Marina v. Connolly

California Supreme Court Jul 1, 1889 No. No. 11888Published

Before: Works

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Holding. The court held that a foreclosure agreement between a mortgagor, mortgagee, and a purchaser, which resulted in the property being sold for its full value, did not constitute a fraud upon subsequent lien-holders. Consequently, the trial court erred in granting a new trial because the transaction was legally valid and caused no injury to the respondents.

Issues

Whether a foreclosure agreement between a mortgagor, mortgagee, and purchaser, intended to clear title, constitutes a fraud upon subsequent lien-holders.
Whether the trial court erred in granting a new trial when the findings of fact were immaterial to the legal conclusion that the transaction was valid.

Disposition. reversed

Quotations verified verbatim against the opinion

“We are unable to see any wrong in this transaction on the part of the appellant.”

“As the property sold for its full value, this was all subsequent lien-holders had a right to ask.”

“Taking this view of the transaction, we are clear that the court below was right in its first conclusion, and that it was error to grant a new trial.”

Synopsis

Mortgage — Sale oe Part of Mortgaged Property—Foreclosure— Agreement for Bid — Fraud — Rights of Subsequent Lien-holder. — When one of several tracts mortgaged is sold by consent of the mortgagor, mortgagee, and pledgee of the mortgage, at its full market yalue, but for a price much less than the amount of the mortgage, and is deeded by the mortgagor, an agreement with the purchaser that the mortgage shall be foreclosed, and a title taken under foreclosure sale of puch tract for his benefit, that an increase of bid shall be made for his benefit upon that tract in the name of the plaintiff, and the certificate of purchase assigned to him by plaintiff, if obtained by such hid, and that If third parties obtain the tract at a higher price he should receive the amount of the agreed bid and quitclaim to the mortgagor, constitutes no fraud of which a subsequent judgment creditor who is made a party to the foreclosure can complain. The provision for an increased bid operates for his benefit in relieving the rest of the mortgaged property from the mortgage lien pro tanto.

Id, — Recital in Deed of Mortgagor—Agreement for Foreclosure — Subsequent Liens. — The fact that a conveyance by a mortgagor of one of several tracts mortgaged recites that the title is taken by the purchaser subject to encumbrances does not preclude an arrangement of the purchaser with the mortgagee and his assignee by which the purchaser is also to take a title under foreclosure of the mortgage to the exclusion of other subsequent liens. The fact that the mortgagor was no party to such agreement is not a matter of which subsequent lien-holders can complain. If the property is sold for its full value, this is all subsequent lien-holders-can ask.

Appeal — Review op Order Granting New Trial—Questions op Law. — The rule that every intendment is in favor of the order of the eourt below granting a new trial is not applicable, where the question presented is purely one of law, and this court is satisfied that an error has been committed.

Works, J. — One Madison H. Turrill, being the owner-of the real estate in controversy in this action, together with several other tracts of land, executed a mortgage thereon to one Edward F. Hall for the sum of $96,725. Subsequently the defendants in this action brought their suit against Turrill, and sued out an attachment upon all of said property, and recovered a judgment for the sum of $10,145.82. An appeal was taken from said judgment to this court, and while the same was pending on appeal the said Hall assigned said mortgage to one Robert Sherwood, as collateral security for a debt due from Hall to Sherwood. The said mortgagor, Turrill, and his mortgagee, Hall, and the assignee of said mortgage, Sherwood, procured the plaintiff in this action to become the purchaser of the property in controversy here for the sum of $37,500, which, by agreement between the parties, was to be paid to Sherwood, the then holder of the mortgage. In consideration of his agreement to purchase the property, Turrill agreed to and did convey to him the real estate, and Hall and Sherwood entered into a written agreement with the plaintiff, in which the fact of encumbrances and the purchase by the plaintiff were recited, and in which it was agreed as follows: —

“And whereas the said party of the third part [the [519]plaintiff] has, by direction of the said Madison H. Turrill, paid the whole of said purchase-money to the said party of the second part [Sherwood] to be applied upon the indebtedness of the said party of the first part [Hall] to him, and to the expenses of said foreclosure proceedings, —

“Now, the said parties of the first and second parts, for and in consideration of the premises, and of the sum of one dollar, lawful money, to each of them in hand paid by the said party of the third part, the receipt whereof is hereby acknowledged, have covenanted, promised, and agreed, and by these presents do promise, covenant, and agree, for themselves, their heirs, executors, and administrators, to and with the said party of the third part, his heirs, executors and administrators, and assigns, as follows, to wit: —

“1. That they will commence immediately to cause the said mortgage of the said party of the first part to be foreclosed, and the said mortgaged premises to be sold by the sheriff without unnecessary delay, and that they, or one of them, will bid at such sale upon the said lot of land and premises so conveyed to the party of the third part, the just and full sum of forty-five thousand dollars.

Marina v. Connolly

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