Opinion
Rehearing Granted June 15, 1928.
Appeal from Superior Court, Los Angeles County; Carlos S. Hardy, Judge.
Action by Abner Podrat and others against Oscar Oberndorff, Carrie Belle Watson, Findlay Watson, and others. Judgment for plaintiffs, and defendants Carrie Belle and Findlay Watson appeal. Modified and, as modified, affirmed. COUNSEL
Walters & Mauk, of Los Angeles, for appellants.
Max Schleimer, of Los Angeles, for respondents.
OPINION
THOMPSON, Justice pro tem.
This is an appeal from a decree foreclosing a chattel mortgage and also a trust deed given to secure a loan.
October 1, 1923, for value, the defendant Oberndorff executed his note for $8,000 in favor of the appellants Carrie Belle and Findlay Watson, payable in installments of $200 each month. This note was secured by chattel mortgage on the furniture of the Plaza Hotel at Whittier Cal. November 17, 1923, this note and chattel mortgage were assigned to the respondents. The appellants, who were husband and wife, at the same time executed and delivered to the respondents their promissory note for $7,800 secured by a trust deed on lot 18, block 29, of the original city of Whittier, as collateral security for the payment of the note and chattel mortgage first mentioned. As a part of the same transaction the appellants and respondents executed an agreement imposing certain conditions with respect to the obligations incurred by the foregoing instruments, for the default of which the foreclosure of both the chattel mortgage and trust deed heretofore mentioned were authorized. In the event of foreclosure, the agreement specified that appellants would refund any taxes which the respondents were compelled to pay pursuant to said transaction. The appellants defaulted in the payment of several installments of the first-mentioned note. After demand, this action was commenced in a court of equity to foreclose the chattel mortgage and the trust deed. Judgment was rendered in favor of the respondents for $5,900 and interest, together with $517.67 attorney’s fees and $140.04 taxes.
The appellants contend that (1) the respondents had no authority to foreclose the chattel mortgage in the ordinary equitable proceeding, since the only power conferred by the chattel mortgage, in the event of default, was for the mortgagee to seize the property and sell it pursuant to division 3, pt. 4, tit. 14, c. 3, of the Civil Code, as a pledge; that (2) the trial court erred in allowing attorney’s fees and taxes, and that (3) the decree failed to preserve appellants’ right of redemption.
The chattel mortgage provided that:
"If the mortgagor shall fail to make any payment as *** provided, then the mortgagee may take possession of the property, using all necessary force so to do, and may immediately proceed to sell the same in the manner provided by law, and from the proceeds pay the whole amount of said note specified, and all costs of sale, including counsel fees not to exceed _____ per cent. upon the amount due. ***"
In the event of default, a power of sale may be conferred by the mortgage upon the mortgagee or upon any other person. Section 2932, Civ. Code. This power of sale conferred upon a mortgagee is deemed to be a part of the security for which the mortgage is given, and may be transferred to another by assignment. Section 858, Civ. Code. Upon default in the payment of any installment of the note, as assignee of the chattel mortgage, the respondents had the option to proceed to sell the mortgaged furniture as a pledge under the power of sale pursuant to division 3, pt. 4, tit. 14, c. 3, of the Civil Code, or to foreclose the chattel mortgage in the usual manner in a court of equity. Section 2967 of the Civil Code provides that:
"A mortgagee of personal property *** may foreclose the mortgagor’s right of redemption by a sale of the property, made in the manner and upon the notice prescribed by the title on ‘pledge,’ or by proceedings under the Code of Civil Procedure."
And with respect to the foreclosure of the right of redemption of a pledge, section 3011 of the Civil Code provides:
"Instead of selling property pledged, as hereinbefore provided, a pledgee may foreclose the right of redemption by a judicial sale, under the direction of a competent court. ***" Donohoe v. Gamble, 38 Cal. 340, 99 Am. Dec. 399.
So, also, where a power of sale is conferred by a mortgage or trust deed, the authorized power of sale is not the only method of satisfying the lien which is created, for this power of sale is merely a cumulative remedy. The lien creditor may disregard the power of sale and elect to foreclose the mortgage in a court of equity in the manner provided by law. 3 Jones on Mortgages (8th Ed.) 745, § 2234; also page 802, § 2295; Cormerais v. Genella, 22 Cal. 116; Fighiera v. Radis, 180 Cal. 660, 664, 182 P. 418; Cortelyou v. Vogel, 51 Cal.App. 785, 788, 197 P. 968; 5 Cal.Jur. 112, § 53. Any effort on the part of the contracting parties to deprive a court of equity of its general jurisdiction to foreclose mortgages by means of incorporating in the instrument terms to that effect is utterly void as an unwarranted interference with the ordinary course of judicial procedure. Guaranty Trust Co. v. Green Cove Railroad Co., 139 U.S. 137, 142, 11 S.Ct. 512, 35 L.Ed. 116; Sauter v. First Nat. Bank (C. C. A.) 8 F.2d 121; Brown v. Denver Omnibus & Cab Co. (C. C. A.) 254 F. 560, 569; Farmers’ L. & T. Co. v. Bankers’, etc., Tel. Co., 44 Hun (N.Y.) 400, 406. The equitable foreclosure of the trust deed and chattel mortgage in the manner pursued in the present case was therefore proper in spite of the power of sale conferred by the chattel mortgage. Nor was there error in failing to provide in the decree for an equity or redemption. When a sale is duly consummated pursuant to the power conferred in a chattel mortgage, or a transfer has been duly made pursuant to the terms of a trust deed, all equity of redemption is thereby foreclosed, and the grantor or mortgagor is thereby divested of his entire interest and title. Section 2903, Civ. Code; Wright v. Ross, 36 Cal. 414; Frese v. Mutual Life Ins. Co., 11 Cal.App. 387, 396, 105 P. 265; Bell Mining Co. v. First Nat. Bank of Butte, 156 U.S. 470, 15 S.Ct. 440, 39 L.Ed. 497.
