Dobbins v. Econ. Gas Co.

This is an action to recover the mesne profits of certain real property in the possession of the defendant, a public utility gas company, and used by it as a part of its gas plant. The plaintiff had recovered a judgment foreclosing a mortgage upon the property, to which mortgage the defendant was not a party, and had bought in the property at the foreclosure sale and claims to be the owner by reason of such foreclosure. The profits sought to be recovered are for the period subsequent to the foreclosure sale. The defendant had judgment and the plaintiff appeals. The ultimate question in the case is, Did the foreclosure decree affect the defendant’s interestÍ

The plaintiff, Mrs. Dobbins, was the original owner of the property. In April, 1903, she conveyed it to a corporation known as the Los Angeles Suburban Gas Company, which for brevity we will call the Suburban Company. In consideration of this conveyance the Suburban Company gave Mrs. Dobbins fifty thousand dollars in par value of its bonds, part of an authorized issue of three hundred thousand dollars secured by mortgage or trust deed previously executed and recorded and which in anticipation of the conveyance from Mrs. Dobbins described the property involved here as a part of the property mortgaged. It was this mortgage which was subsequently foreclosed and under the decree foreclosing which Mrs. Dobbins purchased and

In this state of affairs Mrs. Dobbins in ’June, 1906, conveyed the property by quitclaim deed to a company known as the Peoples Gas Company, which, in turn, conveyed the property to the Peoples Gas and Coke Company. The latter was really nothing but the former under another name, and for the purposes of discussion the two may be treated as one. The effect of the conveyance by Mrs. Dobbins to the Peoples Company was, of course, so far as the record is concerned, to put the title in the latter free and clear of any encumbrance, and, in particular, of the mortgage by the Suburban Company. In fact, however, the quitclaim deed was not intended by the parties to put the title in the Peoples Company free of that mortgage. The Suburban Company was merely a subsidiary of the Peoples' Company, all of its stock practically being owned by the latter, and the latter having taken over the Suburban plant. This was represented to Mrs. Dobbins, together with the fact that her original deed to the Suburban Company had been lost without being recorded, and the quitclaim deed was executed by her upon the understanding that it was to confirm to the Peoples Company the title conveyed by the lost deed to the Suburban Company. According to this understanding, the record title which the Peoples Company obtained by the quitclaim deed was to be subject to the mortgage securing the bonds taken by Mrs. Dobbins in original payment for the property.

[2] This understanding would, of course, be effective as between the parties. The result was that while the quitclaim deed had the effect of putting the record title in the Peoples Company free and clear of all encumbrances, yet the mortgage by the Suburban Company was as to the record owner a valid and subsisting lien, although not one of which the record would give anyone purchasing from the

The evidence that both Hayes and the defendant had actual notice of Mrs. Dobbins’ claim when they purchased is ample and conclusive.. It is unnecessary, however, to state the facts showing such notice, for constructive notice was plainly given them by the record. • Prior to the purchase by Hayes suit had actually been begun to foreclose the Suburban mortgage. It was originally begun by one Gallagher, who claimed to own some bonds secured by it. Mrs. Dobbins and the Peoples Company were both made defendants. Mrs. Dobbins appeared and filed a cross-complaint seeking for herself as the owner of fifty thousand dollars of bonds to secure the foreclosure of the mortgage. The Peoples Company was made a party defendant to the cross-complaint, which alleged that the Peoples Company claimed some interest in the property, but that such interest was subject and subordinate to the mortgage. When Mrs. Dobbins’ cross-complaint was filed a lis pendens was duly recorded, naming the Peoples Company as one against whom relief was sought. It was subsequent to the filing of the cross-complaint and the recording of the lis pendens that Hayes purchased from the Peoples Company, and the defendant, in turn, from Hayes. Hayes and the defendant were, therefore, notified of Mrs. Dobbins’ complaint and of the nature of the cause of action there set up. At the same time they had notice from the record that the Peoples Company was the holder of the record title by deed from

Our discussion so far has been concerned with the underlying facts which go to the real merits of the matter as between the parties.. It is also claimed, however, on behalf of Mrs. Dobbins that the very question as to whether or not the interest of tlie Peoples Company was subject to the .mortgage was litigated in the foreclosure suit itself and there determined adversely -to that company, and that the defendant here is bound by that adjudication as a purchaser pendente lite. The defendant, on the other hand, • claims, first, that there was no such adjudication against the Peoples Company, and, second, that if there were, it was ,not binding upon the defendant here.

