Bullington v. Mize

Decision Date15 December 1970
Docket NumberNo. 11972,11972
Citation478 P.2d 500,25 Utah 2d 173
Partiesd 173, 44 A.L.R.3d 910 Ralph E. BULLINGTON, John L. McMahon, Jr., Joseph K. McMahon, William H. Rouzer and Malcolm Putty, Sr., and Ralph E. Bullington, Trustees for Bullington Properties, Plaintiffs and Appellants, v. Lee MIZE, aka Lee S. Mize, Defendant and Respondent.
CourtUtah Supreme Court

John C. Beaslin, of Beaslin, Nygaard, Coke & Vincent, Vernal, for plaintiffs and appellants.

Dean W. Sheffield, Salt Lake City, Colton & Hammond, Vernal, for defendant and respondent.

CALLISTER, Justice:

Plaintiffs, residents of Wichita Falls, Texas, initiated this action to recover the unpaid balance of $69,666.56 on a vendor's lien note executed by defendant. In November of 1965, plaintiffs sold defendant certain real property upon which the Motor Lodge Motel was situated in Wichita Falls for $200,000. Defendant conveyed his equity in a ranch in Colorado and executed a note for $100,000, secured by a trust deed on the motel property. The last payment made by defendant was in May of 1967. On October 12, 1967, James E. Prothro, the trustee, under the deed of trust, notified defendant by registered mail that if the default in payments on the note were not cured, he had been instructed to take the necessary steps to foreclose in accordance with the trust deed. Defendant did not respond, and thereafter, trustee, Prothro, posted notices in conformity with the trust deed and Texas law and sold the property at public auction to the highest bidder on January 2, 1968. Plaintiffs, the beneficiaries under the deed, made the highest bid and bought the property for $25,000. Subsequently, plaintiffs filed the instant action.

Defendant, in his answer, alleged that he received no notice of the sale and that the sale price of $25,000 was so inadequate as to constitute fraud and deceit. Plaintiffs moved for summary judgment and defendant opposed the motion on the ground that there was a disputed issue of fact, namely, the fair market value of the property, which defendant asserted he was entitled to offset against the indebtedness.

In the pretrial order, the trial court stated that defendant did not put in issue the sufficiency of the procedure whereby the trust deed was foreclosed. Defendant admitted that payments on the note were delinquent and plaintiffs were entitled to foreclose the collateral. However, defendant claimed that the price for which the property was purchased was sufficiently disproportionate to its reasonable value that he was entitled to assert as a defense a claim for credit on the indebtedness equal to the reasonable value of the property.

The trial court denied plaintiffs' motion for summary judgment and ruled that the alleged unfairness of a trustee's sale of the security to the beneficiary in Texas may be inquired into judicially when a subsequent action in Utah is brought for a deficiency judgment. The trial court acknowledged that under the law of Texas such judicial inquiry is not permitted, or, if allowed, its scope is most restricted. The court ruled that the policy of the state of Utah is clear and has been expressed in Section 57--1--32, U.C.A.1953, which provides that in an action to recover the balance due upon an obligation for which a trust deed was given as security, the court shall not render judgment for an amount more than the amount by which indebtedness with interest, costs and expenses exceeds the fair market value of the property sold as of the date of sale.

The instant matter was tried before the court, which found that the sale of the property for $25,000 was so low as to be unconscionable. The court found that the fair market value of the property on the date of sale was $97,500, which the court offset against defendant's indebtedness to plaintiffs. 1

On appeal, plaintiffs assert that the trial court should have granted their motion for summary judgment and applied the law of Texas to the facts in this action.

What is the law of Texas?

A sale regularly exercised under a power is equivalent to a strict foreclosure by a court of equity properly pursued. Article 3810, 12 Vernon's Texas Civil Statutes, governing sales under a deed of trust, provides that notice of such proposed sale shall be given by posting written notice thereof for three consecutive weeks prior to the day of sale in three public places in said county. There is no requirement that personal notice be given to the mortgagor. 2

The amount bid in at a foreclosure sale is the proper amount to credit on the mortgagor's debt, if the sale were valid. If it should be found that the sale were invalid, then the proper amount to credit on the mortgagor's debt is the reasonable market value of the mortgagor's equity in the property at the time of the foreclosure sale. 3

The fact that the property is worth substantially more than the balance owing on the note and substantially more than the price at which the beneficiary bought it at the foreclosure sale is not recognized by the law of Texas as a basis for invalidating such a sale. A trustee's sale will not be set aside merely because of inadequate price. There must be evidence of irregularity which caused or contributed to cause the property to be sold for a grossly inadequate price. 4

