Reynolds v. Harris

Baldwin, J. delivered the opinion of the Court—Cope, J. and Field, C. J. concurring. This was a petition in the District Court for El Dorado County. The facts upon which the decision rests are as follows : In January, 1857, Edward T. Raun, being the owner of two undivided fifths of the South Fork Canal, situated in El Dorado County, sold and conveyed the same by deed to Walter W. Reynolds, for the agreed price of thirty-two thousand dollars, for which sum Reynolds gave Raun his note, payable in six months. To secure the payment of this note, Reynolds executed to Raun a mortgage upon three undivided fifths of said canal—the same being the two-fifths sold by Raun, and an additional fifth, of which Reynolds was the owner at the time of this transaction. — 675 — The note not being paid at its maturity, Raun brought his action to foreclose. Before the time for answering to this action had expired, Reynolds obtained from Raun a stay of proceedings for sixty days, in consideration of which Reynolds gave Raun additional security by procuring John Kirk to join with him in executing a mortgage to Raun of their three-fifths of the Gold Hill Canal, situated in El Dorado County, and connected with the said South Fork Canal by Hangtown Creek, through which it was mainly supplied with water by the last mentioned canal, the owners of both canals being the same, with the exception of Kirk. Reynolds and Kirk owned the three-fifths of the Gold Hill Canal jointly. For the same consideration—to-wit: a stay of proceedings for sixty days—Reynolds procured Kirk and wife to execute to Raun a mortgage upon their homestead in the city of Placerville. At the expiration of the sixty days, Raun filed a supplemental complaint, making Kirk and his wife parties, and including the two mortgages last mentioned, and asking a foreclosure of all three of the mortgages, and a sale of all the mortgaged property. This supplemental complaint was duly served upon Reynolds, Kirk, and Kirk’s wife; all three of the defendants made default. The note sued on drew monthly compound interest, and the Court rendered a judgment for the amount of the principal and interest, at the date of the judgment, and directed that the judgment should draw the same rate of interest which the note drew, to wit: monthly compound interest. The Court directed the Sheriff, in the decree, to first offer for sale the property covered by the first mortgage, to wit: the South Fork Canal property, being the separate property of the defendant,Reynolds; but to receive no bid less than the amount of the judgment and costs; and if no bid was made sufficient to satisfy the judgment and costs, then to offer for sale both the canals together; and if they failed to sell for enough to satisfy the judgment, then to proceed to sell the homestead property. This decree was rendered on the 11th day of February, a. d. 1858. On the 8th day of March, a. n. 1858, the property was sold by the Sheriff, in pursuance of the directions contained in the decree. The South Fork Canal property was first offered for sale— — 676 — no bid being made sufficient to satisfy the judgment—the South Forth Canal property and the Gold Hill Canal property were offered for sale together, and were sold to Raun, he being the highest bidder, for the sum of thirty thousand dollars. The homestead property was then sold to Raun for the sum of two thousand dollars, leaving a part of the judgment still unsatisfied. On the 30th day of March, a. d. 1858, Raun sold and assigned his judgment, and all his interests and rights as purchaser, to the Respondent, L. B. Harris, for the sum of thirty-six thousand dollars. At the time Harris purchased, no steps had been taken by Reynolds and Kirk, or either of them, to review the judgment or decree, by appeal, or otherwise—nor any steps to stay or set aside the sale. Subsequent to Harris’ purchase, to-wit: on the 5th and 12th of April, A. n. 1858, Reynolds and Kirk brought separate actions in the nature of bills of review, against Raun, each concluding with a prayer to set aside the sale. To each of these actions Raun demurred; his demurrers were sustained in the District Court, and Reynolds and Kirk appealed to this Court. On the 26th day of June, a. d. 1858, Reynolds and Kirk appealed from the judgment and decree in Raun v. Reynolds, Kirk & Wife, of the 11th day of February, a. d. 1858. At the July Term of this Court, 1858, all three of these appeals came up for hearing. The two first, to-wit: the bills of review, were dismissed by this Court, upon the ground that a party cannot prosecute a bill of review and an appeal at the same time. In the other, this Court held that the judgment, so far as it drew compound interest, was erroneous, and directed the same to be modified accordingly, and that the decree, so far as it directed the two canals to be sold together, was erroneous, and reversed the same in that particular, but in all other respects affirmed the judgment and decree of the Court below. On the - day of April, 1858, Harris brought an action against Reynolds, to obtain a receiver of the rents and profits pending the time for redemption. In this action the District Court compelled Reynolds to pay the proceeds of the canals into Court during the time allowed for redemption; and after the time for redemption had expired and Harris had obtained • his deed, the Court rendered final judgment in favor of Harris, — 677 — and directed that the money in Court be paid over to him. From this judgment Eeynolds appealed to this Court, and this Court, at its April term, 1859, affirmed the judgment of the Court below. On the 18th day of September, 1858, the time for redemption having expired, and no redemption having been made, and a deed having been executed to Harris, an application, upon due notice, was made by him to the Court below, for a writ of assistance, which was granted, and under it Harris was put in possession, and has since been, and still is, in possession of the canals. As against the homestead Harris has not yet enforced his writ. Subsequently to the decision of this Court, declaring the decree of the sale to be erroneous, Eeynolds and Kirk made a motion in this Court to have the sale set aside, and to be restored to the possession of the property under the 8th Section of the “Act concerning the Courts of Justice of this State and Judicial Officers,” passed. May 19 th, 1853. This motion was not entertained by this Court, for the reason, that the motion was made too late, and should have been made at the hearing of the case. Subsequently, to-wit: on the 17th day of March, 1859, the same motion was made in the Court below and denied. From the order denying this motion the present appeal has been taken. Pending these various proceedings Walter W. Eeynolds died, and his administrator, James W. Eeynolds, has been substituted as a party in his place. The questions involved in this record have been argued with ability and learning, both at the bar and in the briefs of the counsel. 