Opinion
Subsequent opinion 108 P.2d 420
Rehearing Denied July 5, 1940
Hearing Granted Aug. 2, 1940.
Appeal from Superior Court, Los Angeles County; Thurmond Clarke, Judge.
Action by Catherine M. Carroll against Raymond A. Carroll, the Prudential Insurance Company of America, the Thomas Mortgage Company, the Title Insurance & Trust Company, H.B. Thomas, as substituted trustee, and H.B. Thomas, individually, to cancel a note and trust deed and to recover a money judgment against Raymond A. Carroll. From the judgment in so far as it held that the note and trust deed were valid, and from an order appointing a receiver, the plaintiff appeals.
Judgment, in so far as appealed from, reversed with directions, and order reversed. COUNSEL
Charles E. McGinnis and C.C. Caswell, both of Los Angeles, for appellant.
Meserve, Mumper, Hughes & Robertson, John Q. Adams and Arch H. Vernon, all of Los Angeles, for respondents.
OPINION
PER CURIAM.
This action was brought for the purpose of canceling a note and trust deed executed in favor of respondent. Appellant also sought a money judgment against her husband who was a party defendant in the same action. Judgment was rendered in favor of appellant and against her husband on the demand for a money judgment. There is no appeal from that part of the judgment. This appeal is taken from that part of the judgment rendered in favor of the respondents and which concluded that a valid note and trust deed was executed. During the pendency of this action, no restraining order or temporary injunction having been issued against the foreclosure and sale of the premises covered by said deed of trust, and default having taken place thereunder, the trustee, upon demand of the beneficiary, sold said premises, at which sale the respondent, beneficiary under said trust deed, became the purchaser thereof for $23,000. Upon acquiring title under this sale, the respondent gave notice and demanded rentals from the tenant occupying the premises. The tenant being in doubt as to the ultimate right to the rentals, refused to make payments. Approximately one year later respondents made a motion for appointment of a receiver. This motion was granted and a receiver was appointed for the purpose of collecting the rents. Appellant contends that there was an abuse of discretion and a lack of jurisdiction in the appointment of a receiver, and appeals from that order.
This appeal raises the question as to the validity of a note and trust deed executed subsequent to a judgment of restoration to competency but prior to the entry thereof by the clerk.
The evidence in this case discloses that the husband of appellant had, through fraud, coercion, and the exercise of undue influence, preyed upon the weakness of appellant, Mrs. Carroll, for a number of years prior to the execution of the note and trust deed in question. Mr. Carroll had induced his wife, by the procuring of the execution of various instruments and conveyances, to relinquish control to him of over one-half of a million dollars worth of property belonging to Mrs. Carroll. Of this amount, Mr. Carroll failed to account for $422,297.05, and appellant was granted a judgment against Mr. Carroll for this latter sum of money.
During the month of April, 1929, trouble arose between Mr. and Mrs. Carroll, culminating in the shooting of Mr. Carroll by the appellant. Mrs. Carroll contended that her husband was once again seeking her signature to the execution of an instrument. On April 17, 1929, an affidavit of insanity was made out and filed in the superior court of Los Angeles county against the appellant. Mrs. Carroll was found incompetent and made a ward of the psychopathic department of the court and was placed in a sanitarium near Los Angeles. Shortly thereafter, Mr. Carroll instituted guardianship proceedings, and on May 24, 1929, the court having found Mrs. Carroll incompetent and unable to handle her property, appointed the Security First National Bank of Los Angeles as her guardian. On August 8, 1929, Mrs. Carroll was paroled into the custody of her husband and confined in her home until the latter part of October. Mr. Carroll caused a petition which was signed by Mrs. Carroll to be presented to the court, asking that appellant be declared restored to competency. This petition was filed August 15, 1929. The court held a hearing on August 22, 1929, and on this same day made its judgment of restoration, adjudging the appellant restored to competency as of the date of filing the petition for restoration to competency. This judgment was not entered until September 5, 1929. The Security First National Bank, as guardian of appellant’s property, received pay for performing its duties as guardian up to and including September 18, 1929, and was not discharged until February 23, 1930. Mrs. Carroll remained under parole of the psychopathic department of the court until her discharge October 24, 1929.
