Meyer v. Lemley

The cross-complaint states a cause of action in equity for relief against the erroneous decree of foreclosure entered in cause No. 3,289 upon the ground of mistake or excusable neglect, and the findings of the court under the evidence not only render the judgment and decree of foreclosure entered herein erroneous, but warrant a judgment in the appellant's favor.

By the sale of October 11, 1924, the judgment and decree of foreclosure entered on September 15, 1924, in cause No. 3,289, was satisfied and thereby extinguished. On this point it seems that all parties to this suit and the court as well are agreed. It follows under the settled rule of this jurisdiction that from the beginning relief has been available to the appellant, if at all, only by a suit in equity, and that under the opinions of this court referred to below the appellant never was in a position to correct the error appearing in cause No. 3,289 by motion, whether presented under section 9187, Revised Codes 1921 or otherwise.

In Foster v. Hauswirth, 5 Mont. 566, 6 P. 19, a default judgment was entered upon a summons returned as regularly served on the defendants, and thereafter under execution issued certain real property was levied upon and sold by which it appears that the judgment itself was satisfied and extinguished. (Hauswirth v. Sullivan, 6 Mont. 203, 204, 9 P. 798.) On motion made in the original action to vacate and set aside this judgment after the execution sale and its satisfaction thereby this court held (Foster v. Hauswirth, 5 Mont. 567, 568, 6 P. 19) that the judgment could not be disturbed in any other manner than by an equitable action. Thereupon the proceedings had upon the motion were vacated, and the defendant remitted to his action in equity to review the proceedings. This latter suit was later entertained in the subsequent cause of Hauswirth v. Sullivan, supra, where appropriate relief was awarded.

The principle of these two cases is particularly applicable to the cause at bar in this respect: After October 11, 1924, and the sale of the premises described in cause No. 3,289 to the appellant in full satisfaction of the judgment of September 15, 1924, and of all sums due it thereunder, under the mistaken belief that thereby it was acquiring in consideration of the extinction of its debt the title to all of the property described in its mortgage, there was open to the appellant in the courts of Montana but one remedy, and that an action in equity appropriately brought against all interested parties for reformation of the judgment-roll in cause No. 3,289 and relief from the mistake into which it had fallen. (See Gerig v.Loveland, 130 Cal. 512, 62 P. 830; Busey v. Moraga,130 Cal. 586, 62 P. 1081; Quivey v. Baker, 37 Cal. 465; Bacon v. Bacon, 150 Cal. 477, 89 P. 317; Jefferson v. Gregory,113 Va. 61, 73 S.E. 452; Williams v. Williams, 32 Ariz. 164,256 P. 356; Peterson v. First Nat. Bank, 162 Minn. 369, 42 A.L.R. 1185, 203 N.W. 53.) There follows in 42 A.L.R. 1192 a collection of cases in the annotation in theory and result identical with Peterson v. First Nat. Bank, supra. Particularly we cite in addition to the foregoing the following:Wakeman v. Hazleton, 3 Barb. Ch. (N.Y.) 148; Dane v.Daniel, 28 Wash. 155, 68 P. 446; Investment Securities Co. v. Adams, 37 Wash. 211, 79 P. 625; Lane v. Holmes,55 Minn. 379, 43 Am. St. Rep. 508, 57 N.W. 132.

As the Minnesota court said in Peterson v. First Nat.Bank, supra, under Code provisions like our sections 7484-7486, relative to mistake, it is immaterial whether in a given case the mistake be one of law or fact. Relief in the courts of Montana may be awarded in either case, sufficient reason therefor appearing. Moreover, this court is committed to the doctrine that such relief will be awarded where the negligence of the party making the mistake is excusable as in the record at bar the trial court has expressly found, particularly where the adverse party knew of the error and acted at all times with such knowledge. Such is the plain import of section 7485, and of subdivision 2, section 7486, supra (Parchen v. Chessman, 49 Mont. 326, Ann. Cas. 1916A, 681, 142 P. 631, 146 P. 469; Brundy v. Canby,50 Mont. 454, 472, 148 P. 315; Hicks v. Stillwater Co.,84 Mont. 38, 274 P. 296).