Mrs. Dobbins’ cross-complaint contained the averment as to the Peoples Company usual as to a defendant in a foreclosure complaint other than a party to the mortgage, viz., that the Peoples Company claimed some interest in the mortgaged property but such interest was subject to the lien of the mortgage. The answer of the Peoples Company admitted that it claimed an interest, but denied that it was so subject. This was the state of the pleadings at the time when Hayes and the defendant purchased. The foreclosure decree subsequently rendered declared the interest of the Peoples Company to be subject to the mortgage. If this were all, the defendant’s claim that there was no adjudication that 'the interest of the Peoples Company was subject to the mortgage would have to be sustained. The case would come directly within the rule of Beronio v. Ventura Co., 129 Cal. 232 , [ 79 Am. St. Rep. 118 , 61 Pac. 958 ],

The ground upon which the decision in Beronio v. Veniwa Co. is put should, however, be carefully noted. The ease was one where the foreclosure defendant whom it was sought to bind by the foreclosure decree had an adverse, and, in fact, superior title to the property. The opinion lays down the established rule, repeatedly followed in this state, that a foreclosure suit cannot properly be turned into a suit to quiet title and that the question of superiority between a mortgage lien, or, more accurately, between the title upon which it is a lien, and an adverse independent title cannot properly be litigated in such a suit, with the result that even if a judgment of foreclosure be rendered against a defendant other than the mortgagor, the judgment, unless there is some special adjudication in it, will affect only such interest as the defendant may have which is subject to the mortgage and not any interest he may have which is not subject. The real question in the case was whether or not the particular foreclosure decree under consideration did contain a special adjudication by reason of the averment of the complaint that the defendant’s interest was subject to the mortgage, the denial of this by the answer, and the declaration of the decree in accordance with the averment of the complaint. Upon this point, which was the real point of the case, the court held the averment of the complaint was not one of fact but of a conclusion of law; that it therefore tendered no determinable issue and its denial in the answer raised no issue, and that it followed that the question of superiority of title had not been involved and had not been adjudicated. The correctness of this ruling is by no means free from doubt, and it would certainly seem to be directly opposed to Elder v. Spinks, 53 Cal. 293 , upon which it relies. But it has too long been the rule in this state to warrant us in now reopening the point decided. But it is not necessary to extend it any further, and in that connection two things are to be noted regarding it.

[4] The question whether the title of a defendant is adverse or is subject in the strict sense to the mortgage is surely more properly determinable by pleadings' and trial before judgment than subsequently upon proceedings after judgment and sale for a writ of assistance to obtain possession. And yet, if the question is not determinable in one or the

[5] In the second place, it is expressly stated in Beronio v. Ventura Co., that if the parties voluntarily proceed in the foreclosure suit to litigate the question of title, and such question is determined by the decree, such determination will be a binding adjudication. The statement, perhaps, is dictum, but it is manifestly correct, and Johnston v. San Francisco Savings Union, 75 Cal. 134 , 140, [ 7 Am. St. Rep. 129 , 16 Pac. 753 ], is directly in point. Much more would it be true where the question determined was not one of titles, but as to whether the defendant’s interest was one not adverse but subject to the mortgage.

Coming back to the ease at bar, according to Beronio v. Ventura Co., as we have said, the foreclosure decree here, if it rested upon the pleadings as they stood at the time Hayes and the defendant purchased, would not be an adjudication that the interest of the Peoples Company was subject to the Suburban mortgage, in spite of the declaration it contains to that effect. But the Peoples Company did by subsequent amendment to its answer specifically allege

Passing now to the second point in connection with the foreclosure decree, the question as to whetheir it is binding upon the defendant here even if it were binding upon the Peoples Company from whom the defendant purchased .pendente lite, the defendant’s position is based upon the fact that at the time the Peoples Company sold, its answer had not been amended so as to raise the issue as to the subserviency of its title to the” mortgage. The defendant’s contention is that as a purchaser pendente lite it is bound only by the determination of those issues which were presented at the time it bought.

