87 P. 19 | Cal. | 1906
Lead Opinion
The plaintiffs, who are husband and wife, mortgaged certain lands to secure an indebtedness to the defendant Loan and Trust Company, a corporation. Under a judgment of foreclosure, entered upon their default, the mortgaged premises were sold to the corporation by its co-defendant, Keefe, acting as special commissioner under the decree. The object of the present action is to obtain a decree vacating the foreclosure sale, canceling the certificates and deeds executed and recorded in pursuance of the sale, requiring the corporation to account for moneys received by it from the plaintiffs and from others to their use, which should have been credited upon the mortgage indebtedness, and for general relief.
The grounds upon which this relief is claimed are, — 1. That the foreclosure decree was fraudulently obtained for an excessive amount; and 2. That the sale of the mortgaged premises was unfairly and illegally conducted by the commissioner *558 acting in collusion with the mortgagee, for the purpose, and with the effect, of discouraging competition of bidders, and thereby enabling the mortgagee to become the purchaser at a price much below the actual value of the lands.
The complaint was filed in December, 1900. The defendants first filed a general demurrer for want of facts. Afterwards, but before any action upon that demurrer, they filed, as of course, an amended demurrer specifying more particularly their objections to the complaint for want of facts, and adding the special objection that several separate and distinct causes of action had been united and combined in the complaint without a separate statement. An order was subsequently entered in the cause in these terms: "It is ordered that the demurrer be sustained and ten (10) days given to amend the complaint." Plaintiffs declined to amend, and judgment was entered dismissing the action. From the judgment so entered plaintiffs appeal.
The first point urged in support of the appeal is that the judgment was erroneously entered because it appears that the only demurrer in the case has never been disposed of. The appellants contend that the amended demurrer superseded the original, and that the order of the superior court is by its terms confined to the original, leaving the amended demurrer still standing as an obstacle to any final judgment. It is true the amended demurrer did supersede the original, and thereby completely disposed of it. The order of the court subsequently entered, therefore, had nothing to operate upon except the amended demurrer, and is to be construed as sustaining it. This is doing no violence to the terms of the order. A demurrer is none the less a demurrer because it has been amended, and the last amended demurrer in a case, being the only demurrer, is properly designated as "the demurrer." The entry of the judgment cannot be held to have been even irregular, so far as this objection is concerned.
The more serious objections to the judgment remain to be considered, and among these the first in order and importance is the claim that the allegations of the complaint, if true, were sufficient to entitle the plaintiffs to a decree vacating the foreclosure judgment upon the ground that it was procured by fraud. Assuming the truth of what is alleged, there can be no doubt that the decree of foreclosure was procured by a *559 fraud practiced upon the court of a character entitling the plaintiffs to the relief which they are seeking in this action, and the only question is whether their complaint does not also show that they are debarred from any relief in equity by the fact that they had a complete remedy by motion in the foreclosure suit — a proceeding which they took and in which they litigated unsuccessfully the same matters which they are endeavoring to relitigate here. The facts alleged are that plaintiffs borrowed of the Loan and Trust Company $12,675 in May, 1892, giving their note for that principal sum, and also separate interest notes, payable semi-annually for a period of three years. To secure the notes they mortgaged a tract of land containing nine hundred and fifty acres, which had been surveyed and platted into lots and blocks as an addition to the town of San Jacinto, in Riverside County. They received in cash only $1,874.44, the balance of the loan being retained by the Loan and Trust Company to satisfy alleged prior liens upon the land. They have never had any account of the application of the moneys so retained, and charge that they were more than sufficient to satisfy the liens. Between the date of the loan and the 25th of October, 1898, plaintiffs paid all the interest notes, and besides there had been paid by them and by others for their account various sums, amounting in the aggregate to nine thousand six hundred dollars, which the corporation has appropriated, and for which it has failed to account. The suit to foreclose was commenced October 22, 1898, and as shown by the default judgment subsequently entered, the corporation alleged an indebtedness of nearly sixteen thousand dollars, with interest from May 1, 1898. The sum so claimed was, on any calculation, more than could have been due at that date, after deducting the payments alleged to have been made. These plaintiffs retained an attorney to defend the suit to foreclose, and communicated to him the facts constituting their defense. He interposed a demurrer to the complaint, which was subsequently overruled by his consent, time being allowed to answer. A week before the time to answer expired he signed and filed in the action the following stipulation: —
"The defendants, Francisco Estudillo, and Felicitas Estudillo, his wife, named in said action, having appeared therein by their attorney, Wilford M. Peck, and demurred to the *560 plaintiff's complaint, and said demurrer having been overruled by the above-entitled court on the 8th day of February, 1899, by an order duly entered in the minutes of said court;
"Now, therefore, it is stipulated and agreed by and between the plaintiff represented by its undersigned attorney, duly authorized thereto, and the said defendants, Francisco Estudillo and Felicitas Estudillo, his wife, by their said attorney duly authorized thereto.