Upon the authority of the above cases we submit that by its action in equity the appellant has chosen the appropriate remedy for relief against the mistake occurring in cause No. 3,289, and that the facts of the case clearly make out a cause of action entitling it to the relief sought which is the cancellation of the erroneous proceedings and the foreclosure of its mortgage lien in accordance with the true intent and understanding of the parties when the original complaint in cause No. 3,289 was filed. Any other view of the facts works the grossest injustice in the name of equity and in favor of one who according to the admission of her recognized attorney and confessed agent has not been misled or deceived as to the true facts in the slightest. The language of the learned Chief Justice in Parchen v. Chessman, supra, above, is peculiarly pertinent and applicable at bar: "Relief will be granted when, in view of all the circumstances, to deny it would permit one party to suffer a gross wrong at the hands of the other."

STATEMENT OF THE CASE BY THE JUSTICE DELIVERING THE OPINION. Appellant, a corporation whose home office is at Edinburgh, Scotland, during the period of time over which this inquiry extends, maintained an office at Spokane, Washington. On May 12, 1912, appellant loaned to one Kunneke $10,000, for which it took his promissory note, due February 1, 1918, and a mortgage upon 636 acres of land in Carbon county, Montana. The mortgage was recorded June 3, 1912. In 1915 Kunneke sold the land, subject to the mortgage, to Lemley. On July 20, 1920, Lemley and wife mortgaged the land, and other land, to Meyer Chapman State Bank to secure two notes, aggregating approximately $20,000. The bank later transferred the Lemley notes and mortgage to respondent, who in fact was the owner thereof at all times. Lemley paid the interest on the Kunneke note up to February 1, 1922, but no longer.

On June 24, 1924, the manager of the Spokane office wrote to Messrs. Grimstad Brown, attorneys at law residing at Billings, advising them that the Kunneke note was wholly unpaid, and that the interest thereon had not been paid since February 1, 1922, and instructing them to foreclose the mortgage.

Grimstad Brown proceeded with the foreclosure. The action instituted was numbered 3,289, and will be so referred to. In preparing the complaint they omitted from the description of the property 320 acres, the most valuable and essential part of the tract mortgaged. Contemporaneously with filing the complaint, the attorneys filed a notice of lis pendens with the county clerk of Carbon county, which contained a correct description of the property. All defendants defaulted. The decree entered September 15, 1924, followed the description set forth in the complaint, and this error was carried into the order of sale, the sheriff's notice of sale, and in the certificate of sale. All these papers were prepared by Grimstad Brown. The appellant, on the sale day, October 11, 1924, bought in the property described in the notice of sale for the full amount of the judgment, and on that day respondent began an action to foreclose her mortgage, making the appellant and others parties defendant.

By letter dated October 30, 1924, an agent of appellant, writing from the Spokane office, called the attention of Grimstad Brown to the fact that there was "a slight error" in the description of the property contained in the sheriff's certificate of sale. Upon receipt of the letter Mr. Brown immediately checked up the various papers and found the errors. Having determined that section 9187, Revised Codes 1921, afforded appellant an appropriate remedy, he prepared a motion to amend the decree. The motion was dated December 16, 1924, but was not filed until February 9, 1925. The district court, on February 24, 1925, granted the motion, whereupon a new decree was filed, embracing the property described in appellant's mortgage, the sale was set aside, and a new order of sale issued. Afterwards, on respondent's motion, the new decree was ordered set aside, and that order was sustained by this court. (Oregon Mortgage Co.,Ltd., v. Kunneke, 76 Mont. 117, 245 P. 539.)

In the meantime appellant appeared, first by demurrer, and then by answer, in the action instituted by respondent to foreclose her mortgage. In the answer appellant alleged, in effect, that through inadvertence and clerical error a portion of the lands described in its mortgage was omitted from the decree and order of sale, and consequently was not sold by the sheriff on October 11, 1924, but that upon appellant's motion the court had amended the decree, issued a new order of sale based upon the corrected decree, and that the amended decree declared appellant's lien upon all the lands described in its mortgage to be paramount to the lien or interest claimed by respondent. This answer was filed April 28, 1925, and to it respondent demurred on May 7, 1925. No further action was taken in the case until July 24, 1926, when respondent filed a reply to the complaint, alleging that the district court had set aside the amended decree, that the appellant had appealed from the order, and the supreme court had affirmed the order.

