(55 Cal. App. 138)

six certificates representing the ownership of

ANDREWS v. FIRST NAT. BANK OF LOS shares in various corporations, together with

ANGELES. (Civ. 3732.)

(District Court of Appeal, Second District, Division 1, California. Nov. 10, 1921.)

1. Bills and notes 430-Renewal note does not extinguish debt.

A renewal does not extinguish a debt represented by a note for which it is given in lieu, unless there is a distinct and unqualified agreement that it shall so operate.

2. Limitation of actions 167(1)-Passage of time does not require return of security pledged.

Neither a pledgor nor his representative possesses the right to require the return of pledged property until the debt for which it was given as security is paid and satisfied, regardless of the length of time that has elapsed since the debt was created.

3. Corporations 123 (6)-Agreement as to
holding for future advances becomes inop-
erative on death of one joint debtor.
Where two persons each deposited corpo-
rate stock to secure past indebtedness and in-
debtedness that might be incurred in the fu-
ture, upon the death of one of such pledgors
the agreement that the security should be
holden for future advances became inoperative,
and stock of the deceased person could not be
held to secure indebtedness created subsequent
to his death.

Appeal from Superior Court, Los Angeles County; Lewis R. Works, Judge.

six promissory notes of third persons, altogether and on their face representing in value a large amount of money. Among the stock was a certificate for 300 shares of California Delta Farms, Inc., which was in the names of J. E. Marsh and Robert Marsh. This stock was afterwards divided and, in lieu of the one certificate, two certificates were made a part of the deposit; each representing 150 shares and being issued in the names respectively of J. E. Marsh and Robert Marsh. All of the securities mentioned were deposited subject to the terms of a written pledge agreement which was at the date last mentioned executed by J. E. Marsh and Robert Marsh. This agreement recited that

Whereas the parties were indebted to the defendant bank "in sundry amounts, real and contingent, due and to become due, and expect from time to time to incur further indebtedness to the said bank, now, therefore, we the under

signed, Robert Marsh and J. E. Marsh, pledge and deposit with the First National Bank of Los Angeles as collateral security for the payment of each and every liability, or liabilities, of the undersigned Robert Marsh and J. E. Marsh, or either of them, to the said First National Bank of Los Angeles, due or to become due, or that may be hereafter contracted, whether represented by notes, drafts, acceptances, or in open account, whether real or contingent, the following property."

An enumeration of the securities followed the provision quoted, and the agreement pro

Action by Florence A. Andrews, as executrix of the estate of Joseph E. Marsh, de-ceeded with this recital: ceased, against the First National Bank of Los Angeles. Judgment for defendant, and plaintiff appeals. Reversed.

"With this condition that the First National Bank of Los Angeles has the right to call at any time for such additional security as it may deem proper, and on the nonpayment of any

Willedd Andrews and Tanner, Odell & liability or liabilities as above mentioned acTaft, all of Los Angeles, for appellant. Gibson, Dunn & Crutcher and H. F. Prince, all of Los Angeles, for respondent.

JAMES, J. By this action plaintiff in her representative capacity sought to secure a judgment requiring the defendant to deliver to her a certificate for 150 shares of stock in a California corporation, alleged to be of the value of $15,000. Incidental relief, that pending the determination of the action defendant be restrained from converting said stock or disposing of the same in any way, was prayed for. Defendant had judgment. Plaintiff appeals.

The stock in question had been deposited with the defendant, along with other securities of Robert Marsh and J. E. Marsh, prior to the death of J. E. Marsh, plaintiff's testator, which occurred on April 1, 1917. On November 11, 1914, J. E. Marsh and Robert Marsh, being then indebted to the defendant in various amounts, deposited with the latter

cording to the terms and conditions thereof, the First National Bank of Los Angeles, its successors or assigns, is given full power and authority to collect or sell, assign or deliver the whole or any part of the above-named securities, or any substitute therefor, or any addition thereto, at public or private sale, at any time or times hereafter, without demand, advertisement or notice, such demand, advertisement or notice being hereby expressly waived, and upon such sale the said First National Bank of Los Angeles, or the holder thereof, may become the purchaser of the whole or any part of such personal property, discharged from any right of redemption; and after deducting all legal or other costs and expenses for collection, sale and delivery may apply the residue of the proceeds of such collection, sale or sales, to pay any, either or all of said liabilities, as said First National Bank of Los Angeles, its successors or assigns, shall deem proper, returning the overplus to the undersigned. And the undersigned agrees to pay the holder thereof any deficiency upon demand." At the time of the death of J. E. Marsh there was apparently due to the defendant

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(203 P.)

