Lee v. Brown

Opinion

RICHARDSON, J.

In this case we consider whether defendants in a foreclosure action have waived their right to appeal a trial court judgment ordering an execution sale of their homesteaded property by accepting the amount of their homestead exemption from the sales proceeds. We conclude that defendants have not waived their appeal right. .

In 1967 defendants recorded a valid declaration of homestead on their real property in Lake County. Thereafter plaintiff, having recovered-a judgment against defendants in the sum of $42,366.54, caused a writ of execution upon the judgment to be levied on the homesteaded property. Pursuant to Civil Code section 1245 et seq., plaintiff then had the property evaluated by three appraisers. Based on their reports, the trial court found that the value of the property was $93,096. The court determined further that the amount of valid liens and encumbrances on the property was $26,486.17, and that the value of defendants’ homestead exemption was $15,000. Concluding on the basis of these findings that the value of the property exceeded the amount of the liens and homestead exemption, the court ordered that the property be sold under execution.

Defendants appealed but, because they were unable to post the appropriate undertaking pending appeal, they could not prevent the execution sale which occurred on January 27, 1975. At the sale plaintiff, the only bidder, purchased the property for $84,000. From the proceeds and pursuant to Civil Code section 1256 the sheriff tendered defendants the amount of their homestead exemption, which amount they accepted.

Before it could be heard plaintiff moved for dismissal of the appeal on the ground that, having accepted its fruits, defendants were estopped from seeking appellate review of the judgment. We now consider this motion.

At stake are the concurrent preferred rights of appeal and of homestead. We stated in Slawinski v. Mocettini (1965) 63 Cal.2d 70 [45 Cal.Rptr. 15, 403 P.2d 143]: “It is a well established policy that, since the right of appeal is remedial in character, our law favors hearings on the merits when such can be accomplished without doing violence to applicable rules. Accordingly in doubtful cases the right to appeal should be granted.” (Id., at p. 72; see also Cal. Rules of Court, rule 53; In re Morrow (1970) 9 Cal.App.3d 39, 45 [88 Cal.Rptr. 142]; Desherow v. Rhodes (1969) 1 Cal.App.3d 733, 745 [82 Cal.Rptr. 138], hg. den.)

Similarly, the law favors homesteads. They are constitutionally authorized (Cal. Const., art. XVII, § 1), statutorily enacted (Civ. Code, § 1240, and liberally protected. (Thorsby v. Babcock (1950) 36 Cal.2d 202, at p. 204 [222 P.2d 863]; Estate of Kachigian (1942) 20 Cal.2d 787, 791 [128 P.2d 865]; Schoenfeld v. Norberg (1970) 11 Cal.App.3d 755, 764 [90 Cal.Rptr. 47].) Our duty is to harmonize, as far as possible, the foregoing important rights, preserving the rights of appeal and homestead, while protecting the legitimate interests of the creditor.

Plaintiff’s motion has the support of a decision of this court, Turner v. Markham (1907) 152 Cal. 246 [92 P. 485], (See also Pickens v. Coffey (1933) 136 Cal.App. 105 [27 P.2d 914].) In Turner we held that by accepting the proceeds of a homestead exemption, a judgment debtor waives the right to appeal a judgment ordering an execution sale of the homesteaded property. We concluded that accepting the benefits of a judgment and pressing an appeal from the judgment are inherently and impermissibly inconsistent. Although Turner relies on a legal principle that is sound in its general application, we have concluded that it does not accomplish a fair result within the homestead context.

We now reexamine the Turner holding in light of the conjunction of appeal and homestead principles, and consider in particular certain recognized exceptions to the rule of appeal waiver as they bear on the homestead law. We will conclude that, while these principles and exceptions are not directly applicable to the present case, together they provide a compelling rationale for the rule that the acceptance of homestead benefits from the proceeds of an execution sale does not, standing alone, constitute a waiver of the right to appeal from a judgment ordering that sale. This rule assures a more equitable recognition of the legitimate interests of both creditor and debtor.

A waiver of the right to appeal a judgment is implied in a variety of situations. (See 6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, §§ 133-146, pp. 4129-4142.) We consider two of them.

First, as a general proposition, one who accepts the benefits of a judgment cannot thereafter attack the judgment by appeal. In Estate of Shaver (1900) 131 Cal. 219 [63 P. 340], we expressed the rule as follows: “The right to accept the fruits of a judgment, and the right of appeal therefrom are not concurrent. On the contrary, they are totally inconsistent. An election to také one of these courses is, therefor, a renunciation of the other.” (Id., at p. 221, citation omitted.) In the words of Turner, acceptance by the appellant of the benefits of a judgment constitutes an “. . . affirmance of the validity of the judgment against him.” (Turner, supra, at p. 247.) This general rule has been applied in a number of contexts. (See, e.g., Schubert v. Reich (1950) 36 Cal.2d 298 [223 P.2d 242] [appellant accepted money pursuant to an order of the court that had explicitly conditioned the granting of plaintiff’s motion for a new trial on the payment to defendant of that money, which order appellant then attempted to challenge]; Giometti v. Etienne (1936) 5 Cal.2d 411 [55 P.2d 216] [appellants paid the balance due on a contract of purchase, received a conveyance of property, encumbered that property, and filed a satisfaction of judgment]; Wilson v. Wilson (1958) 159 Cal.App.2d 330 [323 P.2d 1017] [appellant accepted the benefits of a divorce decree and then sought to appeal the portion of the decree imposing obligations upon him]; see also 6 Witkin, Cal. Procedure, supra, Appeal, §§ 136-137, pp. 4131-4133.)