In support of their contention that a court of equity had no jurisdiction to foreclose a trust deed or chattel mortgage which contained a direct power of sale as in the present case, the appellants rely upon the cases of Koch v. Briggs, 14 Cal. 256, 73 Am. Dec. 651; Herbert Kraft Co. v. Bryan, 140 Cal. 73, 73 P. 745; and Galusha v. Meserve, 58 Cal.App. 174, 208 P. 348. Neither of these cases are authority in conflict with the foregoing well-established rule to the effect that a specific power of sale conferred by a trust deed or a chattel mortgage, and the ordinary equitable procedure of foreclosure, are mere cumulative remedies, either of which may be pursued in foreclosing a lien. It is true that the statement is made in these cases that an ordinary suit to foreclose a trust deed will not lie. But this declaration was not necessary to the determination of either of these cases, and is dicta having been inadvertently made, and conflicts with the uniform trend of American authorities. In the Koch Case above cited the purchaser of the real property, which was sold pursuant to a power of sale conferred by a trust deed, brought an action in ejectment for the possession of the property. A demurrer was sustained upon the ground that the complaint failed to demand a judicial foreclosure of the trust deed as a mortgage. Final judgment was entered upon this ruling. On appeal the judgment was reversed. The question of whether a trust deed could be foreclosed as a mortgage was not involved in that action. In the Herbert Kraft Case cited by appellants, an action was brought on a promissory note. In a cross-complaint which was filed in that action, the defendant alleged that a sale of property occurred under the provisions of a trust deed, the proceeds from which sale he claimed he was entitled to credit on his promissory note. On motion of plaintiff, the allegations respecting the sale were stricken from the cross-complaint. These allegations were held to be immaterial to the action. The question of the proper method of terminating the lien created by the trust deed was not there involved. On appeal the judgment of the lower court was affirmed. The expression of the court that "on such an instrument, a suit for foreclosure will not lie," was not necessarily involved. Likewise, in the Galusha Case above cited, a suit was brought to set aside a deed executed pursuant to a power of sale conferred by a trust deed. The validity of the sale under the trust deed was the only issue involved in the action. It was not necessary to determine whether a foreclosure of mortgage might also have been a proper method of procedure. The court inadvertently approved the foregoing quotation from the former cases without the necessity of so doing. In the case of Bell Mining Co. v. First Nat. Bank of Butte, 156 U.S. 470, 15 S.Ct. 440, 39 L.Ed. 497, Mr. Justice Field, who also wrote the opinion in the Koch Case, supra, nullified the objectionable language used in the former case when he says at page 477 (15 S.Ct. 443):
"The power of sale in the indenture, whether we call it a deed of trust or a mortgage, does not change its character as an instrument for the security of the indebtedness designated, but it is an additional authority to the grantee or mortgagee, and if he does not choose to foreclose the mortgage by any of the ordinary methods provided by law, he can proceed under the power added for the sale of the property, to obtain payment of the indebtedness. The insertion of a power of sale does not affect the mortgagor’s right to redeem so long as the power remains unexecuted and the mortgage is not, as it may be, foreclosed in the ordinary manner, but when a sale is made of the interest of the mortgagor, his right is wholly divested, embracing his equity of redemption."
The facts of the Bell Mining Case, supra, were almost exactly like the facts of the Koch Case. Mr. Justice Field here recognizes the legal right to terminate the lien created by a trust deed by a sale either as a pledge or by foreclosure.
Moreover, so far as the general question of the right to foreclose a chattel mortgage or trust deed containing a specific power of sale pursuant to the law of pledges by means of the ordinary procedure in equity is concerned, that has become moot in the present case for the reason that the briefs of the respective parties disclose the fact that the judgment has been fully paid and satisfied by the appellants, except as to the items of attorney’s fees and taxes. In response to this charge, the appellants admit in their closing brief that:
"We were compelled to pay the amount of the judgment, except attorney’s fees and taxes."
If certain points raised on the appeal are settled and have become moot, the court will not consider them, but will devote its attention to the remaining points in controversy. 2 Cal.Jur. 804, § 472, and cases there cited.
Attorney’s fees were, however, improperly allowed in the present case for the reason that the agreement contained in the chattel mortgage to pay counsel fees did not contemplate services for foreclosing the mortgage in a court of equity.