In Sather Banking Co. v. Briggs Co., 138 Cal. 724, 72 Pac. 352, discussing the effect of a renewal note, the court there said:

newal of it was simply a prolongation of the
"It was the same indebtedness, and the re-
original contract for its payment.
The gen-
eral rule is that the renewal of notes does not
amount to payment. Savings Bank v. Central
Market Co., 122 Cal. 35. The presumption is
that they were not so taken."

Decisions which treat of the release of sureties and guarantors whose obligations are strictly limited are not applicable in this case. Both of the Marshes entered into the pledge agreement with the bank as principals; presumptively they were engaged in a joint enterprise attended by considerations mutual as between themselves. The entire agreement is so characterized by its terms, and the defendant had the right to rely upon the conditions thereof.

amounts represented by two promissory notes which were secured by the pledged property, to wit, one note for the principal sum of $11,937.50, dated March 7, 1917, signed by Robert Marsh & Company and Robert Marsh; also indorsed by Robert Marsh. The second note was for the principal sum of $8,000, dated March 20, 1917. From the transcript of the testimony we are unable to determine definitely by whom the latter note was signed, although it is stated in the briefs of appellant that it was made by Robert Marsh & Company. Subsequent to the death of J. E. Marsh, there was collected and credited on the $8,000 note the sum of $4,000, and several renewal notes were taken covering the amounts remaining unpaid on the two notes. These renewal notes were signed variously by Robert Marsh & Company, Inc., Robert Marsh & Company and Robert Marsh. It is stated in the briefs that there existed the corporation known as Robert Marsh & plea of the statute of limitation might have Assuming that the Company and also the individual business name of Robert Marsh & Company not in- suggested by appellant, still the pledgor, or some place under the facts of the case as is corporated. The testimony does not fully dis- his representative, would possess no right to close the distinction between the two. How-require the return of pledged property until ever, we think it is immaterial to any of the the debt for which it was given as security questions presented as to whether the re- is paid and satisfied, regardless of the length newal notes were by the alleged corporation of time which may have elapsed since such or by the fictitiously designated "company." debt was created. This proposition is settled The fact remains undisputed that at the time beyond the reach of dispute by California deof the death of J. E. Marsh there was an ap-cisions. Puckhaber v. Henry et al., 152 Cal. parent undischarged indebtedness on account of the two notes for which the shares of stock sought to be recovered had been given in security. Appellant's first contention rests upon the assumption that the renewal notes taken after the death of J. E. Marsh discharged the indebtedness existing at the date of his death and became new engagements. [1, 2] Conceding that the pledge agreement hereinbefore referred to would not be binding upon the estate of J. E. Marsh for any obligation of Robert Marsh incurred subsequent to the former's death (a question which is further referred to in connection with appellant's second contention), and that the only claim of the bank against the security sought to be recovered is on account of such new obligation, then the defendant is without right to the possession of the stock. But it is fully established that a renewal note does not extinguish the debt represented by a note for which it is given in lieu, unless there is a distinct and unqualified agreement that it shall so operate. In its evidence this case is like that considered in Savings Bank v. Central Market Co., 122 Cal. 28, 54 Pac. 273, where the court says:

"There is no evidence which tends to show an express, or any, agreement that the new note should be received as payment. * * 'Unless received by express agreement as payment, it did not extinguish the debt'"-citing Griffith v. Grogan, 12 Cal. 317.

419, 93 Pac. 114, 125 Am. St. Rep. 75, 14 Ann. Cas. 844; Savings Union Bank, etc., Co. v. Crowley, 176 Cal. 543, 169 Pac. 67.

[3] That the terms of the pledge agreement cannot be extended so as to bind the estate of J. E. Marsh for advances made by defendant bank to Robert Marsh or on his behalf subsequent to the death of said J. E. Marsh seems not to be a matter seriously disputed by the argument presented. Indeed, it must be admitted as an unanswerable legal proposition that, upon the death of J. E. Marsh, that term of the pledge agreement providing that the security should be holden for future advances became then inoperative. It is in view of this situation that counsel for appellant make their second contention against the validity of the judgment. It is by them insisted that the evidence shows that portions of the securities deposited under the pledge agreement were converted into cash and applied upon new indebtedness of Robert Marsh or Robert Marsh & Co. created after the death of J. E. Marsh. If it is a fact that the notes bearing date subsequent to the death of J. E. Marsh were in fact renewals, the evidence disclosed by the record does not ficer was clear enough to the point that the so establish. The testimony of the bank ofnotes, for which the stock sued for was being held, were in fact renewal notes of indebtedness accruing prior to the death of J. E. Marsh; but the same testimony was not

225-Partnership agreement

properly silent as to termination or continuance of lease to firm on retirement of part

ner.

