Thompson v. Thompson

• Decision Date: 23 January 1963
• Citation: 378 P.2d 281,233 Or. 262
• Parties: , 32 A.L.R.3d 1012 Kenneth G. THOMPSON, Appellant, v. G. Louise THOMPSON, Lawrence N. Brown and Charles D. Burt, Respondents.
• Court: Oregon Supreme Court

Page 281

378 P.2d 281

233 Or. 262, 32 A.L.R.3d 1012

Kenneth G. THOMPSON, Appellant, v. G. Louise THOMPSON, Lawrence N. Brown and Charles D. Burt Respondents.

Supreme Court of Oregon, Department 1.

Argued and Submitted Dec. 4, 1962.

Decided Jan. 23, 1963.

Harrison M. Weatherford, Albany, argued the cause for appellant. With him on the briefs was Mark V. Weatherford, Albany.

Asa L. Lewelling, Salem, argued the cause for respondents. On the brief were Lewelling & Gies, Salem.

Before McALLISTER, C. J., and PERRY, O'CONNELL, GOODWIN and LUSK, JJ.

O'CONNELL, Justice.

This is a suit brought by the judgment debtor to set aside a sale on execution and to require defendants to account for the reasonable rental value of the property sold. Plaintiff appeals from a judgment in favor of defendants.

Defendant, Gladys Thompson, brought a suit for divorce against plaintiff, Kenneth Thompson. The decree granting her a divorce also awarded separate judgments against the present plaintiff for $25,000 as alimony, $3,000 as attorneys' fees, and $125 for unpaid temporary support. Kenneth Thompson appealed in that case. He did not file a supersedeas bond. Gladys Thompson caused execution to issue on the judgments. Gladys Thompson was the purchaser at the sale on execution. The property consisted of a hotel in Albany which she obtained on a bid of $20,024.38, and a parcel of residential property in Salem which she obtained on a bid of $8,479.34. Kenneth Thompson failed to redeem the property within the statutory redemption period provided in ORS 23.560.

The certificate of sale for the Albany property was assigned to defendants, Brown and Burt, and subsequently the sheriff's deed for that property was issued to them. The sheriff's deed for the Marion county property was delivered to defendant, Gladys Thompson. She conveyed this property to defendants, Brown and Burt.

On June 22, 1960 this court handed down its opinion in the divorce suit which plaintiff had appealed. We sustained the decree awarding a divorce to Gladys Thompson but modified the judgment for alimony by reducing it from $25,000 to $10,000. ¹ The defendants tendered the $15,000 difference to plaintiff. The tender was refused.

Plaintiff's complaint was treated by the trial court as one seeking restitution for unjust enrichment. Defendants moved for judgment on the pleadings on the theory that the payment of the amount tendered by them would discharge their obligation to make restitution to plaintiff. The motion was granted. The court then granted plaintiff's motion to present evidence 'under the rule.'

The trial court heard the evidence and entered a decree which recited that there was no evidence which would support a decree setting aside the execution sale and that, therefore, the court adhered to the judgment on the pleadings.

The principal assignment of error is based upon the theory that the modification of the divorce decree by this court rendered the sale on execution voidable by plaintiff and entitled him to specific restitution of the property sold to satisfy the judgment. Plaintiff relies upon ORS 19.140 which provides as follows:

'19.140 Upon an appeal, the appellate court may review any intermediate order involving the merits or necessarily affecting the judgment or decree appealed from; and when it reverses or modifies such judgment or decree, may direct complete restitution of all property and rights lost thereby.'

Defendants concede that where a judgment is reversed the judgment debtor may recover the specific property sold on execution. ² However, defendants contend that the rule is otherwise where the judgment is only modified. Defendants argue that in the event that the judgment is merely modified and in the absence of fraud or some other distinct equitable basis for relief the judgment debtor's relief is limited to a recovery of the amount by which the judgment is reduced.

