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tion's president and manager, and from the fact that he attended to and managed all its affairs both before and after it became embarrassed from financial difficulties, that he possessed full authority to act for and bind it on the occasion of the making of the oral agreement, and that his election, manifested to the bank, at the time referred to, as to the manner and order of the application of the moneys paid by Cavagnaro & Co. to the bank, was that of the latter, it being clear that said transaction involved an act within the ordinary or usual course of business of said corporation. (Martin v. Webb, 110 U. S. 7; Carpy v. Dowdell et al., 115 Cal. 677; Waterman on Corporations, sec. 30; Preston v. Central Cal. Irr. Co., 11 Cal. App. 190; Stevens v. Selma Fruit Company, 18 Cal. App. 242, 251.

"It is next claimed that certain testimony was erroneously permitted to go to the jury and that its effect was to prejudice the jury against the plaintiff. The testimony of which complaint is thus made and which was brought out, over the objection of the plaintiff, in the examination of the defendants' witness Reynolds, who was connected with Hilbert Mercantile Company at the time of the transactions concerned here, tended to show, so it is urged, that the bank, although entering into the agreement with the other creditors of Cavagnaro & Co. to accept in full settlement of all claims against said corporation payments on the basis of 35 cents on the dollar, had in fact received payment in full of all indebtedness of Cavagnaro & Co. to it. It is manifest that such testimony could have no relevant bearing upon the issues made by the pleadings. It appears, however, that the only testimony showing or tending to show that the bank received more than 35 cents on the dollar was brought out in the cross-examination of the defendants' witness, Gates, by counsel for the plaintiff himself. Having stated, on cross-examination by the plaintiff's attorney, that the bank had received in settlement of Cavagnaro & Co.'s indebtedness to it the full amount thereof, that witness, still under cross-examination, was asked by a juror: "Was there anybody else excepting the bank who got 100 cents?" to which question the witness replied, no objection having been interposed thereto: "Not that I know of." The witness, Reynolds, was thereafter asked by the attorney for the defendants and permitted, against the objections of the plaintiff, to answer the following questions: "Did you know anything about the existence of the $8,750 note other than the $4,700 thirty-five per cent. note at the time these notes were being signed in the office of the Swiss-American Bank? A. I did not. I learned of that after the fire. Q. Did you know that the bank was receiving, or was to receive, anything more than thirty-five per cent.? A. I did not." Thus it will be observed that Reynolds did not himself say that the bank was receiving in settlement of Cavagnaro & Co.'s indebtedness to it an amount in excess of that compounded by the creditors of the former. While the questions thus put to the witness assumed the truth or existence of the fact to the proof of which they were addressed, and were for that reason improper, even though it was true that the bank received more than it agreed to accept, since, as stated, such testimony was wholly ir

relevant to the issues, yet, it cannot be said, in view of the fact that counsel for the plaintiff himself brought out the fact on cross-examination or without objection permitted a juror to bring it out, that the questions to Reynolds or the form in which they were propounded could have added to or intensified the injury which the plaintiff had thus already inflicted upon himself.

"We have found no occasion for remanding the cause, and the judgment and the order are accordingly affirmed."

[9] Subsequently the case was reheard and the learned district court, while adhering to its original views, reversed the judgment and order upon the grounds (1) that the lower court tried the case upon the erroneous theory that the sole consideration which moved the defendants to become parties to the notes was the oral agreement; and (2) that an instruction given by the trial court evidenced this theory and misstated the law to the injury of the plaintiff. A hearing in this court was granted in order that we might further consider these points.

Examining the pleadings we find that the answer does not set up the oral agreement as the sole consideration for the signing of the note by defendants. The first defense pleaded to each note is that said note, both principal and interest, had been paid. To each note there is set up in the answer a defense based upon the verbal understanding with reference to the order of payment of the obligation of the F. Cavagnaro Company and the fact that sufficient money had been received by the bank on account of said company to pay the notes in suit if the credit had been applied in the agreed manner. This part of the pleading is set forth in the opinion of the district court of appeal which we have quoted above. When proof of the oral agreement was offered, however, the objection interposed by plaintiff was that the execution of a contract in writing supersedes all the negotiations which preceded or accompanied the making and signing of the instrument, and that proof of the oral agreement therefore was not admissible to vary the terms of the note. The court below held that the proffered evidence of the oral agreement was admissible on the ground that it constituted the sole consideration for the notes in suit. The ground of this ruling was admittedly erroneous but the ruling itself was nevertheless correct. The agreement or understanding pleaded by defendants did not alter nor modify the terms of the notes. Therefore appellant's objection to its introduction in evidence was untenable. It was admissible under section 1479 of the Civil Code. But the court manifested further by an instruction the theory upon which the case was tried. The instruction was as follows:

"You are hereby instructed that if you believe from the evidence that at the time the notes in suit were executed and as the sole consideration therefor there was an agreement between the defendants and the Swiss-American Bank that any moneys coming into the hands of said bank from F. Cavagnaro Company would be applied first to the note for four thousand seven hundred and eighty and 94-100 dollars ($4780.94) due from the F. Cavagnaro Company to the said bank and then the balance to the payment of the two notes in suit, and if you further believe from the

evidence that there subsequently came into the hands of the said Swiss-American Bank a sufficient sum to pay the said note for four thousand seven hundred and eighty and 94-100 dollars ($4780.94) and also the two notes in suit, if such application had been made, your verdict should be in favor of the defendants."

This instruction was erroneous for the reason stated in the quoted opinion of the district court of appeal, namely, because it sought to confine the jury to the oral agreement as the sole consideration for the acts of the defendants in signing the notes. But defendants assert that plaintiff was not prejudiced by the instruction, which placed upon the defendants the burden of proving both the existence of the agreement and also that it was the sole consideration for the notes in suit. But appellant says he was entitled to have submitted to the jury directly the question whether or not the oral agreement involved a direction to the bank by the debtors for the application of the payments to the satisfaction of particular obligations. The instruction does not submit that question to the jury. There was no dispute at the trial regarding these facts: (1) The bank had loaned to the Cavagnaro Company the money represented by the notes; (2) defendants had signed the notes; (3) enough money had been collected on account of the Cavagnaro Company to pay the notes if applied according to the wishes of the defendants. The sole question pertinent to the oral arrangement which the court should have propounded to the jury was whether or not there had been a direction for the payment of the notes in the order for which defendants contended. The quoted instruction involves that very matter and more. It seems to us therefore that the subject of "sole consideration" may be eliminated from the instruction and it will state correctly the law regarding application of payments. Appellant makes the further objection that the instruction refers to an agreement between the defendants and the bank and therefore is not by its terms applicable to a direction to the bank by the debtor, the F. Cavagnaro Company, regarding the order of settlement of the latter's notes. Of course, no agreement between the plaintiff's assignor and the defendants without the concurrence of the debtor, the F. Cavagnaro Company, would bring the facts of the case under the provisions of section 1479 of the Civil Code. But we do not think the jurors were misled by the careless and inaccurate use of the word "defendants". All of the proof was directed to an agreement between the bank and all of the parties to the notes relative to the order of payment. There was no testimony regarding any agreement between the bank and the Borgfeldts without the other parties to the note, including the debtor; and the jury could not have been misled in reference to the "agreement" mentioned by the court in the instruction. Assuming that the court did adopt an erroneous theory upon the subject of the consideration for the notes (although appellant himself offered an instruction by which the court's attention was directed to section 1479, Civil Code, but which was rejected for certain erroneous statements of the law) the fact remains that the jury considered and determined the one vital question in the case, i. e., was there the direction by the debtor to the bank that

the notes of the F. Cavagnaro Company should be paid in the order specified in the answer.

For the reasons given in the original opinion of the district court of appeal and those which we have added, the judgment and order are affirmed.


We concur:





S. F. No. 6122. In Bank. February 11, 1915.

*C. J. MARTIN, Plaintiff and Respondent, v. A. BECKER et al., Defendants and Respondents; T. B. HUBBARD, Defendant and Appellant.

S. F. No. 6106. In Bank. February 11, 1915. MOLLIE A. CAREAGA, Plaintiff and Respondent, v. A. BECKER et al., Defendants and Respondents; T. B. HUBBARD, Defendant and Appellant.

February 11, 1915.

S. F. No. 6300. In Bank. T. B. HUBBARD, Plaintiff and Appellant; HENRY HART, Plaintiff and Respondent, v. L. M. BRINKER et al., Defendants and Respondents; HOME UNION (a Corporation), Defendant and Appellant.

