Strutt v. Ontario Savings & Loan Ass'n

Opinion

On theories of fraud, negligence and unjust enrichment plaintiff sought damages, compensatory and punitive, against defendants Ontario Savings and Loan Association (hereinafter Ontario Savings) and Ontario Title Service Company, Inc. (hereinafter Ontario Title) for wrongful exercise of a private power of sale in a deed of trust and conversion of personal property. Plaintiff’s third amended complaint also sought declaratory relief. From an adverse judgment on all counts following trial to the court without jury, plaintiff appeals.

Contentions on Appeal

Originally, in addition to damages, plaintiff sought to invalidate the trustee’s sale as well as the subsequent sale to Iler and named Iler as a party defendant. Iler had summary judgment which was affirmed on appeal by this court in Strutt v. Ontario Sav. & Loan Assn., 11 Cal.App.3d 547 [ 90 Cal.Rptr. 69 ] [petition for hearing by the California Supreme Court denied November 18, 1970]. We there held that, assuming some fraud, imposition or breach of obligation by Ontario Title or Ontario Savings, the trustee’s sale was not void but at most voidable; that Iler was a bona fide purchaser for value without notice; and that, as to him, the sales could not be set aside. Thereafter the case proceeded to trial against the remaining defendants with the result as indicated above. On this appeal plaintiff makes the following contentions.

(1) “California Civil Code section 2924 denies constitutional due process and equal protection on its face under both California and federal law to the extent it permits a creditor to confiscate a debtor’s home, furniture and personal belongings without a preliminary hearing.”

(2) “California Civil Code section 2924 does not grant constitutional due process as applied to a debtor actually known to be incarcerated in a mental institution without a court appointed guardian?” (Original italics.)

(3) “If one of two innocent people must bear a loss—the one with the greatest opportunity to avoid it, should bear it.”

(4) “The omission of requested máterial findings requires reversal.”

(5) “The findings are not supported by substantial evidence that will in turn support the judgment.”

(6) “The trial court erred in dismissing plaintiff’s cause of action for declaratory relief?”

Plaintiff’s contentions, if properly made, would present questions of grave concern and considerable import. In advancing these contentions, however, plaintiff has largely ignored findings of fact made by the trial court on substantial evidence that all but make unnecessary consideration of the weighty questions presented by plaintiff’s view of the case.

Among the findings of fact made by the trial court are the following: “Plaintiff was under no legal incapacity from the time he purchased the apartment property in April, 1965 until at least after the trustee’s sale of the property on June 1, 1967.” “The reasonable value of all of plaintiff’s personal property located in and on said apartment property was $100.00 on June 16, 1967, when Ontario Savings paid $100.00 therefor.” “Neither Ontario Savings nor Ontario Title exercised any dominion over Plaintiff’s personal property until after Ontario Savings had purchased the apartment property and paid on Plaintiff’s behalf $100.00 for said personal property.” “The fair market value of the apartment property at the time of the trustee’s sale on June 1, 1967 did not exceed the balances due on the first and second trust deed notes plus the costs of sale.” “Ontario Savings and Ontario Title accurately and fairly accounted to Plaintiff for any moneys received by them on behalf of the Plaintiff and for all expenditures incident to the trustee’s sale of the apartment property.” “All of the actions of Ontario Savings and Ontario Title with respect to Plaintiff and his property interests were performed in more than a reasonable manner and were free from any taint of fraudulent conduct or imposition.”

Among the court’s conclusions of law are the following. “There was no conversion on the part of either Ontario Savings or Ontario Title of any of the Plaintiff’s property.” “Plaintiff suffered no damages by reason of any acts committed by either Ontario Savings or Ontario Title.”

Although plaintiff makes the general contention that the findings are not supported by substantial evidence, the only finding as to which he makes any specific argument is the finding that his personal property located in and about the rental units was reasonably valued at $ 100 on June 16, 1967. Even as to this finding, in making his argument, he adverts only to the testimony favorable to him, i.e., his own testimony that furniture on the premises was worth $1,200 and that his other personal property in and about the rental units was worth $900.

