Federal Farm Mortg. Corporation v. Claussen
| Decision Date | 26 July 1940 |
| Docket Number | 30868. |
| Parties | FEDERAL FARM MORTGAGE CORPORATION v. CLAUSSEN ET AL. |
| Court | Nebraska Supreme Court |
Syllabus by the Court.
1. The effect of chapter 41, Laws 1933, section 20-2141 Comp.St.1929, is to deny a deficiency judgment to the mortgagee in a foreclosure action and to leave unaffected other remedies for the collection of the debt.
2. The purpose of section 20-2142, Comp. St.1929, is to protect the debtor and to prevent the prosecution of proceedings at law to recover the debt concurrently with proceedings to foreclose the mortgage and to prevent the possibility of two judgments being rendered against him for the same debt.
3. Section 20-2142, Comp.St.1929, construed to mean that if a creditor brings an action in foreclosure to enforce payment of the debt, he must pursue that remedy to its end and exhaust the relief afforded by that remedy before resorting to an action at law, " unless authorized by the court" to pursue an action at law and also one in equity at one and the same time.
4. After exhausting the remedy by foreclosure, the equity proceeding is no longer pending and there is no further purpose or right of the court to control the beginning of an action at law. Where that situation occurs, if remedies at law exist, an action at law may be had without the requirement of securing permission of the equity court.
5. Under section 20-2142, Comp.St.1929, district courts do not have authority, unlimited as to time, to tell one creditor who has prosecuted a foreclosure that " you may" and another " you may not" sue at law for your deficiency.
Appeal from District Court, Knox County; Wenke Judge.
Action to foreclose a mortgage by the Federal Farm Mortgage Corporation against Henry Claussen, August E. Claussen and others. A balance remained unsatisfied after the proceeds of the sale were applied to the foreclosure decree. The plaintiff filed a motion for leave to withdraw the mortgage note for the purpose of instituting suit against the makers for the deficiency. From a judgment denying the motion, the plaintiff appeals.
Judgment reversed, and cause remanded.
After exhausting remedy by foreclosure, the equity proceeding is no longer pending, and there is no further purpose or right of the court to control the beginning of an action at law for deficiency, and in such situation, if remedies at law exist, an action at law may be had without securing permission of the equity court. Comp.St.1929, § 20-2141, Laws 1933, c. 41; § 20-2142.
Franklin L. Pierce and Wm. W. Graham, both of Omaha, and F. A. Barta, of Center, for appellant.
W. D. Funk, of Bloomfield, for appellees.
Heard before SIMMONS, C. J., and ROSE, EBERLY, PAINE, MESSMORE, and JOHNSEN, JJ.
Plaintiff prosecuted a mortgage foreclosure to completion. A balance of $2,500 remained unsatisfied after the proceeds of the sale were applied to the decree. The note and mortgage were executed and delivered January 27, 1934. The note was filed in the action when the decree was taken. Plaintiff filed a motion for leave to withdraw the note for the purpose of instituting suit against the makers for the deficiency. Treating the motion as an application for leave to withdraw the note from the files and for leave to bring a separate action at law against the " persons personally liable on the indebtedness evidenced by said note to recover judgment for the deficiency," the trial court denied the motion.
Section 20-2141, Comp.St.1929, was by chapter 41, Laws 1933, amended to read as follows: " When a petition shall be filed for the satisfaction of a mortgage, the court shall have the power only to decree and compel the delivery of the possession of the premises to the purchaser thereof." This does not deprive a mortgagee of the right to elect to proceed initially by suit upon the note instead of by foreclosure, Federal Farm Mtg. Corporation v. Hughes, 137 Neb. 454, 289 N.W. 866; Federal Farm Mtg. Corporation v. Thiele, 137 Neb. 626, 290 N.W. 471; nor does it deny the mortgagee the right to maintain an action at law to recover judgment for the deficiency. Federal Farm Mtg. Corporation v. Cramb, 137 Neb. 553, 290 N.W. 440.The effect of chapter 41, Laws 1933, as construed in the Cramb and Thiele cases, is to deny a deficiency judgment to the mortgagee in a foreclosure action and to leave unaffected other remedies for the collection of the debt.
Section 20-2142, Comp.St.1929, provides: " After such petition shall be filed, while the same is pending, and after a decree rendered thereon, no proceedings whatever shall be had at law for the recovery of the debt secured by the mortgage, or any part thereof, unless authorized by the court." This section was not repealed or amended by chapter 41, Laws 1933. Federal Farm Mtg. Corporation v. Thiele, supra; Federal Farm Mtg. Corporation v. Cramb, supra.
