Guardian Depositors Corp. v. Darmstaetter , 290 Mich. 445 ( 1939 )

Defendant and his wife executed a mortgage on their home located on Arden Park in the third block east of Woodward avenue, between Brush street and Oakland avenue, in the city of Detroit. Plaintiff, as assignee of the mortgagee, foreclosed and purchased the property at a sheriff's sale on November 12, 1937, for the sum of $17,000, there being due on the mortgage the sum of $23,603.96 according to plaintiff's bill of particulars. The bid made at the foreclosure sale was subject to outstanding delinquent State, county and city taxes in the sum of $2,197.79, and left a deficiency balance on the mortgage debt amounting to $6,503.96, according to the testimony of plaintiff's witness Trahern. Plaintiff commenced action on January 20, 1938, for the deficiency, which was met by a general denial of liability and a plea asserting the rights extended to mortgagors in such cause by Act No. 143, Pub. Acts 1937 (Stat. Ann. 1939 Cum. Supp. § 27.1335). Plaintiff's motion to strike defendant's claim of set-off, based upon the unconstitutionality of the act, was denied and plaintiff was granted leave to reply to the set-off, the court holding that the act was constitutional.

The many questions raised by plaintiff as to "fair value" are substantially the same as those raised by this same plaintiff in Guardian Depositors Corp. v. Hebb, ante, 427, which, although not res judicata, is controlling of this phase of the instant case. The trial judge found that — "the property purchased by the plaintiff corporation at the foreclosure sale held on November 12, 1937, was then and there fairly worth at least the total indebtedness owed by defendant."

This finding of the trial court is supported by competent testimony and, as said in the Hebb Case, "This fact, which is found as a fact, was conclusive against the right of plaintiff to recover."

Following our decision in September of 1936 of the case ofNew York Life Ins. Co. v. Erb, 276 Mich. 610, where we affirmed a summary judgment for a deficiency on the foreclosure of a mortgage by advertisement, the legislature enacted the act now under consideration, the same being approved July 2, 1937, and given immediate effect. The language of this act is quoted in full in Guardian Depositors Corp. v. Hebb, supra. We said that, "so far as the provisions of this statute are involved, we cannot say it violates the Constitution," citing Honeyman v.Jacobs, 306 U.S. 539 (59 Sup. Ct. 702). See, also, GuardianDepositors Corp. v. Brown, ante, 433.

Appellant in the present case insists that the act in question, by its mandatory terms, deprives the parties litigant of their constitutional right to a jury trial.

Plaintiff also insists that the retroactive feature of the 1937 act as affecting sales subsequent to February 11, 1933, and preceding the passage of the act, is an unconstitutional impairment of its contractual rights. So far as this argument applies to the instant facts, it is of no avail because the act became effective July 2, 1937, and the first notice of sale was published August 16, 1937. The question of unconstitutional impairment of contractual rights, established under the note and mortgage indenture dated November 7, 1923, is fully answered by reasoning of Richmond Mortgage Loan Corp. v.Wachovia Bank Trust Co., 300 U.S. 124 (57 Sup. Ct. 338, 108 A.L.R. 886). The doctrine of the Wachovia Case was further discussed and followed in Honeyman v. Jacobs, supra.

Neither the California act, Code Civil Procedure (Deering), § 725-a, added by St. 1933, p. 1673, discussed in Miller v. Hart, 11 Cal. (2d) 739 (81 Pac. [2d] 923), nor the North Carolina statute, chap. 275, § 3, Pub. Laws of 1933 (N.C. Code of 1935, § 2593-d), discussed in Richmond Mortgage LoanCorp. v. Wachovia Bank Trust Co., supra, nor the New York statute, New York Practice Act, §§ 1083-a, 1083-b, discussed inHoneyman v. Jacobs, supra, contains the language of the Michigan act, viz., "provided, that such issue shall be determined by the court without a jury," although they are similar in their purpose and in their general tenor to the Michigan act.

The statute, 3 Comp. Laws 1929, § 14425 (Stat. Ann. § 27.1221), reads:

"Every mortgage of real estate, containing therein a power of sale, upon default being made in any condition of such mortgage, may be foreclosed by advertisement, in the cases and in the manner hereinafter specified."

Then follow sections pertaining to such foreclosure, ending with section 14444 (Stat. Ann. § 27.1240). And as was said inBacon v. Northwestern Mutual Life Ins. Co., 131 U.S. 258 (9 Sup. Ct. 787), a decision involving these Michigan statutes, they were "made to enlarge, and not to cut down, the rights of mortgagors."

Prior to the enactment of legislation providing for foreclosure by advertisement, the mortgagee had his remedy in equity (3 Comp. Laws 1929, § 14364 et seq. [Stat. Ann. § 27.1132 et seq.]), or he could have sued at law to recover the mortgage indebtedness. These rights still remain unimpaired by Act No. 143, Pub. Acts 1937. The mortgagee had, and still has, the unquestioned right to trial by jury, if not waived, in an action at law on the debt. But the additional statutory right granted mortgagees to foreclosure by advertisement was and always has been subject to change by the legislature which granted that right. "The right to foreclose and sell by advertisement depends wholly upon the statute." Doyle v. Howard, 16 Mich. 261.

The statutes just cited are silent as to the manner of trial of actions for deficiencies arising out of foreclosures by advertisement. There is nothing inherent in the nature of an action for a deficiency judgment which requires a trial by jury. Such judgments are provided by statute in equitable foreclosure decrees without a guarantee of jury trial. 3 Comp. Laws 1929, § 14366, as amended by Act No. 229, Pub. Acts 1933 (Stat. Ann. § 27.1134).

The provision in the Constitution of Michigan that "the right of trial by jury shall remain" means the right "as it had become known to the previous jurisprudence of the State."Swart v. Kimball, 43 Mich. 443.

The right of legislative bodies to enact changes which affect the remedies available to mortgagees is discussed inHudson v. Virginian Joint Stock Land Bank of Charleston,266 Mich. 644, and Home Building Loan Ass'n v. Blaisdell,290 U.S. 398 (54 Sup. Ct. 231, 88 A.L.R. 1481). It is not unfair to hold a mortgagee, who resorts to the harsh remedy of statutory foreclosure, to an exercise of good faith and require him to bid in the mortgaged premises for its "true value" in order that the mortgagor may have a fair and equitable deduction made from the amount of his debt. Equitable foreclosure is always available to the mortgagee if he is unwilling to conform to the requirements of the 1937 statute.

"The particular remedy existing at the date of the contract may be altogether abrogated if another equally effective for the enforcement of the obligation remains or is substituted for the one taken away." Richmond Mortgage Loan Corp. v. Wachovia Bank TrustCo., supra.

See, also, Home Building Loan Ass'n v. Blaisdell, supra, and cases therein cited under note 13 (290 U.S. 434).

The obligation of the contract and the mortgagee's right to full payment of the debt is unimpaired by the statute, but his right to recover more than is his due is limited, the legislative control over a remedial process being exercised within constitutional limitations.

The judgment entered upon the finding of the trial court sitting without a jury should be affirmed, with costs to appellee.

CHANDLER and McALLISTER, JJ., concurred with BUSHNELL, J.