126 F. 593 | 9th Cir. | 1903
Lead Opinion
after the foregoing statement of facts, delivered the opinion of the court.
The appellee acquired its title to the land in controversy during the pendency of the foreclosure suit, but it claims that it is not bound by the judgment in that suit, because it was not made a party to it, and was not made subject to it by lis pendens. The law of the state of Washington relating to lis pendens, applicable to this case, is as follows:
“In an action affecting the title to real property the plaintiff, at the time of filing the complaint, or at any time afterwards, or whenever a writ of attachment of property shall be issued, or at any time afterwards, the plaintiff or a defendant when he sets up an affirmative cause of action in his answer and demands substantive relief at the time of filing his answer, or at any time afterwards, if the same be intended to affect real property, may file with the auditor of each county in which the property is situated a notice of the pendency of the action, containing the names of the parties, the object of the action, and a description of the real property in that county affected thereby. From the time of the filing only shall the pendency of the action be constructive notice to a purchaser or encumbrancer of the property affected thereby, and every person whose conveyance or encumbrance is subsequently executed or subsequently recorded shall be deemed a subsequent purchaser or encumbrancer, and shall be bound by all proceedings taken after the filing of such notice to the same extent as if he were a party to the action.” Section 4887, Ballinger’s Ann. Codes & St. Wash.
The appellants supposed that a lis pendens was filed at the time of the commencement of the foreclosure suit, but it was only able to show the fact that a lis pendens was filed at a later date, namely, in Kitsap county, where a portion of the lands are situated, on November 23, 1894, and in Mason county, where the remainder of the lands are located, on April 15, 1895. The appellee admits that it had
_ But, assuming that the appellee became an incumbrancer at the date of the levy of the attachment on June 8, 1892, and that at that time it had no notice of the foreclosure suit, what effect did this have upon the rights of the mortgagee to the attached property? It is alleged in the bill of complaint that the mortgage was executed on February 8, 1878, and duly acknowledged and certified, under the laws of the then territory of Washington, after its execution,, so as to entitle it to be recorded, and was thereafter, to wit, on February 21, 1878, duly recorded in the proper office in the territory of Washington. This allegation is not denied in the answer, and therefore stands admitted. The appellee was therefore charged with notice of the existence of the mortgage, and the mortgagee did not lose the lien of the mortgage by reason of the fact that the appellee was not also charged with notice of the pendency of the foreclosure suit. What the mortgagee did fail to accomplish by the foreclosure suit, in the absence of lis pendens, was the foreclosure of the appellee’s equity of redemption acquired by its judgment on July 23, 1894. This result is always recognized in cases where the mortgagor has suffered judgment liens to attach to mortgaged property. A case in point is Stout v. Dye, 103 U. S. 66, 26 L. Ed. 428. In that case Dye, on November 10, 1873, executed a mortgage upon certain real
“That the suit of the hank was one to foreclose a mortgage and that it was actually pending when the judgment lien of the Stouts was acquired, are conceded facts. When the suit was begun, Lye, the mortgagor, represented the entire equity of redemption. He had parted with no portion of it voluntarily; and if the Stouts had failed to get their judgment during the January term, 1876, of the Circuit Court, no one would claim they were not bound by the decree of foreclosure, although not parties to the suit. Neither could it with any propriety be claimed, we think, that they would not be bound if their lien had only taken effect from the date of their judgment. It is true, the lien followed by operation of law from a judgment in an adversary proceeding against the mortgagor, and was not created directly by his own voluntary act; but it was the legitimate result of his failure to pay a debt he had incurred, and reached only the equity of redemption, that was being foreclosed in the pending suit. It was in legal effect no more and no less than an incumbrance of the equity of redemption by the mortgagor under the operation of the judicial proceedings which had been instituted against him to enforce the payment of a debt he owed. As this incumbrance was created pendente lite, there can be no question that it comes within the rule just stated as governing such transfers, unless the rights of the parties are changed because the lien, when created, bound the property, from January 4th, as against other liens and conveyances made by the mortgagor. The inquiry is not as to the extent or validity of the lien, but whether the holder is any less an incumbrancer pendente lite because, although his incumbrance was actually created while the suit was pending, it bound the land, for certain purposes, from an earlier date. Confessedly, the lien of the bank, if its mortgage was valid, was in any event superior to that of the judgment. The only point in controversy is as to the necessity of making such an incumbrancer a party to a pending suit in order to cut off by a foreclosure his interest thus acquired in an equity of redemption. No doubt the Stouts, as soon as them judgment was rendered, had a lien on the mortgaged*601 property, which for some purposes antedated the foreclosure suit; hut until they had secured their lien they, would not have been heard to contest the validity of the bank’s mortgage, or the amount that was due on the mortgage debt. If they had been made parties when the suit was begun, they could have done nothing by way of defense to the action until they had acquired some specific interest in the mortgaged property. As creditors at large they were powerless in respect to the foreclosure proceedings, but when they obtained their judgment, not before, they were in a position to contest in all legitimate ways the validity and extent of the superior lien which the bank asserted on the property, in which, by the judgment, they had acquired a specific interest.”