[1] MORTGAGE-TAKING OF INDEPENDENT SECURITY-ENFORCEMENT WITHOUT REFERENCE TO MORTGAGE-CONSTRUCTION OF CODE.-The rule declared by section 726 of the Code of Civil Procedure that there can be but one action for the recovery of any debt secured by mortgage is designed for the protection of the primary debtor or mortgagor alone, and, therefore, is one which he not only can waive, but is one which has no applicability whatsoever unless the action which is brought directly affects his rights under the mortgage contract, or in other words, the law never contemplated that because a man had taken a mortgage he could not take other independent security for his debt, and, if the contract for such security permitted it, enforce such contract without reference to the mortgage debt.

[2] ID.-LIEN-TAKING OF NEW OR ADDITIONAL SECURITY-WHEN EXTINGUISHED.-The taking of new or additional security operates to destroy an existing lien only (1) where the destruction is worked by virtue of a positive declaration of law, (2) where it is worked by the agreement and contract of the parties, (3) where it is worked by necessary intendment growing out of the agreement of the parties, in that the taking of the later security is inconsistent with the continued existence thereafter of the lien, and, finally, (4) where the nature of the earlier or later security, as that it is concealed or undisclosed, gives rise to a situation where it would partake of fraud upon other claimants to permit the earlier lien to be held valid, whereupon equity interposes and declares it to have been waived or lost by the taking of later security, or what is in effect the same, erects a bar to its enforcement.

*On hearing after judgment in District Court of Appeal, First District (17 Cal. App. Dec. 744).

[3] ID.-MECHANIC'S LIEN-TAKING OF ADDITIONAL SECURITY-DESTRUCTION OF LIEN-RULE.-In this state, the lien of a mechanic, world-wide notice of which is given by recordation, is one of the highest possible dignity, since it is not secured by legislative enactment but by the constitution of the state, and grave reasons must be shown in every case to justify a holding that such lien is lost or destroyed, and the mere circumstance that the mechanic or materialman has taken additional security for his debt should not be held so to operate, nor should any conclusion that such additional security was meant to be a substituted security for the right to the lien be found except in the cleanest case.

[4] ID.-ID.-LIEN OF MATERIALMAN-TAKING OF MORTGAGE UPON PROPERTY OF CONTRACTOR-RIGHT OF LIEN NOT LOST.-A materialman does not lose his right to a mechinic's lien by taking a mortgage upon the real property of the contractor for the value of the material sold to him, either by virtue of section 726 of the Code of Civil Procedure, or by the application of any rule of decision holding that the taking of either security destroys the right to such lien.

[5] ID.-ACTION FOR FORECLOSURE-TIME OF TRIAL-FAILURE TO NOTIFY CROSS-COMPLAINANT-CONDITIONAL ORDER GRANTING NEW TRIAL ERRONEOUS ORDER.-A cross-complainant in an action for the foreclosure of a mechanic's lien who is not given notice of the trial and does not appear thereat, is entitled upon a motion for a new trial to have the order made unconditionally, and it is irregular to order that the motion be denied upon condition of the deposit of the amount of the claim of such cross-complainant in court, thereby depriving such complainant of a hearing upon the question of the settlement of its legal costs.

[6] ID. APPEAL-NEW METHOD SUFFICIENT NOTICE.-A notice of appeal taken under the new or alternative method filed with the clerk thirty-one days after the filing of the judgment, is sufficient.

Appeals from the Superior Court of Santa Clara County-John E. Richards, Judge.

For Appellants-Will M. Beggs, R. C. McComish and A. H. Jarman.

For Respondents-C. M. Lorigan, Owen D. Richardson, John W. Sullivan, H. E. Wilcox, D. M. Burnett, Will M. Beggs, R. C. McComish, Edwin H. Williams, A. H. Jarman, Wilcox & Burnett, Rogers, Bloomingdale & Free.

The defendant Becker was a building contractor who became bankrupt. At the time of his bankruptcy he had completed for Mrs. Careaga and for Mr. Martin each a separate dwelling house under a valid statutory contract. The final payments becoming due, Mrs. Careaga and Mr. Martin deposited the amounts of their payments in court with appropriate averments, asking the court to call in the lien claimants to the funds, apportion the money and dismiss plaintiffs, respectively, without further costs or charge. In the case of Hubbard v. Brinker, Becker, because of his bankruptcy, abandoned the incompleted building which he was constructing for Brinker, and Hubbard and Hart sued Brinker to establish liens for materials furnished. Their cases were consolidated. Hubbard admittedly had furnished material to Becker, which material had been used in the construction of the buildings. No question arises over this nor over the valid ity of his lien claims in the matter of form or substantive proof to sustain them. But Hubbard had taken a mortgage upon real

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