83 Cal. 477 | Cal. | 1890
Lead Opinion
This is a bill in equity, in the nature of a bill of review, brought to set aside a decree of foreclosure, and proceedings subsequently had thereunder, on the alleged ground of fraud. Defendants demurred to the complaint, that the same did not state facts sufficient to constitute a cause of action, or to entitle the plaintiff to relief, and specified many particulars wherein it was insufficient, among others, that as to many of the allegations the plaintiff ivas barred by lapse of time and laches. The demurrer was sustained, the plaintiff declined to amend, and judgment was entered for the defendants, from which plaintiff appeals.
This is a case where the rule that a pleading must be construed most strongly against the pleader clearly applies; but coming up as it does, on demurrer, all the allegations of fact therein, not inconsistent with other allegations in the same count, must be taken as true. The deductions to be drawn from them are for the court, and it does not follow that such as are drawn by the pleader are admitted to be correct.
From the allegations of the complaint it appears that on the fifteenth day of April, 1880, the defendants H. T. Holmes and William Gwynn made and executed to the defendants Frank Miller and Daniel Flint, as trustees, their certain mortgage, covering 2,437.38 acres of land, in Lisbon District, Yolo County, in this state, to hold the same in trust as security for the sum of eighty thousand dollars, to the holders of any and all of certain promissory notes in said mortgage described, to wit:
The said H. T. Holmes and William Gwynn were partners, doing business under the firm name of Ii. T. Holmes & Co.
There is no averment that all, or in fact any, of the said $80,000 series of notes were ever issued. There is an averment, upon information and belief, that “ of the said 3,200 promissory notes, not more than 1,440 were issued,—that is to say, there were only issued 360 notes of each of said several series, making an aggregate of $36,000.” According to the well-settled rules of construction, we have here an entire failure of allegation that any of the notes were ever issued, with an affirmative allegation putting a limit upon the number, if any, that were issued. This is followed by an averment that “ said notes so issued were by ... . said trustees delixmred to said Holmes and Gwynn, xvho, before the same matured, used them, in whole or in part, in the payment of their debts and liabilities, and in discharging the claims and demands of their creditors.” In another portion of the complaint it is averred that the purpose of the parties to the mortgage was to enable Holmes and Gwynn to pay off their debts, etc., “ and that said promissory notes xvere received by said Holmes and Gwynn, and used by them for said purpose, and other purposes.”
There is an averment in the complaint that on the day of the filing thereof, — April 11, 1888, — nearly four years after maturity of the last of the series, the plaintiff is the holder of certain of said notes, and of each of the four series thereof, which are due and unpaid, with interest thereon from the fifteenth day of April, 1880, the day of their date. There is no averment as to when or from whom he received them. Assuming that they were ever executed, all that the complaint shows is, that they were in the hands of Holmes and Gwynn, their makers, until they passed to plaintiff. So long as they remained in the hands of their makers, they were unissued, and were not notes secured by this mortgage. Under every rule of construction of pleadings, we are bound to assume that they passed from the hands of the makers to this plaintiff on the day of the filing of this complaint, and not before. On that day, and for at least fifteen months before that time, if in the hands of the makers, they were mere waste paper, so far as the security of this mortgage was concerned, for the mortgage had already been foreclosed, and the trust under it had ceased. They could not acquire new life by being transferred to plaintiff, and he could not at that time have acquired any rights under them greater than that held by the person from whom
The complaint further shows that 846.26 acres of the laud described in the mortgage hereinbefore mentioned was at the time subject to a prior mortgage, made March 28, 1879, by said William Gwynn to William Russell, to secure the payment of a promissory note of even date, made by said Gwynn to said Russell, with interest thereon at the rate of ten per cent per annum. This note matured two years after its date. It is averred that one half the principal and interest of this note had been paid prior to the execution of the $80,000 mortgage, but it is not stated when of by whom, and as militating against that averment, and inconsistent with it, it is further shown by the complaint that at or about the time of the execution of the $80,000 mortgage, Russell made an assignment of his mortgage to the National Gold Bank of D. O. Mills & Co., of which bank it is alleged said Miller was cashier and manager, which bank agreed to assign the same to the trustees upon payment of $3,500 and interest, and at the same time the trustees gave to Russell a written agreement to deliver to him $4,200 of “the proposed” trust-mortgage notes when received, in full satisfaction of the balance of his claim under the mortgage. It will be borne in mind that the Russell mortgage was not yet due, and that tliene two sums amount to just the principal of said
It is further alleged in this connection that Miller subsequently acquired control of this mortgage, and had it foreclosed, in the name of another person, but in his own interest, and upon the sale thereof under foreclosure had the property bid in, and the title taken in the name of his wife, and that all this was in fraud of the holders of the trust-mortgage notes.