1. It is insisted,.on the part of the Eespondent, that the defendant, Harris, the party really interested, was not served with process or other notice; but the answer is, that he appealed and contested with the plaintiff in the motion, and this is sufficient to bind him, whether he had or had not notice. 2. It is also urged that there was no power in the Court below to grant the relief prayed, but that the power is by statute given to the Supreme Court alone to award restitution. But neither — 678 — the language nor the reason of the provision cited gives the exclusive power to this Court so to decree or order. It would be unreasonable so to hold, for the possession may not be changed at the time of the action of this Court, and the universal rule is that a power given to one Court to do an act is not in exclusion of the Court before possessing the power from acting in respect to the particular matter. 3. It is again said that the proper form of proceeding is by action in the usual form and not by motion, but the authorities seem to be the other way, and we- see no reason, why, in this class of cases, there should be an exception to the usual and recognized authority of the Courts to prevent or to remedy an injurious and illegal execution of the process of its officers. (See the following cases in which this authority of the Court has been upheld; 3 Johns. Ch. 474; 5 Id. 29; Mobile Cotton Press v. Moore & Magee, 9 Port. 679; 2 Yeates, 516; 1 Serg. & R. 2 Wend. 260; 7 Id. 88; 7 Gill & J. 512; 7 J. J. Marsh. 625.) 4. It is, moreover, argued, that this motion comes too late. We see no statute of limitations in such instances, and the Appellants have shown that, in consequence of various obstacles not within their control, there was no unreasonable delay in making the motion. Having disposed of these technical objections, we are brought' to the merits of the controversy. There is no force in the point made by the Appellants that the judgment reversed by this Court is void on its face, because the Court rendering it had no jurisdiction. The Court below had jurisdiction of the question and the parties, and whether its judgment was legal or illegal, proper or improper, it was valid and binding until reversed or set aside. But it has been seen that this judgment was reversed as to the mode of sale of the mortgaged premises. Before this reversal the premises had been sold. At that sale the plaintiff, Raun, became the purchaser. A short time afterward he sold the purchased interest and assigned the judgment to Harris. And now, the real question is, can this purchase stand, or should it be set aside ? The ground of this motion is ,not that the sale was irregular or fraudulent. The ground is that the sale should not have been decreed on the prescribed terms and in the prescribed — 679 — mode. We take the decision of this Court in Raun v. Reynolds, (11 Cal.) as conclusive of the law upon this question. We see no difference between the total reversal of the judgment in that case, so far as this question is concerned, and a partial reversal, for the effect of the reversal was to declare that this sale, as ordered by the decree of the Court below, was improperly so ordered, and that the sale should have been made by the law of the land in a different manner in substance and in fact. Two questions then arise: 1. What is the effect of the reversal of a judgment upon a purchase made in pursuance of its terms by the plaintiff in the judgment; and— 2. Does Harris, the assignee of the judgment and of the purchaser’s rights in the purchase and the purchased property, stand in any different position ? It is hard to see why a man buying in another’s property sold under a judgment rendered according to the forms of law, but against the principles of law, should obtain any advantage from his own judgment thus improperly obtained. It is true that as the error was the .error of the Judge, he should not lose by it; but it is not so clear that he should make a profit by it. It is equally clear that the defendant should not suffer by any such improper judgment, if it can be avoided in consistency with a due respect to the rights of others. It would appear to be exact equity to set aside acts which have been illegally done, if this can be without injury to third persons; so that all parties whom the proceedings affect stand in the same position after as before the acts so done. How could Raun insist that his judgment, rendered against law, should be enforced, when the error can be corrected without the slightest injury to him, and when he is reinstated to all the rights which he had before its rendition ? Accordingly, the principle has been declared in cases innumerable, that when a judgment is reversed, the defendant is to be restored to all things which he has lost by the judgment. (See Jones v. Harker, 5 Mass. 264; Cummings v. Noyes, 10 Mass. 433.) In Jackson v. Cadwell, (1 Cowen, 644,) the Court say, the same reasons of policy which secure to an innocent purchaser a valid title do not exist when the judgment creditor becomes purchaser, and it would be the bight of injustice to allow the party guilty — 680 — of the irregularity to take advantage of it. It is true, that in that case the sale was set aside for errors in conducting it, but the principle would apply to an erroneous judgment, procured by the instrumentality of the plaintiff or his Attorney. So in the case of The Bank of the United States v. The Bank of Washington, (6 Pet. 19,) it is said: “ The reversal of the judgment gives a new right or cause of action against the parties to the judgment, and creates a legal