On August 20, 1926, the district court granted appellant leave to file an amended answer and cross-complaint, which was done on that day. The cross-complaint gives a history of the entire proceedings. It alleges that the omission of the property from the complaint, judgment, order of sale and certificate of sale was suffered by accident, and from the mistake, inadvertence and excusable neglect of appellant, its officers, agents and attorneys, which is explained at length. It is alleged that appellant has suffered injury, for the reason that the lands purchased at the sheriff's sale are worth much less than the debts secured by the mortgage; that respondent was cognizant of the mistake at all times, and will not be injured by an amendment of the complaint in cause No. 3,289, and the foreclosure of appellant's mortgage which is alleged to be prior and superior to the lien of respondent's mortgage; that Kunneke and Lemley, at all times since February 1, 1922, have been and are now insolvent, and a judgment against them, or either of them, would be entirely worthless.

The essential allegations of the cross-complaint, except those as to the existence of appellant's mortgage, the foreclosure thereof, and what took place after the foreclosure, were denied by respondent. Replying further, respondent alleged that, by bidding in the property for the full amount of the judgment, appellant fully satisfied and extinguished the sale in all respects; that appellant's mortgage, at the time of the filing of the cross-complaint, was barred by the provisions of section 8267, Revised Codes 1921, for the reason that the appellant never filed any affidavit of renewal thereof as required by that section; that, although appellant claimed to have discovered the error or mistake in the description of the property purchased by it at sheriff's sale on or about the 30th of October, 1924, it made no attempt to correct the error or to have the same corrected until about the 9th of February, 1925, when it filed a motion for that purpose; appellant's failure in that proceeding is then set forth, and respondent pleads that, having selected that procedure for the purpose of correcting the alleged errors, and having pursued that remedy even to the supreme court without avail, it ought now to be barred and estopped from maintaining the cross-complaint and from obtaining any relief thereunder.

After trial, the court made findings of fact and conclusions of law. The findings are contradictory in many ways. As illustrating this, in finding 26 the court says that the failure of appellant to include all of the lands described in this mortgage in its complaint and subsequent papers in cause 3,289 was caused by the negligence and carelessness of appellant and its attorneys, agents and servants, and without fault or negligence on part of respondent or Meyer Chapman State Bank, her predecessor in interest, while in finding No. 36 it is said that the error complained of was occasioned and suffered by accident and from the mistake, inadvertence and excusable neglect of the attorneys for the appellant.

In view of the law as we have been constrained to determine it, it is unnecessary to refer to other findings.

The court concluded that judgment should go in favor of respondent for the full amount of her notes, interest and costs, and that she should have a decree foreclosing her mortgage as prayed for, and that appellant should take nothing. Judgment and decree were entered accordingly. Both parties made numerous exceptions to the findings, all of which were overruled. Thereupon appellant brought the cause to this court. From out the exhaustive and able arguments and briefs of counsel there appears one determinative question: Is the appellant upon its own showing entitled to relief in equity?

The rules in this state governing the vacation of decrees in equity and judgments at law are the same. With us decrees are but judgments. (Raymond v. Blancgrass, 36 Mont. 449, 15 L.R.A. (n.s.) 976, 93 P. 648.)

The general rule is that the equity power of a court "may not be invoked by a litigant to obtain any relief, when a plain, adequate, and speedy remedy is afforded in the ordinary course of law. Inadequacy or deficiency of the legal remedy is the fundamental concept of equity jurisdiction." (Philbrick v.American Bank Trust Co., 58 Mont. 376, 193 P. 59; Peterson v.School Board, 73 Mont. 442, 236 P. 670; Freeman on Judgments, 5th ed., sec. 1194.)

Section 9187, Revised Codes 1921, provides that the court, in its discretion, may, upon such terms as may be just, relieve a party or his legal representative from a judgment taken against him through his mistake, inadvertence, surprise or excusable neglect, provided that application therefor be made within a reasonable time, but in no case exceeding six months after the judgment was taken.

The statute, though providing a remedy at law, is founded upon equitable principles. It is liberal, and designed to promote justice, but the suitor must be diligent in asserting his rights. Indeed, the statute is designed to afford a speedy remedy in the action itself, rather than to subject the litigant to the delay and expense of a separate suit. The remedy provided is available to one in whose favor a judgment is rendered, as well as to one against whom judgment has gone. This has been held in California, from which state we borrowed the statute, many times. (Brackett v. Banegas, 99 Cal. 623, 34 P. 344; Bernheim v.Cerf, 123 Cal. 170, 55 P. 759; Palace Hardware Co. v.Smith, 134 Cal. 381, 66 P. 474; Grannis v. SuperiorCourt, 143 Cal. 630, 77 P. 647; Lemon v. Hubbard, 10 Cal. App. 471,102 P. 556. And compare Federal Land Bank v.Gallatin County, 84 Mont. 98, 274 P. 288.)

