Opinion
Hearing Granted by Supreme Court Oct. 15, 1928.
Appeal from Superior Court, Los Angeles County; J. A. Smith, Judge.
Action by M. Marie Tomblin against Frank C. Hill and others. Judgment for defendants, and plaintiff appeals. Reversed. COUNSEL
Hugh Dickson and Duke Stone, both of Los Angeles, for appellant.
Hewitt, Crump & Penn, of Los Angeles, for respondents.
OPINION
BARTLETT, Justice pro tem.
Plaintiff asks in this action to have the defendants Frank C. Hill and Cornelia Beauvais declared to be holders of the legal title to certain real properties situated in the city of Los Angeles in trust for her, and for an accounting of rents and profits. It is alleged in the complaint that plaintiff at all times since November, 1921, is and has been the owner and entitled to the possession of the property; that on November 21, 1921, she employed the defendant Hill as her attorney to represent her in litigation pending in the superior court of Los Angeles county; that in 1922 a judgment was rendered in an action wherein one Olive Pearl Phillips was plaintiff against this plaintiff, defendant Hill acting as attorney for this plaintiff in the action; that on January 2, 1923, the property in litigation was sold by the sheriff under an execution issued in the Phillips action, and purchased by Mrs. Phillips through her attorney; that on April 27, 1923, Mrs. Phillips assigned her sheriff’s certificate to the Union Bank & Trust Company; that on January 3, 1924, the Union Bank & Trust Company assigned its interest under the sheriff’s certificate to the defendant Cornelia Beauvais; that said Cornelia Beauvais was acting for Hill in an attempt and with the design of acquiring the property for himself, and in fraud of plaintiff’s rights; that on January 3, 1924, the sheriff executed a sheriff’s deed of the properties to the defendant Beauvais; that said Beauvais is the agent of Hill, and holds the title to the property for said Hill; that Hill on several occasions between January 2, 1923, and January 2, 1924, refused to give plaintiff the address of defendant Beauvais; that Hill and Beauvais claim to own the property to the exclusion of plaintiff; that a mortgage on the property is held by the Union Bank & Trust Company; that Hill has purchased other judgments against plaintiff with intent and design to acquire title to the property for himself, said purchases having been made without the knowledge or consent of plaintiff, and in fraud of plaintiff, and in violation of the duties of Hill as the attorney for plaintiff; that Hill has collected certain rents, and paid out money for taxes and interest; that plaintiff offers to repay any moneys paid out by Hill lawfully in the purchase of judgments against plaintiff, and any other sums he may have legally expended; that the property at the time of the sale under the Phillips judgment was worth $55,000; and that at the time this action was instituted the property is of a value of $80,000.
The answer of Hill, Beauvais, and the Union Bank & Trust Company denies ownership of the property by plaintiff, denies all allegations of fraud, and denies the property to be of a value in excess of $55,000. As an affirmative defense it is averred in the answer that on January 2, 1923, plaintiff owned the property subject to a $12,000 mortgage held by the Security Trust & Savings Bank, which mortgage indebtedness was then in default, to two judgment liens in favor of one Koeberle for the sums of $1,180.45 and $922.45, respectively, to a judgment in favor of one O. D. Collins for $25,000, to a judgment in favor of one Rublee for $2,279.54, and certain delinquent taxes and penalties, and interest thereon, which it is alleged amount approximately to the market value of the property. The answer sets forth in detail the acts and events leading up to and following the acquisition by Hill of the property, and avers acquiescence, ratification, and estoppel, and also avers as a defense that plaintiff is not the real party in interest.
The trial court found in favor of the defendants on all the material issues involved, and decreed by its judgment that plaintiff has no right, legal or equitable, in or to the property in question; that defendant Frank C. Hill is the owner and entitled to the possession thereof; that neither Frank C. Hill nor Cornelia Beauvais holds title to the property in trust for plaintiff; and that plaintiff is entitled to recover nothing by her action.
The evidence adduced at the trial shows that plaintiff first became acquainted with defendant Hill in 1905, and first consulted him professionally in June, 1921, at which time she called at his office for advice and assistance concerning a threatened foreclosure of a trust deed which she had given on this property to O. D. Collins and J. O. Mouser on March 1, 1921, for the sum of $35,000, due 60 days after date. This loan was in fact $25,000, the excess of $10,000 being usurious interest. In addition to the Collins trust deed, plaintiff owed over $12,000 to the Security Trust & Savings Bank on a note secured by her first mortgage on the same property, federal income taxes, city and county taxes, and a large amount of open accounts to merchants and others, aggregating many thousand dollars. For some months Hill negotiated with the attorneys for Collins in an endeavor to obtain a reduction of the Collins demand, so that the property could be refinanced. He was not successful in this, and Collins insisted on full and immediate payment, and served notice of sale on plaintiff under this trust deed, fixing the date of sale for November 29, 1921. On November 15, 1921, upon proceedings had in the superior court of Los Angeles county, plaintiff was adjudged incompetent, and her brother-in-law John H. Coulter, was appointed her guardian. The guardian retained Hill and commenced an action against Collins to have the trust deed declared void, and for a penalty of $30,000 under the Usury Act; a temporary injunction was issued and served, restraining the trustee from selling the properties; the action was thereafter tried, and resulted in a judgment rendered November 20, 1922, which declared the trust deed void, but which gave Collins a simple money judgment on the cross-complaint, which he had interposed, for $25,000, without interest. From this judgment the guardian of plaintiff took an appeal, and thereafter this judgment was affirmed by the Appellate Court of the Second Appellate District, Division 1, the decision therein being reported in 71 Cal.App. 380, the same being filed February 21, 1925.