The evidence discloses that appellant’s husband had attempted to procure a loan on the property in question some time in June of 1929. It appears that the petition to execute a deed of trust went off the calendar at that time and the property was not encumbered. Mr. Carroll continued to carry out his plan to encumber the property, however, and after the filing of the petition for restoration on August 15, 1929, he procured Mrs. Carroll’s signature to a letter dated August 21, 1929, and addressed to the Thomas Mortgage Company. This letter referred to the loan that was to be given upon the property in question and directed that part of the $20,000, the amount of the loan, was to be delivered to the Security First National Bank of Los Angeles, upon completion of the transaction. The Thomas Mortgage Company was an agent of the Prudential Insurance Company, respondent herein, and beneficiary under the deed of trust. The property in question was held in the names of Mr. and Mrs. Carroll as joint tenants, and may be referred to as the Los Palmas property.
On August 23, 1929, the day after the hearing and judgment of restoration the appellant was taken to the office of the Thomas Mortgage Company by Mr. Carroll. There the parties met with an officer of the mortgage company, and the note and deed of trust upon the Los Palmas property were executed. The promissory note in the sum of $20,000 was made to the order of the Prudential Insurance Company and was signed by Raymond H. Carroll and Catherine M. Carroll. A letter dated August 27, 1929, and signed by Mrs. Carroll authorized and instructed the Thomas Mortgage Company to pay the full proceeds due upon the loan to Mr. Carroll. The trial court found that the defendant below, Raymond Carroll, received all of the proceeds from this loan and that at no time did the appellant, Mrs. Carroll, receive any of the moneys from the loan. The court also found that respondents did not participate in or have any knowledge of any fraud or coercion practiced upon appellant by Mr. Carroll, and that the property in question was the separate property of appellant subject to the deed of trust thereon, securing the note for $20,000 in favor of respondent, the Prudential Insurance Company. The court found that appellant did not ascertain that she had signed a note and trust deed in favor or respondent until about the 29th day of January, 1931, at which time she received a notice in which demand for interest was made upon her. It was found that appellant did renounce, repudiate and rescind the note and trust deed upon that same day.
Appellant takes the position that the note and trust deed having been executed prior to the entry of judgment restoring her to capacity that such note and trust deed was void under section 40 of the Civil Code.
Section 40 provides as follows: "After his incapacity has been judicially determined, a person of unsound mind can make no conveyance or other contract, nor delegate any power or waive any right, until his restoration to capacity. ***"
It is contended by appellant that the judgment of restoration to capacity, within the meaning of section 40, was not effectual until the entry thereof on September 5, 1929. In support of this contention the provisions of section 664 of the Code of Civil Procedure are relied upon. The provisions of section 664 in so far as bearing upon the question before us provide as follows: "If the trial has been had by the court, judgment must be entered by the clerk, in conformity to the decision of the court, immediately upon the filing of such decision. In no case is a judgment effectual for any purpose until so entered." (Italics ours.)
Respondents concede that one under guardianship for incompetency cannot make a valid contract providing that the incapacity has been judicially determined within the meaning of section 40 of the Civil Code. It is also conceded that the disability of the incompetent to contract within the meaning of that section remains until a restoration to capacity. Respondents take the position, however, that appellant was not an incompetent within the meaning of section 40 of the Civil Code, and that no evidence was introduced indicating she was under any disability to contract. It is also contended that even though it may be deemed that appellant was an incompetent within the meaning of such section that the judgment of restoration to competency signed August 22, 1929, removed appellant’s disability to contract as of the date of the filing of her petition on August 15, 1929, and that the note and trust deed executed on August 23, 1929, were valid, even though the judgment of restoration to competency was not entered until September 5, 1929. If appellant was an incompetent within the meaning of section 40 of the Civil Code, it should be kept in mind that we are not concerned with competency as a question of fact as of the date of the execution of the note and trust deed. The disability arises out of the judicial determination of incapacity.
