Heim v. Butin

California Supreme Court Apr 4, 1895 No. No. 15,798Published

Before: Belcher

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Holding. The court held that a complaint alleging a defendant breached an oral agreement to waive a deficiency judgment in exchange for the plaintiffs' forbearance from appearing or bidding at a foreclosure sale states a valid cause of action for equitable relief. The plaintiffs' reliance on the promise, resulting in the loss of their legal rights, constitutes sufficient consideration and actionable fraud.

Issues

Whether an oral agreement to waive a deficiency judgment in exchange for a party's forbearance in a foreclosure suit is supported by sufficient consideration.
Whether an agreement to refrain from bidding at a foreclosure sale is void as against public policy.
Whether a complaint alleging breach of such an agreement states a cause of action for equitable relief despite the absence of an allegation of initial fraudulent intent.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“if, as alleged., the plaintiffs, in reliance upon the defendant’s agreement, allowed their defaults to be entered and refrained from being present and bidding at the sale, thus surrendering their legal rights, a benefit was conferred”

“The agreement did not in any way alter the terms of the note or mortgage. It simply, as in Montgomery v. Gibbs, supra, obligated the defendant to limit his remedy to the property sold.”

“If, however, the allegations are true, the defendant’s failure to carry it out constituted an actionable fraud or wrong, which entitled the injured parties to relief.”

Synopsis

Mortgage Foreclosure—Agreement to Purchase—Deficiency Judgment.—Plaintiffs, having executed a note and mortgage to defendant, conveyed the mortgaged property to another, who assumed the payment of said note and mortgage, but he having defaulted thereon, defendant agreed with plaintiffs to purchase the land at the foreclosure sale for the full amount of his claim, and not to take a personal judgment against plaintiffs, and the latter, relying on such promise, allowed default to be entered, and refrained from attending the sale. Held, that there was a sufficient consideration for such agreement. Such agreement was not void as altering the terms of the note and mortgage. Nor was it void as an agreement to prevent bidding at the sale.1

Mortgage Foreclosure—Deficiency Judgment.—The Complaint, in a Suit to Enjoin the Enforcement of a deficiency judgment, obtained against plaintiffs in such foreclosure suit, alleged that plaintiffs, relying on defendant’s promise, failed to appear in the suit, or to be present at the sale, or make any bid thereat, though they were able to purchase the property and protect themselves. Held, that the complaint showed that plaintiffs were damaged by their reliance on defendant’s promise, they having a right to demand that the deficiency judgment be entered also against the owners of the property.

BELCHER, C. The plaintiffs brought this action to obtain a perpetual injunction restraining the enforcement of a deficiency judgment entered against them in a suit to foreclose a mortgage. The facts stated in the complaint are in substance as follows: On or about December 30, 1887, the plaintiffs, Ella M. Heim and Julius F. H. Heim, her husband, executed to the defendant their promissory note, bearing interest at the rate of six per cent per annum, payable monthly in advance, and, if not so paid, to become immediately due, at the option of the holder thereof. At the same time, to secure payment of the note, they executed to the defendant a mortgage upon certain real property in Sonoma county. Subsequently they conveyed the mortgaged property to other parties, upon the express condition that the grantees should assume the payment of the said note and mortgage. Thereafter, about September 1, 1891, the grantees having failed to pay the interest on the note, “and the said defendant herein having elected' and declared said note to be due and payable, defendant herein, being requested, by plaintiff Ella M. Heim to commence proceedings for the foreclosure of said mortgage, did agree with her that he would commence an action for such foreclosure, and, upon obtaining judgment in said cause and a decree of court directing the sale of said property to satisfy said judgment, he, this defendant, would at such sale purchase the same for the amount of such judgment obtained, including interest and costs at that time accrued ; and he, the said defendant, did expressly agree with the said plaintiff that no personal judgment in said action should ever be entered or docketed against plaintiffs, or against either of them.” On September 11, 1891, defendant commenced an action in the superior court of Sonoma county to foreclose his said mortgage; and such proceedings were had therein that on January 4, 1892, judgment, foreclosing the mortgage, and directing a sale of the mortgaged premises to satisfy the same, was duly given and made against the defendants therein (plaintiffs herein), for the sum of, $4,702.25, and $250 attorneys’ fees. ' Thereafter, on February 29, 1892, the mortgaged property ’was sold by the sheriff of the county under and by virtue of said judgment. “That these plaintiffs relied upon said promise and agreement of the said defendant, and, so relying and believing that said defendant would keep and perform the same, these plaintiffs, [21]and both of them, failed to appear or answer in said foreclosure suit though made parties thereto, and permitted their defaults to be entered therein; and thereafter, so relying and believing in said promise of defendant, they abstained from being present at said sale, or talcing any step whatsoever to obtain a purchaser for said property, so that their interests in said judgment might be protected and exonerated; and these plaintiffs, and both of them, furthermore did, by reason of their reliance upon said promise of defendant, refrain from making or causing to be made any bid at said sale, although at that time they were fully able to purchase said property for the amount of said judgment, and thereby to protect themselves against said judgment.” Notwithstanding his said promise, and in violation thereof, the defendant failed to purchase the property at said sale for the amount of said judgment, but instead thereof purchased the same for the sum of $4,200. From this sum were deducted the sheriff’s commissions and expenses in making the sale, leaving $4,195.95, which was credited upon the judgment; and thereafter, on the same day, in violation of his said agreement, the defendant caused a personal judgment to be docketed in said cause against these plaintiffs, and each of them, for the sum of $918.43, which personal judgment has since remained and still is in full force and effect against them. Defendant has refused to cancel said judgment so far as these plaintiffs are concerned, and now threatens to take out an execution against them, and to satisfy the same by the sale of other property belonging to them, to their great and irreparable detriment and harm. No demurrer to the complaint was interposed. Defendant answered, denying that he made the promise or agreement set out in the complaint, admitting that he caused a deficiency judgment for $918.43 to be docketed in the said action on February 29, 1892, and that the judgment so docketed has been and still is in full force and effect against the plaintiffs, but denying that the same was docketed in violation of any such promise or agreement as is alleged in the complaint, or in violation of any promise or agreement of defendant with plaintiffs, or either of them, or with anyone else. At the trial it was proved, without objection, that the plaintiff Ella M. Heim, purchased the mortgaged property from the defendant for the sum of $5,500, and that the terms of the purchase were $600 cash,

Heim v. Butin

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