Federal Land Bank of Spokane v. Schermerhorn

• Decision Date: 16 February 1937
• Citation: 64 P.2d 1337,155 Or. 533
• Parties: FEDERAL LAND BANK OF SPOKANE v. SCHERMERHORN et al.
• Court: Oregon Supreme Court

64 P.2d 1337

155 Or. 533

FEDERAL LAND BANK OF SPOKANE v. SCHERMERHORN et al.

Supreme Court of Oregon

February 16, 1937

En Banc.

Appeal from Circuit Court, Jackson County; H. D. Norton, Judge.

Suit to foreclose a real estate mortgage executed by G. L Schermerhorn and wife to secure payment of a promissory note for $3,200 by the Federal Land Bank of Spokane against G. L Schermerhorn and Ida Schermerhorn, the State of Oregon, and others, wherein the state through its Attorney General filed a motion to quash service of summons and complaint on it on ground that the State was nonsuable, which was denied. From a decree of foreclosure which also adjudged that any liens which the State and others had on the mortgaged property were inferior to the lien of the plaintiff's mortgage, the State of Oregon alone appeals.

Decree reversed.

I. H. Van Winkle, Atty. Gen. (Willis S. Moore, Asst Atty. Gen., on the brief), for the State of Oregon.

Dana E Brinck and E. C. Prestbye, both of Spokane, Wash. (T. W. Miles, of Medford, on the brief), for respondent.

ROSSMAN Justice.

The sole issue presented by this appeal is whether the State of Oregon can be made a party defendant in suits praying (1) for the foreclosure of mortgages, and (2) that the State's right in the property, whatever it may be, be declared inferior to the rights of the mortgagee plaintiff.

The complaint's sole references to the State of Oregon are in the caption, where its name appears as a party defendant, and in a paragraph which states:

"The defendants above named, and each and all of them, claim some right, title, lien or interest in the property in plaintiff's mortgage described, but their interest, if any, in and to said property is subsequent and junior to the right and lien of plaintiff."

The prayer asks that the mortgage be foreclosed and that all of the defendants be barred of whatever rights they may possess in the property described in the mortgage.

As indicated in the preceding statement, the State, through its Attorney General, appeared specially and moved that service upon it be quashed. It contended that the State "cannot be sued in the state courts without its consent, and such consent has never been given." The motion was denied and the State appeared no further. After an order of default had been entered, a decree was signed which recited that the State's interest in the property was "junior, inferior and subject to the lien of the plaintiff herein."

It will be observed that the pleadings do not delineate what interest, if any, the appellant claimed in the property described in the plaintiff's mortgage. However, the attorneys have informed us that the State's interest arises from the fact that in a criminal action it recovered a judgment for $633.70 against the defendant G. L. Schermerhorn, who, together with his wife, signed the note and mortgage held by the plaintiff. Section 13-1116, Oregon Code 1930, provides that a judgment in favor of the State for costs and disbursements in criminal actions "must be docketed as a judgment in a civil action and with like effect, as provided in § 2-1601 of the Code of Civil Procedure." The part of Section 2-1601 which is material follows:

"Immediately after the entry of judgment in any action the clerk shall docket the same in the judgment docket. *** From the date of docketing a judgment, as in this chapter provided, or the transcript thereof, such judgment shall be a lien upon all the real property of the defendant within the county or counties where the same is docketed, or which he may afterwards acquire therein."

Section 14-1019, Oregon Code 1930, provides:

"*** In all cases of the commission or attempt to commit a felony, the state has a lien, from the time of such commission or attempt, upon all the property of the defendant, for the purpose of satisfying any judgment which may be given against him for any fine on account thereof, and for the costs and disbursements in the proceedings against him for such crime; provided, however, such lien shall not attach to such property as against a purchaser or incumbrancer, in good faith, for value, whose interest in the same shall have been acquired before the docketing of the judgment against the defendant."

Section 6-105, Oregon Code 1930, provides:

"Any person may be made a defendant who has or claims an interest in the controversy adverse to the plaintiff, or who is a necessary party."

