Terms of Promissory Note prevail over conflicting terms of Deed of Trust.
U.S. Bank National Association, etc. v. Yashouafar et al. 141217-U.-S.-Bank-N-A-v-Yashouafar
The terms of a promissory note conflicted with the terms of a deed of trust. The note stated that a prepayment fee was not due until the indebtedness was prepaid. The deed stated that the prepayment fee was due immediately upon acceleration of the note. The deed provided that the terms of the note controlled over those of the deed.
The court held that under the clear and explicit terms of the note and deed of trust, as interpreted to give effect to the mutual intention of the parties (California Civil Code sections 1636, 1638, 1639 and 1644), no prepayment fee was due until the actual prepayment of the note’s indebtedness.
The court found that the Bank should not have used the date of acceleration of the note in calculating the prepayment fee and that the fee was not due until the note’s indebtedness was prepaid.
The terms of the note controlled over those of the deed of trust because the deed provided that they would. If this provision had not been included in the deed of trust, the court may have determined that the prepayment fee would have been due immediately upon acceleration of the note.