We are of the opinion that appellant was an incompetent within the meaning of section 40 of the Civil Code, and that the proceedings having been carried on under the Psychopathic Parole Act, section 2167b, rather than under section 2168 of the Political Code, are not a controlling factor in determining incapacity as coming within section 40 of the Civil Code. It must be remembered that the court appointed the Security First National Bank of Los Angeles as guardian of the property of appellant on the 21st day of May, 1929, shortly after she was made incompetent, made a ward of the psychopathic department of the court, and placed in a sanitarium. The cases cited by respondents for the proposition that commitment for insanity or incapacity does not judicially determine incapacity within the meaning of section 40, are not concerned with guardianship proceedings. An examination of those cases discloses the fact that a guardian had never been appointed or that guardianship proceedings had not been instituted prior to the execution of the contracts in question.
In Hellman Commercial Trust & Savings Bank v. Alden, 206 Cal. 592, 275 P. 794, the question as to the application of section 40 of the Civil Code was presented to the court. There, as in the present case, the individual was adjudged an incompetent and a guardian of his person and estate was appointed. There was no adjudication of insanity. It was contended that section 40 of the Civil Code applied only to insane persons, since the latter portion of that section permits the discharge and restoration to competency by means of a certificate from the medical superintendent of the asylum to which the patient has been committed. In answer to this contention the court stated in its opinion at page 604, of 206 Cal., at page 799 of 275 P., as follows: "But evidently this section of the code was not intended to be so restricted. Section 1764, Code of Civil Procedure, authorizes the appointment of a guardian of the person and estate of an insane person, and also of one who is merely incompetent. It seems evident that the term incompetent is intended to include not only the insane, but also those who are afflicted with less serious derangements of the mind. The adjudication of mental incapacity therefore applies to both the insane and the incompetent, regardless of the character or degree of the mental derangement. No further evidence of mental incapacity is required under our statute while such a decree remains in full force and effect."
The case of O’Brien v. United Bank & Trust Co., 100 Cal.App. 325, 279 P. 1048, decided a few months after the Supreme Court decision in the Hellman case, involved the same question as to the application of section 40 of the Civil Code to one who had been adjudged incompetent and over whom a guardian had been appointed.
The court held that an agreement between an incompetent person and another, to open a survivorship account with a bank, after a guardian was appointed, is void under section 40 of the Civil Code. It was determined the incapacity to contract continued until his restoration to competency. It was held that the application of section 40 to the incompetent was not affected by the fact that the judicial determination thereof was had pursuant to sections 1763-1767 of the Code of Civil Procedure, which deal with persons who are insane or from any cause are mentally incompetent. We conclude that under the authority of the last two mentioned cases, appellant herein was an incompetent within the meaning of section 40 of the Civil Code, and that the note and trust deed, if deemed to have been executed prior to restoration to capacity, were void.
As stated in the Hellman case, supra, one adjudicated an incompetent, and coming within the application of section 40, thereby becomes incapable of making a valid contract, and it is deemed to be void. It is stated in that opinion that this conclusion follows not because the individual is unable, unassisted, to properly care for his property, but because the decree of incompetency is notice to the world of his incapacity to make a valid contract.
