Hornbuckle v. Harris

• Decision Date: 25 July 1984
• Docket Number: Nos. A8107-04619 and A8108-05315,s. A8107-04619 and A8108-05315
• Citation: 69 Or.App. 272,686 P.2d 418
• Parties: Howard HORNBUCKLE, Appellant, v. Robert HARRIS, Bob's Messenger Service, Inc., an Oregon Corporation, Robert J. Brady, and Bonded Credit Company, an Oregon Corporation, Respondents. Donna BURNS, Appellant, v. Robert HARRIS, Bob's Messenger Service, Inc., an Oregon Corporation, Robert J. Brady, Capital Credit and Collection Service, Inc., an Oregon Corporation, and Hawthorne Land Co., Respondents. ; CA A25879.
• Court: Oregon Court of Appeals

Page 418

686 P.2d 418

69 Or.App. 272

Howard HORNBUCKLE, Appellant, v. Robert HARRIS, Bob's Messenger Service, Inc., an Oregon

Corporation, Robert J. Brady, and Bonded Credit

Company, an Oregon Corporation, Respondents.

Donna BURNS, Appellant, v. Robert HARRIS, Bob's Messenger Service, Inc., an Oregon

Corporation, Robert J. Brady, Capital Credit and

Collection Service, Inc., an Oregon

Corporation, and Hawthorne

Land Co., Respondents.

Nos. A8107-04619 and A8108-05315; CA A25879.

Court of Appeals of Oregon.

Argued and Submitted July 13, 1983.

Decided July 25, 1984.

Louis Savage, Legal Aid Service, Portland, argued the cause for appellants. With him on the briefs was Michael H. Marcus, Legal Aid Service, Portland.

James N. Westwood, Portland, argued the cause for respondents. With him on the brief were Bruce A. Rubin, and Miller, Nash, Yerke, Wiener & Hager, Portland.

Before GILLETTE, P.J., and WARDEN and YOUNG, JJ.

WARDEN, Judge.

In these appeals plaintiffs seek reversal of judgments of dismissal, entered after the trial court granted defendants' ORCP 21 A motions to dismiss and plaintiffs failed to replead. The cases were consolidated in the trial court. We reverse in part and remand.

The primary question we must answer is: Did plaintiffs allege facts sufficient to state a claim for relief? We are guided by ORCP 12 A, which states that "[a]ll pleadings shall be liberally construed with a view of substantial justice between the parties." In construing these complaints, "we must assume the truth of all well-pleaded facts and give the plaintiff[s] the benefit of the inferences that can properly and reasonably be drawn from those facts." Davidson v. Wyatt, 289 Or. 47, 64, 609 P.2d 1298 (1980); McWhorter v. First Interstate Bank, 67 Or.App. 435, 437, 678 P.2d 766, rev. den. 297 Or. 272 (1984).

We recite only the facts in plaintiff Hornbuckle's case, because there are few material differences in the facts of the two cases. ¹ In January, 1971, Hornbuckle purchased a home in Northeast Portland. In January, 1975, defendant Bonded, a collection agency, sued him for $675.81 in Multnomah County District Court. Defendant Harris operated a process serving business under the assumed name Bob's Messenger Service, ² which served Hornbuckle by making substituted service on his wife. Bonded took a default judgment and filed it with the clerk of Multnomah County Circuit Court, who docketed it in the circuit court judgment docket. ³ Bonded did nothing to enforce its judgment until March, 1979, when it caused a writ of execution to issue against Hornbuckle's home. As required by former ORS 23.450(2) (amended by Or.Laws 1979, ch. 761, § 1; Or.Laws 1981, ch. 840, § 9; and Or.Laws 1981, ch. 903, § 9a), the sheriff published a notice of sale and mailed a copy to Hornbuckle.

At the sheriff's sale on April 18, 1979, Bonded purchased Hornbuckle's home by bidding its judgment and costs, something less than $1,000. At that time Hornbuckle's equity in the home was approximately $22,500. He received no post-sale notice that his home was sold, ⁴ nor was he informed of his right to redeem the property under former ORS 23.520 to 23.600. At that time, no statute required that a judgment debtor be notified of his redemption rights. ⁵ Bonded did nothing for more than one year, until Hornbuckle's redemption rights had expired. Then on June 18, 1980, Bonded assigned its interest to Harris, and in April, 1981, defendant Brady acquired Harris' interest. During that entire time, Hornbuckle continued to live in the home, made mortgage payments ⁶ and paid real property taxes, even though Bonded, as purchaser at the judicial sale, was entitled to immediate possession of the property from the day of the sale. ORS 23.590.

