Bowman v. Sears

This appeal was considered and decided by this court on March 8, 1923 (40 Cal. App. Dec. 606). In due time after the handing down of the decision a petition for a rehearing was presented and the same granted. The ground upon which the rehearing was asked was that this court misinterpreted the evidence and the legal effect thereof. The rehearing was granted for the purpose of further considering whether the evidence sufficiently showed that a gift of the money with which the plaintiff made the purported purchase of the mortgage, to foreclose which was and is the purpose of this suit, had been made to the plaintiff by her husband, one of the mortgagors.

The former opinion contained the following statement of the case which, with the elimination therefrom of an inaccuracy as to the manner in which the plaintiff’s husband deposited in the bank certain money which he had received

“This action was for the foreclosure of a chattel mortgage given to secure the payment of a promissory note for the sum of $2,800, executed and delivered by the defendants to the California National Bank of Sacramento.

“For some time prior to the execution of the note and the mortgage in suit, the defendants were copartners, engaged, as the record sufficiently though rather vaguely discloses, in the farming business in the county of Sacramento. The plaintiff is and was at all times mentioned in the pleadings herein the wife of the defendant, L. W. Bowman.

“The note and the mortgage in controversy were executed by the defendants to evidence and secure a partnership obligation to the said bank, the mortgage covering partnership personal property. As the brief of counsel for the appellant states: ‘ The note sued upon was one of several renewal notes executed from time to time by the defendants, all evidencing the same obligation, except that the indebtedness was originally for the sum of $2,500 only, but which was afterwards increased to the sum of $2,800. At all times the note was secured by a pledge of 28 shares of the capital stock of the Pittsburg Plate Glass Co., belonging to the defendant Bowman.

“The chattel mortgage was not given until the execution of the note in suit. The cashier of the bank testified that the stock in the plate glass company which was pledged as collateral security for the note was of value in excess of the amount evidenced by said note; that it was considered sufficient security and that the bank did not require or demand additional security for the note in the form of a mortgage or otherwise; that it was the defendant L. W. Bowman who suggested and requested the bank to take the chattel mortgage in question.

“The execution of the mortgage and the subsequent payment of the note by the plaintiff and thereupon the assignment of the note and the mortgage to her by the bank came about under these circumstances: It appears that the partnership business was not in a prosperous condition. In fact, all indications pointed to a complete failure of the business enterprise in which the defendants, as copartners, were engaged. The defendant and his wife (the latter plaintiff

“The amended complaint is in the usual or characteristic form in actions for the foreclosure of liens. Paragraph 2 thereof refers to the execution of the note and the chattel mortgage, enumerating the articles of personal property covered by the latter and also states that said mortgage was made in good faith and without any design to hinder, delay or defraud creditors, ‘and at the same time was duly acknowledged by said mortgagors, and certified, so as to entitle the same to be recorded and the same was thereafter, to wit, on the 27th day of September, 1918, duly recorded, ’ etc. It is also alleged in said complaint that the note and the mortgage in suit were on the 27th day of September, 1918, for a valuable consideration, by an instrument in writing, assigned to the plaintiff by the said bank. It is further alleged that by the mistake of the person who prepared the written assignment said instrument erroneously referred to the mortgage'purporting thus to be assigned as having been executed on the ‘13th’ instead of the ‘30th’ day of August, 1918, which was the date of the execution of the last-mentioned instrument. Besides the prayer for a decree of foreclosure, etc., the plaintiff asked that the assignment be reformed in the particular indicated.

“The answer, apart from the admission of the existence of the indebtedness and the execution of the note sued upon, as alleged in the amended complaint, consists of specific denials, upon information and 'belief, of all the other material averments of said pleading. "With the answer, the appellant filed a cross-complaint substantially alleging that the plaintiff did not at the time said note was paid own or possess, in her separate right, sufficient or any funds with which to purchase said note and that the indorsement and delivery of said note was made by said bank to the plaintiff without any consideration whatever being paid or moving to said bank from said plaintiff, but that the entire consideration for said indorsement and delivery of said note and assignment of said chattel mortgage to her by the bank was paid and furnished by the defendant L. W. Bowman, one of the