We can conceive it possible, and even quite probable, that upon the maturity of that mortgage, held as it was by a national bank, of which Miller was cashier and manager, he was compelled to take it up, and as it does not appear that he ever received a dollar of trust funds with which to do it, that he had to do it from his own funds. If so, he was entitled to be protected, and to protect himself, for the advances which he was com
It does not show upon its face that it was a consent decree, but declares that the case was tried in open court, all the parties thereto appearing by counsel, and was tried and submitted upon the pleadings and proofs adduced. It then proceeds to decree and order the sale of
That action was brought and prosecuted by and in the name of the trustees, for the benefit of the beneficiaries under the trust, whosoever they might be, as the statute expressly provides may be done. (Code Civ. Proe., sec. 369.) There is no pretense that the plaintiff or his assignor was without notice of the pendency of that action, or of any of the acts which are alleged to have been fraudulent or collusive. The presumption is, that he
But the fallacy of this charge of fraud, if the plaintiff was or is in position entitling him to be heard on such a charge, is sharply illustrated by reference to one point made and insisted upon in connection with this part of the case. It is insisted upon, as perhaps the strongest and most perfect badge of fraud in this case, that the plaintiff Miller caused and procured this decree to be so framed and entered as to give the intervenor, Miller, a lien upon the entire mortgaged premises for the amount awarded in his favor,—and to be paid out of the proceeds of the sale of the entire premises, instead of upon the part thereof covered by the Russell mortgage only, and to be paid out of the proceeds of the sale of that part. As we have alreadj- said, it does not appear from the record that Miller had anything to do with the framing of this decree. Whether he did or not, there was neither error nor fraud in that part of it which is so insisted to have been fraudulent. This award was not made in satisfaction of the Russell mortgage; on the contrary, the lien of the Russell mortgage was ignored. According to thp facts set up in the complaint, that mortgage had been satisfied and extinguished. The court evidently found, and the facts set up in this com
One further fact, insisted upon as one tending to show fraud, remains to be considered. At the sale had under the foreclosure of this trust mortgage, the defendant McCarty bid in the property in one parcel at the sum of eleven thousand five hundred dollars. This occurred March 5, 1887. He afterward assigned an interest in it to the defendant Dwyer, and in due course the sheriff issued his deed to McCarty and Dwyer. It is alleged upon information and belief that the property was then worth thirty-five thousand dollars, and that the property was allowed by the parties to the action other than Gwynn and Holmes to be struck off to McCarty for this smaller sum, for the purpose of defrauding the other holders of the trust-mortgage notes, but it is not alleged that either the plaintiff or his assignor was one of the holders of such notes, or was injured thereby. We are aware of no law which compels judgment creditors to bid upon property, upon which they have a lien, any higher than they please. The sale was at public auction, under a decree of court, and presumably conducted
It thus appears to us, upon a careful examination of all the allegations of fact contained in this complaint, as distinguished from mere invective and conclusion, that it fails to show a case of fraud in which a court of equity would be justified in interposing to set aside this decree of foreclosure, which has been allowed by not only the parties to the record, but by all the parties in interest, to become final. It also fails to show that the plaintiff or his assignor was or is a party who could or can maintain such an action,—1. Because it fails to show that he or his assignor is or was the holder of any note secured by said mortgage issued before the mortgage was foreclosed and the trust extinguished; 2. If it be assumed that the notes now, claimed by him were outstanding at the time of the foreclosure, then he was privy to the action, and is estopped by the decree, on the authorities and for the reasons already stated. It follows that the demurrer was properly sustained, and the judgment must be affirmed.
So ordered.
Sharpstein, J., concurred.
Concurrence Opinion
I concur. It must be presumed, in the absence of objection to the contrary, that
Concurrence Opinion
I concur in the judgment, for the reasons stated in the opinion of Mr. Justice Paterson.