Alliance Trust Co. v. Hill

Decision Date20 November 1945
Docket Number31739.
Citation164 P.2d 984,196 Okla. 310,1945 OK 297
PartiesALLIANCE TRUST CO., Limited v. HILL et al.
CourtOklahoma Supreme Court

Rehearing Denied Jan. 15, 1946.

Appeal from District Court, Haskell County; Wm. S. Hall, Judge.

Action by Alliance Trust Company, Limited, against Carrie T. Hill executrix of the last will and testament of A. T. Hill, whose full name is Arthur T. Hill, deceased, Carrie T. Hill, and others, to foreclose a mortgage. From an order determining the amount of deficiency judgment, the plaintiff appeals.

Affirmed.

OSBORN BAYLESS, WELCH, and CORN, JJ., dissenting.

Syllabus by the Court.

A state law applicable generally, and not limited to any declared public emergency, which provides in substance that in determining the amount of a deficiency judgment on the foreclosure of a mortgage, the court shall fix the 'fair and reasonable market value' of the property, and shall deduct from the amount of the debt either such market value or the sale price of the property, whichever is the higher, is not, in a case where the mortgagee is the purchaser of the property, an unconstitutional impairment of the obligation of the contract as applied to a mortgage which was executed before the enactment of the statute.

E. O Clark, of Stigler, for plaintiff in error.

W. G. Stigler, of Stigler, for defendants in error.

DAVISON Justice.

This case is presented on appeal from the District Court of Haskell County. On January 2, 1922, Arthur T. Hill (now deceased) and Carrie T. Hill, his wife, borrowed $8,000 from the Alliance Trust Company, Limited, a corporation, and then and there made, executed and delivered to said Alliance Trust Company, Limited, their promissory note for that amount. At the same time and for the purpose of securing the payment of said note, Arthur T. Hill and Carrie T. Hill executed, acknowledged and delivered to the Alliance Trust Company their certain real estate mortgage covering 160 acres of land situated in Haskell County, Okla. The mortgage contained the words 'appraisement waived'.

The interest on the mortgage debt was paid annually throughout the years until and including the year 1940 but no part or portion of the principal debt was paid.

This action to foreclose the mortgage was instituted on September 16, 1941, by the Alliance Trust Company, Limited, a corporation, as plaintiff, against Carrie T. Hill et al., as defendants.

On October 1, 1942, judgment was rendered by the trial court in favor of the plaintiff and against the defendants. The indebtedness due and owing from the defendants to the plaintiff was found and determined to be for the sum of $10,222.46, inclusive of principal, interest, attorneys fees and costs.

Thereafter and after the lapse of six months from the date of judgment the mortgaged land was advertised for sale and sold to the plaintiff in the action for the sum of $3,500. The plaintiff then moved for a deficiency judgment upon which motion the trial court heard evidence from which it concluded that on the date of sale of the mortgaged property the amount of the debt secured by the mortgage was $10,222.46, inclusive of principal, interest, attorneys fees and costs. The trial court also determined and found that the property was sold to the plaintiff for $3,500 and that the actual fair and reasonable market value of the land at the date of the sale was $8,000. The trial court thereupon ordered and directed that the plaintiff have a deficiency judgment for the sum of $2,222.46. This amount represented the difference between $10,222.46 and $8,000, the value of the land as found by the court at the time of the sale. The plaintiff insisted that it was entitled to judgment for $6,222.46, the difference between the face of the judgment and the purchase price of the land at sheriff's sale.

From the order of the trial court determining the amount of the deficiency judgment, the plaintiff has appealed and appears before this court as plaintiff in error. For the sake of convenience we shall continue to refer to the parties by their trial court designation.

Plaintiff presents the following proposition: 'The Act of the Legislature, approved May 5, 1941 (O.S.1941, Title 12, Sec. 686) amending Section 670, Compiled Statutes 1921, Section 424, Oklahoma Statutes 1931 , altering the basis for determining the amount of the deficiency by substituting the fair and reasonable market value of the mortgaged premises as of the date of sale or such nearest earlier date as there shall have been any market value thereof for the proceeds of the foreclosure sale, unconstitutionally impairs the obligation of the mortgage in the instant case executed prior to its enactment for the reason it is in violation of Article II of Section 15 of the Oklahoma Constitution and Article 1 of Section 10 of the Constitution of the United States.'