“The answer of the plaintiff to the cross-complaint, besides denying all the material allegations contained in said pleading, except that as to the execution of the mortgage, as above explained, admits ‘that as one of the makers of said note said defendant Bowman is liable to defendant Sears in contribution for one-half of the indebtedness evidenced by said note, if and when the same shall have been paid by said defendant Sears, but not otherwise; that defendant Bowman has been at all times and still is ready and willing and able to pay to plaintiff one-half of the amount due from said defendants L. W. Bowman and L. C. Sears and that said plaintiff has been at all times since she acquired said note, and still is, ready and willing to accept from said defendant Sears one-half of the amount due from said defendants Bowman and Sears on said note and to give said defendant Sears, upon the payment by him of the amount so due, a full and complete release and satisfaction of his indebtedness and liability under and by virtue of said note and mortgage, all of which has been and still is well known to defendant Sears.’

“The defendant L. W. Bowman by his answer denies all the material averments of the cross-complaint, with the exception of the allegation as to his liability to defendant Sears in contribution for one-half of the indebtedness evidenced by said note, ‘if and when the same shall have been paid by said defendant Sears, but not otherwise. ’ Said defendant also alleges that he ‘has been at all times and still is ready and willing and able to pay to plaintiff one-half of the amount due from said defendants to L. W. Bowman and L. C. Sears.’

“We have thus given an extended statement in substance of the allegations of all the pleadings in the case because the court’s findings, except as to one or two propositions of fact, are not specific, referring only in general language to the allegations of the various pleadings as a statement of the facts found, viz.: That each and all of the allegations of plaintiff’s amended complaint are true; that defendant Bowman made no denial of said allega

“The judgment decreed the reformation of the written assignment of the chattel mortgage by inserting the word ‘thirtieth’ in lieu of the word ‘thirteenth,’ ‘where the same appears in said instrument in the reference to the date of the mortgage thereby assigned.’ The decree also adjudged that the defendants were indebted to the plaintiff on said promissory note in the sum of $2,519.19; that the personal property described in the mortgage be sold by a commissioner appointed by the court for that purpose at public auction and the proceeds of such sale, after the payment of necessary costs and expenses incurred in the sale of the property, be paid to the plaintiff or her attorneys in satisfaction of the judgment. Judgment for any deficiency shown to exist was ordered to be entered against the defendants for the amount of such deficiency.

“Appellant makes three points upon which he insists that the transaction crystallized in the judgment should be set aside. They are: 1. That the payment of the note on September 25, 1918, operated to extinguish the obligation; 2. That the note having been paid on September 25, 1918, the attempted assignment of September 27, 1918, was ineffectual and inoperative; 3. ‘That the. entire transaction of the 25th of September, 1918, was for the benefit of the husband, in fraud of this defendant, and the court must treat the situation as though Mrs. Bowman were but a dummy to enable Mr. Bowman to perpetrate the fraud on appellant.’ ”

The real question dedueible from or involved in the points thus separately presented, however, is whether the money with which the note was taken up was a gift to the plaintiff by her husband, the defendant, Bowman, and

The testimony of the cashier of the California National Bank was to the effect that the defendant Bowman maintained a deposit account in said bank in his own name from June 5, 1916; that the account always remained in said Bowman’s name, but that at some time before the note was taken up—whether at the time the account was opened or subsequently, is not made clearly to appear by the record—said Bowman authorized the bank to honor the plaintiff’s checks on said account, and that the bank thereupon made a record of said authorization by means of a ledger card, the account, however, still remaining in the name of the defendant Bowman. The cashier testified that it was the custom of the bank to pay checks issued by a party other than the depositor on the latter’s checking account where he (the depositor) authorized it to be done without changing the account on the ledger from the separate account of the depositor to the joint account of the latter and the party properly authorized by the depositor to draw on said account, in which ease, of course, either was at liberty to check on such account. The testimony of the cashier further shows that the Chicago draft, above referred to, for the sum of $2,782.62, was deposited by defendant Bowman in said bank in his name and to his separate account; that, as before stated, on the day on which the Chicago draft was deposited (September 25, 1918), the plaintiff drew on the account in the bank a check for $2,814.15 for the purpose of purchasing the note in controversy. As to the giving of the chattel mortgage, the cashier testified that, at some time prior to the execution of the note in suit as a renewal of the note previously given, the defendant Bowman called at the bank and suggested that a mortgage be given by the defendants on the partnership chattels as security for their indebtedness to the bank; that, while it did not ask for or require additional security, the pledged stock being sufficient, the bank