Prior to the time plaintiff was adjudged incompetent, one Koeberle, an assignee of several Los Angeles merchants, secured a judgment against plaintiff on December 31, 1921, for $1,161 and costs. Hill was not an attorney for plaintiff or her guardian in this action. On April 29, 1923, this judgment was purchased by one G. C. Watson, acting for Hill, an execution was issued thereon, and the property was sold to Watson on May 21, 1923, and the writ of execution was wholly satisfied. On January 17, 1922, Koeberle obtained a judgment in another action against plaintiff for $1,922.45. On August 17, 1922, one Mrs. Olive Pearl Phillips, who had loaned plaintiff some money and taken her note for $8,000 to evidence the loan, began an action on the note against plaintiff’s guardian. Hill appeared in this action for the guardian, and answered, denying liability for more than $2,500. An attachment was issued, and the property in controversy was levied upon on August 17, 1922. On a trial of the action judgment was rendered in favor of Mrs. Phillips on November 1, 1922. On January 2, 1923, under an execution issued in this last action the property was sold to Mrs. Phillips for $6,922.55, the writ being returned as fully satisfied. The sheriff issued his certificate of sale to Mrs. Phillips on January 2, 1923, and on April 27, 1923, Mrs. Phillips assigned all her right, title, and interest in the property under the sheriff’s certificate to the Union Bank & Trust Company, which bank on January 3, 1924, assigned its interest in the property to the defendant Cornelia Beauvais. On January 3, 1924, the sheriff of Los Angeles county executed a sheriff’s deed of the property to defendant Cornelia Beauvais.
On November 24, 1922, a writ of execution on the $25,000 Collins judgment was issued, and on January 15, 1923, all the right, title, and interest of Coulter, as guardian, and of the plaintiff, in and to the properties, was sold to Collins for $25,422.55, the judgment being thereby satisfied in full, and on January 29, 1924, the sheriff issued his deed of the properties to Collins. On November 6, 1922, one Kenneth Rublee, a nephew of plaintiff, commenced an action against her for $2,000 and costs, and attached the property, obtaining judgment by default on November 28, 1922; the judgment being for $2,266.14, together with costs and attorney’s fees. Hill was not an attorney in this case, and no levy or sale was made under this judgment. On May 21, 1923, the Security Trust & Savings Bank assigned its $12,000 mortgage, which was then in default, to one G. C. Watson, and on the same day the Union Bank & Trust Company, as assignee of the sheriff’s certificate of sale under the Phillips judgment, redeemed from the Koeberle sale. The plaintiff was restored to competency on December 20, 1922. Immediately after this plaintiff told Hill she had large sums of money due her from an estate in the East, and that she intended to go to the East and collect moneys sufficient to pay up all of the mortgages, judgments, and debts she was owing in California. About March 19, 1923, she departed for the East and remained there until about December 10, 1923, when she returned to the city of Los Angeles. During her absence plaintiff often wrote and telegraphed Hill that she was making progress in the collecting of moneys, and would soon have them in hand and make remittances sufficient to clear all of her indebtedness.
On or about April 17, 1923, Hill was informed by the former guardian of plaintiff that plaintiff would be unable to redeem from the sheriff’s sales that had been made on the Koeberle and Phillips judgments, and thereupon said Hill caused one George C. Watson to purchase, with funds advanced by Hill, the Koeberle judgments, and later caused the Union Bank & Trust Company to purchase the certificate of sale issued on the Phillips judgment, and on May 21, 1923, did cause the Union Bank & Trust Company to purchase the mortgage of the Security Trust & Savings Bank on the plaintiff’s property. These judgments, certificates of sale, and mortgages were afterwards assigned to the defendant Cornelia Beauvais, and thereafter transferred by her to the defendant Hill. Hill notified the former guardian of plaintiff that he had purchased the mortgages and judgments, that plaintiff claimed she was about to receive large sums of money in the East, that such moneys had not been forthcoming, that unless plaintiff redeemed from these sales before January 2, 1924, she would lose all right to the property, and asked Coulter to urge plaintiff to make the redemptions. Hill thereafter gave plaintiff a full and accurate account of the moneys he paid out, urged and requested her to redeem before January 2, 1924, and after her return from the East told her it was necessary for her to redeem the property before January 2, 1924, or she would lose all her rights thereto.
Plaintiff, instead of redeeming the property, on or about February 15, 1924, came to Hill and represented that she had a cash purchaser of the properties for $52,500, and asked him if he would be willing to make such sale, and out of the proceeds take only the moneys he had actually advanced. To this Hill consented, and a deal to effect this sale was begun, but was abandoned by plaintiff, for the reason that she would receive no moneys from such sale, as her debts exceeded the sum of $63,000. After this no further claim of her having any interest in the property was made by plaintiff until May 11, 1925, on which date this action was begun.
