged having of payment. The appeal of Howarth received $ 4,402.74 in reduction of presents for consideration questions the principal of the extension concerning the rights of the agreement and claimed that $ respective parties under the extension 13,197.26, plus interest, is due and agreement. owning to him from the Upshaws and Howarth. The complaint charged that in 1947, In a third count of the complaint that the complaint does not state against the Upshaws only, Kelley facts sufficient to constitute a cause realleged the terms of the promissory of action. note and their failure to pay any part of it except $ 4,702.74. By the extension agreement, William Upshaw and Howarth agreed to pay $ By their joint answer, the Upshaws 1,200 forthwith and $ 50 per week, and Howarth denied the allegations of with interest, until the note was the first cause of action except as to paid. The agreement stated the amount the payment of $ 4,402.74. As to the of $ 17,600 as being due upon the second cause of action, they admitted note, but provided that if $ 8,800 having paid that amount and pleaded plus interest, was paid on or before the execution by the parties of the June 1, 1948, that sum would be extension agreement. They alleged that accepted in full payment of the in October, 1948, the parties principal. In the event of default, terminated and rescinded this the contract reads, the entire balance agreement and entered into a new of the note, plus interest, "shall be contract. Later, they said, Kelley, due and shall be paid on the weekly for consideration, gave John T. basis of Fifty ($ 50.00) Dollars per Goodwin a 30-day option in writing to week, plus interest." purchase the promissory note for $ 2,500. Thereafter, within the option Howarth appeared as his own counsel at the trial. Undisputed evidence period, Kelley refused to accept payment of that sum. Except as to the shows the execution of the promissory note and of the first extension payment of $ 4,402.74, the answer denied the allegations of the second agreement. There is testimony tending to prove that Kelley offered in and third causes of action. writing to assign the chattel mortgage For a separate defense, it was for $ 2,500. J. Clifford Argue, alleged that, in February, 1949, Goodwin's attorney, testified that he Kelley agreed in writing with Goodwin drafted the instrument, which was to cancel the amount due from the signed by Kelley alone. A copy of the defendants upon payment within 30 days instrument, "to the best of his of $ 2,500. Before the expiration of knowledge," was admitted into the option period, according to the evidence. answer, Kelley told Goodwin, Howarth and the Upshaws he would not accept Argue described the document as being "in the nature of an option that amount as full payment of the debt. A further allegation was that executed by Mr. Kelley wherein he granted to John Goodwin an option to Goodwin, the Upshaws and Howarth were then, and are now, ready and able to purchase the chattel mortgage then existing against the equipment at pay Kelley $ 2,500, which he refuses to accept. Coast Enameling for $ 2500 cash. He gave him thirty-days' time in which to The answer also asserted, as a raise the $ 2500, and that was the third defense, that the promissory option; that was the agreement." note sued upon is secured by a chattel mortgage which Kelley has not The record also includes an assignment of the chattel mortgage by foreclosed. By another defense the Upshaws and Howarth charged that the Kelley to Howarth in September, 1947. It recites receipt of a consideration promissory note was given pursuant to an agreement by which Kelley loaned of $ 8,800. William Upshaw money at a rate in Kelley testified that, at the time excess of 12 per cent per annum he signed the alleged option, "there interest. According to the pleading, was no money given to me." He further William Upshaw received only $ 15,000 said that, on a visit to Argue's law as consideration for the note, Kelley office a few hours later, his wife retaining $ 2,900 as interest on the took the instrument away from Argue loan. The final separate defense was and destroyed it. The same day, Kelley told Goodwin that he had business being conducted by defendants destroyed the document and did not Howarth and Upshaw" for $ 2,500. intend to abide by its terms. Goodwin neither accepted the offer nor obligated himself to make any payment. The testimony as to whether $ 2,500 Kelley rescinded the offer by taking ever was tendered to Kelley under his possession of the memorandum and agreement with Goodwin is in direct advising Goodwin that it was revoked. conflict. Howarth said that five days At no time did anyone on Goodwin's after the instrument was executed, he behalf tender Kelley $ 2,500. offered to pay Kelley the money. He Although the note was secured by a further stated that Goodwin acted as chattel mortgage, Kelley "released and his agent in the transaction. Kelley assigned" it to Howarth. The denied that Howarth or anyone else had assignment and release was part of the tendered payment to him. consideration for the extension Following trial, and after entry agreement and thereafter