It was held, however, that the judgment of foreclosure was a judgment on the merits, and concluded the parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter -which might have been offered for that purpose. Citing Cromwell v. County of Sac, 94 U. S. 351, 352, 24 L. Ed. 195. It was accordingly further held that the holder of the judgment was not entitled to maintain his suit to set aside the mortgage, and the decree of the Circuit Court dismissing the bill was affirmed.
In the present suit the appellant, holding the judgment in the foreclosure suit, seeks to foreclose the equity of redemption held by the appellee. This it is clearly entitled to do. The only question to be determined is the sufficiency of the defenses interposed by the appellee. These are: (1) That there was laches, or an abandonment of the foreclosure suit by the complainant therein; (2) that complainant’s rights in the foreclosure suit were barred by the statute of limitations ; (3) that the appellant was not entitled to amend the prayer of its bill in the present suit.
No hard and fast rule has been laid down by the courts which can be said to govern all cases wherein the defense of laches is invoked. The lapse of time which might induce the application of the doctrine is not a determined period, but depends upon the circumstances of the particular case. One principle pervades all cases involving the defense of laches, however, and that is, that not only must there be a seemingly unnecessary delay on the part of the plaintiff in bringing or prosecuting his action, but that, by reason of some change in the condition of relations of the property or parties occurring during the period of delay, it would be inequitable to permit the claim of the plaintiff to be enforced. Galliher v. Cadwell, 145 U. S. 368, 12 Sup. Ct. 873, 36 L. Ed. 738; Halstead v. Grinnan, 152 U. S. 412, 14 Sup. Ct. 641, 38 L. Ed. 495; Wheeling Bridge & T. Co. v. Reymann Brewing Co., 61 U. S. App. 531, 90 Fed. 189, 32 C. C. A. 571. As defined in the case of Demuth v. Bank, 85 Md. 326, 37 Atl. 268, 60 Am. St. Rep. 322:
“Laches is such neglect or omission to assert a right as, taken in conjunction with lapse of time, more or less great, and other circumstances causing prejudice to an adverse party, operates as a bar in a court of equity. * * * There must be a legal duty to do some act, a failure to do that duty, and attendant circumstances which cause prejudice to an adverse party, before the doctrine of laches can be successfully invoked.”
Applying this definition and the principle above stated to the case at bar, what duty has the appellant failed to perform ? Wherein has
But has the delay which did occur caused any prejudice to the rights of the appellee ? Suit was not brought by the appellee to protect its alleged rights until January, 1892. It is not contended that the laches of the appellant, if any existed, was later than this, but, in fact, that it was some years prior in time. How, then, could it have injured the appellee before its rights had attached to the property in question? But if it be said that the appellee’s rights by relation date back to the inception of the lien of the appellee’s assignor, Sayward, by privity of estate, it is only entitled to such defenses as Sayward. may have been entitled to. Sayward did not invoke the defense of laches during the foreclosure proceedings, but contested the suit upon other grounds. . Sayward was personally served in that action, appeared, and contested the suit. The decree in that suit is binding upon the mortgagor, the Meigs Lumber & Shipbuilding Company, its grantee, Sayward, and all the parties to the action, as to all defenses which were actually urged or which might have been urged in that suit. Cromwell v. County of Sac, 94 U. S. 351, 24 L. Ed. 195. Viewed from this standpoint, the appellee is not in position to invoke the defense of laches.