What, then, is the power of the court under the language " unless authorized by the court?"
A review of many decisions of this court establishes the following as the proper construction of section 20-2142, Comp.St.1929: The purpose of the statute is to protect the debtor and to prevent the prosecution of proceedings at law to recover the debt concurrently with proceedings to foreclose the mortgage and to prevent the possibility of two judgments being rendered against him for the same debt. If a creditor brings an action in foreclosure to enforce payment of the debt, he must pursue that remedy to its end and exhaust the relief afforded by that remedy before resorting to an action at law, " unless authorized by the court" to pursue an action at law and also one in equity at one and the same time. However, after exhausting the remedy by foreclosure, the equity proceeding is no longer pending and there is no further purpose or right of the court to control the beginning of an action at law. If remedies at law exist, an action at law may be had without the requirement of securing permission of the equity court. District courts do not have authority, unlimited as to time, to tell one creditor who has prosecuted a foreclosure that " you may" and another " you may not" sue at law for your deficiency. Meehan v. First Nat. Bank of Fairfield, 44 Neb. 213, 62 N.W. 490; Hargreaves v. Menken, 45 Neb. 668, 63 N.W. 951; Maxwell v. Home Fire Ins. Co., 57 Neb. 207, 77 N.W. 681; Brayton v. Oakes, 2 Neb., Unof., 593, 89 N.W. 646; Merrill v. Miller, 2 Neb., Unof., 630, 89 N.W. 606; Waugh v. Newell, 62 Neb. 438, 87 N.W. 143; Mann v. Burkland, 68 Neb. 269, 94 N.W. 116; Armstrong v. Patterson, 97 Neb. 229, 149 N.W. 408 (reversed on rehearing on other grounds, 97 Neb. 871, 152 N.W. 311); Quesner v. Novotny, 116 Neb. 84, 215 N.W. 796.
In the case here presented it is conceded that a deficiency judgment cannot be granted in the foreclosure action; the remedy in equity therefore is exhausted; there is nothing further in the foreclosure action that the court can do; that action is finally determined. An action at law if brought by the plaintiff to recover the deficiency will therefore be the only action pending, and but one judgment can be recovered for the deficiency and that in the action at law.
The foreclosure action being completed, the plaintiff may sue at law to recover judgment for the deficiency without pleading or proving that it has been authorized by the court to bring the action. The question of the necessity for court authorization was not presented in the Cramb case, for the reason that authorization of the equity court had been obtained.
The trial court has the right to protect its files. However, it should not, and we assume will not, deny the plaintiff the right to withdraw the note if plaintiff deems it necessary to produce the note to properly prove its case in an action at law to recover a judgment for the deficiency.
Reversed and remanded.
My concern is with the question whether chapter 41, Laws 1933, now section 20-2141, Comp.St.Supp.1939, can soundly and effectively be made to accomplish the purpose for which it was enacted. That question does not seem to me to have received a sufficiently careful analysis, either in this case or in the cases of Federal Farm Mtg. Corporation v. Cramb, 137 Neb. 553, 290 N.W. 440, and Federal Farm Mtg. Corporation v. Thiele, 137 Neb. 626, 290 N.W. 471, which have preceded it.
The purpose of the legislature in enacting chapter 41, Laws 1933, is unmistakable. It was to prevent mortgage debtors, who had lost their homes through foreclosure, from being bogged down with subsequent deficiencies, that might shatter their morale or deprive them of the opportunity for rehabilitation. The opinion in this case and those in the Cramb and Thiele cases, supra, take the view that, whatever may have been the legislative intent, all that the statute actually does is take away the power of the court to enter a deficiency judgment in the foreclosure proceedings, and that it does not affect the right to institute an action at law for a deficiency. If this is all that chapter 41, Laws 1933, accomplishes, it fails to serve any practical purpose whatsoever. In fact, its effect then is to increase, instead of to lessen, the financial burden of a harassed mortgage debtor, by forcing him to be subjected to the additional costs and expenses of another separate proceeding. Such a purposeless and burdensome result would be regrettable, and I cannot believe that, on the basis of sound legal principles, it is necessary to allow the statute thus to fail in its objective.
For convenience, I set out the language of the statute. Before its amendment by chapter 41, Laws 1933, section 20-2141 Comp.St.1929, read: " When a...
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