the of a minute order in which judgment obligation of the defendants was was ordered against the defendants and unsecured. The promissory note was Kelley's counsel directed to prepare not executed pursuant to an agreement findings, Howarth retained an for a loan at a rate of interest in attorney. Thereafter, his attorney excess of 12 per cent per annum. filed objections to Kelley's proposed As conclusions of law, the court findings of fact and conclusions of held that Kelley was entitled to law. In them, for the first time, judgment against Howarth for $ Howarth took the position that he can 13,197.20 principal and $ 2,694.16 be liable for no more than accrued interest, payable as follows: $ installments of principal and interest 2,297.26 principal and $ 2,694.16 under the extension agreement as of interest payable forthwith, the the date of judgment. There was, he balance of $ 10,899.94 to be paid at claimed, no provision for acceleration the rate of $ 50 per week, plus of installment payments and no basis interest, commencing July 1, 1950. for a finding that the balance of the The judgment provided "that execution amount of the note, with interest, was shall issue as against said defendant due. Cody W. Howarth only in accordance The findings of fact signed by the herewith." trial judge stated: The promissory Howarth contends that the trial note was in default at the time the court erred in awarding judgment parties signed the extension agreement against him for the full amount of providing for the payment of $ 8,800 principal and interest provided in the by June 1, 1948. This agreement was extension agreement. He further argues in default. Four thousand, four that certain findings of fact are hundred and two dollars and seventy- inconsistent and not supported by four cents had been paid on the note evidence. subsequent to the execution of the extension agreement, therefore, Howarth owed Kelley $ 13,197.20, plus interest, payable at the rate of $ 50 principal per week commencing December 1, 1947. As of June 30, 1950, there was $ 6,700 due from Howarth to Kelley, less $ 4,402.74 paid subsequent to December 1, or a total of $ 2,297.26, plus interest. Other findings were: Kelley offered to give Goodwin a 30-day option "to purchase the right, title and interest, if any, of plaintiff, in those certain fixtures and assets of a If it be assumed that Kelley was used, but it often merely denotes the entitled to judgment against him, idea of a complete debt, an existing Howarth says, the judgment should have obligation, or money fully earned but been limited to the principal amount not payable until a future time or of the contract installments due at until the happening of another event." the time the action was filed, with ( Philbrook v. Mercantile Trust Co., interest only on that amount. The 84 Cal.App. 187, 196 [257 P. 882]; extension agreement, he argues, Black's Law Dictionary, 3d ed., p. contains no provision for acceleration 625, "due.") in the event of default in payment of weekly installments. Therefore, he Even if there is merit to Howarth's states, Kelley may not recover for contention that the action was future installments which had not premature in part, Kelley argues, he become an indebtedness at the time of has waived this defense by failure to suit. urge it seasonably in the trial court by special plea. Howarth, on the Kelley, on the other hand, contends other hand, contends that his defense that, by the express terms of the is not dilatory. The issue raised by contract, the entire amount of unpaid the pleadings, he states, was the principal and interest was due and amount of money, if any, owed by him owing on June 1, 1948. He relies upon to Kelley; determination of the issue the provision of the agreement that, rested in part upon the number of if $ 8,800 plus interest was not paid matured installments of the contract. by June 1, the entire balance of the In addition, he argues that he note, with interest, "shall be due and seasonably presented his contention to shall be paid on the weekly basis of the trial court in the form of Fifty ($ 50.00) Dollars per week, plus objections to Kelley's proposed interest." (Emphasis added.) findings of fact and conclusions of From the findings of fact, law. conclusions of law, and judgment, it Neither the pleadings nor the is apparent that the trial court evidence raised the issue of the distinguished between accrued prematurity of the action as to installments and the total amount installments not yet accrued. The provided in the agreement. That this amount of money due, if any, was interpretation is correct is clear placed in issue by general denials of from a reading of the agreement as a the allegations of the complaint and whole. The contract provided for by special defenses which did not go payment of $ 17,600 in weekly to the question of premature installments of $ 50. Kelley agreed commencement of the action. Howarth to accept $ 8,800 in full satisfaction tried the case upon the theory that of the indebtedness if, but only if, the rights of the parties were to be that amount were paid by a date determined by the option contract. certain. Otherwise, the