An appellate court is not required to consider alleged errors where the appellant merely complains of them without pertinent argument. (Estate of Randall, 194 Cal. 725 , 728-729 [ 230 P. 445 ]; Richard v. Richard,

Turning first to the problem concerning plaintiff’s personal property, the trial court’s conclusion that defendant Ontario Savings did not convert said property must be held erroneous. The rights and duties of the Department of Mental Hygiene concerning a patient’s property was in 1967 governed by Welfare and Institutions Code, sections 6650-6667 (now §§ 7275-7294, added by Stats. 1967, ch. 1667, operative July 1, 1969.) The department had a duty to cause an investigation to be made to determine the nature, extent and value of plaintiff’s property. (Welf. & Inst. Code, § 6653 [now § 7278].) The department had the right to accept moneys owing to plaintiff not in excess of $3,000 (Welf. & Inst. Code, § 6661 [now § 7289]) for deposit in plaintiff’s personal deposit fund (Welf. & Inst. Code, § 6657 [now § 7281]). The right to receive such funds, however, does not authorize the Department to compromise disputed claims of a patient. (Young v. Young, 14 Cal.App.3d 1 , 4-5 [ 92 Cal.Rptr. 148 ].) The department also had the right to take into possession for safekeeping plaintiff’s personal property (Welf. & Inst. Code, § 6660.5 [now § 7288]), but such right did not authorize it to sell any such personal property except in conformity with the code section last cited [patient likely to remain indefinitely; sale at public auction]. Clearly, the statutory scheme did not and does not contemplate sale of a patient’s personal property of disputed value in a private sale without appointment of a guardian and court authorization. (See Welf. & Inst. Code, §§ 6660 [now § 7284] and 6655 [now § 7279].)

Technically, therefore, when Ontario Savings paid the Department of Mental Hygiene $100 and took possession of plaintiff’s personal property on or after June 16, 1967, it converted that property. (Beverly Finance Co. v. American Casualty Co., 273 Cal.App.2d 259 , 264-265 [ 78 Cal.Rptr. 334 ]; Culp v. Signal Van & Storage, 142 Cal.App.2d Supp. 859 ,

The finding of the trial court that the fair market value of the apartment property at the time of the trustee’s sale on June 1, 1967, did not exceed the balances due on the first and second trust deed notes, plus the costs of sale is supported by substantial evidence. (See fn. 2, ante, and accompanying text.) Plaintiff places considerable emphasis on the fact that, shortly after the trustee’s sale, the property was resold by Ontario Savings to Iler for $32,500 and urges that the net gain to Ontario Savings of approximately $6,000 is a sum to which he should be equitably entitled. In this he is incorrect. In the first place, it is common knowledge that at forced sales such as a trustee’s sale the full potential value of the property being sold is rarely realized, and, in fact, Ontario Savings was the only bidder at the trustee’s sale. More importantly, there existed, at the time of the trustee’s sale an indebtedness to Livingston secured by a. second deed of trust in the approximate amount of $6,000, and had the property sold at the trustee’s sale for more than the amount of the indebtedness to Ontario Savings, the holder of the second trust deed note would have been equitably entitled to any such “surplus” up to the amount of the indebtedness owed him. (Dockrey v. Gray, 172 Cal.App.2d 388 , 391-392 [ 341 P.2d 746 ]; see Sohn v. California Pac. Title Ins. Co., 124 Cal.App.2d 757 , 766 [ 269 P.2d 223 ]; Cal. Land Security and Development (Cont. Ed.Bar 1960) § 13.28, p. 328; Ogden’s Cal. Real Property Law (1956) § 17.71, p. 669.) As noted in the statement of facts taken from the findings of the trial court, the net gain to Ontario Savings on the subsequent sale to Iler, which involved refinancing and sale through real estate brokers, was approximately $6,000, and the indebtedness secured by the second trust deed was in approximately the same amount.