"That said defendants waive the service of notice of overruling of said demurrer, and further waive the right to and refuse to further appear or answer in said action, and that the plaintiff shall be entitled to take judgment in accordance with the prayer of its complaint, or as may otherwise be ordered by the court on the hearing of said cause.
"Dated February 21, 1899.
"R.H.F. VARIEL,
"Attorney for Plaintiff.
"WILFORD M. PECK,
"Attorney for said Defendants."
On the same day the cause was heard and judgment of foreclosure entered. The mortgage indebtedness, according to the complaint and judgment, amounted at that date to $18,464.98, to satisfy which, and costs, the lands were ordered sold. There was besides a personal judgment entered against these plaintiffs for one thousand dollars attorney's fee. According to the allegations of the complaint in this action a much smaller sum remained unpaid on the mortgage debt than was found due by said judgment, and the mortgagee must be deemed to have known that it was taking judgment for an excessive amount upon the stipulation of an attorney who was sacrificing the interest of his clients in abandoning their valid defense to a large portion of the claim asserted against them. It is charged, and by the demurrer admitted, that the mortgagee knew prior to the date of the stipulation that said attorney had been instructed to file an answer for these plaintiffs, and that he had no authority to stipulate for a judgment by default. That the stipulation was collusive and fraudulent in fact and in intent is repeatedly charged, and is by the demurrer admitted. These facts so admitted, constitute a fraud extrinsic and collateral to the issues in the *561
cause which entitles the plaintiffs to relief in this action unless it shall be held that their sole remedy was by motion in the foreclosure suit to vacate the judgment on the ground of surprise and excusable neglect. (Code Civ. Proc., sec.
The facts relevant to this question are that plaintiffs first learned of the stipulation and subsequent proceedings on the 14th of April, 1899, and immediately discharged their said attorney, and on the 19th of the same month filed a motion to set aside their default and vacate the judgment. This motion was overruled by the superior court June 14th. An appeal from that order was taken to this court, and was still pending when the present action was commenced in December, 1900. The grounds upon which that motion was based are not stated in the complaint, but counsel in their briefs make frequent reference to the report of our decision on the appeal from the order (Security Loan andTrust Co. v. Estudillo,
If the right of plaintiffs to maintain this action depends upon their discovery of the frauds here alleged too late to make them the ground, or one of the grounds, of their motion to vacate the default judgment in the foreclosure suit, it must be held that their complaint does not state facts sufficient to constitute a cause of action. They allege it is true that the frauds of the corporation defendant were discovered about the 10th of October, 1899, but they also allege that they had notice of the judgment and the stipulation upon which it was entered in April, 1899. Necessarily they also knew before that date of their instructions to their attorney to make their defense in the action and of his betrayal of their cause. They knew that the judgment was for an excessive amount and that the corporation must have been aware of the fact when its complaint was filed. They knew how the land was described in the decree, and the manner in which it had been arbitrarily subdivided for the purposes of the sale; they knew that Keefe had been appointed commissioner to make the sale, and what his connection with the corporation's attorney and with the litigation was. In short, they knew all the facts which they now allege for the purpose of showing the fraud, except the fact that the corporation induced their attorney to enter into the stipulation, and to conceal his proceedings. That their attorney was induced by the corporation to consent to the default judgment was a fact necessarily to be inferred from the facts which they knew, and since they discovered his proceedings in time to make their motion, his attempted concealment, whether collusive or not, is a circumstance entirely immaterial here.
We must, therefore, treat this complaint as showing, not that the alleged frauds were first discovered in October, 1899, but as showing that they were known to plaintiffs at the time they gave notice of their motion to vacate the default judgment. So regarding it, the question presented for decision is whether a party against whom a judgment excessive in amount has been entered upon a fraudulent and collusive agreement between his attorney and the opposing party can *563
maintain a separate suit in equity to vacate such judgment, or enjoin its enforcement when it appears that he had notice of its entry and the fraud in its procurement in ample time to have moved for relief under section
Upon this question there seems to be a conflict of authority in other jurisdictions, and we have not been referred to any decision of this court in a case clearly calling for a determination of the precise point. The general principle that equity will not interfere to vacate or enjoin the execution of a judgment at law when the party aggrieved has a plain, speedy, and adequate remedy by motion to vacate the judgment or quash the execution, or by an appeal, is recognized and applied in many cases, but the question whether a summary motion to be supported by affidavits is an adequate remedy, and therefore exclusive, in a case such as this, has not been directly involved or decided in any of the cases that have come to this court, with the possible exception of California Beet Sugar Co. v. Porter,
But it is objected that they did move, and that their right to have the judgment vacated is res adjudicata. It does not, however, appear from this complaint that they moved upon the ground of the fraud here alleged, and the report of our *565
decision on the appeal from the order denying the motion shows that it was made upon the ground of want of authority in their attorney to stipulate. The allegations of this complaint do not show that the order denying the motion to vacate is a bar to this action. In Black on Judgments it is said (sec. 321): "In an action to set aside a judgment on the ground of fraud, neither the judgment thus sought to be vacated, nor an order refusing to set aside a default and permit an answer in that case can be set up as a bar to the action." From which it would seem to follow that in such a case as this the correct practice would be to move promptly under section
This is the course which plaintiffs have taken, and if the practice is admissible, they cannot be charged with lack of diligence. They moved promptly for relief in the foreclosure suit, and before that motion was finally decided they commenced this action.