As is so often the case, however, application of the rule has generated a number of equitable exceptions, A waiver is not implied, for example, in those cases in which appellant is concededly entitled to the accepted benefits, and his right to them is unaffected by the outcome of the case on appeal. (Estate of Hubbell (1932) 216 Cal. 574, 577 [15 P.2d 503].) Stated another way, one may appeal from a portion of a severable and independent judgment while accepting the benefits of the unaffected remainder of the judgment. (Templeton Feed & Grain v. Ralston Purina Co. (1968) 69 Cal.2d 461, 468-469 [72 Cal.Rptr. 344, 446 P.2d 152]; Mathys v. Turner (1956) 46 Cal.2d 364, 365 [294 P.2d 947]; Gudelj v. Gudelj (1953) 41 Cal.2d 202, 214-215 [259 P.2d 656]; Estate of Hubbell, supra, 216 Cal. 574, 577; Preluzsky v. Pacific Co-operative C. Co. (1925) 195 Cal. 290, 293 [232 P. 970]; see also 6 Witkin, Cal. Procedure, supra, Appeal, §§ 138-139, pp. 4134-4136.) .

While the parties agree that defendants are entitled at the least to the equivalent of the amount they accepted, that is, $15,000, the value of their homestead exemption, the foregoing severability exception to the general waiver rule is not directly applicable. The judgment is not truly severable for if defendants were to prevail on appeal, this sum would have to be returned to plaintiff in exchange for the homesteaded property. (See Mathys v. Turner, supra, 46 Cal.2d 364, 365; Schubert v. Reich, supra; 36 Cal.2d 298, 300; Preluzsky v. Pacific Co-operative C. Co., supra, 195 Cal. 290, 293; San Bernardino v. Riverside (1902) 135 Cal. 618, 621 [67 P. 1047].)

Second, a waiver will be implied where there is voluntary compliance with a judgment, as when the judgment debtor satisfies the judgment by making payment to the prevailing party under its terms. (See Code Civ. Proc., § 1049; Hellman Commercial T. & S. Bk. v. Alden (1929) 206 Cal. 592, 599 [275 P. 794]; see also 6 Witkin, Cal. Procedure, supra, Appeal, § 134, p. 4129.) Again, the waiver rule as applied in this context is also subject to an exception. A waiver of the appeal right occurs only where the compliance was “. . . by way of compromise or with an agreement not to take of prosecute an appeal.” (Estate of Merrill (1946) 29 Cal.2d 520, 524 [175 P.2d 819]; see Wisniewski v. Clary (1975) 46 Cal.App.3d 499, 502 [120 Cal.Rptr. 176]; County of Los Angeles v. Resolute Ins. Co. (1972) 22 Cal.App.3d 961, 963, fn. 1 [99 Cal.Rptr. 743]; Mackay v. Whitaker (1952) 112 Cal.App.2d 112, 117 [245 P.2d 521].) Thus where compliance arises under compulsion of risk or forfeiture, a waiver will not be implied. (See, e.g., Reitano v. Yankwich (1951) 38 Cal.2d 1 [237 P.2d 6] [appellant faced with an execution sale against his property if judgment not satisfied]; Alamitos Land Co. v. Shell Oil Co. (1933) 217 Cal. 213 [17 P.2d 998] [appellant acts to avoid forfeiture of his property]; Sapin v. Security First National Bank (1966) 243 Cal.App.2d 201 [52 Cal.Rptr. 254]; Wisniewski v. Clary, supra, 46 Cal.App.3d 499 [appellant complies with judgment to escape dismissal of his action under the terms of a contested trial court judgment]; see also 6 Witkin, Cal. Procedure, supra, Appeal, § 135, pp. 4129-4131.)

The forfeiture exception to the general waiver rule has particular application to the present case because, as a practical matter, defendants may lose the right to the homestead exemption to which they are concededly entitled if they do not accept the exemption funds before exhausting their appeal rights. This possibility occurs because Civil Code section 1257 extends to the funds the homestead protection for a period of six months only. A rule declaring that a debtor is deemed to have waived his appeal rights by the acceptance of his homestead exemption proceeds thus presents a debtor with a dilemma. To appeal he must reject the exemption proceeds. If, as,is most likely, resolution of this appeal consumes more than six months, then the judgment debtor’s homestead protection will have lapsed and other creditors will have access to the funds. We have said that the purpose of section 1257 is to permit the exemption holder to purchase with the funds another home which may then be selected and protected as a homestead. (Thorsby v. Babcock, supra, 36 Cal.2d 202, 205.) By exercising the right to appeal, however, the debtor may be denied the opportunity of converting the funds into another residence similarly protected by the homestead laws.

