Gates v. Crocker-Anglo National Bank

257 Cal. App. 2d 857 (1968)

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Gates v. Crocker-Anglo National Bank

California Court of Appeal
257 Cal. App. 2d 857 (1968)

Facts

Thomas and Joanne Gates (plaintiffs) co-owned a piece of real property with Peter and Patricia Abell as tenants in common. Unbeknownst to the Gateses, the Abells owed an unsecured debt to Crocker-Anglo National Bank (bank) (defendant) of approximately $25,000. To refinance a separate debt of the Abells, of which the Gateses were aware, the four co-owners issued the bank a promissory note secured by a deed of trust on the property. The deed of trust contained a dragnet clause providing that the deed of trust covered all indebtedness of all four co-owners owed to the bank. Neither the bank nor the Abells disclosed the Abells’ prior unsecured debt to the Gateses. Eventually the property was sold, and the proceeds covered the outstanding balance on the promissory note and generated an excess of approximately $28,000. The bank claimed that it was owed $25,000 of the excess by virtue of the Abells’ undisclosed debt. The Gateses filed an action challenging the bank’s claim to the money. The trial court found that the Gateses were, as they claimed, totally ignorant of the Abells’ previous debt but that the dragnet clause was enforceable anyway. The trial court ruled in favor of the bank, and the Gateses appealed.

Rule of Law

Issue

Holding and Reasoning (Shoemaker, J.)

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