Each complaint alleges six identical claims for relief. Specifically the complaints allege that defendants have a "pattern and practice" ⁷ of obtaining default judgments on small debts, executing on those judgments and then purchasing the homes of the judgment debtors at judicial sales, thereby unjustly enriching themselves by obtaining the excess equity in the real property. They also allege that defendants' "pattern and practice" is to exploit plaintiffs' ignorance of the consequences of judicial sales and their ignorance of the statutory right to redeem by failing to notify plaintiffs of their rights, thereby inducing plaintiffs to continue paying on their mortgages, to the further unjust enrichment of defendants. Additionally, they allege that, but for defendants' failure to advise plaintiffs of their right of redemption, plaintiffs would have redeemed their homes. We construe the complaints as alleging four claims based on an equitable right of a judgment debtor to redeem and two claims based on constitutional violations under 42 U.S.C. § 1983. As alternative remedies, plaintiffs request either an additional year to redeem, imposition of a constructive trust on the homes or money damages.

Oregon has long recognized the rule that the trial court has equitable power to set aside a sheriff's deed and allow a judgment debtor to redeem property when the price paid by the purchaser is so grossly inadequate as to shock the court's conscience. Thompson v. Thompson, 233 Or. 262, 378 P.2d 281 (1963); Ahlstrom v. Lyon, 169 Or. 629, 131 P.2d 219 (1942); Shepperd v. Holmes, 89 Or. 626, 174 P. 530 (1918). In Shepperd, the court affirmed the trial court's order allowing the plaintiff to redeem his property after the statutory redemption period had expired. The defendant had obtained a default judgment against the plaintiffs for $178. The sheriff sold real property of one of the plaintiffs to the defendant for the amount of the judgment plus costs, even though the fair market value of the property was $4,000. In affirming the trial court, the court relied on Graffam v. Burgess, 117 U.S. 180, 6 S.Ct. 686, 29 L.Ed. 839 (1886).

In Graffam, the plaintiff brought a bill in equity to compel the defendant to return to her lands and premises held by the defendant. Earlier, the defendant had sued the plaintiff when she had refused to pay $23 for masonry work done on her summer home, which was worth more than $10,000. He recovered judgment for $28.95 and costs. After judgment was entered, the sheriff sold the property to him for $73.10. The plaintiff, unaware of the sale, did nothing until after the statutory right to redeem had expired and the defendant had taken possession of the property. The trial court granted the plaintiff's bill and allowed her to redeem her property, and the defendant appealed.

The defendant argued that he had merely followed the law. Of that argument the court stated:

"It is insisted that the proceedings were all conducted according to the forms of law. Very likely. Some of the most atrocious frauds are committed in that way. Indeed, the greater the fraud intended, the more particular the parties to it often are to proceed according to the strictest forms of law." 117 U.S. at 186, 6 S.Ct. at 689.

It noted that the defendant took advantage of the plaintiff's ignorance of the sale, gave no notice of the sale nor of his intent to seize the property once the redemption period had expired but, instead, allowed the plaintiff to spend money improving the property. The court concluded that it was the defendant's design to obtain the property for a nominal consideration and, further, that he had pursued a course of conduct calculated "to lull [the plaintiff] into security and thus to prevent her from redeeming the property * * *." 117 U.S. at 190, 6 S.Ct. at 691. In affirming the late redemption, the court adopted the following rule:

" * * * [I]f the inadequacy of price is so gross as to shock the conscience, or if, in addition to gross inadequacy, the purchaser has been guilty of any unfairness, or has taken any undue advantage, or if the owner of the property, or party interested in it, has been for any other reason, misled or surprised, then the sale will be regarded as fraudulent and void, or the party injured will be permitted to redeem the property sold. Great inadequacy requires only slight circumstances of unfairness in the conduct of the party benefited by the sale to raise the presumption of fraud." 117 U.S. at 192, 6 S.Ct. at 692. ⁸

We recognize that the equitable right to redeem a mortgage "only exists until the interest is foreclosed, while the statutory redemption only begins after the interest is foreclosed." Land Associates v. Becker, 294 Or. 308, 313, 656 P.2d 927 (1982). However, that rule has been applied to mortgage foreclosures only. See Stamate v. Peterson, 250 Or. 532, 533, 444 P.2d 30 (1968). The rule is grounded in the nature of the contract obligation and its relation to the property. By giving a mortgage, the mortgagor expressly grants an interest in the mortgaged property to the mortgagee. The mortgagor knows, because the mortgage specifically provides, that failure to pay according to the terms of the mortgage can cause loss of the property securing the debt. We see no reason to extend the rule to apply to the foreclosure of these money judgments. Plaintiffs had not pledged their homes as security for payment of the debts. In fact, the judgments could not have been enforced by execution against their homes, if they had remained judgments of the district court.

Defendants urge that plaintiffs' complaints fail to state a claim, because plaintiffs have not alleged a violation of any duty owed them by defendants, citing Scoggins v. State Construction, 259 Or. 371, 485 P.2d 391 (1971). In Scoggins, the court relied on the Restatement of Restitution (1937) when it stated that an unjust enrichment claim must also allege an underlying ground, such as mistake, coercion, undue influence or fraud. 259 Or. at 376, 485 P.2d 391. We have defined mistake as a "state of mind which is not in accord with the facts." Ellison v. Watson, 53 Or.App. 923, 927, 633 P.2d 840, rev. den. 292 Or. 108 (1981). The...