The plaintiff testified that she and her husband, before the note in suit fell due, foresaw that failure of the partnership business of the defendants would inevitably occur, and that the result, under the then existing circumstances, would be that the stock of her husband, pledged as security for the note, would be sold to satisfy the partnership obligation; that she and her husband, after consideration of the situation, called on their attorney, who, having been by them put in possession of all the facts, advised them that the stock could be saved by the plaintiff purchasing the note and mortgage; that said attorney advised them that the defendant Bowman could make a gift to plaintiff of sufficient money to purchase the note; that, in pursuance of. said advice, the defendant Bowman sent for the money (presumably that represented by the Chicago check) “and arranged so she could draw a check on the account.” She further stated that the understanding between her and her husband was that, upon her taking up or purchasing the note, the same and the chattel mortgage were to be her separate property; that the money covered by the Chicago draft or check was the separate property of the defendant L. W. Bowman. The manner in which the money was given to her by her husband and the taking over the note and mortgage by her has been explained. She testified that, after she became the owner of the note, and on October 1, 1918, the defendant Bowman paid the accrued interest thereon, amounting to the sum of $16.34, and that on the twenty-ninth day of November, 1918, he made a payment on the principal of $313.49. (These payments were noted on the back of the note in the handwriting of the plaintiff, and they account for the fact that the judgment is a trifle over $300 less than the face value of the

The above in substance is all the evidence presented by the plaintiff in support of the theory that the money with which she took up the note and mortgage was a gift to her from her husband. From said evidence the court, believing it, could have made specific findings as follows: That the plaintiff desired to become the owner of the note and mortgage; that she and her husband were advised by their attorney that she could accomplish that result by her husband making her a gift of sufficient money to purchase the obligation; that she and her husband agreed to that plan and to that end he sent for and received certain money, which was his separate property, deposited the same in the bank, and authorized the bank to honor her cheek on said account for the sum necessary to buy the note; that her husband, being present, with the intention of making a gift of the money to the plaintiff, filled out a blank check in favor of the bank (mortgagee) for the amount of the note, delivered said check to the plaintiff, who thereupon signed her name thereto and delivered it to the bank as the purchase price of the note; that the bank thereupon delivered the note and mortgage to the plaintiff, with the indorsement as indicated above. Upon these facts can this court say as a matter of law that the transaction did not constitute a gift of the money by the husband to the plaintiff? Are we legally authorized to declare that the trial court’s interpretation of the transaction as it was exposed to it by the testimony—testimony given by the witnesses in its presence—is erroneous? We do not feel that we are at liberty to ,answer those questions in the affirmative.

[1] The conclusion that the money with which the plaintiff purchased the note was a gift to her by her husband and so became and was at the time she purchased the

[2] The appellant contends, however, that the transaction, as it was shown by the evidence of which a synoptical statement is given above, does not measure up or square with the requirements essential to the consummation of a completed verbal gift as the same is described by section 1147 of the Civil Code, which thus lays down the essentials of a valid gift: “A verbal gift is not valid, unless the meaqs, of obtaining possession and control of the thing are given) nor, if it is capable of delivery, unless there is an actual or symbolical delivery of the thing to the donee.”