The case of Hanna v. Kasson, 26 Wash. 568, 67 Pac. 271, cited by counsel for appellee, does not, in our opinion, state a different doctrine, as applied to the facts of this case. It appears that in that case a tract of land in the state of Washington was sold and conveyed by the plaintiffs Hanna and his wife in April, 1890, to Thompson, Drum, and Savage, for $18,141, of which sum $1,000 was paid in cash, and a note secured by a mortgage on the land was executed by Savage, payable in two years from date. By agreement of all the parties in interest the deed was made to Savage, who executed the mortgage to the plaintiffs. The note was not paid at maturity, and suit was brought by the plaintiffs against Thompson, Drum, and Savage to recover the amount due on the note, and interest. Judgment was entered in favor of the plaintiffs. An appeal was thereupon taken to the Supreme Court of the state, and a supersedeas bond in the sum of $40,000 filed on the appeal. The only question in controversy in that case arose out of the statement in the complaint concerning the guaranty of the defendants Thompson and Drum for the payment of the debt, and whether upon such statement the complaint stated a cause of action against all the defendants, and the allegations of the answer as to a rescission of the contract, to which answer a demurrer was interposed and overruled on June 13, 1893, and judgment in favor of the plaintiffs was entered upon the pleadings. This judgment was affirmed by the Supreme Court. Hanna v. Savage, 7 Wash. 414, 35 Pac. 127, 36 Pac. 269. The sum of $17,000 was thereupon paid on this judgment by Thompson and the sureties on the supersedeas bond, and on the 28th day of May, 1894, the land involved in the action was sold by the sheriff on execution to satisfy the balance due on the judgment. At the sale the sureties, through trustees, purchased the land for the amount remaining due on the judgment, and on the same day an agreement in writing was made between the trustees of the sureties and the plaintiffs, which was to The effect that the defendants, other than the defendant Kasson, should execute their notes to the plaintiffs for the balance due plaintiffs on the judgment, payable 12 months from the date of sale, and that the sheriff’s certificate should be assigned to the plaintiffs to secure the payment of the notes, and, if the notes remained unpaid at maturity, the plaintiffs should take a deed from the sheriff to the premises involved, and should have the option to hold the deed in satisfaction of the balance due, or to hold it as a mortgage to secure the payment of the notes. The notes were given, and the certificate assigned, pursuant to said agreement. In April, 1895, Savage and
“But plaintiffs abandoned this mortgage. They brought suit upon the note which it was given to secure, and obtained the judgment against the makers of the note, and levied the execution under such judgment upon the property which was included in the original mortgage, and it was sold for a sufficient amount to satisfy the judgment. By agreement between the plaintiffs and the sureties upon the supersedeas bond in the original action, the sureties purchased the premises, and the sheriff returned the satisfaction of the execution and the notes which were executed for the purchase price by the sureties to the plaintiffs. The original mortgage had thus been abandoned. The debt which it was executed to secure had passed through several transmutations, and did not exist in its original form, and in fact was evidenced by entirely new obligations.”
The judgment of the lower court was accordingly affirmed.