The appellant was not restored to capacity by any certificate of discharge as provided for by section 40, and consequently no presumption of legal capacity in appellant at the time of the execution of the note and trust deed was established unless the judgment of restoration became effective prior to the entry thereof on September 5, 1929. The validity of the note and trust deed is therefore dependent upon the force and effect of the provisions of section 664 of the Code of Civil Procedure. The fact that the judgment of restoration restored appellant to mental competency as of the date her petition was filed, August 15, 1929, is not a controlling factor unless the judgment rendered on August 22, 1929, is not effected by the specific provisions of section 664, which provides, "In no case is a judgment effectual for any purpose until so entered." Section 664 of the Code of Civil Procedure was amended in 1907, providing that "In no case is a judgment effectual for any purpose until so entered," and consequently cases decided prior to this amendment can have no bearing upon the effect to be given this provision.
The argument of respondents in support of the contention that the judgment of restoration became effective prior to the entry thereof is forceful, but an examination of the cases leads us to the conclusion that the law is otherwise in this jurisdiction. We agree with the proposition that under some circumstances an order or decree takes effect from the time it is pronounced, but conclude that ordinarily a judgment is not effective until entered. The case of Fresno Estate Co. v. Fiske, 172 Cal. 583, 157 P. 1127, relied upon by respondents is cited in 14 California Jurisprudence at page 937, and does support the contention that an order or decree takes effect from the time it is pronounced. The statement at page 937, which is supported by the citation of the Fresno Estate case, supra, clearly indicates, however, that this last-mentioned rule of law is quite limited in application. The quotation from page 937, reads as follows: "However, under some circumstances an order or decree undoubtedly takes effect from the time it is pronounced and the failure of the clerk to file the papers or enter the judgment does not delay or defeat the operation of the court’s pronouncement. Thus, decree of divorce in a default case, where findings are unnecessary, is rendered when it is pronounced and entered in the minutes, and it may be entered in the judgment book after the death of one of the parties."
The Fresno Estate case simply involved the validity of an order discharging a guardian, and the court held that the validity of such an order did not depend upon the day of its entry. No findings were necessary, nor were any made. This case certainly does not, as contended for by respondents, hold that section 664 of the Code of Civil Procedure is not applicable to a judgment of restoration to competency. The character of a judgment of restoration to competency is quite different from an order discharging a guardian. Moreover, it appears that the court in the Fresno Estate case intended a clear distinction to be made between orders made in open court and judgments or decrees. This distinction is disclosed by the language used at page 598 of 172 Cal., at page 1133 of 157 P., in the Fresno Estate case. Speaking for the court, it is stated by Justice Melvin as follows: "There is nothing in Brownell v. Superior Court, 157 Cal. 703, 109 P. 91, in conflict with this conclusion. The court was there concerned with the question: ‘When is an order of partial distribution "taken" within the meaning of section 473, Code of Civil Procedure’? It was held that it was only ‘taken’ when duly entered. This court carefully limited the effect of the decision in that case, for Mr. Justice Shaw, who delivered the opinion, said: ‘Nor are we concerned with the effect of an announcement of a decision or order against one who was then present.’ "
The case of Barbee v. Young, 79 Cal.App. 119, 249 P. 15, cited by respondents, does quote, with approval from Fresno Estate Co. v. Fiske, supra, but also definitely indicates the distinction intended in the decision of the Fresno Estate case. In Barbee v. Young, supra, it was held that an order granting a motion for new trial became effective at the time of its pronouncement. The court compares the order granting the motion for a new trial with the order made in the Fresno Estate case, discharging the guardian. At page 125 of 77 Cal.App., at page 17 of 249 P. of the Barbee case the necessity of the entry of judgments, as distinguished from orders of court,— is pointed out in the following language: "The case of Brownell v. Superior Court, 157 Cal. 703, 109 P. 91, relied upon by petitioners, is commented upon in the opinion in the case of Fresno Estate v. Fiske, supra, and the distinction pointed out that the court in the Brownell Case was dealing with the entry of judgments. In the Brownell Case we find the following: ‘The word "taken," as used in section 473, is, as we think, used in the same sense as the words "render" or "rendition," when used with reference to a judgment. The word "rendered" is appropriately used in reference to a judgment or decree, but not to a proceeding or order. The phrase in question embraced judgments, orders, and proceedings, and the word "taken" was adopted as a term alike applicable to either or all of them, and having relatively the same meaning as "rendition." ’ (Italics ours.) These words which we have quoted were used after the reference made by the court to the provisions of the Code relative to the making and filing of findings before a judgment could be entered. As stated in Fresno Estate Co. v. Fiske, supra, the applicability of what was decided in the Brownell Case is likewise apparent here. We are dealing with an order of court made in open court which required nothing further on the part of the trial judge.’’