By forcing an option upon him, application of the waiver rule under such circumstances may thus require a debtor to sacrifice his homestead rights in order to,preserve his appeal rights. The possibility of this result invites the invocation of the forfeiture exception to the waiver rule.

In Turner v. Markham, supra, 152 Cal. 246, this precise issue was raised. There, the court recognized the debtor’s homestead right, but held that the debtor, by accepting the homestead exemption benefits, had agreed to enjoy this right in the form of money rather than land. The Turner court, contrasting Estate of Shaver, supra, 131 Cal. 219, and In re Baby (1890) 87 Cal. 200 [25 P. 405], noted that in the two latter cases no estoppel was worked since the position of the adverse party, the creditor, was not changed to the creditor’s detriment. In Turner, however, the debtor who had accepted the exemption proceeds was insolvent. He had exhausted the funds for his own benefit. The homesteaded property had been sold to a third party, and in the event the debtor prevailed on appeal the purchaser would have a remedy against the judgment creditor for the monies paid the debtor. The Turner court concluded: “Here clearly is a situation presented where the appellant [debtor] by his election has changed the position of the respondent [creditor] to the latter’s injury, and the doctrine of estoppel by election is clearly applicable.” (Turner, supra, at p. 249.) The present case is dissimilar. The judgment creditor has not irrevocably changed his position to his detriment. He may be made whole. The necessity for application of estoppel is not established. We accordingly seek a resolution which fairly respects the debtor’s rights of appeal and homestead, while at the same time preserving the creditor’s right to satisfy his judgment in full.

We note in passing that it is arguable that if the defendants here, rather than accepting, had chosen to return the homestead proceeds to the sheriff or to the court pending appeal and they had lost on appeal, their right to those funds may still have been protected. (See, Note, Homesteads: Exemptions: Proceeds of Voluntary Sale (1951) 39 Cal.L.Rev. 444, 446-447.) One appellate court has indicated that the six months period does not begin to run under section 1257 until the homestead claimant “obtains payment” of the proceeds. (Chase v. Bank of America (1964) 227 Cal.App.2d 259, 263-264 [38 Cal.Rptr. 567].) There is statutory support for the argument since section 1257 seems to contemplate that the six months period runs from the time that “The money [is] paid to the claimant. . . .” In Thorsby v. Babcock, supra, 36 Cal.2d 204, we held that it was unreasonable to apply the six months rule during the period when an escrow holder had refused to deliver the funds to the debtor. Similarly, it may be deemed unfair for a debtor to lose his homestead rights in funds over which he never retained control. We are not required, however, to construe section 1257 within this context and have concluded that no waiver existed.

No valid purpose is served by forcing a debtor to choose between his right to appeal and his homestead rights where the creditor’s interests may be fully protected. In the matter before us, irremediable injury to plaintiff may be avoided while preserving defendants’ appeal and homestead rights. Defendants themselves suggest that any order on appeal favorable to them be conditioned on the return to plaintiff of the amount of the exemption proceeds theretofore paid to them. This suggestion has merit, but we conclude that in this case it does not afford sufficient protection to plaintiff. Fairness and equity require further that any such judgment in defendants’ favor also be conditioned upon the payment by defendants to plaintiff of such additional amounts paid by plaintiff (here, $25,437.33) to other creditors whose claims had been reduced to liens against the subject real property.

The payment of these claims, of course, was of direct and immediate benefit to defendants. While they did not request plaintiff to make these payments, neither can it be said that plaintiff acted as a volunteer. She had a right in this case to execute her judgment against the property pending the appeal since defendants did not obtain a stay of execution by the posting of an undertaking pursuant to former Code of Civil Procedure section 945. Her execution could not be completed until she discharged the liens outstanding against the property. (See Civ. Code, § 1256; Viotti v. Giomi (1964) 230 Cal.App.2d 730, 740 [41 Cal.Rptr. 345], hg. den.) Having paid and discharged the lien claimants, she is entitled to repayment of the full amount of such claims, so that she may be restored to her prejudgment status.

Normally the offer of a return of the benefits of a judgment which were accepted does not invalidate the waiver. (Schubert v. Reich, supra, 36 Cal.2d 298.) In a situation like the one before us, however, a careful balancing of important policy and statutory considerations, leads us to adopt a rule which preserves the remedies of homestead and appeal while minimizing the financial prejudice occasioned to plaintiff creditor.

We do not reach, here, the substantive issues which defendants raise on appeal, leaving to the Court of Appeal the appropriate resolution of them in the light of our conclusion that the right to appeal has not been waived.

The motion to dismiss the appeal is denied.

McComb, J., Tobriner, J., Mosk, J., and Clark, J., concurred.