Hoffman v. Sheahin, 7660.

Decision Date07 April 1941
Docket NumberNo. 7660.,7660.
Citation121 F.2d 861,73 App. DC 374
PartiesHOFFMAN v. SHEAHIN.
CourtU.S. Court of Appeals — District of Columbia Circuit

George D. Horning, Jr., of Washington, D. C., for appellant.

George P. Lemm and Harold Brody, both of Washington, D. C., for appellee.

Before GRONER, Chief Justice, and VINSON and RUTLEDGE, Associate Justices.

RUTLEDGE, Associate Justice.

The suit is for a deficiency on deed of trust notes. The sole question is whether the cause is barred by the statute of limitations, as the trial court held.

The notes aggregated a principal sum of $25,000. They matured, after an extension, on September 18, 1934. The deed of trust, conveying real estate as security, was foreclosed and the proceeds of sale were credited on the notes December 21, 1934. A deficiency of $6,387.16 remained on account of principal, interest, taxes and foreclosure costs. Plaintiff's suit for this amount was filed December 10, 1937. This was more than three years, the statutory period, from the date of maturity, September 18, 1934, and less than that time from the date of foreclosure and application of the proceeds. The deed of trust, in customary form, authorized the trustee, on default, to sell the property and apply the proceeds to pay the notes, after paying expenses of sale, taxes, etc.

Defendant says the beginning of the statutory term was the date of maturity of the notes. Plaintiff says it was the date of foreclosure and application of the proceeds of sale. He advances two theories. The first is that the trustee was defendant's agent to make the application and his doing so constituted a payment which revived the cause and started the running of the statute from the time it was made. The second is that the suit is for the deficiency which could not accrue until after the sale and determination of the amount, not upon the notes themselves.

To sustain the first theory, plaintiff cites no authority involving foreclosure of liens on real estate. None appears to be available.1 However, plaintiff relies on cases relating to pledges of personalty. Among these are First National Bank v. King, 1913, 164 N.C. 303, 80 S.E. 251, 49 L.R. A.,N.S., 392; Buffinton v. Chase, 1890, 152 Mass. 534, 25 N.E. 977, 10 L.R.A. 123; Sornberger v. Lee, 1883, 14 Neb. 193, 15 N.W. 345, 45 Am.Rep. 106. These treat the trustee's or pledgee's authority to apply the proceeds, given prior to the statutory period, as the equivalent of the debtor's voluntary payment within it. Power to apply the security is identified with authority to waive the statute's running.

We think this extends the "agency" beyond its intended scope and ignores its true nature as well as the basis upon which payment is held to give new life to the debt. The "agency" is not one solely on behalf of the debtor, if indeed it is truly one at all. It is rather a power coupled with an interest, irrevocable by the donor. Cf. Hunt v. Rousmanier, 1823, 8 Wheat. 174, 5 L.Ed. 589. In exercising it the donee acts on behalf of the creditor, whether himself or another, rather than for the debtor, though the latter has empowered him to do the act. The application therefore lacks the voluntary character which gives to the debtor's own act, or to that of an agent acting solely on his account, the character of waiver of immunity and acknowledgment that the debt retains vitality. The time element, too, is important. A power of application given when the debt is incurred expresses intention as of that time, not as of some time within or following the period of limitations. It is the present acknowledgment which gives force to the intention to extend the time of liability. Furthermore, the power to apply is one which is essential to making effective the security. It has no intended relation to any deficiency. There is no policy which favors deficiency judgments so strongly that it should convert an authority limited in terms to dealing with the security into a power to affect something not related to it in any way. For these reasons, we think the better rule, and that more widely accepted at present, is found in the authorities relied upon by the defendant. See Zaks v. Elliott, 4 Cir., 1939, 106 F.2d 425; Brooklyn Bank v. Barnaby, 1910, 197 N.Y. 210, 90 N.E. 834, 27 L.R.A., N.S., 843; Holmquist v. Gilbert, 1907, 41 Colo. 113, 92 P. 232, 14 L.R.A.,N.S., 479; Notes (1923) 25 A.L.R. 58, 62.

As to plaintiff's second contention, no point is made that there is any difference as to the time available for enforcing liability for payment of the balance due for principal and interest on the notes, on the one hand, and on the other for taxes, expenses of foreclosure, etc., under the deed. To the contrary, the agreed statement of facts upon which the case has been presented here stipulates that plaintiff is entitled to recover the full $6,387.16 or nothing. Since the larger portion of this amount consists of unpaid principal and interest, we think the fairer disposition will result from treating the entire sum as if it were comprehended within the specific terms of the notes.2 Furthermore, the deed provided for the application of the proceeds of sale to payment of the taxes and expenses of foreclosure in priority to payment of principal and interest, and the proceeds have been applied in accordance with the provision. They were more than sufficient to take care of the taxes and expenses of foreclosure, so that these items may be regarded as having been paid and the entire amount of $6,387.16 as constituting unpaid principal and interest.

Plaintiff's argument appears to be that the deficiency became a separate and independent obligation from that represented by the notes and, since the amount could not be determined until after the sale, the statute did not begin to run until that time. In other words, determination of the deficiency is regarded as giving rise to an entirely new cause of action. In support of this view, plaintiff relies upon authorities which assert that a cause of action for a deficiency does not accrue until after a sale and determination of the amount due. Parratt v. Hartsuff, 1906, 75 Neb. 706, 106 N.W. 966; Reynolds v. Jensen, 1936, 14 Cal.App.2d 558, 58 P.2d 687, 688.

Neither case involved the question whether a deficiency judgment for unpaid principal and interest could be rendered after the notes had been outlawed. The first involved chiefly another issue,3 but the court also held a plea of limitations bad, "for the cause of action for a deficiency judgment did not accrue until the coming in of the report of the sale." 106 N.W. at page 969. It does not appear that the plea was based on the fact that the notes had been barred before the foreclosure proceedings were begun, and the case does not purport to overrule Cady v. Usher, 1904, 71 Neb. 236, 98 N.W. 651, in which the same court held that this prevented the rendering of a deficiency judgment in foreclosure proceedings.

In Reynolds v. Jensen, supra, the statute specifically prescribed the period within which independent actions for deficiency might be brought, fixing the date of sale on...

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    • October 12, 1971
    ...116, 117, 232 F.2d 373, 374 (1956); Brice v. Walker, 73 App.D.C. 377, 378, 121 F.2d 864, 865 (1941); Hoffman v. Sheahin, 73 App.D.C. 374, 375-377, 121 F.2d 861, 862-864 (1941). 69 The record does not reveal whether Markowitz' obligation to pay Fox-Greenwald for the sheet metal work was embo......
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    ...the Note strains credulity and renders the premise underlying the partial payment provision of § 2415(a) an utter fiction. Thus, in Hoffman v. Sheahin, the court spurned the contention that a party's authority to liquidate collateral and apply the proceeds to an outstanding obligation shoul......
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    ...be brought by the creditor for the amount of the deficiency." (citing Finley v. Friedman, 159 A.2d 668 (D.C. 1960) ; Hoffman v. Sheahin, 121 F.2d 861 (D.C. Cir. 1941) )). While the plaintiff's original complaint requests a deficiency judgment pursuant to D.C. Code § 42–816, see Compl. at 14......
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    ...unless the third party had the debtor's authorization or assent to make payments on the debtor's behalf. See, e.g., Hoffman v. Sheahin, 121 F.2d 861, 862 (D.C.Cir.1941) (emphasizing the absence of a voluntary act by the debtor in determining that the trustee acted on behalf of the creditor ......
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