Innoncente v. Et Ux., 8691.
| Decision Date | 26 July 1945 |
| Docket Number | No. 8691.,8691. |
| Citation | 43 A.2d 700 |
| Parties | INNONCENTE v. GUISTI et ux. |
| Court | Rhode Island Supreme Court |
OPINION TEXT STARTS HERE
Exceptions from Superior Court, Providence and Bristol Counties; Alexander L. Churchill, Judge.
Action of assumpsit by Adolf Innoncente against Sante J. Guisti and wife on a note and the common counts for money had and received to recover the amount of a deficiency in the proceeds of a sale of realty under a power of sale in a mortgage securing the note. Decision for plaintiff on the common counts, and defendants bring exceptions.
Exceptions overruled, and case remitted for entry of judgment on the decision.
Ralph Rotondo, of Providence, for plaintiff.
John DiLibero, of Providence, for defendants.
This is an action of assumpsit to recover a deficiency which was determined by the application of the proceeds of a sale of real estate under a power of sale in a mortgage. Plaintiff's declaration is in two counts, the first on the promissory note secured by the mortgage, and the second on the common counts. The action was tried in the superior court before a justice sitting without a jury and resulted in a decision for the plaintiff on the common counts. To such decision defendants duly excepted and have brought the case here on their bill of exceptions.
The following facts are undisputed. On January 6, 1933, defendants made and delivered to plaintiff their promissory note in the sum of $3500, payable one year after date to him or order. On that date they executed and delivered to him, to secure payment of that note, a mortgage on their real estate situated in Pawtucket, Rhode Island. No payment of principal or interest was ever made on the note. On June 30, 1938, the plaintiff foreclosed the mortgage, sold defendants' real estate at public sale for $1000, and applied the proceeds of the sale in diminution of the amount then due on the note. On January 16, 1944, plaintiff brought his present action for the deficiency thus established on June 30, 1938 by such sale.
Defendants contend that the action is barred by the statute of limitations, because it was not brought within six years of the maturity of the note. They also contend that the note is usurious and that the trial justice clearly erred in not so finding. We shall now consider such contention before discussing further defendants' first contention.
The evidence relating to the indebtedness of the defendants to the plaintiff and to the making of the mortgage and note in the sum of $3500 on January 6, 1933 is sharply conflicting. It appears that on June 23, 1927, plaintiff had loaned the defendant Sante J. Guisti, who is his brother-in-law, the sum of $2000. No payment was ever made on the prinicipal of this loan, although Guisti testified that he had paid some interest, but he could not either place the time or fix the amount of such payments.
Plaintiff testified that he had also loaned his brother-in-law at an earlier time $1000; that he had at times paid taxes on defendants' real estate and had made other advances of money to Guisti, and that he had never been repaid. Neither loan was evidenced by any note or other memorandum in writing. Plaintiff testified further that he was requested by the defendants to come to their home on January 6, 1933; that he went there; that their attorney was there; and that they admitted they owed him money and that they, themselves, fixed the total sum at $3500, for which they gave him their note secured by a mortgage on their real estate in Pawtucket.
Defendants did not deny that they had called him to their home and gived him such note, but they explained that it was made for $3500 for a special reason. Defendant Sante J. Guisti testified that it was understood between them and plaintiff that, in the event it became necessary to foreclose the mortgage, plaintiff was to give them a credit of $1500 on the note. He further testified that the reason he made the mortgage for $3500 was that His wife testified that they never admitted to plaintiff that they owed him $3500. She also testified that the attorney, whose name appears upon the mortgage as the notary public before whom she and her husband acknowledged the mortgage on January 6, 1933, was never in her house. That testimony was flatly contradicted by the attorney. He testified that he had been retained by the defendants to draw the mortgage and note; that, in their home on January 6, 1933, in his presence and hearing, they admitted to the plaintiff that they owed him $3500; and that they, then and there, signed the note for such amount and also signed and acknowledged the mortgage as security for the payment of the note.
The defendants' evidence that they actually borrowed only $1500 from the plaintiff was not credited by the trial justice. On the contrary, he believed the plaintiff's testimony, that the sum of $3500 was defendants' own calculation of the amount in which they were indebted to plaintiff for the loans and advances which he had previously made to them. After a careful perusal of the transcript we are of the opinion that the trial justice was not clearly wrong in finding that the defendants had failed to prove, by a fair preponderance of the evidence, their plea of usury.