That the sale could be set aside upon motion is settled in this jurisdiction by the exhaustive opinion of Mr. Justice Holloway in State ex rel. Coffey v. District Court, 74 Mont. 355,240 P. 667, to which we direct attention. The statutory remedy may be invoked to set aside a judgment, even after it had been satisfied by sale under execution. (Patterson v. Keeney,165 Cal. 465, Ann. Cas. 1914D, 232, 132 P. 1043, 1044; Brown v.Martin, 23 Cal. App. 736, 139 P. 823; Dickerson v. Davis,111 Ind. 433, 12 N.E. 145.) The great weight of authority is in accord. (34 C.J. 225.) "It must be admitted that the rule allowing such relief is more in accordance with justice than the rule which denies it." (Patterson v. Keeney, supra.) Under some circumstances, the satisfaction of a judgment may preclude relief; but none such appear here.

In Foster v. Hauswirth, 5 Mont. 566, 6 P. 19, 20, it appeared that more than a year after judgment had been rendered against the defendant, and after an execution had been issued thereon and the sale of the property had, defendant moved the court to set aside the judgment. The defendant presented affidavits purporting to show that the summons was served upon him on Sunday, and not on Saturday, as the sheriff returned. But the judgment on its face was valid. "Besides this," said the court, speaking through Mr. Chief Justice Wade, "real estate has been sold by virtue of the judgment, and the rights of third persons have intervened, or, at least, additional rights have been created thereby. * * * This case is to be distinguished from those in which the judgment is simply void, and where no property has been sold under it, and no rights have intervened or come into existence by virtue of such sale." It will be seen that the court seems to have been influenced to some extent by the thought that the rights of third parties had intervened. This is seen by the succeeding case ofHauswirth v. Sullivan, 6 Mont. 203, 9 P. 798, 800, in which the administrator of the defendant Hauswirth had brought an action against the sheriff and those who were plaintiffs in the action of Foster v. Hauswirth to set aside the judgment and to have all proceedings thereunder vacated on the ground that the judgment was void. The court, again speaking through Mr. Chief Justice Wade, said: "It is not necessary to cite authorities to sustain the proposition that Hauswirth might have appeared in that action by motion, within the statutory time, and shown that the sheriff's return was false, and had this void judgment against him set aside, provided the rights of third persons have not intervened, or additional rights been acquired, as stated inFoster v. Hauswirth, 5 Mont. 566, 6 P. 19. But was that his only remedy?" The learned jurist continued: "What was the use of Hauswirth making a motion to set aside a judgment that was a mere nullity, and that he had the right to show was utterly void for want of jurisdiction whenever any attempt was made to enforce the judgment against him? He had the right to treat the judgment as void until it was attempted to enforce it against him, and then to bring an action, and have it declared so [citing cases]. A judgment at law may be vacated or relieved against in equity, when it is made to appear that the court in pronouncing it acted without jurisdiction [citing cases]."

It is thus made clear that the court did not intend to hold that the remedy by motion would not have been available to the defendant, even if property had been sold under the judgment, unless the rights of others had intervened. And we may say that, when third parties take the property with full knowledge of all the facts, if the facts would warrant relief to the injured party, the remedy should also run against the third parties.

Green v. Wiederhold, 56 Mont. 237, 181 P. 981, is called to our attention. In that case the defendant moved to set aside the judgment after the expiration of more than six months from its entry. This case, as the records show, was placed upon the "Short cause docket" upon motion of appellant, on the ground that "said cause involves the sole and single question of whether or not the court below is justified in vacating and setting aside a judgment after more than six months had elapsed from the date of its rendition and entry, where the defendant was personally served with summons, and is ruled by numerous previous decisions of this court." The court passed upon that decisive question, and whatever else was said is obiter dictum. The court observed that the record showed that it appeared that the judgment had been satisfied upon execution, and "the matter had therefore passed beyond the jurisdiction of the court in this proceeding" — citing Foster v. Hauswirth, supra, and 2 Black on Judgments, section 1010. The language quoted is correct for the reason that the motion was made too late, but not otherwise. The rights of third parties had not intervened, and upon the facts Foster v.Hauswirth is not authority. Section 1010 of Black on Judgments does not bear upon the point at all.