[8] There can be no doubt that under these circumstances the defendant here is bound as a purchaser pendente lite by the determination of that issue, although it was raised by subsequent amendment. It may be that the defendant was not required to anticipate the introduction into the action, even by the party from whom it purchased, of a new cause of action and would not be bound by the course of such party in so doing. [9] But certainly a purchaser pendente lite is bound by the result of the suit, although that result may be based upon issues raised subsequent to Ms purchase, provided the matter adjudicated be the cause of action subject to' which he bought and the issues be material and proper to that cause of action. This is directly decided in

“There is another objection to the case of the appellees, which must not be overlooked. They are not subsequent attaching creditors, nor creditors at all; they are purchasers pendente lite. The law is, that he who intermeddles with property in litigation does it at his peril, and is as conclusively bound by the results of the litigation, whatever they may be, as if he had been a party to it from the outset. (Inlow’s Lessee v. Harrey, 11 Md. 524 ; Salbury v. Benton, 7 Lans. (N. Y.) 352; Harrington v. Slade, 19 Barb. (N. Y.) 162; 1 Story’s Equity, sec. 406.) The appellees voluntarily took the position they occupy. They chose to buy a large amount of property, including that in controversy, from the fugitive debtor. This was done after the latter had been seized under the writ of attachment, and while the suit in which it v/as issued was still pending. They took the title subject to the contingencies of the amendments that were made, and of everything else, not coram non judice, the court might see fit to do in the ckse. The attachment might be discharged, or the judgment might be larger than was then anticipated. They took the chances, and must abide the result. Having obtruded themselves upon the property attached, they insist that their purchase narrowed the rights of the plaintiffs and circumscribed the jurisdiction of the court. Such is not the law. After their purchase, the court, the parties, and the res, stood in all respects as they stood before; and the judgment, sale and conveyance have exactly the same effect as if the appellees and the facts upon which they rely had no existence. ’ ’

The general rule in regard to amendments is thus stated in 25 Cyc.; at page 1473: “An amendment to the bill or complaint, after a purchase or the acquisition of other rights pendente lite, which does not alter the cause of action, does not affect the lis pendens, since it relates back to the filing of the original bill. On the other hand, if the cause of action is changed by the amendment, or a new cause added, the Us pendens does not relate back but dates from the filing of the amended complaint.” (See, also,

Our conclusion is that the adjudication against the Peoples Company that its interest was subject to the mortgage is binding upon the defendant here as a purchaser pendente Ute. It follows that for this reason also the interest of the defendant was foreclosed by the foreclosure decree and sale and that Mrs. Dobbins as the purchaser at the sale is now the owner of the property.

This conclusion, reached both upon the underlying facts and because of the scope of the foreclosure decree, is determinative of the real merits of the case at least, 'but there are further points which require discussion. Defendant’s counsel, in their brief, take the position that the defendant was not a purchaser pendente Ute. In fact, a large part of their argument is based upon this assumption. This position is rather puzzling, since the record is plain that the defendant purchased from Hayes and Hayes from the Peoples Company, and the Peoples Company, at the time of the purchase was a -party defendant in the foreclosure suit and named as such in Mrs. Dobbins’ cross-complaint, and had, in fact, appeared and answered. Furthermore, it was under the conveyance from the Peoples Company that the defendant received possession and it had no other muniment of title or right of possession. Just why it is said, under these circumstances, that the defendant was not a purchaser pendente Ute is rather difficult to see.

Apparently what is meant is that although the defendant was a purchaser pendente lite, yet it now has, not that it then had, a title by adverse possession, and that such title is not one purchased pendente lite and as to it the defendant is .not a purchaser pendente lite. This, of course, is true provided the defendant has a title by adverse possession. The question is, Has it such a title? Defendant’s counsel maintain stoutly that it has and the lower court so found and based its judgment for the defendant upon that finding. The finding of adverse possession, however, is specifically only of a possession commencing with the defendant going into possession. The court also finds specifi