Section 6-502, Oregon Code 1930, which is a part of the legislative enactments providing for the foreclosure of liens upon property, provides:

"Any person having a lien subsequent to the plaintiff upon the same property or any part thereof, *** shall be made a defendant in the suit."

Article 4, § 24, Constitution of Oregon, provides:

"Provision may be made by general law for bringing suit against the state, as to all liabilities originating after or existing at the time of the adoption of this constitution."

As we have already stated, the State appeared specially for the purpose of challenging the court's jurisdiction over it. The plaintiff makes no contention that when the Attorney General joined with the plaintiff in volunteering the above information concerning the nature of the State's interest he thereby waived the State's immunity from suit and conferred jurisdiction upon the court. It will be observed that the Constitution vests in the Legislature, not in the Attorney General, authority to waive the State's immunity. The authorities cited in 59 C.J., States, p. 300, § 459, and p. 323,§ 481, indicate that the Attorney General, in the absence of legislative authorization, has no power to waive the State's immunity, even if he should desire to do so.

The problem that confronts us, therefore, is whether or not a mortgagee may name the State as a party defendant and force it to (1) contest or concede the interest of the plaintiff in the property described in the complaint; and (2) defend the interest which the State claims in that property.

The plaintiff seems to concede that the constitutional provision above quoted renders the State nonsuable except with its permission, but insists that in the legislative enactments above quoted consent that suit may be brought against it in mortgage foreclosure suits and suits to quiet title will be found by implication.

In Christian v. Atlantic & N.C. R. R. Co., 133 U.S. 233, 10 S.Ct. 260, 263, 33 L.Ed. 589, the federal Supreme Court seems to have foreseen the filing of this suit, for in that decision it not only spoke of the difficulty that facts of the kind disclosed by our record present, but also pointed out the legal principles controlling such a situation. We quote from the decision the following:

"There is a class of cases, undoubtedly, in which the interests of the state may be indirectly affected by a judicial proceeding without making it a party. Cases of this sort may arise in courts of equity, where property is brought under its jurisdiction for foreclosure, or some other proceeding; and the state, not having the title in fee, or the possession of the property, has some lien upon it, or claim against it, as a judgment against the mortgagor, subsequent to the mortgage. In such a case the foreclosure and sale of the property will not be prevented by the interest which the state has in it, but its right to redemption will remain the same as before."

But the plaintiff contends that the quoted language was unnecessary to the decision of the case. The facts in that suit were: The State of North Carolina had subscribed for railroad stock, and to pay for its subscription had issued bonds pledging for their payment the public faith, the stock itself, and any dividends which might be declared upon it. Subsequently it defaulted in payment of interest upon the bonds. The plaintiff, an owner of several of these bonds, instituted the suit under review and prayed that the bonds be declared a lien upon the stock owned by the State, that the dividends received by the State from the stock be applied upon the bonded indebtedness, and that, if the amount thus received by insufficient, the stock be sold for the benefit of the bondholders. He made as parties defendant two of the State's officials, but not the State. After making the statement above quoted, the court held that the State was a necessary party to the suit and that, in its absence, the claim was unenforceable. It pointed out that the State could not be sued by a private party without its consent. In Cunningham v. Macon & Brunswick R. R. Co., 109 U.S. 446, 3 S.Ct. 292, 609, 27 L.Ed. 992, the court indicated that a State's interest in property cannot be determined in litigation unless it waives its immunity from suit and voluntarily appears.

The situation before the court in American Trust & Savings Bank of Albuquerque v. Scobee, 29 N.M. 436, 224 P. 788, 789, was substantially similar to the one before us. The court held that the suit could not be maintained. The facts were that one M. E. Hickey had entered into a contract with the New Mexico Commissioner of Lands whereby he undertook to purchase a tract of state-owned land at a price of $142,882.26. A provision of the contract reserved to the State all minerals in the land. Plaintiff, as successor in interest to Hickey, filed a bill to quiet title to the land, claiming that the commissioner, in reserving to the State the mineral in the land, had exceeded his authority. He did not name the State as a defendant. The defendants demurred upon the ground that the State was a necessary party. In affirming the lower court's decision, which sustained the demurrer, the opinion above cited stated:

"The state, before its contract can be canceled or reformed must be before the court and in these...