Munger v. Moore

• Decision Date: 03 September 1970
• Citation: 89 Cal.Rptr. 323,11 Cal.App.3d 1
• Court: California Court of Appeals Court of Appeals
• Parties: Maynard MUNGER, Jr., Plaintiff and Respondent, v. Robert MOORE, Defendant, Cross-Defendant and Appellant. Valley Title Company, a California Corporation, Defendant, Cross-Complainant and Respondent. Civ. 25853.

Page 323

89 Cal.Rptr. 323

11 Cal.App.3d 1

Maynard MUNGER, Jr., Plaintiff and Respondent, v. Robert MOORE, Defendant, Cross-Defendant and Appellant Valley Title Company, a California Corporation, Defendant, Cross-Complainant and Respondent.

Civ. 25853.

Court of Appeal, First District, Division 1, California.

Sept. 3, 1970.

Bruce Oneto, San Jose, for appellant.

Field, DeGoff & Rieman, San Francisco, for respondent.

MOLINARI, Presiding Justice.

Defendant appeals from a judgment in the sum of $30,000 plus accrued interest entered in favor of plaintiff after a trial by the court upon supplemental complaint for tortious damages for wrongfully effecting a trustee's sale of a parcel of real property. ¹

The facts, essentially undisputed, are as follows: In 1959 defendant was the owner of a parcel of unimproved real property situated in Santa Clara County. Defendant exchanged such property with Mr. and Mrs. Atwill for a parcel in Los Angeles. The Atwills then sold the Santa Clara property to Geld, Inc. Geld gave Atwill and defendant notes and executed a deed of trust as security. Defendant's note was for $13,393.41, while Atwills' was for $36,606.59. Thus, the total encumbrance against the property was $50,000. Valley Title Company (hereinafter 'Valley'), a codefendant below, was named trustee.

Geld, Inc. then granted the subject property to one Reichert. Reichert, who intended to build an apartment complex on the parcel, executed a second deed of trust in favor of Home Foundation Savings and Loan (hereafter 'Home') as security for a $283,000 building loan from the latter. Shortly thereafter, Atwill and defendant agreed with Home to subordinate their deed of trust to that of Home. Accordingly, the Atwill-defendant deed of trust, although first in time, became second in priority.

Plaintiff then entered the picture by lending Reichert some $15,000 for construction of the apartment building. This loan was represented by a promissory note in the face value of $18,000 and was secured by a third deed of trust on the subject parcel. Shortly, thereafter, plaintiff advanced an additional sum of $10,000 to Reichert to be used to defray costs in the construction of said apartment building. In exchange for this loan plaintiff received a grant deed to the property from Reichert, but gave Reichert an option to repurchase the property for the sum of $25,000.

Subsequently, the payments on the Atwill-defendant note became in default. Accordingly, defendant caused to be published a notice of default and intent to sell. Apprised of such default notice, plaintiff duly and timely tendered to Valley the sum of $4,000 representing the sum needed to cure the default. Contrary to its advice to defendant and based upon his insistence, Valley refused plaintiff's tender. Defendant advised Valley that the note to Home, ² which was secured by the first deed of trust, was also in default and therefore plaintiff's tender was an insufficient cure of the default. Accordingly, the trustee's sale was had on May 22, 1963, and defendant, along with the Atwills, purchased the property at such sale for $57,920.94. Defendant held the property for several years and in 1965 'exchanged' the property for a price of $475,000.

On appeal defendant makes two contentions: (1) That the trial court used the wrong standard for measuring damages; and (2) that in any event there was no evidentiary support for the court's finding as to damages. We observe here that no contention is made that damages may not be assessed where a trustee illegally, fraudulently or oppressively sells property under a power of sale contained in a deed of trust. We note that in California the traditional method by which such a sale is attacked is by a suit in equity to set aside the sale. (See Taliaferro v. Crola, 152 Cal.App.2d 448, 449--450, 313 P.2d 136; Crummer v. Whitehead, 230 Cal.App.2d 264, 266, 268, 40 Cal.Rptr. 826; Central Nat. Bank of Oakland v. Bell, 5 Cal.2d 324, 328, 54 P.2d 1107.)

The only California case which has come to our attention involving an analogous situation is Murphy v. Wilson, 153 Cal.App.2d 132, 314 P.2d 507. In that case the plaintiff and the defendant entered into an agreement whereby the defendant loaned $50,000 to the plaintiff who, pursuant to the agreement, placed a bill of sale to and chattel mortgage on certain personalty and a deed to his home in escrow and agreed that if he did not pay the sum of $75,000 to the defendant before a certain date the conveyances would go to the defendant. The defendant subsequently took possession of the property and sold it. The plaintiff then brought a declaratory relief action to have the conveyances adjudged to be mortgages. The trial court found that the agreement was in fact a mortgage loan and that since the defendant had not foreclosed the chattel mortgage and had sold the home outright he was liable to the plaintiff for damages. (At p. 134, 314 P.2d 507.) The reviewing court, although it disagreed with the computation of the damages, upheld the trial court's determination that the plaintiff was entitled to damages. The appellate court held that the defendant had converted the property to his own use and that he was required to pay to the plaintiff the fair market value of the property converted as of the date he took it into his possession together with interest on the value of the property converted. (At pp. 135--136, 314 P.2d 507.)