obligation on their part to restore what the other party has lost by reason of the erroneous judgment, and as between the parties to the judgment there is all the privity necessary to sustain and enforce such right.” Authorities might be multiplied indefinitely, to the same effect, but it is unnecessary. The current of authority, broken by only a case or two, goes directly to the point, that a party obtaining through a judgment, before reversal, any advantage or benefit, must restore what he got to the other party, after the reversal. A different rule, however, obtains as to a stranger. An innocent purchaser, without notice, is held not to be within the rule, but is protected, because otherwise, as the old authorities say, he would lose both the property he bought and the price. Another reason is, that a contrary rule would discourage bidding at judicial sales. The real question now arises: Is Harris within this protection ? He claims it, because he is the assignee of this judgment, and of the Sheriff’s certificate. He must claim to be a bona fide purchaser without notice. But to constitute this character, he must show that he has paid the purchase money. (See the numerous cases cited in the Appellant’s brief,) More than this, he must show that he is the purchaser of the legal title, not of a mere equity; and a purchaser at execution sale, until he receives the Sheriff’s deed, is not clothed with the legal title, but has only a lien or equity. (9 Cal. 296; Id. 103.) It is urged that, therefore, Raun was only the holder of an equity, and that Harris, by the assignment, cannot claim any higher rights, under these circumstances, than his assignor; and that when Harris bought of Raun he took Raun’s claim to a title subject to the defendant’s right of appeal and reversal. And it is argued that if this were not so, it would follow that a plaintiff might purchase during, or before, an appeal, and afterward trans — 681 — mit to an assignee a title to the premises, which would defeat the rights of the Appellant if he succeeded in the appeal. For is the case altered, even if the answer of the Respondents be well founded, that this certificate, or the purchase it represents, is not a mere equity in the sense of the authorities, but is an inchoate legal title, which, after the lapse of the period of redemption, ripens into a full and complete legal estate in the premises sold and purchased. It is not necessary to pass on this question; for Harris was as well the assignee of this certificate as of the judgment. He occupied the position of Eaun fully and entirely. He stood precisely as Eaun stood, with all his rights, as well in the judgment and debt as in the purchase. The reason of the rule which protects the purchase of a stranger, as we have intimated, is, that he might lose his money if not protected; but here there is no danger of loss; for the judgment is restored to its full force, unaffected by any payment or credit made on it by the sale or proceeds of sale. By the force of this assignment, as he says himself, he became entitled to all the rights; in fact, he represented fully the entire claim of Eaun. The primary right of Kirk and Reynolds, as we have shown, was to be reinstated after the reversal of the judgment, to their former condition. The only obstacle to this in equity, was the consequence that an innocent third party might suffer; but here this obstacle does not exist. Full justice may be done to all parties by giving all the rights for which they contracted, and to which they are in law and equity entitled. Again, the assignee of the certificate does not come within the protection of the rule in favor of the purchaser at the Sheriff’s sale—the purchaser being a stranger to the execution. The policy of the rule was to encourage bidding at judicial sales, where parties might have little or no opportunity to inquire into the regularity of the anterior , proceedings. But, as we have said, this rule does not apply, at least to the same extent, to the plaintiff in execution; nor does it apply to his assignee. The grantee is charged with notice of the deeds and documents from which he deraigns his title. When be purchases from the plaintiff in the execution, he is presumed to know the course of the proceedings and state of the record from which the title of his grantor proceeded, and he is presumed to know, too, that the right of the defendant is to take an appeal — 682 — within the statutory period, and also the consequences of the successful prosecution of this right; and he must he supposed to purchase with reference to these things. But without affirming, for it is not necessary to do so in this case, that in every case the grantee of the plaintiff in the execution stands in this position, we think it clear that when the double character of judgment creditor and assignee of the certificate is in the same person, so that the setting aside of a sale would work no real hardship, but the parties can stand upon their original equities, then a Court of Chancery will set aside the sale, for that would be giving effect to the defendant’s right to be reinstated to the position, in which, by law, he was entitled to stand, without injustice or injury to any one. Or to state the proposition in a different form: In this case, Kirk and Reynolds were entitled to have their property sold in a particular way; of this right they were unjustly deprived, to their injury; but they can now be restored to their original right, and this without loss or injury to any one; this being so, we can conceive of no principle governing Courts of Justice which denies their claim to such obvious equity. Harris stands substantially in the place of Raun, for on setting aside this sale, he will be entitled to enforce the judgment, as modified by this Court, for the full amount of principal, and interest, and costs, and the credit given on the former sale will be vacated.' He thus is made whole, while no injustice is done to the defendants in the judgment. Whether Harris, after going into possession, and before the setting aside of the sale, is accountable for rents and profits, is a question which has not been fully argued, and which is not necessary to be now determined. Decree reversed and cause remanded for a judgment in pursuance of the principles of this opinion.