Cooley v. Fredinburg

• Decision Date: 18 November 1996
• Docket Number: J-1
• Citation: 146 Or.App. 436,934 P.2d 505
• Parties: Marion C. COOLEY, Plaintiff, v. Robert Roger FREDINBURG, Appellant, Marion C. Cooley, as assignee of U.S. National Bank of Oregon, a national banking association; First Interstate Bank of Oregon, N.A.; L. Ken Casteel; John C. Preston and Patricia J. Preston, husband and wife; Timotheas John Horn and Normalee D. Horn, husband and wife; Tischhauser, Cooper & Co., a partnership; Frieda A. Kuttig; and Federal Deposit Insurance Corporation, in its corporate capacity as successor to Bear Creek Valley Bank, Defendants, and Hogue Investment Corporation, Respondent. 88-0971-; CA A89024. . On Appellant's Petition for Reconsideration
• Court: Oregon Court of Appeals

Page 505

934 P.2d 505

146 Or.App. 436

Marion C. COOLEY, Plaintiff, v. Robert Roger FREDINBURG, Appellant Marion C. Cooley, as assignee of U.S. National Bank of Oregon, a national banking association; First Interstate Bank of Oregon, N.A.; L. Ken Casteel; John C. Preston and Patricia J. Preston, husband and wife; Timotheas John Horn and Normalee D. Horn, husband and wife; Tischhauser, Cooper & Co., a partnership; Frieda A. Kuttig; and Federal Deposit Insurance Corporation, in its corporate capacity as successor to Bear Creek Valley Bank, Defendants and Hogue Investment Corporation, Respondent.

88-0971-J-1; CA A89024.

Court of Appeals of Oregon.

On Appellant's Petition for Reconsideration Nov. 18, 1996 and Respondent Hogue Investment Corporation's Petition for Reconsideration Nov. 19, 1996 Decided Feb. 19, 1997.

Douglas J. Richmond, Medford, for appellant's petition.

Richard D. Adams, Grant's Pass, for respondent Hogue Investment Corporation's petition.

Before WARREN, P.J., and EDMONDS and ARMSTRONG, JJ.

EDMONDS, Judge.

Appellant Fredinburg and respondent Hogue Investment Corporation (Hogue) separately petition for reconsideration of our decision in this case, in which we concluded that Fredinburg was entitled to judgment against Hogue in the amount of $9,837. Cooley v. Fredinburg, 144 Or.App. 410, 927 P.2d 124 (1996) (Cooley II ). ¹ We grant reconsideration of both petitions, increase the amount of Fredinburg's judgment to $12,723, and otherwise adhere to our previous opinion.

We quote the facts from our previous opinion:

"Fredinburg is the owner of real property that was subject to several liens. The senior lienholder, Cooley, filed a complaint for foreclosure and joined as defendants all junior lienholders as well as Fredinburg. One of the junior lienholders was the Federal Deposit and Insurance Corporation (FDIC). Cooley's complaint requested foreclosure of all liens on the property and sought a judgment against Fredinburg for the amount owed to her. Cooley's complaint also requested that the court apply

" 'any proceeds of the sale * * * first toward the costs of sale, then toward satisfaction of plaintiff's judgment prayed for herein, and any surplus to the party or parties who may establish their right thereto.'

"Except for FDIC and one other lienholder that had assigned its interest in the property to Cooley, all of the defendants, including Fredinburg, failed to appear, and the court entered orders of default against them. FDIC eventually entered into a stipulated judgment with Cooley that foreclosed all of the parties' liens. The stipulated judgment did not reduce to judgment the debt owed to FDIC. The judgment, however, provided:

" '6. The proceeds of sale shall be applied (a) to the costs of the sale; (b) then toward the satisfaction of plaintiff's judgment awarded in paragraph 1 above; c) next toward the satisfaction of defendant's Marian C. Cooley as assignee of U.S. National Bank of Oregon, judgment awarded in paragraph 3 above; and (d) the surplus, if any, to the Clerk of this Court to be disposed of by further order of this Court.'

"A third party bought the property at the foreclosure sale for more than was necessary to satisfy the judgment in favor of Cooley. As a result, the sheriff paid $14,581 as surplus proceeds to the clerk of the court. The clerk thereupon sent the surplus proceeds to Fredinburg. The trial court, upon learning of the clerk's action, sent a letter to Fredinburg demanding that Fredinburg return the money. Fredinburg did not respond to the court's letter or return the money.

"FDIC thereafter moved for an order directing that the surplus proceeds be disbursed to it. It did not serve Fredinburg with the motion. By this time, Fredinburg had redeemed the property. Pursuant to the motion, the trial court ordered 'that the Trial Court Administrator pay to the FDIC, or its assigns, the excess proceeds of Sheriff's sale in the sum of $14,581.40.' It further ruled:

" '6. On or about June, 1990, [Fredinburg] without seeking or obtaining approval or order of this Court, wrongfully obtained from the Trial Court Administrator payment to him of the $14,581.40 in excess proceeds of sale which should properly have been subject to further order of this Court; this Court has requested of Fredinburg the prompt return of these improperly obtained funds, which request has been refused.

