Court Opinion

ID: 3281940
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:55:54.390149+00
Date Added: 2024-06-11T13:45:25.716739
License: Public Domain

While I concur in the decision reversing the order appealed from in so far as it declared the execution sale to be void and in so far as it restrained the appellant from hypothecating or disposing of the property involved, I cannot agree with the grounds stated in the opinion by Mr. Presiding Justice Langdon as those upon which the decision has been reached. In my view of the law and of the duty of this court that opinion is objectionable in three particulars.
First: In the opinion of the presiding justice it is stated that it is well settled that in a foreclosure proceeding the court cannot try the question of title of those claiming adversely to both the mortgagor and mortgagee. (Murray v.Etchepare, 129 Cal. 318, [61 P. 930]; Cady v. Purser,131 Cal. 552, [82 Am. St. Rep. 391, 63 P. 844].) This rule is correctly applied in the further statement that "the order in the present case annulling the deed to the appellant cannot be justified, therefore, upon the ground of an adjudication of title as between the appellant and the mortgagor and those claiming under it, because the lower court was powerless to make such an adjudication." Based upon this statement and a review of cases, including the Petaluma Savings Bank case (Petaluma Sav. Bank v. Superior Court, 111 Cal. 488, [44 P. 177]), in the opinion of the presiding justice the conclusion is reached that a receivership in a mortgage foreclosure case "is but a provisional remedy for the sole and exclusive benefit of the plaintiff," and for that reason, a sale under execution not being an interference with the possession of the receiver, the order of the court annulling the deed to the appellant and enjoining him from mortgaging or disposing of the property was erroneous. This amounts to a decision that the execution *Page 501 
sale was valid. In my opinion, such an adjudication was not necessary to the determination of this appeal; it is revolutionary in character and opens the door to vexatious litigation.
A lengthy argument was made on behalf of the appellant to show that under the decision of the supreme court in the case of Petaluma Sav. Bank v. Superior Court, supra, a receivership in a foreclosure proceeding is differentiable from a general receivership. On the other hand, the respondent, in reliance upon the case of Grosscup v. German Sav.  Loan Soc., 162 Fed. 947, maintains that the same rules apply to a receivership in a foreclosure proceeding as are generally recognized. It is wholly unnecessary and would be improper on this appeal to determine this question, because, even though the respondent's broadest contentions should be upheld, and all the rules applicable to federal receiverships applied, the order purporting to vacate the execution sale could not be sustained.
The general rules to which reference has been made not only permit but require a court to protect the possession of its receiver. "No other court of co-ordinate jurisdiction has any power or authority to interfere or meddle with the property in the hands of a receiver. . . . This rule is essential to the orderly administration of justice and to prevent unseemly conflict between courts whose jurisdiction embraces the same subjects and persons, and has no reference to the superiority of one tribunal over the other, nor to the superiority in ranks of the several claims, in behalf of which the conflicting jurisdictions are invoked." (23 R. C. L., Receivers, sec. 71.)
These general rules have been modified to some extent in this state in their application to receiverships granted in divorce cases. The Petaluma Savings Bank case, in my opinion, does not support the conclusion reached by the presiding justice in this case. It is differentiable from the present case in three particulars: First, the receiver appointed in the divorce case was not in possession of any of the lands, but was claiming to be in possession and was actually endeavoring to take possession at the time of the execution sale; secondly, as was pointed out in the opinion by Mr. Chief Justice Beatty, the sole authority for the appointment of a receiver in a divorce case is to *Page 502 
enable the court to require the husband to give reasonable security for providing maintenance and making payments of alimony. In a foreclosure suit, subject to the rights of third parties, the court takes possession of the corpus of the property by a receiver for the purpose of conserving the rents, issues, and profits, for the benefit of anyone who may in that proceeding establish a right thereto. Lastly, the final judgment in the divorce action involved in the Petaluma Bank case (White v. White, 130 Cal. 597, [80 Am. St. Rep. 150,62 P. 1062]), was rendered before the recovery of the judgment of the Petaluma Savings Bank. As was stated, also, in the opinion of White v. White, the receiver had not taken possession of any property, and the functions originally vested in him terminated with the entry of the judgment. Any new duties conferred upon him by the judgment were in excess of the jurisdiction of the court.
