Bradley Engineering & Machinery Co. v. Muzzy

• Decision Date: 17 July 1909
• Court: Washington Supreme Court
• Parties: BRADLEY ENGINEERING & MACHINERY CO. v. MUZZY.

103 P. 37

54 Wash. 227

BRADLEY ENGINEERING & MACHINERY CO. v. MUZZY.

Supreme Court of Washington

July 17, 1909

Department 2. Appeal from Superior Court, Spokane County; E. H Sullivan, Judge.

Action by the Bradley Engineering & Machinery Company against F. N Muzzy. Judgment for plaintiff, and defendant appeals. Reversed, with directions to dismiss the action.

Munter & Lovejoy, for appellant.

B. B Adams and R. B. Blake, for respondent.

RUDKIN C.J.

On the 23d day of July, 1907, the defendant made, executed, and delivered to the plaintiff his five certain promissory notes for the aggregated amount of $1,936.26 payable on demand with interest at the rate of 8 per cent. per annum from date until paid. At the same time, and for the purpose of securing the payment of said several promissory notes according to their terms, the defendant made, executed, and delivered to the plaintiff a chattel mortgage on certain personal property therein described. The notes and mortgage contained no agreement for a deficiency judgment in case of foreclosure, and no stipulation or agreement that a deficiency judgment should not be taken, or that the mortgagee would look to the mortgaged property alone for the satisfaction of his claim. On the 8th day of January, 1908, the plaintiff commenced an action in the superior court of Spokane county to foreclose this mortgage and for a deficiency judgment on the notes, and such proceedings were had in that action that on the 26th day of May, 1908, judgment was given in favor of the plaintiff and against the defendant for the sum of $1,936.26, with interest and costs of suit, including $200 as attorney's fees, foreclosing the mortgage, and for any deficiency that might remain after applying the proceeds of the sale of the mortgaged property to the satisfaction of plaintiff's claim. Afterwards, on motion for a new trial, the court modified its decree by limiting the plaintiff to a foreclosure of its mortgage and a sale of the mortgaged property, and denying a judgment for any deficiency that might remain. Execution issued on the modified decree and the mortgaged property was sold by the sheriff, leaving a deficiency of $1,676.80 after applying the proceeds of the sale of the mortgage property to the satisfaction of the plaintiff's demand. The present action was instituted to recover this deficiency. To this action the defendant interposed two affirmative defenses: First, that the plaintiff was not entitled to a deficiency judgment because its notes and mortgage contained no agreement for such a judgment; and, second, that the judgment in the original action foreclosing the mortgage and denying a deficiency judgment was a bar to the present action. The court below held against both of these defenses, and gave judgment for the deficiency according to the prayer of the complaint. From this judgment the present appeal is prosecuted.

The two questions presented by the affirmative defenses are: First is the respondent entitled to a deficiency judgment under the facts disclosed by this record; and second, if so, should such judgment have been entered in the original action to foreclose the mortgage? The answer to the second question must be found in our statutes, for the general rule is that a court of equity has no power to enter a deficiency judgment in an action to foreclose a mortgage unless authorized so to do by statute or rule of court. 9 Ency. of Pl. & Pr. p. 451 et seq. The statutory provisions determining the right of the respondent to a judgment for a deficiency after subjecting the proceeds of the sale of the mortgaged property to the satisfaction of its demand, and the procedure by which such judgment shall be obtained, are the following: Section 5880, Ballinger's Ann. Codes & St. (Pierce's Code, § 1284), relating to the foreclosure of chattel mortgages, provides that: 'The mortgagee or holder of the lien may proceed upon his mortgage or lien, [or] if there be a separate obligation in writing to pay the same secured by said mortgage or lien, he may bring suit upon such separate promise. When he proceeds on the mortgage, if there be a specific agreement therein contained for the payment of a certain sum, or there is a separate obligation for the said sum, in addition to a decree of sale of mortgaged property, judgment shall be rendered for the amount due upon said mortgage or other instrument, the payment of which is thereby secured. The decree shall direct the sale of the mortgaged property, and if the proceeds of sale be insufficient under the execution, the sheriff is authorized to levy upon and sell other property of the mortgage debtor, not exempt from execution, for the sum remaining unsatisfied.' Section 5888, relating to the foreclosure of mortgages on real estate, contains similar provisions. Section 1 of the act of March 11, 1897 (Laws 1897, p. 98, c. 63), provides 'that in all proceedings for the foreclosure of mortgages hereafter executed, or on judgments rendered upon the debts thereby secured, the mortgagee or assignee shall be limited to the property included in the mortgage.' This act was declared unconstitutional by this court in the case of Dennis v. Moses, 18 Wash. 537, 52 P. 333, 40 L. R. A. 302, and need not be further considered. Section 2 of the act of March 8, 1899 (Laws 1899, p. 85, c. 53), provided that: 'When there is an agreement of the judgment debtor for the payment of any sum of money secured by a mortgage or other lien, and a deficiency judgment is consented to in said agreement, the court may direct in the decree that the balance due and costs which may remain unsatisfied after the sale of the property shall be satisfied from any property of the judgment debtor, and if any part of the judgment, interest and costs remains unsatisfied, the sheriff shall forthwith proceed to levy upon any property of the judgment debtor not exempt from execution, and all subsequent proceedings under said execution shall conform to the provisions of this act. The judgment creditor may also obtain from the clerk of the court execution on executions in the ordinary form for such deficiency: Provided, that in case of mortgage foreclosure where the mortgage contains a stipulation that no deficiency judgment shall be taken against the mortgagor, but that the mortgagee shall look to the mortgaged premises for satisfaction of his claim, no deficiency judgment shall be allowed. The commencement of an action for the recovery of a debt secured by mortgage not asking a foreclosure of the mortgage and brought before a foreclosure of the mortgage and sale thereunder, shall be, and be deemed to be, a waiver of the mortgage security; and this provision may not be waived or avoided by agreement contained in the mortgage or otherwise.' This latter section is plain in so far as it speaks, but its silence is enigmatic. It authorizes a deficiency judgment when stipulated for in the mortgage. It denies a deficiency judgment when stipulated against in the mortgage; but, where the mortgage is silent, the statute is also silent. Under his first affirmative defense, the appellant contends that this section prohibits deficiency judgments in all cases, unless expressly stipulated for in the mortgage, and the section is perhaps as susceptible to that construction as any other. The respondent, on the other hand, contends that the mortgagee is entitled to a deficiency judgment in the foreclosure action if so stipulated in the mortgage, but otherwise is relegated to an independent action at law to recover the deficiency. If this construction be adopted, the statute relates merely to a matter of procedure, and its only effect is to drive the creditor to two actions to recover his debt. We cannot believe that such was the legislative intent. A similar contention was made before this court in Dennis v. Moses, supra, where the validity of the act prohibiting deficiency judgments was involved, but in answer to the contention the court said: 'The discussions in some of the briefs view the act as prescribing a method of procedure. Looking only to the title of the act and the older and later practice relating to the foreclosure of mortgages, this would in a measure be justified. If it could be held to apply to a matter of practice only and to prohibit deficiency judgments in actions to foreclose mortgages, and the right remains intact to enforce collection of the deficiency in a subsequent suit or to waive the security in the first instance and bring an ordinary action where there is a covenant to pay in the mortgage or a separate instrument contracting to pay, then the question comes...