We now come to defendants' second point. Is the plaintiff's action barred by the statute of limitations? It is admitted that the action on the note is barred, if the running of the statute was not interrupted on June 30, 1938 by the application of the proceeds of the foreclosure sale to the note. Plaintiff contends that such application was, in law, a payment by the defendants' agent and, therefore, tolled the statute on that date. Defendants contend that it was not a payment which bound them, since it was neither made by them nor intended by them as an acknowledgment of the note, and therefore could not interrupt the running of the statute.
The plaintiff's contention is founded on the proposition that a power of sale in a mortgage constitutes the mortgagee the agent of the mortgagor, not merely to sell the mortgaged real estate for the benefit of the mortgagee but also to apply the proceeds of the sale in diminution of the mortgagor's debt. There is no authority in this state for or against such a proposition. Elsewhere in similar cases involving a mortgage, deed of trust, or other collateral security, the authorities are divided. Among the cases supporting plaintiff's contention are Buffington v. Chase, 152 Mass. 534, 25 N.E. 977, 10 L.R.A. 123; First Nat. Bank v. King, 164 N.C. 303, 80 S.E. 251, 49 L.R.A.,N.S., 392; Sornberger v. Lee, 14 Neb. 193, 15 N.W. 345, 45 Am.Rep. 106. Some which are to the contrary are Brooklyn Bank v. Barnaby, 197 N.Y. 210, 90 N.E. 834, 27 L.R.A.,N.S., 843; Holmquist v. Gilbert, 41 Colo. 113, 92 P. 232, 14 L.R.A., N.S., 479; Zakes v. Elliott, 4 Cir., 106 F.2d 425; Hoffman v. Sheahin, 73 App.D.C. 374, 121 F.2d 861.
Apart from authority, and purely upon principle, it would seem that the mortgagee is the agent of the mortgagor, at least while the mortgage debt is still actionable and before the statute has run, not only to sell the mortgaged real estate but also to apply the proceeds of the sale to the payment of the debt in whole or in part, as the funds realized by the sale will permit. The power to sell and the duty to apply the proceeds of the sale are inseparable and spring from the will of the mortgagor as evidenced by the mortgage itself. It is as if the mortgagor had expressly said: ‘I authorize you, in the event of my default, to collect the money I owe you by selling my real estate provided, however, that you shall credit me, at the time of the sale, with a payment on my debt to you as if I had actually paid you myself.’ This is a reasonable construction of the mortgagor's contract with the mortgagee and takes nothing away from the mortgagor. If the statute had already run at the time of the sale, the case might be different, because then the mortgagor might be deprived of something, namely, his freedom from action on the barred debt. In the instant case the debt was not barred at the time of the sale but was still actionable.
In some of the jurisdictions, which hold that the application of the proceeds of sale is not such a payment on the part of the debtor as will interrupt the running or remove the bar of the statute, it has been expressly decided that the fact that the sale was made before the statutory period had expired makes no difference. Brooklyn Bank v. Barnaby, supra, and Hoffman v. Sheahin, supra. We have examined both of those cases, not only because the Hoffman case seems to rely on the Brooklyn Bank case on this point, but also because the latter case itself seems to follow an earlier New York case, Shoemaker v. Benedict, 11 N.Y. 176, 62 Am.Dec. 95, which, in our opinion, did not present the same factual situation that is before us in the case at bar.
In the Brooklyn Bank case the New York court of appeals recognized that the Shoemaker case, and cases following it, did not present facts precisely like those in the case before them, but, nevertheless, the court felt that those cases were ‘so identical as to be controlling under the rule of stare decisis.’ [197 N.Y. 210, 90 N.E. 837] We have examined those cases and almost all of them are cases where a joint debtor made a payment on the joint debt, while the statute of limitations was still running, and it was contended that such payment was binding on his codebtor so as to interrupt the running of the statute as to both.
The fundamental question at issue in those cases was, as stated in Shoemaker v. Benedict, supra, ‘whether the joint contract creates an agency in one of several joint debtors to continue a debt or renew a debt already barred against all, and prevent the statute of...
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