The ease comes- exactly within Pratt v. Pratt, 96 U. S. 704 , [ 24 L. Ed. 805 , see, also, Rose’s U. S. Notes]. There the statute of Illinois provided a limitation of seven years on actions for the recovery of real property. The action was ejectment and both parties claimed from one Speer. The plaintiff had obtained a judgment against Speer in 1857, which was a lien upon the land. In 1863 the land was sold on execution upon the judgment, and in 1865, pursuant to the sale, was deeded by the marshal to the plaintiff. After the recovery of the judgment and its becoming a lien, but long before the sale, Speer sold the land to another, from whom it came by mesne conveyances to the defendant, the possession of the property passing with such conveyances. Within less than seven years after the plaintiff received the marshal’s deed, but more than seven years after Speer had parted with the property and the defendant had taken possession, the action before the court was brought. The defendant’s claim was that the statute had

“The defendant, having purchased the land of the person who had the legal title, does undoubtedly hold adversely to everybody else. He admits no better right in anyone. He is no man’s tenant. The right by which he' holds possession is superior to the right of all others. He asserts this, and he acts on it. His possession is, in this sense, adverse to the whole world. But it is not inconsistent with all this that there exists a lien on the land—a lien which does not interfere with his possession, which cannot disturb it, but which may ripen into a title superior to that under which he holds, but which is yet in privity with it. In the just sense of the term his possession is not adverse to this lien. There can be no adversary rights in regard to the possession under the lien, and under the defendant’s purchase from the judgment debtor, until the lien is converted into a title conferring the right of possession. The defendant’s possession after this is adverse to the title of plaintiff; and then, with the right of entry in plaintiff, the bar of the statute begins to run.”

And again:

“If we are wrong in what we have supposed to be the law, it must follow that, in all eases in which the owner of real estate owes money which is a lien on "the land in his hands, the statute of limitation begins to run against that lien as soon as he conveys the land with possession to someone else. It can make no difference in the principle asserted, whether the lien be created by a judgment or by a mortgage. Nor can it make any difference whether the debt secured by the lien be due when the conveyance is made, or has ten or twenty years to run before the lien can be enforced against the land. The principle asserted is applicable in all these cases; namely, that from the day of the conveyance by the debtor, of the land on which the lien of the debt exists to some third person, accompanied by transfer of possession, the possession of the purchaser is adverse to the lienholder, and the limitation of seven years begins to run. If this be established to be the law,

the owner of real estate may borrow money on ten years’ time, to the value of that estate, and give a mortgage on it to secure payment; and by a sale and conveyance of the land to a third person, with delivery of possession a week afterward, the lien is utterly defeated. For, according to this doctrine, the statute of limitations begins to run against the mortgagee the moment the title and possession are vested in the purchaser, and the bar of the statute becomes perfect against all the world by seven years’ possession; whereas the mortgagee can take no steps to foreclose his mortgage until his money becomes due, three years later.

“And this doctrine is asserted in the face of the fact that there is a limitation law specially applicable to. the enforcement of the judgment lien by sale under execution, and of the mortgage lien by foreclosure.”

See, also, Jefferson v. Wendt, 51 Cal. 573 ; Leonard v. Flynn, 89 Cal. 535 [ 23 Am. St. Rep. 500 , 26 Pac. 1097 ].

[11] To close up our discussion of this point of a title acquired by the defendant here by adverse possession, we may say that it resolves itself into the very simple rule which can hardly be gainsaid, that the statute of limitations does not run during the pendency of the litigation in favor of a purchaser pendente lite any more than it does in favor of the party from whom he purchases, and that he will not be regarded as holding the property adversely during the litigation. (Christy v. Spring Valley Water Works, 97 Cal. 21 , [ 31 Pac. 1110 ]; In re Grider, 81. Cal. 571, [ 22 Pac. 908 ].) The creation of an independent title by adverse possession during the litigation is very different from the assertion of a superior title existing independently of such possession. The defendant here has no such superior independent title and asserts none. Its only claims are its right derived from the Peoples Company, which was foreclosed, and its right by possession during the litigation. But such possession could not be adverse, and the general finding of the lower court that the defendant acquired a title by adverse possession and that the plaintiff, therefore, is not the owner is not only contrary to the evidence, but is contrary to the facts specifically found with regard to the defendant’s possession and is