Whether either partner could terminate a lease to the firm any time by withdrawing from the firm, or whether the other partner could continue it, are matters concerning the lessor, to be provided for in the lease, if at all, and as to which the partnership agreement is properly silent.

3. Landlord and tenant 24 (1) Lease of business definite as to what lessees were to receive therefrom.

of

Provision of lease of ranch with a business raising, buying, and fattening stock, and then selling it, that the lessees "for a full and final remuneration for their services and investment were to receive one-half of the gross proceeds," is not ambiguous and void under Civ. Code, § 1598.

4. Landlord and tenant 24(1)—Under lease of business lessees to return an equal number in kind.

given as to the indebtedness which the bank | 2. Partnership
discharged by the sale of securities subse-
quent to the death of said Marsh. For in-
stance, in a written memorandum admitted
in evidence as "Exhibit A," an executive of-
ficer of the bank set forth that 175 shares of
mortgage guaranty stock standing in the
name of Robert Marsh were sold on dates in
1918, 1919, and 1920 and proceeds applied on
notes of Robert Marsh dated variously in
July, 1917, April and May, 1919. The ag-
gregate sum of money collected upon the sale
of this stock exceeded $17,000. There was
also noted the sale of 150 shares of Delta
Farms stock, for which $8,997 was received,
which money was applied on a $20,000 note
of Robert Marsh & Co. dated April 13, 1919.
It appeared by the testimony of the same
witness that J. E. Marsh had, after the
pledge agreement was made, executed both
individual notes and notes in other form, but
that these notes had all been paid. Upon the
face of the testimony of the bank official, we
think that it was established prima facie that
application of pledge security money was
made in discharge of indebtedness of Robert
Marsh or Robert Marsh & Co. created subse-
quent to the death of J. E. Marsh, and that
the amount realized on such securities was in
a sum in excess of that still claimed to be due
the bank on the unpaid notes before men-
tioned. If that evidence represents the true
situation, then the bank must be deemed to
have in its hands money realized upon the
sale of pledge securities more than sufficient
to satisfy all of the remaining debt which
arose under the pledge agreement. Hence it
would follow that the stock, to recover which
this action is brought, would be freed from
any charge arising on account of the contract
of J. E. Marsh, deceased. From the conclu-
sions expressed it follows that plaintiff is
entitled to a new trial.

The judgment is reversed.

We concur: CONREY, P. J.; SHAW, J.

(54 Cal. App. 776)

CALDWELL v. WESTERN DEVELOPMENT
CO. et al. (Civ. 3774.)

(District Court of Appeal, First District, Division 2, California. Oct. 31, 1921. Rehearing Denied Nov. 30, 1921. Hearing Denied by Supreme Court Dec. 29, 1921.)

1. Appeal and error 194 (2)-Sufficiency of denials of answer not questionable for first time.

The sufficiency of denials in an answer not questioned in the trial court cannot be raised on appeal.

Under such lease, it is clear that the lessees are not to retain the specific stock and return it to the lessors at termination of lease, but return an equal number in kind.

5. Landlord and tenant 24(1)-Termination of lease by one of the parties authorized.

The provision of such lease that, if any of the parties shall wish to terminate it, the retiring party shall recompense the others for izes one of them to terminate it, and so was any loss sustained by such retirement, authornot uncertain in that respect.

6. Landlord and tenant 24(1)-Lease properly silent as to partnership matter of one of the parties.

Such lease was properly silent as to how, if it is terminated, the members of a partnership, constituting one of the parties, should settle between themselves; this being a partnership matter.

7. Landlord and tenant 24(1)—Under lease, lessor held to have right to direct that alfalfa be not planted.

Under the provision of such lease that the lessees are to sow 10 acres of alfalfa each year, and that the welfare of the operations of the ranch shall be under the personal supervision of the lessor, it has the right to direct, in any one year, that the alfalfa need not be sown. 8. Landlord and tenant 24(1)—Under general covenant to return articles in good condition, no excuse.

Under lease of buildings and personal property providing, without any exception, for return of everything in as good condition as at time of leasing, there is no excuse for not doing so.

9. Contracts 9(1)—Enough that intention can be ascertained.

A contract is not void for ambiguity if so framed that one can readily ascertain the parties' intention by following the well-established

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(203 P.)

rules governing the interpretation of con-poration; that defendant W. S. Gray owned tracts stated in Civ. Code, §§ 1635-1661.

