PHILIP J. CAITO et al., Plaintiffs and Respondents, v. UNITED CALIFORNIA BANK, Defendant and Appellant, 20 Cal. 3d 694

Summary

Plaintiffs, a husband and wife, were cotenants in a farm with another couple who managed the farm. That couple took various loans from an initial bank, which were secured by deeds of trust on the farm, which plaintiffs signed only to accommodate the couple. Plaintiffs also lent money to the couple to enable them to keep the bank loans current. The couple also had a loan from defendant bank, which was later secured with the farm without the knowledge of plaintiffs. Plaintiffs sought partition, an accounting, and a declaration of rights and priorities of all parties in the farm. A nonjudicial foreclosure of the earlier deed of trust satisfied the initial bank's interest and the surplus was awarded to plaintiffs by the trial court based on the doctrine of equitable priority. Defendant argued that it had no notice of the couple's debt to plaintiffs and that it had security interest in the surplus, which could not be subordinated to plaintiffs' claims. The court reversed the decision of the...