We now come to the case of Hanna v. Kasson, 26 Wash. 568, 67 Pac. 271. This was an action brought March 9, 1900, to foreclose the original mortgage as against Kasson, the grantee of the community interests of the original mortgagor and his wife. The complaint asked for a decree enforcing the mortgage lien for the balance claimed to be due the plaintiffs, and establishing said lien as prior to any claim of the respondent in the land. In her answer the respondent set up the record in Hanna v. Reeves as a bar to the action,? and also pleaded the statute of limitations as a defense. The lower court dismissed the action. On appeal to the Supreme Court, that court held that the record in Hanna v. Reeves was not sufficient to raise the issue of res adjudicata, and with respect to the statute of limitations the court held that there was no longer any right of action upon the note, for that right had been exercised, and that it' was not an action upon the judgment. “The entry of the judgment,” said the court, “could not have the effect to extend the statute of limitations as to a right of action upon the mortgage, because:
It will be observed that in this case the original debt was extinguished by a judgment that was fully satisfied by payments to the plaintiffs and by an execution sale for the balance due; that the plaintiffs thereupon entered into a second agreement with the original debtors, by which they created a new debt, and under which the plaintiffs received the certificate of the sheriff’s sale, and subsequently the sheriff’s deed as security for this new debt. The grantee of the mortgagor was not a party to this new debt, although a party to the pending suit. Moreover, the plaintiffs entered into the possession of the property under the sheriff’s sale and deed. By these proceedings the original debt was not revived by the judgment, but, on the contrary, the judgment fully discharged and extinguished that debt, leaving nothing but the mortgage contract remaining, and against this contract the statute of limitations had unquestionably run in favor of the respondent when the foreclosure suit was brought. The case at bar presents a very different state of facts. The original debt has never been discharged or extinguished. No execution was ever issued upon any of the judgments obtained in California. Those judgments merely served to vitalize the original debt for successive statutory periods dating from the time of the original acknowledgment or promise, and the supplemental bill of complaint filed in the foreclosure proceeding on January 8, 1894, did not state á new cause of action, but merely informed the court as to the proceedings which had resulted in continuing the debt. There was, therefore, no suspension of the mortgage lien, and no time when the statute of limitations could commence to run in favor of the appellee.
As to the defense urged that, by reason of the merger of the debt evidenced by the notes in the judgments recovered in California, the mortgage security was waived or destroyed, as the law of California did not permit separate actions upon the note and mortgage simultaneously, it is sufficient to say that such law has no extraterritorial effect, and does not apply to the action to foreclose a mortgage upon land in the state of Washington. Moreover, that defense was pleaded in the supplemental answer of Sayward, the grantor of the appellee herein, in the foreclosure suit in the state court. That
“The judgments in the courts of California were not, and did not operate as, an extinguishment, merger, or waiver of the security of the mortgage. The mortgage remains valid and effectual as a security for the debts represented by the notes. The statute of California regarding an action for the 'collection of a debt secured by a mortgage does not debar or affect an action on the notes and mortgage brought in the courts of said territory before an action on the notes in California, nor does it affect in any way the plaintiff’s or the bank’s remedial rights in this state.”
From this judgment an appeal was taken by the defendants in that case, the Meigs Lumber & Shipbuilding Company and W. P. Sayward, to the Supreme Court of the state, and on motion of counsel for the complainant in that case (the appellant in this case) that appeal was dismissed, and the judgment became final and binding upon the appellee as the grantee of Sayward.
The court below denied to the appellant permission to amend the prayer of its complaint, after the filing of the memorandum of decision, by adding an alternative clause praying for a decree of general foreclosure. This action of the court is assigned as error. An amendment to the prayer was not necessary to obtain the relief sought by the appellant, as, though the- specific relief sought was strict foreclosure, the bill also contained a prayer for general relief, and under this prayer a decree for a foreclosure sale is appropriate, if the case presented warrants such relief. Sage v. Central R. R. Co., 99 U. S. 334, 25 L. Ed. 394. The appellee, under the name of Dexter Horton & Co., Bankers, a corporation, holds the legal title to the lands described in the appellant’s bill of complaint. This title, as has been stated, was acquired by the appellee by purchase at a judicial sale made June 26, 