Garretson Investment Co. v. Arndt , 144 Cal. 64 ( 1904 )

This is an appeal by the defendants from a judgment entered against them upon default after demurrer overruled. The suit was brought to foreclose a mortgage made by the defendants to secure the payment of the defendant H.R. Arndt's note to the plaintiff for the sum of six thousand dollars, etc. The judgment recites the previous appointment of a receiver in the case, and that his account rendered subsequently to the default of the defendant shows a balance in his hands of $142.30, which, it is adjudged, should be allowed as a credit on the mortgage. It is further found, or rather in effect adjudged, that there is now due and owing to the plaintiff from the two defendants, after deducting the credit allowed, the sum of $7,526.76, together with three hundred dollars allowed as attorneys' fees and costs.

The points urged by appellant — or such as require consideration — are: That the judgment imposes on the defendant, Mrs. Arndt, who was not a party to the note, a personal liability for the debt, and that the appointment of the receiver ana the appropriation of the funds in his hands to the satisfaction of the mortgage debt was not warranted either by the allegations or by the prayer of the complaint.

As to the first of these objections there can be no doubt — in the event of the proceeds of the sale proving to be insufficient to satisfy the mortgage — that the plaintiff would be authorized by the judgment, as it stands, to enter a deficiency judgment against the defendant, Mrs. Arndt, who is not personally liable. (Code Civ. Proc., sec. 726.) Nor is it any answer to this objection for respondent to say that he may not, or even that he will not, avail himself of this power. The judgment should therefore be modified in this regard.

The other objection involves, in fact, two propositions: The one relating to the jurisdiction of the court to appoint a receiver, pending the suit; the other, to the appropriation of the money in his hands to the satisfaction of the debt. With regard to the former it is assumed in the argument of the appellants' counsel, that the order appointing a receiver was made on the complaint; in which, in fact, there is nothing to justify the appointment, unless it be a stipulation in the mortgage providing for the appointment of a receiver on ex parte application; and on this assumption it would be necessary to sustain the appellants' contention. (Baker v. Varney, 129 Cal. 564;¹Scott v. Hotchkiss, 115 Cal. 94.) But in support of the judgment, it may perhaps be presumed that the order for the receiver was not made upon the complaint, but afterwards on motion, and on affidavits showing the necessary facts to give jurisdiction to the court; and, accordingly (for the purposes of the decision), it will be so assumed. It does not follow, however, from this assumption, that the money in the hands of the receiver could be rightly applied to the satisfaction of the mortgage debt; and I am of the opinion, on the record before us, that it could not. For the title of the defendants to the rents and profits was in no way affected by the possession of the receiver (Von Roun v. Superior Court, 58 Cal. 360; Skip v.Harwood, 3 Atk. 564, 565; Beach on Receivers, secs. 3, 6); nor could they be divested of it otherwise than by a valid adjudication; and in this case there is neither any allegation (as there was in Scott v. Hotchkiss, 115 Cal. 94) nor prayer to justify such an adjudication. Nor, the defendants being in default, was it competent for the court so to adjudge. (Code Civ. Proc., sec. 580; Brooks v. Forington, 117 Cal. 219;Foley v. Foley, 120 Cal. 42, 43;¹ Staacke v. Bell, 125 Cal. 312 et seq.) The case, it may be added (though it is hardly necessary), differs essentially from that of property taken under attachment; where the law itself provides that it shall be disposed of by the officer to satisfy the judgment (Code Civ. Proc., sec. 541); and where, consequently, no adjudication with regard to it is necessary. While in the case of the receiver there is no such provision; nor, indeed, is there any personal liability on the mortgagors, with regard to this or other property, until the exhaustion of "the primary fund out of which the mortgage debt must be paid." (Woodward v. Brown, 119 Cal. 291.²) The court, therefore, was not justified in granting this relief, or in otherwise disposing of this money in the hands of the receiver than by directing it to be paid over to the defendants; and the judgment should, therefore, be modified in this respect also.

We advise that the cause be remanded, with directions to the lower court to modify the judgment as indicated in this opinion, and that when thus modified the judgment shall stand affirmed.

Gray, C., concurred.

For the reasons given in the foregoing opinion the cause is remanded, with directions to the lower court to modify the judgment as indicated in this opinion; and that when thus modified the judgment shall stand affirmed.

McFarland, J., Henshaw, J., Lorigan, J.

¹ 79 Am. St. Rep. 140.

¹ 65 Am. St. Rep. 147.

² 63 Am. St. Rep. 108.