Before the enactment of chapter 12 of title 12, S.L.1941, page 35, it was proper and appropriate to take a deficiency judgment for the difference between the amount of the judgment and the price bid and for which the sale was confirmed, but from and after the effective date of chapter 12, title 12, S.L.1941, it became appropriate for the trial court to ascertain the fair and reasonable market value of the mortgaged premises at the date of sale or the nearest preceding date on which it had a market value and to deduct said sum from the amount due on the judgment in order to ascertain the correct amount of the deficiency judgment.

The question to be decided is whether this change in the law constituted an impairment of the obligation of mortgage contract.

Subsequent to the amendment in 1941, title 12, chapter 12, S.L.1941, the section contained the following language which did not appear in the section prior to the amendment: '* * * Simultaneously with the making of a motion for an order confirming the sale or in any event within ninety days after the date of the sale, the party to whom such residue shall be owing may make a motion in the action for leave to enter a deficiency judgment upon notice to the party against whom such judgment is sought or the attorney who shall have appeared for such party in such action. Such notice shall be served personally or in such other manner as the court may direct. Upon such motion the court, whether or not the respondent appears, shall determine, upon affidavit or otherwise as it shall direct, the fair and reasonable market value of the mortgaged premises as of the date of sale or such nearest earlier date as there shall have been any market value thereof and shall make an order directing the entry of a deficiency judgment. Such deficiency judgment shall be for an amount equal to the sum of the amount owing by the party liable as determined by the judgment with interest, plus costs and disbursements of the action plus the amount owing on all prior liens and encumbrances with interest, less the market value as determined by the court or the sale price of the property whichever shall be the higher. If no motion for a deficiency judgment shall be made as herein prescribed the proceeds of the sale regardless of amount shall be deemed to be in full satisfaction of the mortgage debt and no right to recover any deficiency in any action or proceeding shall exist.'

The application of this provision of the statute to a mortgage which existed prior to its enactment is said to constitute an impairment of the obligations of the mortgage contract.

The Constitution of the United States provides that 'No State shall * * * pass any * * * Law impairing the Obligation of Contracts.' Article 1, Sec. 10.

Our state Constitution, in section 15 of article II provides that no 'law impairing the obligation of contracts, shall ever be passed.'

Is chapter 12, title 12, S.L.1941, a law which impairs the obligation of contracts? It is apparent by comparison that the Federal Constitution places the same limitation on state Legislatures as is contained in our state Constitution.

The question now before us was squarely presented to the Supreme Court of the United States in Gelfert v. National City Bank of New York, 313 U.S. 221, 61 S.Ct. 898, 902, 85 L.Ed. 1299, 133 A.L.R. 1467. In that case the court said: 'Mortgagees are constitutionally entitled to no more than payment in full. Honeyman v. Jacobs [306 U.S. 539, 59 S.Ct. 702, 83 L.Ed. 972], supra. They cannot be heard to complain on constitutional grounds if the legislature takes steps to see to it that they get no more than that. As we have seen, equity will intervene in individual cases where it is palpably apparent that gross unfairness is imminent. * * * But there is no constitutional reason why in lieu of the more restricted control by a court of equity the legislature cannot substitute a uniform comprehensive rule designed to reduce or to avoid in the run of cases the chance that the mortgagee will be paid more than once. * * *'

It was thus held by the Supreme Court of the United States that a state law, applicable generally and not limited to any declared public emergency, which provides in substance that in determining the amount of a deficiency judgment on the foreclosure of a mortgage the court shall fix the 'fair and reasonable market value' of the property and shall deduct from the amount of the debt either such market value or the sale price of the property, whichever is the higher, is not, in a case where the mortgagee purchased the property, an unconstitutional impairment of the obligation of contract as applied to a mortgage which was executed before the enactment of the statute.

To the same general effect see Richmond Mortgage & Loan Corporation v. Wachovia Bank & Trust Co., 300 U.S. 124 57 S.Ct. 338, 81 L.Ed. 552, 108 A.L.R. 886; and...

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