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District Court of Appeal, Fourth District, California.

STACK v. WELDER et al.a1

Civ. 1465.

Decided: October 22, 1934

Sarau & Thompson, of Riverside, for appellants. Goodman, Bachrack & Brownstone, of Los Angeles (Herman A. Bachrack, of Los Angeles, of counsel), for respondent.

The appellants were the owners of a half interest in 700 acres of land on which were many hot mineral springs, the property being suitable for a health resort. This action was brought on June 7, 1929, by Virginia L. Armstrong, to foreclose a mortgage on this land securing an indebtedness of $30,000. The appellants were served on June 18, 1929, and defaulted; their defaults being later regularly entered. In July, 1929, the appellants and the defendants Welder conveyed the property to a corporation called “Eden Hot Springs, Inc.,” receiving in payment about one-quarter of the shares of the capital stock of said corporation. At the time of this transfer $5,000 was paid upon the principal of the Armstrong mortgage, together with all interest; but this action was not dismissed. Some six months later the respondent herein acquired the remainder of the capital stock of this corporation, became its president, and assumed control thereof. About two weeks later he purchased from Virginia L. Armstrong the notes and mortgage upon which this action was based. Subsequently the respondent obtained from the corporation named a note for $13,714.96, secured by a trust deed on this real property, subject to the first mortgage.

On June 3, 1932, the respondent procured an order of court substituting himself as plaintiff in the action in the place and stead of Virginia L. Armstrong, no notice being given the appellants. The cause was tried (other defendants appearing) and taken under submission on June 24, 1932. On November 10, 1932, without service upon or notice to the appellants, the respondent filed a supplemental complaint alleging the execution and delivery of the note for $13,714.96 by the corporation referred to, that the same was secured by a trust deed on this property, that payment had not been made, and asking that the trust deed be declared to be a second lien upon the property, and that any surplus arising from the sale of the property, under decree of foreclosure be paid to the respondent to the extent of the amount named in the trust deed. On November 12, 1932, the defendants Welder filed a demurrer to this supplemental complaint, which demurrer was never ruled on by the court. No answer was filed and no further hearing had, but on November 19, 1932, the court filed its findings of fact and conclusions of law, finding in accordance with the allegations of both the original complaint and the supplemental complaint, and finding as a conclusion of law that the trust deed mentioned in the supplemental complaint was a second lien upon the property. Judgment was entered on November 22, 1932, directing a sale of the property; the proceeds to be applied to the amount due under the first mortgage and any surplus to be applied on the amounts due to the respondent under the second deed of trust. On May 8, 1933, these appellants filed notice of motion to vacate the judgment and permit them to file an answer, the proposed answer being also filed. Among other things, the proposed answer contains allegations of fraud on the part of the respondent, and alleges that he used funds of the corporation, in part, in purchasing the Armstrong mortgage, that he had the same assigned to himself, that he obtained the note and trust deed from the corporation at a time when the amount thereof was not due from the corporation or owing to him, and that the corporation had become a necessary party to the action. The motion last referred to was based upon the ground that the amendment to the complaint substituting the respondent as plaintiff, and the supplemental complaint, changed the complaint in matters of substance and added new and different issues affecting the rights of these appellants and that said changes were made without service upon or notice to the appellants. This motion was denied by the court on May 17, 1933, and the appellants filed notice of appeal from the judgment and from the order denying this motion.