The claim that defendant Hill holds the property under a constructive trust is based upon the ground that he was the attorney for plaintiff in certain legal proceedings, which culminated in the legal title becoming vested in Hill prior to the institution of this action. That it is a presumption of law that, when an attorney purchases at a judicial sale property in relation to which he has in some way acted in a professional capacity, he shall be regarded as the trustee of his client is well established, unless he shows he has purchased for himself, with his client’s consent, and that the transaction is in every way fair and not to his client’s disadvantage. An attorney is under no actual incapacity to deal with or purchase from his client. If he makes a clear showing that there has been a consent with full knowledge on the part of his client, no abuse of confidence, and no advantage taken, the legal presumption of his being a constructive trustee of properties purchased is overcome and his purchase will be upheld. Kisling v. Shaw, 33 Cal. 425, 91 Am. Dec. 644; Boardman v. Crittenden, 52 Cal.App. 438, 198 P. 1020; 3 Cal.Jur., p. 622, § 33.
If it be conceded there was no abuse of confidence and no advantage taken, the defendant’s own testimony in this case shows that he made the purchases without the knowledge or consent of plaintiff. He thereafter held the property in trust for her, a relation which he could not change by any act of his without her consent. Dean v. Shingle, 198 Cal. 652, 658, 246 P. 1049, 46 A. L. R. 1156; Cobb v. Whitney, 124 Okl. 188, 255 P. 566.
While it cannot be said that the evidence taken at the trial of this action shows that there was any willful abuse of confidence or intentional taking advantage of his client on the part of defendant in the many transactions that resulted in the legal title to the properties becoming vested in him, there are certain elements entitled to serious consideration. The mental incapacity during a portion of the time in which the relation of attorney and client obtained, the position taken by Hill in the Phillips case that the loan sued on was for the sum of $2,500, instead of $8,000, his purchase thereafter of the certificate of sale on this judgment for $6,922.55 and its accruing penalties, his having a third party, G. C. Watson, and the defendant Cornelia Beauvais become the apparent purchasers of the various certificates of sale and judgments and mortgage against plaintiff, and his consent to permit plaintiff to negotiate a sale of the property after the time to redeem from the sale under the Phillips judgment, taken into consideration with the large difference between the amount expended on account of the properties by Hill, some $27,500, and their admitted value of $55,000, are persuasive facts in this case pointing to the conclusion that defendant Hill, up to the time of the present controversy, considered himself a trustee of the properties involved for the plaintiff. Counsel for defendants concede:
"It is not clear whether Hill purchased the Phillips’ certificate of sale and the mortgage of the Security Bank and redeemed from the Koeberle sale, intending at that time to hold adverse to Mrs. Tomblin."
As stated, if the defendant did not then intend to acquire the property in his individual capacity, he could not change the character of his title by a subsequent change of intention.
The sheriff’s certificate of sale and the deed made thereunder to O. D. Collins, pleaded by defendants as a fourth affirmative defense as a bar to this action, presents a novel matter for consideration. Said O. D. Collins is not a party to this action. Under section 700 of the Code of Civil Procedure the purchaser at an execution sale becomes the successor in interest of the judgment debtor, whether his title under the certificate of sale be considered legal or equitable. Pollard v. Harlow, 138 Cal. 390, 71 P. 454, 648; Leaver v. Smith, 47 Cal.App. 474, 190 P. 1050; Bateman v. Kellogg, 59 Cal.App. 464, 211 P. 46; Wangenheim v. Garner, 42 Cal.App. 332, 183 P. 670; Freelon v. Adrian, 161 Cal. 13, 118 P. 220; 11 Cal.Jur. 117, § 64.
Section 367 of the Code of Civil Procedure provides that every action must be prosecuted in the name of the real party in interest. Can a defense that an action is not being prosecuted by the real party in interest be invoked as a bar to the action, where the defendant is shown to be a trustee for the plaintiff? The purpose of an action seeking the holding of a defendant to be a trustee of real properties is in many respects similar to one for quieting title to real estate. In such actions it has been held that a defendant not in possession cannot defeat a title of a plaintiff in possession by showing title in a stranger to the suit with whom he is not in privity. McGrath v. Wallace, 85 Cal. 622, 24 P. 793; Williams v. City of San Pedro, 153 Cal. 44, 94 P. 234; Sears v. Willard, 165 Cal. 12, 130 P. 869; Rockey v. Vieux, 179 Cal. 681, 178 P. 712; Kilfoil v. Warden, 46 Cal.App. 503, 189 P. 303; Weldon v. Lawrence, 76 Cal.App. 534, 245 P. 451.
The possession of a trustee is the possession of his beneficiary. A trustee holds the legal title for his beneficiary. It cannot be held that he can defeat the beneficiary’s claim by showing that the beneficiary’s title has passed to some third person, not a party to the action.
The judgment is reversed.
We concur: FINCH, P. J.; PLUMMER, J.