Apache Lanes, Inc. v. National Educators Life Ins. Co.

• Decision Date: 10 September 1974
• Docket Number: Nos. 45446,45440,s. 45446
• Citation: 529 P.2d 984
• Parties: APACHE LANES, INC., a corporation, et al., Appellants, v. NATIONAL EDUCATORS LIFE INSURANCE COMPANY, Appellee.
• Court: Oklahoma Supreme Court

Page 984

529 P.2d 984

APACHE LANES, INC., a corporation, et al., Appellants, v. NATIONAL EDUCATORS LIFE INSURANCE COMPANY, Appellee.

Nos. 45446, 45440.

Supreme Court of Oklahoma.

Sept. 10, 1974.

Rehearing Denied Jan. 7, 1975.

F. Paul Thieman, Jr., C. Rabon Martin, Crowe & Thieman, Tulsa, for appellants.

Best, Sharp, Thomas & Glass, Joseph A. Sharp and Jack M. Thomas, Tulsa, for appellee.

HODGES, Justice.

This is an appeal from the trial court which awarded judgment to the creditor against six individual guarantors based on a contract of guaranty after a mortgage foreclosure action which had resulted in a deficiency.

The issue to be decided is whether the failure of a creditor in a foreclosure proceeding to seek a deficiency judgment against the debtor also bars an action against a guarantor. The focal point of contention is our interpretation of 12 O.S.1971, § 686. We find the action is barred, and the judgment of the trial court should be reversed.

The controversy arises out of an action that was initially commenced on May 19, 1964, by the mortgagee, National Educators Life Insurance (Creditor), against Apache Lanes, Inc., an Oklahoma Corporation (Debtor), and against six individual guarantors of the mortgage note. In the first cause of action, the creditor sued on the note claiming judgment against the debtor and against the guarantors but as to the latter only 'in the event that the proceeds of such (mortgage foreclosure) sale be not sufficient to satisfy the amount of the indebtedness as set out hereinbefore.' The second cause of action sought foreclosure of the mortgage against the debtor. After separate answers by the debtor and the guarantors, the trial court ordered the property, a bowling alley, sold at foreclosure sale. On June 28, 1965, the property was sold as sheriff's sale to the creditor for $125,170.00 which was confirmed by the court on October 6, 1965.

Approximately five years later, on May 15, 1970, the creditor filed a motion for summary judgment against the guarantors. The motion asserted that a deficiency of more than $41,000.00 had not been paid by the debtor and prayed for judgment against the guarantors in that amount. The guarantors also filed a motion for summary judgment. Both motions were overruled, and the case was set for trial on the issue of the liability of the guarantors, based upon the original pleadings filed in 1964.

After trial, the court granted judgment 'against the individual guarantors in the amount to which each of them had personally guaranteed'.

The guarantors and National appealed the judgment. The appeals were consolidated, and assigned to the Court of Appeals, Division No. 1. By written opinion the judgment of the trial court was affirmed.

The issue presented is one of first impression. Although the question is suggestive of much legal rhetoric, the issue is basically an interpretation of 12 O.S.1971, § 686. This statute, which pertains to deficiency judgments in a foreclosure suit, provides in pertinent part:

'* * * 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 the judgment is sought or the attorney who shall have appeared for such party in such action. * * * 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 guarantors contend that the contract of guaranty cannot be enforced because a motion for deficiency judgment was not filed within the prescribed 90 day period and therefore the mortgage debt has been satisfied.

The guaranty agreement provided:

'For value received, we the undersigned stockholders of Apache Lanes, Inc. guarantee payment of the foregoing promissory note, with the individual...