Bank of Woodland v. Stephens

Upon a further consideration of this case we adhere to the opinion heretofore rendered in Department One. It is proper to state further that there is an allegation in the complaint that "the mortgaged premises are insufficient to pay and discharge the mortgage debt," and the court finds that this allegation is true. On the authority of Scott v. Hotchkiss, 115 Cal. 94, it is claimed that this is a sufficient statement to uphold the part of the decree continuing the receivership. An inspection of the transcript in that case shows that there was in the complaint there under consideration a similar allegation. The entire discussion of the point in the opinion is as follows: "No stipulation can confer jurisdiction upon the court to appoint a receiver in a case where the court has no such authority given by law. It is not necessary to decide the matter in this case, however, because there is an averment that the security is insufficient." It is obvious that the subject of the sufficiency of such an averment as an allegation of fact was not fully considered in that case.

Such a statement is no more than a conclusion. It is no better than the statement sometimes contained in a complaint for an injunction, that if the acts threatened are committed "the plaintiff will suffer irreparable injury which cannot be compensated in damages." This is always held insufficient to authorize or support an injunction. The same rule should be applied here. The appointment of a receiver involves the taking of the defendant's property from his possession — a measure more violent and drastic than an injunction. It should never be allowed in cases of mortgage foreclosure, except upon a statement of facts showing that the actual value of the mortgaged premises is less than the debt secured, with interest and costs, and that resort to the rents and profits is necessary.

Subdivision 2 of section 564 of the Code of Civil Procedure states the various conclusions which must be made by the court before it can appoint a receiver in foreclosure suits. The complaint or affidavit on which the application for a receiver is based must state facts which support one or more of these conclusions. It is not enough to state the conclusions alone. The value must be alleged. A mere averment that its value is insufficient or that the premises are insufficient will not do. Allegations of this character may be sufficient to uphold an order where the attack is collateral, but this cannot be allowed where, as in this case, there is a direct attack upon appeal. We do not think Scott v. Hotchkiss, 115 Cal. 94, should be considered as holding such an allegation sufficient in form.

It is ordered that the decree be modified by striking out the part thereof relating to the continuance of the receiver in his office after the final decree, and that as so modified the judgment be affirmed.

Henshaw, J., Lorigan, J., Angellotti, J., Van Dyke, J., and McFARLAND, J., concurred.