1896, under a judgment entered in the United States Circuit Court for the District of Washington on July 3, 1894. The lien of this judgment had its origin in an attachment levied January 8, 1892. In this action the appellee, under the name of Dexter Horton & Co., Bankers, was the plaintiff, and W. P. Sayward was a defendant. While this action was in progress in the United States Circuit Court, the appellant’s assignor was prosecuting his action in the state court to foreclose his mortgage lien, upon the same lands. In that case Dexter Horton & Co., a copartnership, and W. P. Sayward, were defendants. This action resulted in a judgment of foreclosure and sale on February 17, 1896, and at the sale made on August 12, 1896, in pursuance of this judgment, appellant’s assignor became the purchaser of the lands. In the present action Dexter Horton & Co., Bankers, a corporation, is made a party defendant, and it is alleged in the bill of complaint that the corporation of Dexter Horton & Co., Bankers, is the successor by assignment of the former partnership of Dexter Horton and Arthur A. Denny, copartners as Dexter Horton & Co., who were made defendants in the former suit. This allegation of the bill of complaint is denied by the answer of Dexter Horton & Co., Bankers, and, although certain transactions are set forth which it is alleged resulted in the judgment obtained by the corporation against Sayward, it is by no means clear that the corporation of Dexter Horton & Co., Bank
In California, where the mortgage under consideration was executed, and in the state of Washington, where it is being enforced, the law is that a mortgage does not convey the legal title for any purpose, either before or after condition broken. It is a mere security for the payment of money, and passes no estate in the land. McMillan v. Richards, 9 Cal. 365, 70 Am. Dec. 655; Johnson v. Sherman, 15 Cal. 287, 76 Am. Dec. 481; Goodenow v. Ewer, 16 Cal. 461, 76 Am. Dec. 540; Fogarty v. Sawyer, 17 Cal. 589; Dutton v. Warschauer, 21 Cal. 609, 82 Am. Dec. 765; Dane v. Daniel, 23 Wash. 379, 63 Pac. 268. A foreclosure suit under this law results only in a legal ascertainment of the amount due on the mortgage, and a decree directing the sale of the premises for its satisfaction, the surplus, if any, going to subsequent incumbrancers or the owner of the premises, and execution follows for any deficiency. The appellee obtained a judgment against the grantee of the mortgagor, and has enforced an execution sale of the mortgaged property under the judgment; and, having become a purchaser at the execution sale, it has acquired the right of redemption, which may be extinguished by a second foreclosure and sale of the premises under the present bill. The bill alleges, among other things, in substance, that the interest of the defendant Dexter Hórton & Co., Bankers, in the mortgaged property was not, for the reasons therein set forth, bound by the foreclosure judgment, but was at all times subordinate to the mortgage lien, and was acquired with notice of its existence; and the main, if not the sole, object of the bill, is to foreclose that defendant’s outstanding equity of redemption. The bill was so framed as to cover that object, and the prayer for general relief embodied in it admitted of that relief being granted. The defendant Dexter Horton & Co. could not, therefore, have been taken by surprise, but had full opportunity to make whatever defense it had to the suit. The relief to which we think the appellant is equitably entitled, and which is here awarded it, is in our opinion not without, but clearly within, the scope of the bill upon which the suit rests.
That part of the decree of the Circuit Court adjudging that the appellant had an equitable lien upon the land described in the bill of complaint for the sum of $11,015.47, the amount of the advances for payment of taxes thereon, with interest to the date of the decree, is affirmed. The remainder of the decree is reversed, with instructions
Dissenting Opinion
(dissenting). I am unable to concur in that portion of the opinion which holds that the trial court erred in not ordering, under the prayer for general relief, that a new sale of the mortgaged premises be had. The rule is well settled that under the prayer for general relief the court may decree only such relief as is conformable to the case made by the bill.
In i Daniell’s Chancery, 379, the author, referring to the relief that may be decreed under the general prayer, says:
“Yet such reliei must be consistent with tbe case made by tbe bill; for tbe court will not suffer a defendant to be taken by surprise, and permit a plaintiff to neglect and pass over tbe prayer he has made and take another decree, even though it be according to tbe case made by the bill.”
On page 381 the same author says:
“In order to entitle a plaintiff to a decree under a general prayer different from that specifically prayed, tbe allegations relied upon must not only be such as to afford a ground for tbe relief sought, but they must have been introduced into the bill for the purpose of establishing a claim for relief, not for the purpose of corroborating the plaintiff’s right to the specific relief prayed; otherwise the court would take the defendant by surprise, which is contrary to these principles.”