In Consolidated Const. Co. v. Pacific Elec. Ry. Co., 184 Cal. 244, 193 P. 238, the question arose as to the effect to be granted an order of dismissal which had been signed by the judge but not entered until after application had been made asking that the order of dismissal be vacated. At page 250 of 184 Cal., at page 240 of 193 P. of the opinion, the following language indicating the necessity of entry of judgments in order to become effective, is as follows: "In fact, strong reasons may be urged why the effective character which an order of dismissal under section 581 assumes, upon its mere entry in the minutes, is an exception to the general rule that judgments must be entered in the judgment book before they become effective as judgments (sections 664 and 668, Code Civ.Proc.), and that the exception should not be extended beyond the particular case provided for by the statute."
The question of the validity of an order of dismissal was again presented to the court in Egan v. McCray, 220 Cal. 546, 31 P.2d 1041, and the language used by the court in the Consolidated Construction case, supra, referring to the entry of judgments, was quoted with approval at page 547 of 220 Cal., 31 P.2d 1041 of the Egan case, supra. Section 664 of the Code of Civil Procedure is commented upon in the case of Ross v. O’Brien, 1 Cal.App.2d 496, 498, 36 P.2d 1108. In declaring the force and effect to be granted that section of the code, the following language appears at page 499 of 1 Cal.App.2d, at page 1109 of 36 P.2d of the opinion: "The general rule applicable is expressed in section 664, Code of Civil Procedure, which provides that ‘in no case is a judgment effectual for any purpose until *** entered.’ "
We conclude that under the general rule of law in this jurisdiction that the effect of judgments and decrees is controlled by the clear and specific provision of section 664, and that such judgments are not effectual for any purpose until entered. It is our opinion that the judgment restoring appellant to competency comes within the general rule of law and was not effective for any purpose until entered. The character of the judgment in question compels us to place such judgment within the provisions of section 664, and no sound reason appears calling for the application of the exception to the general rule. It follows that the note and trust deed having been executed prior to the entry of judgment of restoration to capacity, that such note and trust deed were void, having been executed by an individual within the meaning of section 40 of the Civil Code, whose incapacity had been judicially determined but who had not been at the time of the execution of the note and trust deed in question restored to capacity, nor discharged from guardianship. Hellman Commercial Trust & Savings Bank v. Alden, 206 Cal. 592, 275 P. 794; O’Brien v. United Bank & Trust Co., 100 Cal.App. 325, 279 P. 1048.
The note and trust deed executed by appellant, as stated, were void, and consequently rescission was not necessary. This is not the case of a voidable contract but one which is entirely void, and it is no defense that the complaint fails to state a cause of action for rescission. The only defense available in the case of a void transaction is one of estoppel. That equitable defense is not made, nor does it appear that the actions of appellant gave rise to any estoppel. We further conclude that as appellant received no part of the consideration secured by said note and trust deed she was under no equitable duty to offer restoration. The court found that appellant had received no part of the consideration paid by respondent.
The action to cancel the note and trust deed and to quiet title to the property covered by the trust deed was proper.
That portion of the judgment from which this appeal was perfected is reversed, and the trial court is directed to ascertain the amount of rent which has been collected by the receiver and to render judgment in accordance with this opinion quieting title in appellant free from the encumbrance of the note and trust deed in question. It is further ordered that the order appointing receiver be, and the same is, hereby reversed.