Boggs v. Fowler & Hargrave

California Supreme Court Jul 1, 1860Published

Before: Field

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Holding. A purchaser at a foreclosure sale cannot maintain an independent action to recover money paid under a mistake of law regarding the validity of a decree, but must instead seek relief through the original foreclosure proceedings.

Issues

Whether a foreclosure decree is void when the mortgagor's grantee is not made a party to the suit.
Whether a purchaser at a foreclosure sale can recover money paid under a mistake of law in an independent action.
Whether the doctrine of caveat emptor bars relief for a purchaser when a foreclosure decree is invalid due to lack of jurisdiction.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“The Court never acquired jurisdiction over the estate which, by its decree, it undertook to condemn to sale.”

“The plaintiff did not attach any importance to the existence of the deed, and his bid was made upon a mistake of law as to the effect of the decree; and the real question presented is, whether for money paid under these circumstances the present action will lie. We are clear that it will not.”

“the plaintiff must seek relief from the consequences of the invalidity of the decree, by proceedings in the foreclosure suit, and cannot maintain the present action.”

Synopsis

A decree in a foreclosure suit for the sale of the premises, where the mortgagor had transferred his estate in the premises previous to the institution of the suit, and his grantee was not made a party, is void so far as it orders a sale.

A foreclosure suit, under our system, is only a proceeding for the legal determination of the existence of the lien the ascertainment of its extent, and the subjection to sale of the estate pledged for its satisfaction. Upon the validity and extent of that lien, the owner of the estate, whether mortgagor or his grantee, has a right to be heard, and no valid decree for the sale of the estate can pass until this right has been afforded to him.

Goodenow v. Ewer (ante) cited.

The doctrine of caveat emptor applies only to sales made upon valid judgments ; and is usually invoked with reference to sales upon execution issued against the general property of a judgment debtor. In these latter cases, a defect of title is no ground for interference with the sale, or a refusal to pay the price bid. The purchaser takes upon himself all the risks as to the title, and bids with full knowledge that in any event he only acquires such interest as the debtor possessed at the date of the levy, or the lien of the judgment; and that he may possibly acquire nothing.

A somewhat different rule prevails in cases where particular property is the subject of sale, by a specific adjudication; as where the interest of A in a certain tract is decreed to be sold. To the validity of a decree of this character, the presence of A is essential, and when present, the decree binds him and is effectual, by the sale it orders, to transfer his estate. A valid decree in a mortgage case operates upon such interest as the mortgagor possessed in the property at the execution of the mortgage. That interest may not constitute a valid title; it may not, in fact, be of any value; and the purchaser takes that risk. To that extent the doctrine of caveat emptor applies even in those cases, and in all cases of adjudication upon specific interests, but no further. The interest specifically subject to sale, whatever it may be worth, a purchaser is entitled to receive; it is for that interest he makes his bid and pays his money.'

A purchaser under a decree of this character may petition to be released from his purchase, or that the sale be set aside, where it has been subsequently discovered that the Court rendering the decree had not acquired jurisdiction of the subject matter; or of personshaving interests in the property; or for other reasons that the estate directed to be sold would not pass.

Where a purchaser at a sale under a decree, in a foreclosure suit, directing the sale of the premises—which decree was void, because the grantee of the mortgagor was not made party—brought suit against the mortgagees to recover back the money paid them on his bid : Held, that the action does not lie—the purchaser being aware, at the time of his bid, that the mortgagor had sold the premises before the institution of the foreclosure suit, and there being no fraud.

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

This is an action to recover the sum of $5,395, with interest from March, 1859, and arises under the following circumstances. In September, 1857, one Harbin executed a mortgage to the defendants, upon certain premises situated within the county of Napa, to secure the payment of his promissory note to them, with interest, and afterwards, in February, 1858, sold and conveyed the premises to one Bristol. The note not being paid at maturity, the defendants, in July following, instituted proceedings for the foreclosure of the mortgage and sale of the premises, making the mortgagor the sole party defendant. - Service of the summons was made by publication, and upon his default upon such service, a personal judgment against the mortgagor was entered for the amount due, with the usual decree in such cases, directing a sale of the premises by the Sheriff, the execution of a conveyance to the purchaser or purchasers, the application of the proceeds of the sale to the payment of the amount adjudged due, and expenses, and a deposit of any [563]surplus or an execution for any deficiency remaining. Upon the decree, the premises were sold in two parcels, and the plaintiff became the purchaser of both, for the sum of $5,395. This sum he paid directly to the defendants, and passed their receipt to the Sheriff, who made the usual certificates of sale, and returned the order of sale satisfied. It is for the money thus paid that the present action is brought, and the right to recover is based upon the alleged ground that the decree was void, in directing a sale of the premises, the title being at the time in Bristol, a stranger to the suit in which the decree was rendered. The plaintiff had judgment, and the defendants appeal, controverting the position that the decree was void; and contending that, if void for the reason assigned, the plaintiff is without remedy, as the doctrine of caveat emptor was applicable to the sale, or that his remedy must be by proceeding for a resale of the premises.

In a case recently decided—Goodenow v. Ewer (ante, 461)—we had occasion to consider the validity and effect of a decree in a foreclosure suit, where the mortgagor had transferred his estate in the premises previous to the institution of the suit, and his grantee was not made a party. In that case, the mortgage was upon an undivided half of certain premises; the mortgagor had disposed of an undivided one-sixth of the same, and in the suit his grantee was not brought before the Court; and we held that the decree did not operate upon the interest transferred; but, as to that interest, was ineffectual for any purpose. This conclusion follows, necessarily, from the nature of the contract of mortgage. In this State, as we have held in numerous instances, a mortgage is not a conveyance passing any estate in the land, but a mere security, operating upon the premises as a lien or incumbrance only. Here the mortgagor continues the owner of the premises after the execution of the mortgage equally as before, and may sell and convey them in any of the ordinary forms prescribed for the sale and transfer of real property. Here, what is termed a foreclosure suit is only a proceeding for the legal determination of the existence of the lien, the ascertainment of its extent, and the subjection to sale of the estate pledged for its satisfaction. Upon the validity and extent of that lien the owner of the estate, whether mortgagor or his grantee, has a right to be heard, and no valid decree for the sale of the estate can .pass until this right has been afforded to him.

Boggs v. Fowler & Hargrave

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