Defendants appeal from a judgment foreclosing an equitable mortgage on certain real property in San Luis Obispo County. The trial court overruled defendants' general demurrer and upon defendants' failure to answer the complaint decreed foreclosure and ordered a sale of the property. (See Code Civ. Proc., § 585, subd. 4.)
From January 18 to November 12, 1957, plaintiff bank
In the present case, however, plaintiff pleaded and defendants admitted by demurring and failing to answer that the parties intended to create a security interest in the property. Accordingly, the question presented is not what meaning appears from the face of the instrument alone, but whether the pleaded meaning is one to which the instrument is reasonably susceptible. (Richards v. Farmers' & Merchants' Bank, 7 Cal.App. 387, 395 [94 P. 393]; see 2 Witkin, Cal. Procedure, pp. 1231-1232.) It is essentially the question that would be presented had defendants denied that the parties intended to create a security interest and plaintiff had offered extrinsic evidence to prove that they did. Such evidence would be admissible to interpret the instrument, but not to give it a meaning to which it is not reasonably susceptible. (Imbach v. Schultz, 58 Cal.2d 858, 860-861 [27 Cal.Rptr. 160, 377 P.2d 272]; see Rest. Contracts, § 235(d); Code Civ. Proc., § 1860; Reid v. Overland Machined Prods., 55 Cal.2d 203, 210 [10 Cal.Rptr. 819, 359 P.2d 251]; Beneficial Fire & Cas. Ins. Co. v. Kurt Hitke & Co., 46 Cal.2d 517, 524-525 [297 P.2d 428]; Barham v. Barham, 33 Cal.2d 416, 422-423 [202 P.2d 289]; Balfour v. Fresno Canal & Irr. Co., 109 Cal. 221, 225-226 [41 P. 876].)
The instrument restricts the rights of the Enrights in dealing with their property for plaintiff's benefit; it describes itself as "For use with Property Improvement Loan," it specifically sets forth the property it covers, and it authorizes plaintiff to record it. These provisions afford some indication that the parties intended to create a security interest and are clearly sufficient to support the pleaded meaning.
The view that the common-law rule against restraints on alienation
The protection of several such interests has been recognized as justifying reasonable restraints on alienation. Spendthrift trusts are permitted because of the settlor's interest in protecting potentially improvident beneficiaries. (Civ. Code, §§ 859, 867; Seymour v. McAvoy, 121 Cal. 438, 442-443 [53 P. 946, 41 L.R.A. 544].) A lease for a term of years can be made terminable upon alienation because of the lessor's interest in the personal character of the lessee. (See People v. Klopstock, 24 Cal.2d 897, 901 [151 P.2d 641]; Chapman v. Great Western Gypsum Co., 216 Cal. 420, 426-427 [14 P.2d 758, 85 A.L.R. 917]; Murray v. Green, supra, 64 Cal. 363, 367; see Rest., Property, § 410.) A life estate can be made terminable upon alienation because of the interest of the remainderman in the life tenant's character. (See Hall v. Brittain, 171 Cal. 424, 425 [153 P. 906]; Rest., Property, § 409.) A corporation can restrict the transfer of its shares because of the interest of shareholders in the persons with whom they are in business. (See Corp. Code, § 501, subd. (g); Vannucci v. Pedrini, 217 Cal. 138, 143-145 [17 P.2d 706]; Tu-Vu Drive-In Corp. v. Ashkins, ante, p. 283 [38 Cal.Rptr. 348,
Whether the promise not to transfer or encumber the property would be directly enforcible by injunction, specific performance or an action for damages is another question. It is open to doubt whether such a promise would be a reasonable restraint when, as in this case, plaintiff had the additional protection of a security interest and the right to declare the entire debt due in the event of default. It is unnecessary, however, to decide this question now. Plaintiff is seeking not to enforce the Enrights' promise not to transfer the property but only to foreclose its security interest. The creation of that interest was a separate lawful object of the agreement. (Civ. Code, § 1599; Bonnell v. McLaughlin, supra, 173 Cal. 213, 216; Murray v. Green, supra, 64 Cal. 363, 369.)
The judgment is affirmed.
Gibson, C.J., Schauer, J., McComb, J., Peters, J., Tobriner J., and Peek, J., concurred.
"(For use with Property Improvement Loan)
"In consideration of any loan or advance made by Bank of Belmont Shore (hereinafter referred to as `Bank') to the undersigned, either jointly or severally, the undersigned (hereinafter referred to as `Borrower' whether one or more), jointly and severally promise and agree that until all such loans and advances and all other indebtedness or liabilities to the Bank shall have been paid in full, or until 21 years following the death of the last survivor of the undersigned, whichever shall first occur, they will pay all taxes, assessments and charges of every kind, imposed or levied, or which may be imposed or levied upon the hereinafter described real property prior to the time when any of such taxes, assessments or charges shall become delinquent and will not, without the consent in writing of Bank, first had and obtained, create or permit any lien or other encumbrances (other than those presently existing and/or securing the payment of loans and advances made to them by Bank) to exist on said real property, and will not transfer, sell, hypothecate, assign, or in any manner whatever dispose of said real property, or any interest therein or any portion thereof, which real property is situated in San Luis Obispo County, California.... [Description omitted.]
"It is further agreed and understood that if default be made in the performance of any of the terms hereof, or of any Instrument executed by Borrower in connection herewith, or in the payment of any indebtedness or liabilities now or hereafter owing to Bank, Bank may, at its election, in addition to all other remedies and rights which it may have by law, declare the entire remaining unpaid principal and interest of any obligations or indebtedness then remaining unpaid to the Bank due and payable forthwith.
"It is further agreed and understood that Bank may, in its discretion, and is hereby authorized by Borrower, to cause this instrument to be recorded at such time and in such places as Bank may, in its discretion elect."