In view of the foregoing, it is dubious whether any further discus

We have some difficulty understanding plaintiff’s contention that Civil Code, section 2924 is unconstitutional as applied. We have heretofore held that the notice provisions of Civil Code, section 2924 (see also Civ. Code, § 2924b) comport with due process. (Strutt v. Ontario Sav. & Loan Assn., supra, 11 Cal.App.3d at pp. 553-554.) While the trial court declined to adopt a finding that plaintiff had actual knowledge of the pending foreclosure sale, the evidence establishes that several notices concerning the sale were mailed to him at his last known address, and his failure to receive them was undoubtedly the result of his leaving the state after his initial default in payment without in any way communicating with defendants. “As noted in Mullane V. Central Hanover Bank & Trust Co., 339 U.S. 306 , 317 [ 94 L.Ed. 865 , 875, 70 S.Ct 652 , 658], ‘. . . it has been recognized that, in the case of persons missing or unknown, employment of an indirect and even a probably futile means of notification is all that the situation permits and creates no constitutional bar to a final decree foreclosing their rights. [Citations.]’” (Estate of Horman, 5 Cal.3d 62 , 79 [ 95 Cal.Rptr. 433 , 485 P.2d 785 ].)

Plaintiff’s attempt to equate a commitment under Penal Code, section 1368 with an adjudication of incompetency is mistaken. The criterion under Penal Code, section 1368 is whether the defendant is able to understand the nature and purpose of the proceedings taken against him. and to assist counsel in the conduct of his defense in a rational manner. (People v. Brock, 57 Cal.2d 644 , 648-649 [ 21 Cal.Rptr. 560 , 371 P.2d 296 ]; see also In re Franklin, 7 Cal.3d 126 , 141, fn. 9 [ 101 Cal.Rptr. 553 , 496 P.2d 465 ].) An incompetent for whom a guardian should be appointed is a “person, whether insane or not, who by reason of old age, disease, weakness of mind, or other cause, is unable, unassisted, properly to manage and take care of himself or his property, and by reason thereof is likely to be deceived or imposed upon by artful or designing persons.” (Prob. Code, § 1460; Guardianship of Walters, 37 Cal.2d 239 , 245 [ 231 P.2d 473 ].) A commitment to a state hospital pursuant to Penal Code, section 1368 is not the equivalent of an adjudication of either insanity or incompetency. (Cf. Hsu v. Mt. Zion Hospital, 259 Cal.App.2d 562 , 571-573 [ 66 Cal.Rptr. 659 ] and authorities there cited; cf. also In re' Franklin, supra.) There was considerable evidence before the trial court that plaintiff was not incompetent with respect to the management of his affairs. Shortly before his arrest on bad check charges, he had, by his own testimony, left on a trip in an attempt to liquidate other assets in order to cure

Plaintiff requested special findings on several points which the trial court declined to make, and plaintiff urges that reversal is required for failure of the court to make material findings. Most of the points upon which plaintiff requested special findings were either immaterial or questions of law, but two requested findings require consideration. Plaintiff requested the court to make a finding of the reasonable rental value of the apartments between February 9 and June 1, 1967 and the reasonable value of all personalty on or about the real property between February 9 and June 1, 1967. It is plaintiff’s theory that defendant Ontario Savings was a “mortgagee in possession” and thus accountable for the reasonable rental value of the property as opposed to the actual rents collected. Inferentially, although not expressly, it is apparently plaintiff’s position that as a “mortgagee in possession” defendant Ontario Savings was also accountable for the unexplained disappearance of any personal property between February 9 and June 1, 1967. (As to the rights and duties of a “mortgagee in possession” generally, see Murdock v. Clarke, 90 Cal. 427 , 438-440 [ 27 P. 275 ]; Johns v. Moore, 168 Cal.App.2d 709 , 713-714 [ 336 P.2d 579 ]; 1 Witkin, Summary of Cal. Law (7th ed. 1960) pp. 726-727.)