If the Petaluma Bank case is authority for the sale of property in the hands of the receiver in a divorce case under process issued out of a court of co-ordinate jurisdiction, it is an exception to the general rule, and the exception ought not to be extended to other cases of receiverships. To extend this exception to foreclosure receiverships would amount to an invitation for collusive sales pending foreclosure by which a mortgagee entitled to satisfaction upon a defaulted mortgage debt might be held in litigation for years during the pendency of appeals involving the determination of whether or not buyers at such sales acquired title. The effect of the rule stated in the opinion of the presiding justice amounts to an adjudication that the appellant in the present case acquired title under the execution sale. If the trial court on this proceeding had no power to adjudicate that the appellant did acquire title by the sale, this court is without power to adjudicate that the sale was good. Such an adjudication amounts to a determination of the question of title.
Second: In the suit pending for the foreclosure of the mortgage, in which a receiver had been appointed, the receiver, who is the sole respondent on this appeal, procured an order of the superior court in a proceeding instituted by him against the appellant, who was never made a party to that suit, in terms purporting to vacate and *Page 503 
annul a sale under execution of another judgment to the appellant of certain real property included within the mortgage, and further enjoining the appellant from interfering with the possession of the receiver or dealing with the title to the property. The mortgage involved in the foreclosure proceeding was to secure the payment of bonds aggregating $2,000,000 issued by the Sunset Road Oil Company. The mortgagee was the Mercantile Trust Company of San Francisco. The mortgage, among other property, covered certain lands held by the Sunset Road Oil Company and others as tenants in common. Prior to the commencement of the foreclosure suit two of the tenants in common, Anita M. Dewey and D. W. Hobson, sued the other tenants in common and the mortgagee in partition, lispendens being filed when the suit was commenced. While that suit was pending, the foreclosure suit was commenced, and John Daniel, the present respondent, was appointed and qualified as receiver of the mortgaged property. He did not seek to intervene in the pending partition suit and it was not necessary that he should have been made a party to that suit.
The final decree in the partition suit awarded specific property free from all liens to the plaintiffs in that suit and awarded to the Sunset Road Oil Company other specific property subject to the mortgage of the Mercantile Trust Company. The decree provided that the plaintiffs were entitled to $1,182.75 and costs, of which the sum of $1,000 was allowed as an attorney's fee to the present appellant, who was the attorney for the plaintiffs in the partition suit. The decree further provided that two twenty-fifths of the amount so determined should be a lien on the land set apart to the plaintiffs, and that twenty-three twenty-fifths thereof should be a lien upon the land set apart to the defendant Sunset Road Oil Company "prior to the said mortgages and liens" theretofore mentioned in the decree.
None of the defendants in the partition suit appealed from the judgment establishing the priority of the lien so imposed. In legal effect, as between the parties, this was a consent judgment making the lien of the mortgage then in suit subordinate to the lien of the twenty-three twenty-fifths of the amount awarded in the partition suit. *Page 504 
Except as thus stated, the judgment in the partition suit had no effect upon the foreclosure suit or the receivership. It must be borne in mind that the prior lien was the lien of the plaintiffs in the partition suit. The present appellant received nothing by virtue of that decree. The plaintiffs in the partition suit were simply prior lienholders.
