Kaiser Industries Corp. v. Taylor

Kaiser Industries Corporation (Kaiser) (plaintiff) purchased all the assets of Sondgroth Brothers. One of the purchased assets was an open account representing debt owed by Robert Taylor (defendant) and West Bay Building Company. Because payments were not being made on the account, Kaiser asked Taylor to issue it a promissory note for the owed amount secured by a deed of trust on real property. After efforts to execute a conventional deed of trust failed, Taylor made arrangements with a title company that owned a piece of real property under a holding agreement subject to Taylor’s instructions. Because Taylor’s interest in the property was worth enough to adequately secure the note, Kaiser agreed to the alternate arrangements. Under the arrangement, Taylor issued a letter to the title company with instructions that, if Taylor defaulted on the note, the company was not allowed to convey the property without Kaiser’s consent. Taylor defaulted on the note, Kaiser issued a notice of default with the title company, and Kaiser brought an action against Taylor to recover the amount due on the note. At trial, Taylor invoked California Code of Civil Procedure § 726 to argue that Kaiser was required to foreclose on the property before bringing its action. The trial court ruled in favor of Kaiser, and Taylor appealed. On appeal, Kaiser argued that § 726 did not apply to equitable mortgages.