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Tahoe National Bank v. Phillips

Supreme Court of California
4 Cal. 3d 11, 480 P.2d 320 (1971)


Beulah F. Phillips and her partners (defendants) urgently needed a loan to continue their work on a real estate development. Tahoe National Bank (plaintiff) agreed to make the loan after Phillips signed a document, prepared and presented to her by the bank, entitled "Assignment of Rents and Agreement Not to Sell or Encumber Real Property." The real property to which this document applied was Phillips's house. Phillips subsequently filed for a homestead exemption on the property, but otherwise she complied with the document's terms. The partners defaulted on the loan and the bank sued. One of the remedies the bank requested was foreclosure on the instrument as an equitable mortgage. At trial, the bank president testified that he viewed the document as the equivalent of a mortgage, and he pointed out that the document stated that it secured a loan. Phillips testified that she would not have signed the document if she thought it amounted to a mortgage, and that she did not think she had the power to mortgage the property because she held the property, in part, only as her deceased husband's trustee. The trial court ruled that the document constituted an equitable mortgage and ordered foreclosure. Phillips appealed to the Supreme Court of California.

Rule of Law


Holding and Reasoning (Tobriner, J.)

Dissent (Sullivan, J.)

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