In analyzing the holding in Murphy we observe that it makes no distinction between the real and personal property and holds that both had been converted. We note here that it is generally acknowledged that conversion is a tort that may be committed only with relation to personal property and not real property. (See Graner v. Hogsett, 84 Cal.App.2d 657, 662, 191 P.2d 497; Reynolds v. Lerman, 138 Cal.App.2d 586, 591, 292 P.2d 559; Vuich v. Smith, 140 Cal.App. 453, 455, 35 P.2d 365; 48 Cal.Jur.2d, Trover and Conversion, § 8; but see Katz v. Enos, 68 Cal.App.2d 266, 269, 156 P.2d 461, 463 where an action was brought for what was there stated as an action 'to recover damages for the alleged wrongful conversion by her of 42 acres of land' and damages were assessed.) ³

Since conversion is a tort which applies to personal property, we disagree with the Murphy case to the extent that it purports to indicate that there may be a conversion of real property. ⁴ We are inclined however, to believe that with respect to real property the Murphy case was articulating a rule that has been applied in other jurisdictions. That rule is that a trustee or mortgagee may be liable to the trustor or mortgagor for damages sustained where there has been an illegal, fraudulent or wilfully oppressive sale of property under a power of sale contained in a mortgage or deed of trust. (See Davenport v. Vaughn 193 N.C. 646, 137 S.E. 714, 716; Sandler v. Green, 287 Mass. 404, 192 N.E. 39, 40; Edwards v. Smith (Mo.) 322 S.W.2d 770, 776; Dugan v. Manchester Federal Savings & Loan Ass'n, 92 N.H. 44, 23 A.2d 873, 876; Harper v. Interstate Brewery Co., 168 Or. 26, 120 P.2d 757, 764; Black v. Burd (Tex.Civ.App.) 255 S.W.2d 553, 556; Holman v. Ryon, 61 App.D.C. 10, 56 F.2d 307, 310--311; Royall v. Yudelevit, 106 U.S.App.D.C. 1, 268 F.2d 577, 580.) ⁵ This rule of liability is also applicable in California, we believe, upon the basic principle of tort liability declared in the Civil Code that every person is bound by law not to injure the person or property of another or infringe on any of his rights. (Civ.Code, § 1708; see Dillon v. Legg, 68 Cal.2d 728, 69 Cal.Rptr. 72, 441 P.2d 912.)

Accordingly, since the subject tort liability inures to the benefit of a mortgagor or trustor, it also inures to the benefit of the successor in interest to the trust property. Pursuant to Civil Code section 2924c, such successor has the statutory right to cure a default of the obligation secured by a deed of trust or mortgage within the time therein prescribed. Plaintiff, therefore, as Reichert's successor in interest in the trust property was entitled to tender the amount due to cure any default in the obligation to defendant and to institute the instant action for damages for the illegal sale which resulted from the failure to accept the timely tender.

Before proceeding to discuss the proper measure of damages we observe that in the instant case plaintiff has brought the instant action against both the trustee and the beneficiary of the deed of trust. Since the trustee acts as an agent for the beneficiary, there can be no question that liability for damages may be imposed against the beneficiary where, as here, the trustee in exercising the power of sale is acting as the agent of the beneficiary. (See Davenport v. Vaughn, supra, 193 N.C. 646, 137 S.E. 714, 716; Edwards v. Smith, supra, 322 S.W.2d 770, 777.) In the instant case the trial court made unchallenged findings that the trustee Valley was acting as the agent for and pursuant to the instructions and directions of defendant and the Atwills, the beneficiaries of the subject deed of trust.

Adverting to the measure of damages we observe that defendant asserts that the proper measure in the instant case is that which applies to damages occasioned by the wrongful loss of security. ⁶ In this context defendant argues that plaintiff has only suffered a loss of security for the promissory notes executed and delivered by Reichert to plaintiff. In essence defendant is contending that the deed absolute in form from Reichert to plaintiff was in fact a mortgage because it was intended as security for a debt. (See Civ.Code, § 2924.) In considering this contention we note initially that the trial court found that plaintiff purchased the subject property from Reichert and that such purchase was eivdenced by a grant deed given for a valuable consideration.

The record is silent as to whether the issue was tendered below that defendant had no standing to make the claim that the...