Timothy Kowal, Esq.
April 24, 2020

A retired music teacher came to TVA desperate because her retirement had just been stolen from her. She was the owner of a productive $420,000 promissory note that provided her regular monthly payments. A few years ago, she needed a small loan, and to make the payments she temporarily assigned her note. But when she paid the loan and asked for her note back, the lender refused. Instead, he pointed out that one of the loan documents used the word "sale" when referring to the note, and he ignored the other language and the documents clearly describing it as security for the loan. The trial judge accepted the lender's specious argument, and would have left the elderly plaintiff without her primary income source for her retirement.

TVA appealed and reversed the judgment, and restored the note and its income stream back to its rightful owner.

On appeal, TVA pointed out that the "Loan Sale Agreement" explicitly described itself as "security" when given "in respect of a loan." Indeed, the lender admittedly signed another document titled "Loan Agreement." In view of the four corners of the Loan Sale Agreement and the undisputed facts, the plaintiff's so-called "mistake" was not about what the documents said - rather, it was about which documents were part of the deal.

In that regard, the parties had prepared a Loan Agreement, and a Loan Sale Agreement temporarily assigning a $346,000 note as security. They signed the documents, and then submitted them to escrow with instructions to process it as a "loan." Yet the lender insisted that the plaintiff agreed to just walk away from the signed Loan Agreement still in escrow, and forfeit the entire $346,000 note under the Loan Sale Agreement standing by itself.

Someone making a cake does not suddenly decide to eat the eggs raw, throw the flour and sugar in the garbage, and just walk away with the oven still on. Yet that was the culinary equivalent of the lender's version of events.

The Court of Appeal agreed: "Plaintiff contends the Loan Agreement and the Loan Sale Agreement must be read together. We agree. 'Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together.' (Civ. Code, § 1642.)" Thus, the trial court's judgment "was based in part on the court's mistaken finding the two documents could be read separately, and the court's erroneous assumption Defendants had the option to choose between a loan and a sale."

The Court directed that the judgment be reversed and that the note be restored to TVA's client, along with over $150,000 in note payments that should have been paid to TVA's client. The Court also reversed the award of attorneys' fees, and on remand, TVA obtained a fee award of over $120,000.

The lender seized an unfair advantage, and after the trial court's numerous errors, justice seemed unattainable. But TVA obtained a reversal, got back the note along with a judgment of almost $300,000. "Pessimism," said President Eisenhower, "never won any battle."