The remaining contention of the defendant which requires , consideration is that it is a public utility corporation; that the property involved is an integral part of its plant and required for adequate service to the public; that the plaintiff cannot be given possession without interfering with such service ;■ that, therefore, even though she be the owner of the property, she cannot have possession of it, and that an action for mesne profits will not lie except as an incident of the recovery of possession. It may be admitted that the plaintiff, although she is the owner of the property, cannot have possession of it because it has been appropriated to a public use which would be interfered with by giving her possession. It may also be admitted that ordinarily mesne profits cannot be recovered except as an incident to the recovery of possession. [12] But it does not follow that the owner of real property in the peculiar situation of the plaintiff here may not maintain an action for mesne profits, although she cannot have possession. She would be entitled to possession and could recover it except for the public interest which intervenes between her and the defendant and prevents her having the full measure of relief to which otherwise she would be entitled. But the public interest should not be permitted to affect the rights of the parties further than the protection of such interest itself requires. So far as may be done without interfering with the public interest, the position of the plaintiff should be that which she would have except for its intervention. Without its presence she would have the right both to possession and to mesne profits. With it present she cannot have possession, but as to mesne profits, the public interest will in no wise be injuriously affected by permitting their recovery. There is no public interest which intervenes as to them.

The case comes within the principle of Nathan v. Dierssen, 164 Cal. 607 , [ 130 Pac. 12 ]. There an action was brought for mesne profits by a plaintiff out of possession. Pending the action the defendant surrendered possession and thereafter judgment was given against him for mesne

The various conclusions we have stated necessitate a reversal of the judgment against the plaintiff. They go further. They show that the plaintiff was plainly entitled to judgment upon the evidence presented at the trial. It remains to consider ‘whether judgment can be entered for her upon the findings. The findings set forth that the plaintiff was the original owner of the property: that she conveyed it to the Suburban Company, which executed its mortgage; that the mortgage was foreclosed upon the plaintiff’s cross-complaint; that the Peoples Company was made a defendant to the cross-complaint and a lis pendens naming it as a defendant was recorded by the plaintiff at the time the cross-complaint was filed; that the foreclosure decree “ordered, adjudged and decreed . . . that said mortgage was a lien prior and superior to any and all rights, title and claims and interests of any of the defendants in said action on the property described in the judgment [foreclosure decree]; that the property was sold at foreclosure and bought in by the plaintiff and the sheriff’s deed to her executed; that the defendant was a purchaser ’pendente lite from the Peoples Company, who was at the time in possession; that the defendant entered into possession claiming title only under such purchase; that it has remained in possession ever since; that the property is part of a public utility plant, and that the reasonable value of the use and occupation of the property was $415 a month. [13] These findings are sufficient to require judgment for the plaintiff except, possibly, in two respects.

In the second place, there is no finding connecting the interest of the Peoples Company with the Suburban mortgage or the title of the Suburban Company. The finding, on the contrary, is that the Peoples Company had no right whatever in the property other than that of possession. If the fact as shown by the findings was merely this, it

It may perhaps be objected that while the foreclosure decree itself when considered, as we have heretofore considered it, in connection with the judgment-foil of which it is a part, shows that the interest of the Peoples Company was foreclosed upon, yet neither the decree nor the balance of the judgment-roll are a part of the findings here, that the findings here must be construed by themselves, and that so construed they amount on this point only to a finding that the foreclosure decree contained the usual declaration as to defendants not parties to the mortgage, a declaration which, under Beronio v. Ventura Co., would not, in the absence of anything more, be an adjudication that the interest of the Peoples Company was foreclosed. It is true that neither the foreclosure decree nor the judgment-roll is a part of the findings and that the findings must be construed by themselves. [14] But, even so, the construction that they find merely that the foreclosure decree contained a possibly inoperative declaration of the character mentioned cannot be sustained. The language of the findings is that the foreclosure decree “adjudged” that the lien of the mortgage was prior and superior to the interest of the Peoples Company. “Adjudged” is the equivalent" of “adjudicated,” and means a judicial determination and not a mere declaration which may be operative or not.

Shaw, J., Angellotti, C. J., Lennon, J., and Lawlor, J., concurred.

Rehearing denied.