full $ 17,600 Only in his objections to the proposed "shall be due" and payable at the findings of fact and conclusions of weekly rate. The word "due" was used law did he raise the question of in the contract in the sense of prematurity of the action. "owed," not "payable." If the lesser amount was not paid on the date set, $ "The rule has long been settled 17,600 would be owing, but payable that the defense that an action is only in accordance with the contract. premature is in the nature of a There was no provision for dilatory plea not favored in the law, acceleration of the weekly payments. and that such defense must be seasonably urged in the trial court or "The word 'due' upon which a it is waived." ( Seches v. Bard, 215 claim is founded as applied to a debt Cal. 79, 81 [8 P.2d 835].) "A plea in or obligation to pay money does not abatement, without disputing the always mean that the money is then justness of plaintiff's claim, objects immediately payable. It may be so to the place, mode, or time of asserting it and requires pro hac vice defendant shall pay said sums to that the judgment be given for the plaintiff as they become due, as defendant, leaving it open to renew aforesaid; that execution shall issue the suit in another place, or form, or for each amount as each amount shall at another time. It must not only become due." point out the plaintiff's error, but must show him how it may be corrected, Upon appeal, the judgment was modified to read: "That execution or, in technical language, it must give the plaintiff a better writ." ( shall not issue for such future Nevills v. Shortridge, 146 Cal. 277, installments until after the date when 278 [79 P. 972].) Thus, although a such installments shall become timely plea in abatement, properly severally due." Relying upon Seches v. proved, requires judgment for the Bard, supra, the court said: "So far defendant, it is an objection which as the record speaks, the conclusion is inescapable that the case was tried may be waived if not seasonably urged. upon the theory that if the When a defense in abatement has Association was entitled to any of the been waived, the court may, following refunds, it was entitled to all. It trial upon the merits, enter judgment is too late now to take a different for the entire amount in controversy, position." (P. 283.) The modification even though a portion of the cause of of the judgment was required for the action had not accrued at the time protection of the right of the suit was commenced. In Seches v. judgment debtor to be saved from Bard, supra, the dispute concerned the execution until the amounts payable rights of the parties to a total fund became overdue. It in no way of $ 78,000, of which $ 48,000 was challenged the validity of the represented by a series of $ 4,000 judgment for amounts not then matured notes payable progressively each and, in fact, emphasized the power of month. At the time the action was the trial court to grant such commenced, five of the notes, totaling judgment, subject to proper safeguards $ 20,000, had not matured and were upon the issuance of execution. unpaid. No plea in abatement was Howarth claims, however, that his entered and the action was tried on objections to the proposed findings of its merits without reference to any fact and conclusions of law possible prematurity. A judgment constituted seasonable presentation of disposing of the entire sum in the defense of prematurity. He controversy was affirmed upon appeal. apparently bases his argument upon a Another case involving installment quotation in the Seches case from payments not matured at the Hentsch v. Porter, 10 Cal. 555, 561, commencement of the action is Loomis that: "Where the objection, if true, F. G. Assn. v. California F. Exch., would only defeat the present right to 128 Cal.App. 265 [16 P.2d 1040]. The recover, the defendant, though not association brought an action against compelled to demur or answer, should the exchange to recover almost $ be obliged to make the objection, by 100,000 payable in installments. Three motion or otherwise, before the Court installments, aggregating some $ of original jurisdiction, during the 30,000, had not matured at the date term at which the judgment was suit was brought. No plea in obtained." abatement was entered and the case was not tried upon the theory that only a Similarly broad language appears in portion of the debt was then due. Williams v. Schalk Chemical Co., 11 Trial was had upon the issue of breach Cal.App.2d 396, 399 [53 P.2d 1015]. of contract. Judgment was entered in There the appellant was held to be favor of the association for the total precluded from raising the question of amount, specifying that the sum of $ prematurity of the action "for the 30,000 would become payable in reason that there was no demurrer, no installments upon designated future special defense, no motion to vacate dates. The judgment provided: "That any part of the judgment, nor any motion for a new trial specifically on Howarth attempts to distinguish the that ground. In short, the question Bollinger case upon the ground that was not presented to the trial court the