A case directly in point is Koehler v. Pioneer Insurance Company, 5 which was an action to recover the balance due on a note after a trust deed foreclosure sale. Defendant, Koehler, had executed a note in the sum of $100,000 and a deed of trust securing payment. Defendant defaulted in his payments, and the trustee, after posting notices, sold the property to plaintiff for $25,000, Which was credited on the note. In the subsequent action on the note, plaintiff moved for and was granted summary judgment. On appeal, defendant asserted that the trial court erred in granting summary judgment because there was a disputed issue of fact as to whether the foreclosure sale was invalid due to the gross inadequacy of price. The appellate court observed that mere inadequacy of consideration, alone, does not render a foreclosure sale void, if the sale were legally and fairly made. The court stated:

In the words of Justice Williams in Castle v. Appliance Buyers Credit Corporation, 410 S.W.2d 485 (Tex.Civ.App., 1966, no writ hist.), 'The real theory of appellants' appeal seems to be nothing more than a collateral attack upon a trustee sale held prior to the institution of this suit. Appellant's contention that the consideration paid by appellee corporation for the property at the trustee sale was inadequate is in itself insufficient to constitute a valid attack on the sale.'

In the instant action, the pretrial order specified that the defendant did not put in issue the sufficiency of the procedure whereby the trust deed was foreclosed. Under Texas law, if the sale were valid, the amount bid in at the foreclosure sale is the prper amount to credit on the mortgagor's debt. If the law of Texas were applicable to the instant action, the trial court erred and plaintiff's motion for summary judgment should have been granted. Therefore, the issue to be resolved in this appeal is a choice-of-law question.

A review of the significant contacts in this action reveals that the situs of the property conveyed by the trust deed, the performance of the obligation of the note, and the residency of the plaintiffs were in Texas. Defendant in his answer admitted that he was a resident of Utah but testified at the trial that he was a resident of Fruita, Colorado. Defendant executed the note and trust deed in Colorado, and the property he traded as part of the transaction was located there.

If the right to recover a deficiency is not prohibited by the law of the situs of the mortgaged property and the situs of the contract of mortgage indebtedness, the state of the forum has no interest in denying such right to deficiency allowed by the law of the situs, and will, generally speaking, give effect to that right, even though by a local statute that right to recover the deficiency is denied absolutely or conditionally (such statues being ordinarily construed as having reference to deficiencies arising from foreclosures of mortgages on property within the state--* * *), unless the policy behind such statute is regarded as a fundamental part of the public policy of the state, which will be violated by the enforcement of a right to deficiency, even one arising from a foreclosure without the state. * * * 6

Defendant successfully asserted before the trial court that Section 57--1--32, U.C.A.1953, constituted a public policy of this jurisdiction and the courts of this State need not give full faith and credit to the laws of Texas in contravention to the public policy of Utah. Defendant reasoned that the Legislature has deemed as inimical to the interest of the public the enforcement of personal liability upon an obligation secured by a trust deed without granting a credit to the extent of the fair market value of the property.

There are jurisdictions where anti-deficiency statutes have been construed as a legislative expression of public policy. In such instances, the courts, although admitting the validity of the contract in the state where it was executed and to be performed, have denied enforcement thereof by appropriate legal remedy, i. e., if the contract be contrary to the public policy of the forum, remedy will be denied. 7

* * * But whether a forum statute would be applied to protect a defendant sued on a deficiency relating to foreign land, must depend on the interpretation of the statute in the light of its policy. * * * 8

There are two aspects which must be considered in the interpretation of the forum statute. First, does the language of section 57--1--32, U.C.A.1953, express a legislative intent to extend its protection to all debtors whose obligations are secured by trust deeds, regardless of the situs of the land? Secondly, is there a public policy in...

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3 cases
  • Soro v. Eighth Judicial Dist. Court of Nev.
    • United States
    • Nevada Court of Appeals
    • December 28, 2017
    ...application of the antideficiency statute at issue here, Utah Code Ann. § 57–1–32 (LexisNexis 2010), in Bullington v. Mize, 25 Utah 2d 173, 478 P.2d 500 (1970). Our supreme court has not addressed whether Nevada courts, in determining the extraterritorial reach of another state's antidefici......
  • Desario v. State Farm Mut. Auto. Ins. Co.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • November 29, 1993
    ...state if it finds that applying another state's law would violate the "strong public policy" of the forum state. See Bullington v. Mize, 478 P.2d 500, 504-05 (Utah 1970). Courts, including those of Utah, construe the public policy exception very narrowly. The doctrine is reserved for situat......
  • Jones v. Johnson
    • United States
    • Utah Court of Appeals
    • September 2, 1988
    ...sale. First Nat'l Bank v. Haymond, 89 Utah 151, 57 P.2d 1401, 1405 (1936) (addressing judicial foreclosure); Bullington v. Mize, 25 Utah 2d 173, 478 P.2d 500, 504-05 (1970) (applied Haymond language in nonjudicial foreclosure). It would be unwarranted conjecture upon conjecture to attempt t......

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