In Jones v. Jones, 3 Atk. 110, the bill was brought to set aside a lease for forgery, and by way of inducement it was alleged that there were fraudulent circumstances attending its execution. The complainant prayed to be relieved only as to the forgery. Lord Chancellor Hardwicke remarked that if the bill had been properly framed as to both points of relief, and had stated clearly, “first, the forgery, and then, if the lease was not forged, yet that it was fraudulent, there, though the plaintiff had not prevailed to set aside the deed for forgery, he might have proceeded on the point of the fraud.”
In Palk v. Lord Clinton, 12 Vesey, Jr., 48, where a bill was filed by a mortgagee, praying a sale under a trust to which it appeared he was ’entitled, he was not permitted, under the general prayer, to take a decree that the defendant might redeem or be foreclosed, although that was the relief which properly belonged to his case.
In Holt v. Rogers, 8 Pet. 420, 434, 8 L. Ed. 995, where the plaintiff had brought a bill for the specific performance of a contract for the sale of land on which he had made a payment, the court denied the specific performance, and, referring to the payment which had been made by the plaintiff, said:
“The bill. contains no alternative prayer for the return of £45, if specific performance should not be decreed. And under the circumstances we are of opinion that it ought not to be decreed under this bill upon the prayer for general relief, it not being the case specially made by the bill.”
A case in point is Kent v. Lake Superior Land Co., 144 U. S. 75, 12 Sup. Ct. 650, 36 L. Ed. 352. The complainant, a holder of bonds issued under a mortgage, charged a fraudulent conspiracy among the other bondholders, whereby they had fraudulently obtained pos
Of similar import are Pennock v. Ela, 41 N. H. 189; Dormer v. Fortescue, 3 Atk. 134, 142; Casady v, Woodbury County, 13 Iowa, 113, 120; Hayward v. National Bank, 96 U. S. 611, 614, 24 L. Ed. 855; Texas v. Hardenberg, 10 Wall. 68, 19 L. Ed. 839; Hobson v. McArthur, 16 Pet. 182, 195, 10 L. Ed. 930; English v. Foxall, 2 Pet. 595, 610, 7 L. Ed. 531.
The case of Sage v. Central Railway Co., 99 U. S. 334, 25 L. Ed. 394, is not in conflict with the decisions above quoted. -In that case the mortgage of a railroad company gave to the trustee of the bondholders the option of either strict foreclosure or a sale at public auction. The bill prayed for a strict foreclosure, but under the prayer for general relief the complainants were permitted to obtain a decree directing a foreclosure sale. The Supreme Court approved this substitution of remedies. But the relief so obtained was clearly in accordance with the case made by the bill, for the bill had set forth the terms of the mortgage, showing that the complainant was entitled to the relief which was afforded, and averred affirmatively all the facts upon which that relief was decreed; in other words, it alleged facts showing that the complainant was entitled to' elect between two remedies. The trustee had in the bill expressed his choice, but there was no' ground for withholding the alternative relief when he applied therefor under the prayer for general relief.
Applying these settled principles to the case which is under consideration, we find that the whole frame and structure of the appellant’s bill is one for strict foreclosure. The opinion of the majority of the court find reason for the relief which it is now proposed shall be accorded the appellant, in saying that “the bill alleges, among other things, in substance, that the interest of the defendant Dexter Horton & Co., Bankers, in the mortgaged property, was not, for the reasons therein set forth, bound by the foreclosure judgment.” It is true that the bill alleges that the equity of redemption of Dexter Horton & Co. has not been barred by the foreclosure decree and sale, otherwise the appellant would not be in court. But there is nowhere in the bill an allegation or an admission that the rights of Dexter Horton & Co. were not adjudicated by the decree, or that its title in the land was not sold thereunder. On the other hand, the bill sets up the proceedings in the former foreclosure suit, and avers that the rights of Dexter Horton & Co. were determined by the decree therein, and that as to it the mortgage has been foreclosed. It asserts the validity of the decree and the validity of the foreclosure sale made thereunder, and it alleges that Dexter Horton