statute of limitations had barred in any manner, and it cannot be a new suit in that action, whereas the raised, in the absence of some such statute has not run against any presentation as suggested, for the installment here involved. The facts first time on appeal." In Loomis F. G. in the Bollinger and Bemmerly cases Assn. v. California F. Exch., supra, merely emphasize the reason for the p. 283, the court also implied that rule, but do not alter the requirement the defense might be raised in some that the defense be asserted promptly way other than by plea. and plainly by plea. Assuming that the trial court, under the facts of However, a more accurate this case, could have permitted the statement of the rule appears to be defense to be raised after waiver, it "that the plea that an action has been did not do so. If it is a matter of prematurely brought is in the nature judicial discretion, as the Bemmerly of a dilatory plea which must be case indicates, here there is no specially pleaded in order to be showing of an abuse of such available as a defense." ( Verbeck v. discretion. Clymer, 202 Cal. 557, 562 [261 P. 1017]; Realty & Rebuilding Co. v. Rea, For these reasons, it is now too 184 Cal. 565, 573 [194 P. 1024]; Mears late for Howarth to complain either of v. Jeffry, 80 Cal.App.2d 610, 615 [182 the award of installments and interest P.2d 294].) In Bemmerly v. Woodward, accrued at the date of judgment or of 124 Cal. 568 [57 P. 561], the opinion the determination of Kelley's right to assumes that an objection based upon unmatured installments. The provision prematurity of the action was made in of the judgment "that execution shall the statement on motion for a new issue as against said defendant Cody trial. At that time, the bringing of W. Howarth only in accordance a new suit would have been barred by a herewith" is adequate to protect statute of limitations. No cause of Howarth's rights insofar as execution action existed at the time the suit upon future installments is concerned. was commenced. The court held that Unlike the judgment which was modified the defense had not been seasonably in the Loomis case, supra, p. 283, the urged and was waived. It said that provision for execution here may be "this is a mere matter of abatement, read as permitting issuance of which is waived unless pleaded. execution only after the date when the Formerly, such pleas could only be installments shall become severally interposed before a plea to the merit. due. Under our code all defenses may be included in one answer, but if a Howarth further contends that the defense which is mere matter of evidence is insufficient to sustain abatement is not made by that time, it the findings that the promissory note should be deemed waived. was executed and delivered for good and sufficient consideration and that ". . . It is simply matter of it was not executed pursuant to an abatement -- a defense which is not agreement to lend money at a rate of favored, and must be made by plea, and interest in excess of 12 per cent per in proper time, or it is waived. If annum. Even if we assume that Howarth so waived the court will be rarely may complain of these findings, though justified in permitting the defense to not a party to the note, his be made later." (Pp. 574-575.) contention is without merit. The evidence is susceptible of the Likewise, in Bollinger v. National construction that William Upshaw, or Fire Ins. Co., 25 Cal.2d 399, 405-406 his company, received adequate [154 P.2d 399], the court held that consideration for the note, either the defense of prematurity was not upon its execution or prior thereto. asserted promptly when raised for the William Upshaw testified that Kelly first time by a motion for nonsuit. loaned money to the business. He said that "the money that went into the finding is inartificially drawn, it is Coast Enameling was around $ 15,000. not prejudicially erroneous. Kelley's The other was prior to the $ 15,000 testimony that there was no loan." According to the witness, consideration for the offer, and that Kelley had invested in excess of $ he withdrew it before acceptance, was 15,000. "Where different conclusions undisputed. The trial court's finding may reasonably be drawn from the says no more than that Kelley's evidence by different minds the trial "offer" was revoked prior to court's findings are not to be acceptance. The evidence is clearly disturbed on appeal." (Pfingsten v. sufficient to sustain the finding. Westenhaver, ante, pp. 12, 19 [244 P.2d 395]; Connor v. Owen, 28 "An agreement for an option not Cal.App.2d 591, 592-593 [82 P.2d based upon consideration is simply a 1114].) continuing offer which may be revoked at any time." ( Thomas v. Birch, 178 The findings in regard to the Cal. 483, 489 [173 P. 1102].) total sum paid on the note, Howarth Although the evidence is conflicting claims, are not supported by the upon the question of whether tender of evidence. For this argument, he the $ 2,500 was ever made, Howarth's relies upon testimony by Kelley that own testimony was to the effect that the total payments from the inception he did not make tender until after of the note, both