The general rule on the effect of a modification of a judgment is stated in Restatement, Restitution § 74, comment m (1937):

'Where a judgment is modified and a smaller amount awarded to the judgment creditor, if payment has been made in excess of the amount finally awarded, the judgment debtor is entitled to restitution of the excess under the same circumstances and from the same classes of persons as where the judgment is reversed. If property of the judgment debtor was seized on execution and sold to a purchaser, the purchaser is entitled to retain the property but the creditor is under a duty of restoring any excess received. If the property has been purchased by the judgment creditor, the sale will not be set aside but the judgment creditor will be required to restore the excess amount of net proceeds received by him unless such result would be unfair to the judgment debtor.' ³

The right of the judgment debtor to set aside an execution sale after a modification, as distinguished from the reversel of a judgment, has never been passed upon directly in any Oregon case. Thus, in McFadden v. Swinerton, 36 Or. 336, 355, 59 P. 816, 62 P. 12, 13 (1900), it was said that 'Our statute provides that, when a judgment or decree is reversed or modified by the appellate court, it 'may direct complete restitution of all property and rights lost thereby.'' The case was remanded for further proceedings to restore whatever the judgment debtor lost by reason of the original decree. The court did not decide whether the judgment debtor was entitled to specific restitution as a matter of statutory right, as plaintiff contends in the present case. The court cited, with approval, California cases interpreting a California statute similar to ORS 19.140. California holds that the judgment debtor is entitled to recover only the amount by which the judgment was reduced upon a modification of the judgment. ⁴

It will be noted that the rule stated in § 74 of the Restatement, Restitution, does not permit the judgment creditor to keep the property sold on execution if 'such result would be unfair to the judgment debtor.' A similar statement of the rule is found in Martin v. Victor Mill & Mining Co., 19 Nev. 197, 9 P. 336, 337 (1886). There the court, interpreting a statute similar to ORS 19.140, said:

'* * * It is only in cases where the judgment is reversed, or so far modified as to make it inequitable to allow the sale to stand, that a court would be authorized, under the statute, to set the sale aside.'

We are of the opinion that ORS 19.140 should be similarly construed. Therefore, if plaintiff is to prevail he must show that it would be inequitable to permit defendants to keep the property sold upon paying to plaintiff the difference between the original and the amended judgment.

Plaintiff asserts that an inequity resulted from the manner in which the defendants bid in the property at the execution sale. He contends that attorneys Brown and Burt 'manipulated' the sale as a result of which they personally profited from the transaction. It was shown that Brown and Burt purchased the interest of defendant Gladys Thompson for $10,000. It was further shown that the defendants agreed among themselves to bid in the property for the total amount of the judgments.

The purchase of Gladys Thompson's interest by Brown and Burt was made only after she was carefully advised not only by Brown and Burt but by other counsel at their suggestion. She was in urgent need of cash and gave up her interest fully realizing that her interest in the property might be of greater value than the price she received. Furthermore, even if there had been something inequitable about the conduct of Brown and Burt in connection with their transaction with Mrs. Thompson, it would have no relevancy in establishing any breach of duty to plaintiff. Similarly, the agreement to bid in the property for the amount of the judgment has no relation to any duty to plaintiff. Plaintiff and defendants were dealing at arm's length at the time of the execution sale. They had made no agreement relating to the bid which defendants would make. Under these circumstances defendants had the privilege of bidding any amount they pleased and were entitled to agree among themselves as to the bid which would be made.

Plaintiff argues that the disparity between the amount bid at the execution sale and the value of the property is, in itself, a basis for setting aside the sale. We have held that a sale may be set aside where the amount paid for the property at the forced sale is so grossly inadequate as to shock the court's conscience. ⁵ Without deciding whether the sale can be set aside for this reason alone after confirmation of the sale, we are of the opinion that the evidence does not clearly establish a shocking disparity between the amount bid and the value of the property. As we indicated above, the total amount bid at the execution sale was $28,503.72, of which $8,479.34 was bid for the residence and $20,024.38 was for an undivided one-half interest in the hotel. According to the testimony in the present case, the residence had a value of approximately $17,500 and a one-half interest in the hotel property was worth approximately $40,000. From this amount must be deducted about $4,000 in back taxes and judgment lien against the property. This would not produce a...