For the proposition that Ontario Savings was a “mortgagee in possession” plaintiff relies upon Childs etc. Co. v. Shelburne Realty Co., 23 Cal.2d 263 , 267 [ 143 P.2d 697 ]. But in Childs the court noted: “The bank’s possession was established by making Shelburne its agent to collect rents and manage the property. [Citations omitted.]” (23 Cal.2d at p. 267, italics supplied; see also Johns v. Moore, supra, 168 Cal.App.2d at p. 714.) The only evidence that defendant Ontario Savings took possession of the real property prior to the trustee’s sale is that following plaintiff’s default it sent letters to the tenants requesting payment of rent to it and that pursuant thereto some of the tenants paid their rent to Ontario Savings. It also appears that after plaintiff left the state, Mr. Livingston, the holder of the second trust deed note and an acquaintance of plaintiff, took possession of the apartment plaintiff had been occupying and paid some rent to Ontario Savings after deducting some small amounts he had paid out for minor work done by him on the property (mowing, trimming, gas bill for $1.90 and $3.46 for replacing an electrical switch). Plaintiff characterizes Mr. Livingston as Ontario Savings’ “de facto resident agent,” but

Neither in the trial court nor in this court has plaintiff challenged the right of Ontario Savings to attempt to collect rents prior to the trustee’s sale by means of letter requests therefor to the tenants and that question is not therefore before us. (See Cal. Real Estate Secured Transactions (Cont.Ed.Bar 1970) § § 2.12 and 2.13, pp. 17-18.) On the contrary, implicit in plaintiff’s contention that Ontario Savings constituted a “mortgagee in possession” is the premise that it was entitled to collect rents after default in this manner. Plaintiff has cited no case, and we have discovered none, holding that a beneficiary or trustee who, after default, does no more than collect rents by means of a letter request to the tenants and who does not undertake management of the property is a “mortgagee in possession.” We think he is not. That is not to say that a beneficiary or trustee under a deed of trust who receives rents from the property prior to a trustee’s sale is not accountable for the rents thus collected, but as several times heretofore noted, the trial court found that defendants did fairly and accurately account to plaintiff for the rents received.

Even if Ontario Savings was a “mortgagee in possession” the findings of the trial court that it rendered a fair and accurate accounting to plaintiff is, on the record before us, dispositive of plaintiff’s claim on this point. While a “mortgagee in possession” is in some respects treated as a trustee, in respect to his obligation to account for rents, “ ‘[t]he mortgagee may be held chargeable for rents and profits not actually received where, and only where, he has failed to use reasonable diligence, or where he is guilty of fraud, gross negligence, or wilful default ....’” (Johns v.

In the absence of any showing of negligence or wrongful conduct on the part of defendants with respect to plaintiff’s personal property between February 9 and June 1, 1967, and in view of the trial court’s express finding to the contrary and its further findings that defendants exercised no dominion over plaintiff’s personal property until after June 16, 1967 and that the value of plaintiff’s personal property on June 16, 1967 was $100, the value of plaintiff’s personal property between February 9 and June 1, 1967 was immaterial, and the trial court was not required to make any finding thereon.

Plaintiff’s contention that the trial court erred in denying his request for declaratory relief is unmeritorious. Plaintiff’s alleged right of action against defendants was fully matured at the time he filed his action, and declaratory relief was properly denied. (Travers v. Louden, 254 Cal.App.2d 926 , 931-932 [ 62 Cal.Rptr. 654 ]; 3 Witkin, Cal. Procedure (2d ed. 1971) pp. 2342-2343.)

No reversible error appearing, the judgment is affirmed.

In the interests of justice, the parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 26(a).)

Tamura, J., concurred.

Appellant's petition for a hearing by the Supreme Court was denied February 7. 1973.