In denying a rehearing the court filed the following opinion on May 7, 1920:

In denying the petition of the defendant for a rehearing we deem .it well to discuss two points which are raised by the petition. The first is that the trial court found that the Peoples Gas and Coke Company never had any title to the mortgaged property, and from this it is argued that the defendant by its purchase through Hayes .from the Gas and Coke Company acquired no title, and was therefore not a purchaser pendente lite and not subject to the rule that the statute of limitations will not run in favor of such a purchaser in possession during the pendency of the litigation. ■ It is true that the trial court found that the Peoples Gas and Coke Company never had any title to the property, the finding being based upon the supposed invalidity of the deed whereby the Gas and Coke Company purported to acquire the interest of the Peoples Gas Company. The right of the defendant to question the validity of this deed is open to serious question, but the point need not be determined, for the finding is wholly immaterial in any case. It makes no difference how invalid the title of the Peoples Gas and Coke Company was. The facts are, and the trial court so finds, that - that company was in possession of the property at the time of the filing in the foreclosure suit of the cross-complaint of Mrs. Dobbins upon which the decree of foreclosure was subsequently based, that, the Gas and Coke Company was made a party defendant by the cross-complaint and a lis 'pendens was recorded naming it as such, that the foreclosure decree adjudged that its interest, whatever it might be, was subject to the mortgage so that it was foreclosed upon, that pending the foreclosure suit instruments of eon

In other words, as found by the court, the title or claim of title of the Gas and Coke Company, however invalid it might be, was the only right or title which the defendant had when it took possession, and it took possession as the holder of such title and not otherwise. [15] Such title was plainly acquired by the defendant as a purchaser pendente Ute subject to the determination of the foreclosure suit, and of necessity the possession which accompanied such title and which was taken and held only by virtue of it was likewise held by the defendant as a purchaser pendente Ute and was subject to the determination of the foreclosure suit, and could not ripen as against the result in that suit into a title by adverse possession.

Defendant’s counsel in support of their position quote from Irving v. Cunningham, 77 Cal. 52 , [ 18 Pac. 878 ], as follows, the italics, however, being ours: “Persons not parties to an action of ejectment cannot be put out of possession of the premises involved, unless they entered under the defendant, either in good faith or coliusively, ” and from Graham’s Heirs v. Kitchen, 118 Ky. 18 , [ 80 S. W. 464 ], as follows, the italics again being ours: “It is thought, though, that there is something in the doctrine that an entry by a stranger to the suit, pendente Ute, affects him by the judgment as if he were a party to the record, as controlling the case before us. This doctrine can have no application here. It applies only when the stranger enters under some person who is a party to the suit. In that event he is hound hy the record and decree hy privity of his relation to him from whom he took title. He is bound in law to take notice of the records affecting his vendor’s title, but he is not bound to take notice of, nor is he bound by, a suit over the property between strangers to lUs chain of title and right of entry.”

Defendant’s counsel also urge that upon the point under discussion the case is governed by Robinson v. Thornton, 102 Cal. 675 , [ 34 Pac. 120 ], But the facts there, while in some aspects resembling those here, really presented a very different situation. The facts were that the owner of certain land mortgaged it. Suit to foreclose the mortgage was brought and after decree of foreclosure and sale the interest of the mortgagor was attached' in an action against him by a third person. The period of redemption from the foreclosure sale then expired without redemption, as a result of which the foreclosure purchaser became the absolute owner of the property free and clear of the attachment lien which was, in effect, destroyed. In this situation the mortgagor deeded the property to one Thornton, . who took possession and thereafter maintained it. Thornton’s possession so taken after the expiration of the period of redemption was, of course, hostile and adverse to the foreclosure purchaser, the real owner of the property, and if allowed by the latter to continue would ripen into a title by prescription against him. It was allowed so to continue, and thereby Thornton became the real owner of

[16] The second point we desire to 'discuss is the plea that, instead of directing judgment for the plaintiff, the cause, at most, should be sent back for a new trial. This plea' is made on the ground that the defendant has added very substantial improvements to the property while it has been in possession under a claim of right, that the property, the value of whose use and occupation is found by the court, includes these improvements, that the defendant has the right to remove such of the improvements made by it as can be removed without injury to the realty and should not be held liable for the value of the use and occupation of what may be so removed, and that a new trial is necessary to determine what may be so removed and the value of the use and occupation of the property after such removal. The answer to this is that the plaintiff is entitled to recover the value of the use and occupation of whatever was sold by the foreclosure decree, and that the property,

There are other points discussed in the petition, but they are all determined by what has been said in the original opinion, and we see no reason for departing from the conclusions there stated.

Rehearing denied.

All the Justices concurred.