Loeb v. Christie
6 Cal. 2d 416 (Cal. 1936)
WASTE, J.
Defendant appeals from a judgment entered against him in an action based on an unconditional guarantee of a promissory note payable to plaintiff, which guarantee was executed May 19, 1930. The note so guaranteed by defendant was secured by a trust deed and at the time of this suit the power of sale therein given had not been exercised by the plaintiff.
It is first urged that an action will not lie against a guarantor of
a secured obligation until the security has been exhausted. On many occasions it has been
declared by this court to be the rule that the guarantor's liability may be enforced
without first resorting to the mortgage security... In Withers v. Bousfield, 42 Cal. App.
304, 319,...it was held that a suit would lie against the guarantor of a note secured by
an instrument in the nature of a trust deed without first exhausting the security. It is
there declared: "This case presents no different aspect from the foregoing, and
numerous other cases, decided by the courts of last resort of this state, in which it has
been held that regardless of the necessity for exhausting the security given, before
resorting to the personal liability of the maker of a note, nevertheless an indorser or
guarantor may be sued upon his personal liability before and without such action having
been taken."
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Nor do we find anything in section 2809 of the Civil Code that requires
a result different from that herein announced. The section reads: "The obligation of
a guarantor must be neither larger in amount nor in other respects more burdensome than
that of the principal; and if in its terms it exceeds it, it is reducible in proportion to
the principal obligation." This section has been in the code since 1872 and its
presence there in no way influenced the disposition of the several cases above referred to
wherein it was held that an action would lie against the guarantor of a note secured by
mortgage without the necessity of first foreclosing the mortgage . . .
Our conclusion does not cause the guarantor's obligations to be any heavier or more burdensome than that of the principal or maker of the note. The fallacy in appellant's theory is traceable to the erroneous premise upon which it is based. He confuses the obligation of the principal or maker of a mortgage or trust deed note with the remedy to enforce such obligation. The liability of the principal or maker of a note secured by mortgage or trust deed is for the face amount of the note and is not simply for any deficiency remaining after foreclosure or sale, as appellant assumes. A mortgage, trust deed, or any other security is merely a fund which the principal or maker of the note makes available for the performance of his obligation to pay. Though the mortgage or trust deed security becomes the primary fund for the discharge of the indebtedness, by virtue, respectively of the provisions of section 726 and Bank of Italy v. Bentley, supra, it merely remains a source from which the obligation of the principal or maker is to be repaid. The principal debtor remains liable at all times for the full amount of the obligation and may be compelled to pay it, first out of the security, and thereafter out of his general assets. The obligation of the guarantor is no heavier or more burdensome, since he is liable for as much as, but no more than, the principal debtor or maker of the note, viz.: the face value of the note. All that differs is the remedy against the guarantor but, under the authorities above cited, the obligation of the guarantor is separate and independent from that of the principal debtor, and the fund which the latter may have supplied for payment of his own obligation is not necessarily or logically available to the guarantor. As stated in one of the above cited cases, the mortgage only affects the remedy against the mortgagor or primary debtor.
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The judgment is affirmed.