[3] It is first argued that the transaction, as it was shown by the evidence and as it was found by the court to have been conducted and consummated, cannot be considered in any other light than that of a payment of the note by the defendant Bowman himself, or, in other words, that it was within the rule that, where a promissory note is taken up by a third party with funds furnished by the maker of the note, the legal effect thereof is the extinguishment of the obligation evidenced by the note. (Porter v. Title Guaranty & Surety Co., 17 Idaho, 364 [ 27 L. R. A. (N. S.) 111 , 106 Pac. 299 , 302]; Binford v. Adams, 104 Ind. 41 [ 3 N. E. 753 ]); that, furthermore, in order to show a purchase of a promissory note, it is essential that there be shown an agreement, express or implied, on the part of the holder to sell, and, on the part of the party paying the money due on the note, to buy. (Lee v. Field, 9 N. M. 435 [ 54 Pac. 873 , 874]; Daniel on Negotiable Instruments, sec. 1221; Lancy v. Clark, 64 N. Y. 209 [ 21 Am. Rep. 604 ]; Burr v. Smith, 21 Barb. (N. Y.) 263); that one who voluntarily pays the note of another cannot make himself by such, payment the owner of the note without the knowledge and consent of the holder thereof; that “the doctrine of subrogation has no application to payments made by a mere volunteer.” (People’s & Drovers’ Bank v. Craig, 63 Ohio St. 374 [ 81 Am. St. Rep. 639 , 52 L. R. A.

But it is further argued in effect that, even conceding that the transaction could in any view have been intended to constitute a gift, or, in other words, that the evidence clearly enough shows that the intention of the defendant Bowman was to effect a gift of the money to the plaintiff, yet all that the transaction amounted to was the delivery to the plaintiff, not of the thing itself which was supposed to be the subject of the gift, but of a check, which, as counsel for the appellant well declares, is nothing more than an order by the owner of a deposit in a bank directing the latter to pay the payee a certain sum of money. It is true, as the learned counsel for appellant states, that the depositor of money in a bank is not by reason of such deposit the owner of specific money or funds in such bank, but is a mere creditor owning only a chose in action as against the bank for the amount due him from the latter. It follows, therefore, that the delivery of a check by the depositor to one to whom he desires and intends to make a

The above-stated propositions are, as declared, unassailable. But it is not claimed here that the check which the defendant

Of course, the fact that the donor and donee here were husband and wife was one which, under the circumstances of this case, called for a scrutinizing examination and consideration of the transaction, and we may assume that the trial court gave the transaction such consideration, since there is an absence of clear ground for holding that the conclusion of that court from the facts and circumstances proved and found is upon its face, or when measured by the proofs, erroneous. As to the fact of the relationship between the plaintiff and the defendant Bowman it was for the trial court to consider it in connection with all the other evidence in determining whether or not the facts proved justified it in concluding, as a matter of law, that the transaction constituted a gift of the money to the plaintiff. “Of course,” as was stated in the former opinion filed herein, “it is not disputed that a husband and wife may enter into contracts with each other or with other persons respecting property the same as they might were they unmarried. This proposition is established by section 158 of our Civil Code. [4] Under said section a husband may make a transfer of property to his wife, whether the same be his own or community, and in such case it is well settled that, in the absence of a contrary intent, the transfer will vest in the wife the property conveyed as her separate property. (Hamilton v. Hubbard, 134 Cal. 603 [ 65 Pac. 321 , 66 Pac. 860 ]; Tillaux v. Tillaux, 115 Cal. 672 [ 47 Pac. 691 ]; Ions v. Harbison, 112 Cal. 260 [ 44 Pac. 572 ]; Carter v. McQuade, 83 Cal. 274 [ 23 Pac. 348 ]; Burkett v. Burkett, 78 Cal. 310 [ 12 Am. St. Rep. 58 , 3 L. R. A. 781 , 20 Pac. 715 ]; Taylor v. Opperman, 79 Cal. 468 [ 21 Pac. 869 ].) ” In the instant case, as we have concluded,• after a

As to the charge of fraud in the transaction on the part of defendant Bowman and plaintiff, made in appellant’s cross-complaint, we adopt the following views expressed in the' opinion originally filed herein:

[5] “ The appellant wholly failed to sustain the charge of fraud against the defendant Bowman or the plaintiff or both in the transaction. The averments of the cross-complaint as to the charge of fraud are on information and belief, and these the answers of defendant Bowman and the plaintiff in direct and positive language deny. There is no evidence that the defendant Bowman was an insolvent or ‘pretended’ to be. There is no evidence that by the trans

For the reasons hereinabove stated the judgment is affirmed.

Burnett, J., and Finch, P. J., concurred.

A petition by appellant to have the cause heard in the supreme court, after judgment in the district court of appeal was denied by the supreme court on September 24, 1923.