There has been no laches. The period of limitation for actions for relief on the ground of fraud is three years from the discovery of the fraud. This action was commenced less than two years after its commission. The cases cited by respondent in which the complaint has been held bad for failure to show how and when the fraud was discovered, and why it was not sooner discovered, were all cases in which the action was commenced more than the full period of limitation after the commission of the fraud. In such cases the doctrine of laches applies, but in a case like this the right to maintain the action is governed by the statute of limitations.
Nor does the right to maintain the action depend upon the readiness and ability of the plaintiffs to pay the amount that may be found due on an accounting. They are entitled to a correct determination of the amount of their indebtedness and to have the mortgaged premises sold only under a proper decree. What has been said in the cases of rescission cited by the respondent as to the necessity of averring readiness and *566 ability to restore what has been received under the contract has no application to such cases as this.
It follows from what has been said that the judgment of the superior court must be reversed, but in view of the further proceedings involved in this conclusion it is proper to add that if upon a trial of the issues it shall be found that the attorney who represented these plaintiffs in the foreclosure suit had authority from them and acted in good faith in stipulating for judgment according to the prayer of the complaint, and that no fraud was practiced by the defendant corporation in procuring the entry of the decree, the plaintiff will have no right to demand that the sale and other subsequent proceedings be vacated. For if the decree was not in accordance with the prayer of the complaint the defendants therein had a remedy by appeal, and that remedy was exclusive, and if it was in accordance with the prayer of the complaint they cannot now object to a sale made in the mode authorized by their formal consent. In other words, our conclusion is that if there was in fact no fraud in the procurement of the judgment, the plaintiffs have no right of action.
The judgment appealed from is reversed and the cause remanded, with instructions to the superior court to overrule the demurrer with leave to the defendants to answer.
Shaw, J., Sloss, J., Angellotti, J., Henshaw, J., and Lorigan, J., concurred.
Dissenting Opinion
I dissent, and adhere to the opinion delivered in Department affirming the judgment. [
The following is the opinion in Department referred to in the dissenting opinion: —
Addendum
A general demurrer to the complaint was sustained, and, plaintiffs not offering to amend within the time allowed, judgment was entered for defendants. Plaintiffs appeal from the judgment.
In appellants' points and authorities it is merely asserted that the complaint does state facts sufficient to constitute a cause of action, and in support of the assertion a general reference is made to eleven paragraphs of the complaint, which are designated by numbers. There is nothing more in the points that can be designated as argument, and no authorities are cited except section 694 of the Code of Civil Procedure. The complaint, with exhibits attached, occupies seventy pages of the transcript. The gist of the complaint, when seen through the mass of the matter set forth, seems to be this: That in May, 1892, appellants executed to the defendant, the Security Loan and Trust Company, a mortgage on certain described lots of land to secure certain promissory notes made by appellants to said company; that on October 22, 1898, said company commenced an action to foreclose said mortgage, and that appellants employed an attorney, W.D. Peck, to defend the action; that the attorney filed a demurrer to the complaint, which was afterwards, by his consent, overruled; that on February 21, 1899, the said attorney made and filed a stipulation on the part of the appellants that appellants would make no further defense to the action, that their default be entered, and that judgment might be rendered for plaintiff in said action as prayed for in his complaint; that on said twenty-first day of February, 1899, a judgment of foreclosure was rendered and entered; that the defendant herein, Thomas F. Keefe, was appointed a commissioner to sell the mortgaged premises; that on the twenty-second day of January, 1899, said Keefe did sell said premises to the respondent herein, the said Security Company, and *568 gave it certificates of sale, and on January 22, 1900, executed to respondent deeds for the land so sold. The main purpose of the action is to have the said judgment of foreclosure set aside, and the said sale of the mortgaged premises vacated.
It is averred that appellants' attorney in the foreclosure case was not authorized to make the stipulation above noticed, and that he did so by the procurement of the plaintiff in said action, etc. But it is also averred that within the time allowed by section
It is averred that the commissioner sold the mortgaged premises in nine different parcels, whereas it should have been sold in different and more numerous parcels as demanded by appellants by written notice served on the commissioner, and that therefore the said sale was void. But, in the first place, there is no averment of facts showing that appellants were injured by the manner of sale; and, in the second place, it was decreed in the judgment that the sale should be made in nine named parcels, and the commissioner in making the sale followed the judgment, and, such being the case, the only remedy for the alleged grievance was an appeal from the judgment. In Ontario Land etc. Co. v. Bedford,
The foregoing are the main points in the case, and we see nothing else necessary to be specially noticed. The complaint does not state facts sufficient to constitute a cause of action and the demurrer was properly sustained.
The judgment appealed from is affirmed.