F. H. Dam, of San Francisco, for appel- received therefor"; that defendants have lant.

C. W. Humphrey and E. F. Conlin, both of Thereupon plaintiff prays judgment for $1,San Francisco, for respondents.

834.40, being the amount of the moneys by him invested, and the value of his labor. The defendants each answered separately; no demurrer was interposed to the answer of either one. In one answer the pleading is:

"Denies that defendant W. S. Gray did, or now does, or at any time mentioned in the complaint on file herein, own all of the stock of the Western Development Company, a corporation, and in this connection defendant alleges

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

that he only owned five per cent. of stock in the specific stock or whether certain portions said company."

The other answer is worded:

"Denies that at any time mentioned in said complaint that W. S. Gray owned more than above five (5) per cent. of stock of the Western Development Company."

[1] During the trial no question as to the sufficiency of such denials was presented to the trial court. Such denials must now be considered as sufficient. Grogan & Lent v. Ruckle, 1 Cal. 193, 196; 2 Hayne New Trial and Appeal, § 280. With the exception of the allegation as to ownership of stock, the trial court found in the language of plaintiff's complaint in plaintiff's favor on every allegation which we have mentioned above, but gave judgment in favor of the defendants. Both in the trial court and in this court the defendants have contended that the plaintiff may not maintain this action, or any action, regarding the subject-matter except that he make John C. Gray a party, and then, and in that event, the only proper action for the plaintiff to maintain is an action for an accounting. The plaintiff has contended that such would ordinarily be the rule, but that both of the instruments, the lease and the partnership agreement, are void as being wholly ambiguous. Civ. Code, § 1598. If this contention on the part of the plaintiff is well founded, then it may be assumed, without going into the matter, that the judgment should be reversed; but, if the plaintiff is mistaken in such contention, then the judgment must be affirmed.

were to be sold from time to time; whether any one of the three parties had the right to terminate the lease; whether, upon the termination of the lease, the parties were entitled to share in the profits or only in losses; and whether it was the duty of the lessees to check and sow ten acres of alfalfa each year in any event, or, only by direction of the lessor. The plaintiff also enumerates: That it cannot be ascertained whether damage by fire is to be borne by the lessees in the first instance, and thereafter shared by the lessor; whether the duty of restoring burned buildings applies to all fires or merely nres caused by the fault or negligence of the lessees; whether the lessees are to make good all stock that dies from any cause or only stock that dies by the fault or negligence of the lessees; and whether it is the duty of the lessees to furnish necessary feed even though feed must be purchased at great cost.

[3-9] The foregoing attacks, in the order stated, we shall now consider. The lease provided that the lessees "for a full and final remuneration for their services and investments were to receive one-half of the gross proceeds." That passage clearly answers the first attack. The evidence showed that the lessor had been engaged in the business of raising, buying, and fattening stock and then selling the same, and that it was such busi

ness which he leased to the lessees and

which they were to conduct. Therefore it is clear that the lessees were not to retain and return the specific stock, but were to return an equal number in kind. It is provided:

In the event of a termination of the lease

[2] We shall take up first the consideration of the attack made on the partnership of March, 1920, and if for any reason, any or "This lease shall terminate on the first day agreement. It is: You cannot tell from the either party to this lease shall, for any reapartnership agreement (1) whether either son, wish to terminate the same, the retiring partner could terminate said lease at any party shall suitably recompense the remaining time, by withdrawing from it, or (2) wheth-party for any loss that they may sustain by er the other partner could continue the reason of such retirement." lease by settling with the one withdrawing. As to the first item, the instrument is, very properly, silent. Such subject should be provided for in the lease, if at all. The lessor would be entitled to be heard before the lease could be terminated. As to the second item, the instrument is, very properly, silent. If one partner retires from the contract it is a matter concerning the lessor and the remaining lessee what the future terms are to be-not a subject to be inserted in a dissolved contract. The instrument provides, in the event the lease is terminated, how the partners may settle between themselves. The passage is reasonably clear and is not attacked by the plaintiff.

In elucidating his contention that the lease is void for ambiguity the plaintiff enumerates: That it cannot be ascertained whether the lessees were to divide the gross returns, gross receipts, profits, or receipts; whether the lessees were to retain and later return

the instrument is silent as to the manner in which the partners should settle between themselves. This is as it should be. Such a matter was a concern of the two partners and not a concern between the lessor and the lessees. It is provided in the lease that the lessees are "to properly check and sow ten acres of alfalfa each year," and it is also provided in legal effect that the welfare of the operations of the ranch shall be under the personal supervision of the defendant corporation. Therefore the defendant corporation had the right to direct, in any one year, that the alfalfa need not be planted. The lease covered certain lands and buildings, and certain personal property thereon and to be added thereto, and it further provided:

"To return all stock, tools, buildings, equipments, horses, and everything in as good con