The appeal from the judgment was taken too late and must be dismissed. Schainman v. Kierce, 199 Cal. 249, 248 P. 905; Lawson v. Guild, 215 Cal. 378, 10 P.(2d) 459. The respondent argues that the appeal from the order should also be dismissed since the judgment itself was appealable, citing De La Montanya v. De La Montanya, 112 Cal. 101, 44 P. 345, 32 L. R. A. 82, 53 Am. St. Rep. 165, and similar cases. While it is held in such cases that to allow an appeal from an order refusing to set aside a judgment, where the judgment itself was appealable, would be virtually to allow two appeals from the same ruling and have the effect of extending the time for taking an appeal, these cases have no application if, as contended by the appellants here, an inspection of the judgment roll discloses that the judgment itself is void. A judgment which is void upon its face and which requires only an inspection of the judgment roll to demonstrate its invalidity is a nullity and may be set aside at any time upon motion. Luckenbach v. Krempel, 188 Cal. 175, 204 P. 591; In re Estate of Pusey, 180 Cal. 368, 181 P. 648; Reichert v. Rabun, 89 Cal. App. 375, 265 P. 260. The changes here made in the complaint, upon which this judgment is based, were made after the default of these appellants and without service upon or notice to them. If these changes are matters of substance rather than mere matters of form, the original default of the appellants would not justify the judgment as against them. In Cole v. Roebling Construction Co., 156 Cal. 443, 105 P. 255, 257, the court said: “It is settled by a long line of decisions that where, after the default of a defendant has been entered, a complaint is amended in matter of substance as distinguished from mere matter of form, the amendment opens the default, and unless the amended pleading be served on the defaulting defendant, no judgment can properly be entered on the default. See Thompson v. Johnson, 60 Cal. 292; Reinhart v. Lugo, 86 Cal. 399, 24 P. 1089, 21 Am. St. Rep. 52; Witter v. Bachman, 117 Cal. 319, 49 P. 202; Woodward v. Brown, 119 Cal. 304, 51 P. 2, 542, 63 Am. St. Rep. 108; Linott v. Rowland, 119 Cal. 452, 453, 51 P. 687; Riverside County v. Stockman, 124 Cal. 224, 56 P. 1027; Tappendorff v. Moranda, 134 Cal. 421, 66 P. 491. The reason for this rule is plain. A defendant is entitled to opportunity to be heard upon the allegations of the complaint on which judgment is sought against him. His default on the original complaint is limited in its effect to that complaint; and, if by amendment a matter of substance is added, he should be given the opportunity to contest the same before any judgment is given against him on account thereof. The law, therefore, requires that the amended pleading shall be served on all the adverse parties, including defaulting defendants.”

In our opinion, the matter set up in this supplemental complaint and included in the judgment entered was a matter of substance and not merely of form, which added to the original cause of action and materially affected the rights of the appellants. The supplemental complaint asked for an entirely new relief, which was accorded in the judgment. The respondent, as substituted plaintiff, not only succeeded to the rights of the original plaintiff but asked for and was granted additional relief, which could not have been given under the original complaint. An additional evidence of debt was declared to be a lien upon the property and the debt ordered paid from the proceeds of sale, if such were sufficient. Only one judgment was entered, which included the additional matter in which the appellants had had no opportunity to appear and defend, and yet the entire judgment purported to bind them and foreclose their rights in the property. If the matters set up in the proposed answer are true, no court would give this same judgment in favor of the respondent. The appellants are entitled to their day in court and particularly should this be true in an equity case.

The respondent relying upon the case of Zierath v. Superior Court, 35 Cal. App. 788, 171 P. 112, contends that since the court had jurisdiction in this matter, this action, even though erroneous, cannot now be corrected. In that case, a writ of review was sought and the court was limited to the question of jurisdiction. We are here concerned with an appeal from an order and questions of error may be considered as well.

It is finally urged by the respondent that the questions raised by this appeal are now moot because the record shows that the sale of the property did not produce sufficient funds to allow anything to be paid upon the second lien. It is not a question of what happened later, or whether any money was actually applied upon the additional part of the judgment based upon the supplemental complaint, but whether the judgment itself was erroneous when entered. That question has not become moot and the error complained of is not affected by this subsequent development.

The appeal from the judgment is dismissed, and the order denying the appellant's motion to set aside the judgment and permit them to file an answer is reversed.

BARNARD, Presiding Justice.