In the foreclosure suit the prior lienholders were not necessary parties. They might have been made parties by their own intervention, and had they been made parties by proper pleadings, their right as prior lienholders would necessarily have been protected in the foreclosure suit, either by preliminary order or in the final decree. [1] While it is generally the rule that claims adverse to both the mortgagor and mortgagee cannot be litigated in a foreclosure suit, if the adverse claimants subject themselves to the jurisdiction of the court in the foreclosure suit, it being before a court of equity, complete justice may be done. (Van Loben Sels v.Bunnell, 131 Cal. 489, [63 P. 773]; Dobbins v. Economic GasCo., 182 Cal. 616, [189 P. 1073].) The undisputed evidence shows that instead of intervening in the foreclosure suit, the plaintiffs in the partition suit, through the appellant, as their attorney, sought to collect the amount of the lien upon the property involved in the foreclosure suit from the mortgagee and its attorneys, and that the appellant made no attempt to make such collection from the receiver, nor was any application made to the court in the foreclosure suit for leave to enforce the prior lien imposed on the mortgaged property by sale under execution issued on the judgment in the partition suit. Regardless of any reasons or excuses advanced for not applying to the court having jurisdiction of the receiver when payment was not made by or on behalf of the mortgagee, as a matter of fact execution was issued on the judgment in the partition suit and levy was made, followed by a sale under that judgment. The certificate of sale was duly recorded on February 18, 1914. In May, 1915, there having been no redemption nor offer of redemption, a sheriff's deed issued on the certificate and was duly recorded on May 17, 1915, sale being made to the appellant for $1,307.70. *Page 505 
On December 20, 1916, in the foreclosure suit the receiver filed a petition setting forth with some elaboration the foregoing facts, praying for an order directing the appellant to show cause why he should not be adjudged guilty of contempt of court for interfering or attempting to interfere with the possession of the receiver, also for a temporary restraining order to prevent him from interfering with such possession and from selling, pledging, mortgaging, hypothecating, or in any other way disposing or attempting to dispose of the property in question. The record shows that when this matter came on for hearing, it was very definitely agreed between the parties that all proceedings for contempt be abandoned and the right to proceed for contempt for past acts be waived. Thereafter, by amendment, the proceeding was changed so that the restraining order was maintained in force until the order appealed from was made, and by amendment of the petition the court undertook to determine the validity of the execution sale. It is to be noted that the appellant at all times reserved his objections to the court proceeding with the hearing because of its lack of power to determine the question of title upon the amended petition, and that the allegations of the petition upon which the proceeding was based were wholly insufficient to warrant the relief sought by the petitioner. Upon this record, the receiver with the approval of the court, having waived all right to proceed against the appellant for contempt based on past acts, the court was without power to make any order except one of injunction as to future acts. It certainly could not in this ancillary proceeding adjudicate upon the validity of the execution sale.
Third: In addition to the facts stated in the opinion of the presiding justice the record shows that of the properties mortgaged to secure the payment of the issue of bonds of $2,000,000, of which there were outstanding bonds of the value of $1,190,000, the appellant as the attorney for the plaintiffs in the partition suit caused to be sold to satisfy the lien of about $1,200 over 400 acres of the land which was the original refining property of the Oil Company, on which there were a number of buildings and structures, pipe-lines, and all sorts of equipment necessary for a refinery. Under this sale the appellant bought all *Page 506 
that property for $1,307.70. He made no application to the receiver, who had sufficient money in his hands to pay the prior lien, and who, after learning of the sale, tendered to the appellant all money he had expended, with interest, which tender was rejected on the sole ground that it was not made in gold coin. Neither did he apply to the court for leave to sue the receiver or to sell the property under execution. The receiver, relying upon the general rule prohibiting interference with receivers, could not in this proceeding take the opposing positions on one hand that the sale was void, and, on the other hand, that it should be set aside upon equitable grounds, if such grounds exist. If this court announces the rule that in a foreclosure suit property in the hands of a receiver may be sold under process of a court of co-ordinate jurisdiction, the bondholders, the mortgagee, the bondsman of the receiver and the receiver himself will be deprived of any possibility of litigating before a court having power to determine whether the execution sale was void or voidable, or valid, any question of equitable cognizance which might possibly be raised in such a suit.
[2] Solely on the ground that the trial court in this proceeding was without power to adjudicate on the question of title and in recognition of the fact that the appellant acquired at the sale something which eventually may or may not be determined to have vested him with title, I concur in the conclusion that the order appealed from, in so far as it purports to vacate the execution sale and in so far as it purports to restrain the appellant from selling or dealing with his justiciable claim of title acquired while the property wassub judice, must be reversed. The order appealed from should be affirmed in so far as it restrains the appellant from interfering with the possession of the receiver.