before and after the revocation of the offer. In any extension agreement, were $ 4,700, event, the evidence is sufficient to including $ 1,200 paid at the time the sustain the finding that no tender was agreement was executed. Because of ever made. this testimony, Howarth says, he must be credited with the total payment of Howarth contends that the finding $ 4,700 in computing the amount which that Kelley offered Goodwin an option he owes. However, the amount and time to purchase the chattel mortgage is of the payments were not in issue. By inconsistent with the finding that the his answer, Howarth admitted the mortgage had been previously assigned payment of $ 4,402.74 upon the and released. He further argues that extension agreement. Incorporated in the evidence does not support the his answer and admitted into evidence, finding that Kelley offered Goodwin an was a copy of the agreement, which option to purchase his "right, title showed upon its face that the original and interest, . . . in those certain debt had been reduced by $ 300 by the fixtures and assets of a business." time the agreement was made. The Nor does the evidence support the findings, therefore, are based upon finding that the assignment and the pleadings and the evidence. release of the mortgage was part of the consideration for the extension Howarth's contention that the agreement, Howarth says. If Kelley finding concerning the amount of his did not assign the mortgage, Howarth indebtedness is not supported by the argues, it remains as security for the evidence is based upon his claim that indebtedness and should have been the action was premature in part. For foreclosed. If he did assign it, the $ the reasons which have been stated, he 8,800 consideration recited should be cannot now assert this defense. credited upon the entire indebtedness. Howarth further objects to the The finding that Kelley offered finding that Kelley did not grant Goodwin an option to purchase his Goodwin a 30-day option to purchase "right, title and interest" in the the promissory note, but offered to fixtures is supported by the evidence. give him such an option "to purchase Although the phraseology of the the right, title and interest, if finding is inept, it is clear from the any, of plaintiff, in those certain record the Kelley's only interest in fixtures and assets of" Coast the fixtures at any time was the Enameling, and that no tender was made chattel mortgage. Any error in the of the option price. Although the terminology is not prejudicial to Howarth. The finding properly may be Christie, 6 Cal.2d 416, 418 [57 P.2d interpreted as meaning that Kelley 1303]; Security-First Nat. Bank v. offered Goodwin an option to purchase Cooper, 62 Cal.App.2d 653, 666 [145 the chattel mortgage. P.2d 722].) The evidence also is sufficient In any event, Kelley's purported to support the finding that the assignment of the mortgage without an assignment was part of the assignment of the debt which is consideration for the extension secured was a legal nullity. ( agreement. Kelley testified that Johnson v. Razy, 181 Cal. 342, 344 negotiations were conducted with [184 P. 657]; Adler v. Sargent, 109 Howarth prior to execution of the Cal. 42, 48-49 [41 P.2d 799]; Hyde v. extension agreement. He then Mangan, 88 Cal. 319, 327 [26 P. 180].) identified the assignment, which was In like manner, the option to purchase admitted into evidence. From this the mortgage, if it had been accepted, evidence, the trier of fact could would have been of no legal effect. conclude that the assignment formed a The rights of the parties, therefore, part of the consideration for the can be determined only upon the basis agreement. of the extension agreement. Even if Kelley did not assign the Insofar as the consideration mortgage, there is no merit to recited in the assignment is Howarth's argument that it should have concerned, the uncontradicted been foreclosed. The mortgage was not testimony is to the effect that the security for Howarth's promise, but total amount paid upon the only for the promissory note, to which indebtedness was $ 4,702.74. From he was not a party. This Howarth this, the trier of fact was entitled admitted by his pleadings. "'The to believe that the recited mortgage only affects the remedy consideration of $ 8,800 was not paid, against the mortgagor' or primary or was merely a reference to the debtor. . . . It never has been, nor identical settlement figure in the has it ever been declared to be the extension agreement. Therefore, there law in this state, that a mortgagee is no merit to Howarth's contention may not take security other and in that an additional $ 8,800 should be addition to his mortgage security, and credited upon the indebtedness. if the contract with the giver of such Howarth's last contention, that the security permits, may not enforce his judgment is not supported by the debt from this third party without evidence, is a reiteration of his reference to the mortgagor and his preceding arguments and does not security." ( Martin v. Becker, 169 require discussion. Cal. 301, 306-307 [146 P. 665, Ann.Cas. 1916D 171]; cf. Loeb v. The judgment is affirmed.