Cronin v. Gager-Crawford Co.

• Decision Date: 10 April 1942
• Citation: 128 Conn. 688,25 A.2d 652
• Court: Connecticut Supreme Court
• Parties: CRONIN et al. v. GAGER-CRAWFORD CO. et al.

25 A.2d 652

128 Conn. 688

CRONIN et al.

v. GAGER-CRAWFORD CO. et al.

Supreme Court of Errors of Connecticut.

April 10, 1942.

Appeal from Superior Court, New London County; Dickinson, Judge.

Action by Elizabeth A. Cronin and others against the Gager-Crawford Company, mortgagor, Sarah Crawford, second mortgagee, and others, to foreclose a mortgage brought to the Superior Court, where upon motion by second mortgagee a judgment of foreclosure by sale was rendered. From a judgment after sale disallowing plaintiffs' claim for deficiency judgment and an order for distribution of funds in hands of receiver of rents, plaintiffs appeal.

Error and case remanded with directions.

See, also, 128 Conn. 401, 23 A.2d 149. Before MALTBIE, C. J, and AVERY, BROWN, JENNINGS, and ELLS, JJ.

J. Rodney Smith, of New London, for appellants.

Francis F. McGuire, of New London, for appellee.

BROWN, Judge.

In this action of foreclosure the court, on April 25, 1941, rendered judgment for the plaintiffs for $45,845.89 against the named defendant as mortgagor, and, upon the motion of the defendant Sarah Crawford, second mortgagee, for a foreclosure by sale. Pursuant to the judgment the mortgaged premises, consisting of real estate in New London, were appraised at $57,000 on June 2, 1941, and were sold to the plaintiffs for $45,000 on June 18, 1941. On September 26, 1941, the court accepted the committee's report of the sale, and the plaintiffs claimed a deficiency judgment. On September 30, 1941, the court by its supplemental judgment approved the reports of the appraisers and of the committee, found the total debt as of that date to be $47,275.90, and disallowed the plaintiffs' claim for a deficiency judgment in the amount of $2,275.90. On October 3, 1941, the court ordered the receiver of rents to pay to the named defendant $865.03, the net balance in his hands as of June 18, 1941, and to the plaintiffs $770.93, the net amount collected by him subsequent to that date. The plaintiffs have appealed from the denial of their claim for a deficiency judgment, and from this order directing the distribution of the net rentals other than on account of a deficiency judgment in their favor.

Counsel for both parties have devoted their arguments primarily, both orally and upon their briefs, to the question of the effect of § 5116 of the General Statutes, printed in the footnote,¹ upon the plaintiffs' right to a deficiency judgment. It is the plaintiffs' claim that on this record the $45,000 sale price must be taken as the value of the property in determining the amount of the deficiency under the statute, and that since the motion for foreclosure by sale was not made by them, but by the second mortgagee, the amount of the appraisal has no bearing whatever. The named defendant claims on the contrary that the court in rendering the deficiency judgment under the statute is conclusively bound by the value as fixed by the appraisal. The record contains no finding. The vital provision of the judgment is simply "that the plaintiffs' claim for a deficiency judgment in the amount of $2,275.90 is disallowed." Interpreting this in the light of the memorandum of decision, it is apparent that what the court actually decided was that the sale price determined the value of the property and that the plaintiffs had therefore failed to sustain the burden of proving that any deficiency existed.

The question is whether when a plaintiff, not having asked for a sale, as in the present case, has bought in the property at the foreclosure sale for less than the appraisal, the amount of the appraisal is conclusive upon him as to the property's value in the determination by the court of the amount of the deficiency. Section 5113 requires the court in its decree of foreclosure by sale to provide for an appraisal. Section 5116, after providing generally for a deficiency judgment when the proceeds of sale will not pay in full, goes on to deal with the specific situation of a sale for less than the appraisal provided for in § 5113. Under such circumstances it expressly requires that "the party or parties upon whose motion the sale was ordered" shall obtain no judgment for the unpaid portion of the debt and shall in no way collect it from other than the proceeds of the sale "until one-half of the difference between such appraised value and such selling price shall have been credited upon such debt * * * as of the date of sale." By the express words of the statute the provision last quoted applies only to those parties upon whose motion the sale was made. Staples v. Hendrick, 89 Conn. 100, 103, 93 A. 5. It is just and equitable that the party who asks and obtains an order of sale in place of a decree of strict foreclosure, with the resultant sacrifice of value which a sale is likely to involve, if he seeks a deficiency judgment should bear a part of the value sacrified by the forced sale. North End Bank & Trust Co. v. Mandell, 113 Conn. 241, 245, 155 A. 80. The provision in the statute concerning the appraisal was essential for the accomplishment of this purpose. It might also serve to assist the court in determining whether or not to approve the sale as one which fairly realized the value of the property. No reason appears and there is nothing in the context of the statute to indicate a legislative intent that the appraisal should be conclusive as to value upon any party not moving for a foreclosure by sale. It is accordingly our conclusion that an appraisal under the statute is not conclusive upon a plaintiff under such circumstances as here as to the value of the property in fixing the amount of the deficiency.

This raises the further question upon this record as to the effect of the price realized at the sale as fixing the amount for which a deficiency judgment may be entered. While this is governed by statute in a number of states, there is no such provision in Connecticut. There is, however, ample authority that in the absence of statute the price realized upon a sale which has been duly approved by the court affords the basis for the determination of the amount of the deficiency. In re White's Estate, 322 Pa. 85, 89, 185 A. 589; Artisti-Kote Co. v. Benefactor Bldg. & Loan Ass'n, 3 Cir., 64 F.2d 407, 408; Jacksonville Loan & Insurance Co. v. National Mercantile Co., 77 Fla. 825, 82 So. 292; Etter v. State Bank of Florida, 76 Fla. 203, 79 So. 724; Walton v. Washington County Hospital Ass'n, 178 Md. 446, 451, 13 A.2d 627, 128 A.L.R. 970; Marshall v. Davies, 78 N.Y. 414, 422; Frank v. Davis, 135 N.Y. 275, 279, 31 N.E. 1100, 17 L.R.A. 306; Snyder v. Blair, 33 N.J.Eq. 208, 209; 3 Jones, Mortgages, 8th Ed., § 2206; 3 Wiltsie, Mortgage Foreclosure, 5th Ed., §§ 975, 994; 37 Am.Jur. 243, § 865; 42 C.J. 295, § 1982. As the court said in Walton v. Washington County Hospital Ass'n, supra, 178 Md. at page 451, 13 A.2d at page 629, 128 A.L.R. 970: "It is also well established that since the confirmation of a foreclosure sale is the final determination by the Court that the mortgaged property was sold at a fair price, the defense of inadequacy of price can not be raised in subsequent proceedings, and for the purpose of a deficiency decree the price obtained at the sale is conclusive on the question of the market value of the property." The theory underlying the rule first above stated is that the mortgage is merely security for the debt, and, as in the case of the pledge of any property for debt where it has been fairly sold at public auction, the creditor is obliged only to credit the amount received and may hold the debtor for the balance. We are satisfied that the rule is the sound and proper one, and that, by reason of the court's power to...