The allowance of attorney’s fees depends entirely upon the contract between the parties. 3 Cal.Jur. 683, § 84. Section 1021 of the Code of Civil Procedure provides:
"The measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties. ***"
The only contract for the payment of attorney’s fees in the present case is found in the language of the chattel mortgage heretofore quoted, which provides that, in the event of default, the mortgagee may take possession of the property and proceed "to sell the same in the manner provided by law (as a pledge) and from the proceeds (of such sale) pay the whole amount of said note, _____, including the counsel fees not to exceed per cent. ***" Where a provision for attorney’s fees is stipulated, but the amount is left blank, a reasonable fee may be allowed. 3 Jones on Mortgages (8th Ed.) 514, § 2059; Alden v. Pryal, 60 Cal. 215. If there is no stipulation in the mortgage for the payment of counsel fees, they cannot be allowed. 3 Jones on Mortgages, supra, 215, § 2059; 5 Cal.Jur. 109, § 50; Fell v. Frierson, 171 Cal. 351, 153 P. 229; Sichel v. De Carrillo, 42 Cal. 493; Boob v. Hall, 107 Cal. 160 40 P. 117. In the case last cited it is said:
"Neither the prayer in the complaint for its allowance nor the averment of the amount which would be reasonable can supply the necessity of a direct averment that an attorney’s fee had been agreed to be paid by the mortgagor."
If, however, the fees are provided for in the note, although they are omitted from the mortgage, under proper pleadings, they may still be allowed. Worth v. Worth, 155 Cal. 599, 102 P. 663; National Bank of California v. Mulford, 17 Cal.App. 551, 120 P. 446. But attorney’s fees will not be awarded in a foreclosure suit unless proper averments authorizing the same are incorporated in the pleadings. 19 Standard Ency. of Proc. 1056.
The specific question involved in the present case is whether a contract to allow attorney’s fees for the seizure and sale of personal property under a chattel mortgage will authorize the allowance for the performance of entirely different service, to wit, the foreclosure of the mortgage. The respondent claims that the language of the chattel mortgage implies that attorney’s fees were contracted to be paid for services performed in satisfaction of the mortgage lien, by whatever procedure this end was accomplished. No case is cited in support of this claim. On the contrary, it is said in 3 Jones on Mortgages, supra, at page 520:
"Under a provision in a power of sale for an attorney’s fee in case of foreclosure by (seizure and sale) no allowance can be made if the mortgage is foreclosed in chancery instead." Van Marter v. McMillan, 39 Mich. 304; Sage v. Riggs, 12 Mich. 313; Hardwick v. Bassett, 29 Mich. 17.
In the case of Brown & Parler v. Kolb, 92 S.C. 309, 75 S.E. 529, it is said:
"The mortgage provided that on default, the mortgagee might seize and sell the property, and that upon the sale ‘he shall apply the proceeds of such sale, after deducting all expenses and charges, including attorney’s fees, toward the payment and discharge of the indebtedness,’ etc. Under a similar contract, it was held in Walker v. Killian, 62 S.C. 482, 40 S.E. 887, that the mortgagee could not claim the fees if he foreclosed by action and not by seizure under the power."
The judgment in this last-mentioned case was modified by striking out the amount allowed for attorney’s fees. Upon the foregoing authorities, we are of the opinion that the counsel’s fees were improperly allowed in the present case.
So, also, the item of $140.04, paid by respondents for taxes, was erroneously allowed, for the reason that the complaint failed to allege that any sum for taxes was paid by the respondents. The question of taxes was not an issue in the trial of the case. In the case of Brichetto v. Raney, 76 Cal.App. 232, 245 P. 235, relied on by respondents in support of this contention, it appears that the complaint there alleged the authorization which was contained in the mortgage to reimburse the mortgagee for any taxes paid by him, together with the fact that he had incurred the expense by so doing, and a prayer for reimbursement.
The respondents contend that the question of the allowance of attorney’s fees and of taxes is not reviewable, since the appeal is based solely upon the judgment roll, and since the evidence is not before this court for consideration. And, furthermore, the respondents assert that under article 6, § 4 ½, of the Constitution, a judgment may not be reversed for any defect of pleadings, except when such a defect accomplishes a miscarriage of justice, citing Etienne v. Kendall (Cal.App.) 258 P. 435 [opinion adopted by Supreme Court, see 259 P. 752]. But the facts of that case were entirely different from those in the case at bar. In the present case the record discloses the fact that there was no contract to support an allowance of counsel fees, and no pleading upon which to base an allowance for refunding taxes. The constitutional provision relied upon by respondents was intended to remedy defective pleadings, and the improper admission or rejection of evidence. It is not intended to supply authority to dispense with either pleadings or evidence upon a material issue. Such a construction would be destructive of all rules of pleading and procedure. People v. Schiaffino, 73 Cal.App. 357, 360, 238 P. 725.
For the foregoing reasons, the judgment is modified so as to eliminate the allowance of $517.67 attorney’s fees and $140.04 taxes. As so modified, the judgment is affirmed. The appellants will recover their costs of appeal.
We concur: KOFORD, P. J.; NOURSE, J.