Raun v. Reynolds

California Supreme Court Jul 1, 1860 No. Nos. 2754, 2742Published

Before: Baldwin

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Holding. Upon the reversal of a foreclosure sale, the court has the equitable power to order the restitution of both the property and the rents and profits received by the mortgagee during their possession, and may resolve these accounting matters within the original suit rather than requiring a separate action.

Issues

Whether a party whose property was improperly sold under a foreclosure decree is entitled to restitution of rents and profits received by the purchaser during their possession.
Whether a court may order an accounting of rents and profits by motion within the existing suit or must require a separate legal action.
Whether a mortgagee in possession following an invalid sale must account for rents and profits as a credit against the mortgage debt.

Disposition. affirmed

Quotations verified verbatim against the opinion

“the defendants, whose property was improperly sold, were entitled to be restored to the position which they occupied before, or would have occupied but for such sale”

“we do not feel inclined unnecessarily to complicate and prolong this protracted controversy by affirming a right, and then doing justice piecemeal by sending the petitioners to another forum for the determination of this matter of account”

“The Court of Equity having jurisdiction of the mortgage suits should close the whole controversy, by settling and adjusting the accounts of these parties.”

Synopsis

Undeb a decree of foreclosure and sale, H. had come into possession of the mortgaged premises. Subsequently, on appeal to the Supreme Court, the decree was reversed, with directions that the sale under it be set aside, that defendants in the suit be restored to the property sold, and that the Court below should proceed to dispose of the case in pursuance of the principles of the opinion. The Court below, on filing the remittitur, entered a decree setting aside said sale, restoring defendants to possession, directing plaintiff to deliver up possession ; awarding a writ of restitution, in case of refusal, vacating the credit given on the decree of foreclosure—the plaintiff having bought in the property—and ordering an account of the rents and profits of the premises while in the hands of H., with an injunction pending the account. Hdd, that the order by the Court below for an account of the rents and profits, was right; that the general direction by this Court to the Court below, to proceed in pursuance of the principles of the opinion of this Court, was mere formality, neither giving authority, nor limiting the power of the Court below; that without such directions that Court could act only in subordination to the principles declared by this Court; that the question of rents and profits being left open by this Court, indicated that it was to be passed on by the Court below; that there is no distinction as to the right to have the corpus of the property restored on reversal of the decree under which it was sold, and the restoring of the rents and profits received from its use; and that the restitution of both is essential to making the party whole.

Where a party gets into possession of property, as a water ditch, under a Sheriff’s sale on foreclosure of a mortgage, and the judgment on which such sale was made is afterwards reversed by the Supreme Court, and restitution of the property is ordered, the Court below may, on motion, order such party in possession to account, before a referee, for the rents and profits received by him— that is, for the sales of water, etc. The right to such rents and profits being clear, the Court will not, on a mere question of remedy, compel a direct suit for them.

The common law method, in such cases, of an inquisition of damages by a Sheriff’s jury on the writ of restitution, would be impracticable, in estimating the rents and profits of a water ditch—involving, as the inquiry would, the receipts from sales of water every day for a long period, as also payments, expenses, etc. This is in its nature an equity proceeding—at least, to be disposed of according to equity practice.

The party so in possession, under Sheriff’s sale, is in no better position than if he entered directly under the mortgage, to enforce which the sale was made; and having received the proceeds of the property by way of sales of water, and appropriated the same to his own use, he cannot hold the property bound by the mortgage, and at the same time refuse to give the mortgagor the benefit of the amounts so received. In equity he is not a purchaser, but a mortgagor; and although the sale was not set aside until after the receipt of the rents and profits, still when it was set aside, the order took effect upon the relations of the parties as they existed before the sale—the mortgagors and mortgagee have the same rights they had before.

Baldwin, J. delivered the opinion of the Court Field, C. J. and Cope, J. concurring.

The history of this case and most of the facts upon which the questions rest, appear in the opinion rendered at the January Term, 1860. After the case had been returned to the District Court, the proceedings were taken which are the subjects of present review.

[468]The original opinion and judgment of this Court affirmed the right of Kirk and Reynolds to claim that the sale made under the decree of foreclosure of the mortgage executed to Raun should be held for naught, and that they be restored to the property sold. The question as to rents and profits received by Harris between the sale and the reversal, was not passed upon. The general direction upon the reversal of the judgment was, that the District Court should proceed to dispose of the case remitted, in pursuance of the principles of the opinion. The District Court, upon the filing of the remittitur, proceeded to enter a decree, setting aside and annulling the sale which had been made, restoring the defendants to the position, lights, franchises and estates of which they had been deprived, directing the plaintiff to deliver up possession to the defendants, awarding a writ of restitution upon refusal, vacating the credit upon the former decree of foreclosure, and appointing a referee to take an account of the rents and profits of the property while in the hands of Harris.

The directions of this decree, except the last one, are in express accordance with the decision of this Court. In respect to this last direction, which involves the question of the rents and profits, no express decision was made here; and the question was left open, not because we felt any serious doubt upon it, but because the amount involved was considerable, and the point had not been fully argued.

The general direction to the lower Court, to proceed in pursuance of the principles announced in the opinion, is a mere formality, which, of itself, neither gives authority nor limits the power of the inferior tribunal. Without such direction, the principles being adjudged, the same duty would devolve upon that Court. It could legally act in no other manner than in subordination to the principles declared by the stiperior tribunal. But the order in this case was for a decree by the Court below upon the facts as they appeared here; but this order did not prevent that Court from taking such a course of proceedings as would give full effect to the principles of the opinion of this Court; and the fact that this question as to the rents and profits was left open, sufficiently indicated that it was to be passed upon by the Court below, as that Court might consider accordant with the principles decided here. The District Judge has, accordingly, acted in the matter ; and the propriety of his action is now the matter before us.

Raun v. Reynolds

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