In the case at bar the statutory remedy was plain, speedy and adequate. Under it appellant could have obtained complete relief. It could have had the decree, and all subsequent proceedings thereunder, set aside, and have obtained an order permitting an amendment of its complaint. Having served the amended complaint upon the defendants, appellant could then have pursued its action in due course. Appellant invoked the aid of the statute, but through its own fault failed to pursue properly the remedy it afforded. (Oregon Mortgage Co. v. Kunneke, 76 Mont. 117,245 P. 539.)

When counsel for appellant invoked the legal remedy, when they filed their motion to amend the decree, they knew all the facts respecting the commission of the errors that were known to present counsel when the cross-complaint asking relief in equity was filed. Under the circumstances, equity shuts its doors against them. "As appears upon the face of their complaint," said Mr. Justice Sharpstein in Ede v. Hazen, 61 Cal. 360, "the plaintiffs discovered within forty days after the entry of the judgment, and within six months after the entry of their default, all the facts upon which they now base their right to have it set aside, and if it be conceded that upon those facts they are entitled to the relief they now claim, it is clear that they had ``a speedy, complete adequate, summary remedy in the same proceeding, and that the complaint shows no circumstances which entitled them to maintain a separate and distinct equitable action.' (Ketchum v. Crippen, 37 Cal. 223.)" (And seeMoulton v. Knapp, 85 Cal. 385, 24 P. 803; 15 Cal. Jur. 25.)

"If the complaining party has resorted to an adequate legal remedy, and been denied relief, this adjudication should bar any relief in equity on grounds then available which were or might have been there urged." The form of the legal remedy is immaterial, if it be adequate. (3 Freeman on Judgments, 5th ed., sec. 1194.)

When a party seeking relief from a judgment has an adequate remedy at law by motion in the original case, equity will not interpose in his favor while that remedy is available, nor thereafter if he does not show a sufficient excuse for not having resorted to it at the proper time. (Dunne v. Yund, 52 Mont. 24,155 P. 273; Freeman on Judgments, sec. 1197.) And this is so, whether the mistake be one of fact or one of law. The rule is not invariable that a mistake of law will never be considered excusable. (14 Cal. Jur. 1035, 1044.) It is true that a mistake as to the law is not the mistake contemplated by section 9187, and ignorance of the law does not constitute an excuse within the meaning of the statute. (Canning v. Fried, 48 Mont. 560,139 P. 448.) Nothing said in Federal Land Bank v. Gallatin County, supra, was intended to go further than this.

But if fraud enters in, or if the misconduct of his adversary has brought about the result (Bullard v. Zimmerman, 82 Mont. 434,268 P. 512), or if there be a want of jurisdiction in the court entering the judgment, although the judgment is fair on its face (Hauswirth v. Sullivan, 6 Mont. 203, 9 P. 798; State ex rel. Happel v.District Court, 38 Mont. 166, 129 Am. St. Rep. 636, 35 L.R.A. (n.s.) 1098, 99 P. 291; Clark v. Clark, 64 Mont. 386,210 P. 93), or if the statute provides an inadequate remedy (Bullard v.Zimmerman, supra), or where a party without any fault of his own has been deprived of his legal remedy (Freeman on Judgments, 5th ed., sec. 1195), equity will assume jurisdiction and afford relief. When such conditions are shown, the statutory remedy is deemed cumulative, or concurrent. (Baker v. O'Riordan, 65 Cal. 368,4 P. 232; Bacon v. Bacon, 150 Cal. 477, 89 P. 317.) Here nothing of the sort appears. Appellant had an adequate remedy, invoked it, lost it through its own fault. He who summons the public force to aid him in the assertion of his rights must follow the rules prescribed. He cannot be permitted, after having selected an appropriate and adequate remedy and having failed through his own fault to obtain relief thereby, to then harass his blameless adversary by pursuing another and different remedy. It is to the interest of society that litigation end; "interestreipublicae ut sit finis litium." (United States v. Throckmorton,98 U.S. 61, 25 L. Ed. 93; Kennedy v. Dickie, 34 Mont. 205,85 P. 982.)

The unavoidable conclusion reached above makes it unnecessary to consider other problems presented in the briefs. And in view of the result reached the fact that the court's findings are inconsistent is inconsequential.

The court reached the correct conclusion, and its judgment is affirmed.

ASSOCIATE JUSTICES MATTHEWS, GALEN and FORD concur.