" '7. The FDIC has represented to the Court that it intends to exercise an existing right to further redeem the subject property on or about February 11, 1991, during the course of which it will deposit with the Trial Court Administrator the approximate sum of $87,350, which sum would ordinarily be disbursed as a matter of course to Fredinburg as the previous redemptioner of the property.

" ' * * * * *

" 'IT IS FURTHER ORDERED that the Trial Court Administrator, in the event of a further redemption of the subject property, shall recover from any future redemption funds received which would otherwise be payable [to Fredinburg] the sum of $14,581.40, as a recovery of the excess proceeds from the original Sheriff's sale of June 14, 1990, which were previously inadvertently paid to Mr. Fredinburg without authority. That sum shall then be paid by the Trial Court Administrator to the FDIC or its assigns in accordance herewith.'

"Fredinburg received no notice of the court's order before its entry.

"Eventually, Hogue Investments, as the assignee of any interest that FDIC had in the property, gave notice of its intention to redeem the property from Fredinburg. Fredinburg objected, but the trial court concluded that Hogue was entitled to redeem the property. On appeal, we reversed, holding that the judgment of foreclosure had foreclosed FDIC's lien and that Hogue, as FDIC's assignee, lost its right to redeem the property because it had not 'established' its lien before the foreclosure. [Cooley I ]. While that appeal was pending, Hogue remained in possession of the property, received rents from it and made improvements.

"After our decision, Fredinburg brought this action against FDIC and Hogue seeking restitution for the actual rent received from the property or the property's reasonable rental value, whichever was greater, during the time that Hogue was in possession of the property. Hogue counterclaimed, alleging that the improvements that it had made to the property while it was in possession had increased the property's fair market value and that the costs of those improvements should be offset from the rent it had received. It also alleged that Fredinburg was indebted to it for the surplus of $14,581, as determined by the previous order and that it was entitled to recover that amount from him. The trial court dismissed Fredinburg's claims for restitution against both Hogue and FDIC on the ground that the cost of Hogue's improvements was greater than the rent received. It further ruled that the earlier order had determined FDIC's entitlement to the surplus proceeds and that it was binding on Fredinburg." Cooley II, 144 Or.App. at 413-15, 927 P.2d 124. (Footnote omitted; emphasis supplied.)

On appeal, we reversed the trial court, concluding that Hogue could offset the expenses "necessarily incurred in [the property's] protection," but could not offset the fair market value or cost of improvements from the rent it owed Fredinburg. 144 Or.App. at 417, 927 P.2d 124. We also concluded that the trial court erred in holding that Fredinburg was bound by the order requiring him to return the surplus proceeds from the sheriff's sale to FDIC "or its assigns," because Fredinburg was not given notice or an opportunity to be heard regarding that order. Id. at 419, 927 P.2d 124. Accordingly, we ordered judgment to be entered in favor of Fredinburg in the amount of $9,837.

In its petition for reconsideration, Hogue first argues that, while we correctly held that the trial court's order that Fredinburg return the surplus monies was void for lack of notice, Hogue's entitlement to the proceeds had previously been established. It reasons:

"The trial court had jurisdiction to keep the door open in the original foreclosure judgment for the Court to later dispose of foreclosure sale proceeds by 'further order.' The Court's Opinion from which reconsideration is sought correctly acknowledges that the trial court had proper jurisdiction to enter that part of the February 4, 1991, order awarding the excess sale proceeds to FDIC because that part of the order was completely consistent with the language found in both the complaint and the foreclosure decree. No notice to Fredinburg, as a defaulted party, was required for that part of the order as he had been properly served with the original complaint, and had defaulted. * * * No part of that order was ever appealed, and it became final years ago."

Hogue's argument, as we understand it, is premised on the language in the judgment that ordered that the surplus from the sale paid to the court clerk "be disposed of by further order of this court." The judgment obtained by Cooley foreclosed all liens on the property, ordered a sale of the property and ordered that Cooley's judgment and costs be satisfied from the proceeds of the sale. Cooley's complaint did not and could not have contemplated an order requiring Fredinburg to deliver the surplus proceeds to FDIC because at that time there was no certainty that there would be a surplus or that the surplus would find its way into Fredinburg's possession. The subsequent order to that effect was made by the court without notice to Fredinburg after the sale occurred.

Nevertheless, Hogue contends that the portion of the subsequent order that awarded the surplus to FDIC is a valid order because it was part of the relief contemplated by Cooley's complaint and the foreclosure judgment. We think that Hogue's argument overstates the relief that was requested by Cooley's complaint and granted by the foreclosure judgment....