McGirl v. Brewer

• Citation: 280 P. 508,132 Or. 422
• Parties: MCGIRL v. BREWER ET UX. [*]
• Decision Date: 24 September 1929
• Court: Supreme Court of Oregon

280 P. 508

132 Or. 422

MCGIRL v. BREWER ET UX. ^[*]

Supreme Court of Oregon

September 24, 1929

Department 2.

Appeal from Circuit Court, Jackson County; Orlando M. Corkins Judge.

Action by Thomas McGirl against Joe T. Brewer and wife. Judgment for defendants, and plaintiff appeals. Reversed.

This is an action to recover the unpaid balance on a promissory note executed and delivered by Joe T. Brewer and Anna C. Brewer, of Medford, Or., to evidence a portion of the purchase price of a tract of land situate in the state of Montana, which note was secured by a purchase-money mortgage on the land. The makers of the note and mortgage defaulted in the payment thereof, and the holder brought suit in Montana to foreclose his mortgage. On foreclosure, the property was sold for an amount much less than the amount due upon the mortgage note, whereupon the holder of the note brought this action to recover the deficiency. From a judgment against the plaintiff, and in favor of the defendants herein, plaintiff appeals.

The history of the case is substantially as follows: In 1921, the above-named defendants bought of one P. G. Carlin real estate in Carbon county, Montana, and, as part payment therefor transferred to Carlin property that they alleged to be of the value of $19,000. For the balance of the purchase price they executed two notes, in the amount of $500 and $12,000 respectively, secured by a purchasemoney mortgage in the amount of $12,500. Prior to the maturity of the notes, Carlin, for value, transferred the same to this plaintiff, who thereby became the owner and holder thereof. The defendants paid the $500 note, and accrued interest on the $12,000 note, amounting to about $4,320, as well. But when the note for $12,000 became due, notwithstanding they had paid about $23,820 on the purchase price of the property the plaintiff refused to grant additional time, and promptly foreclosed the purchase-money mortgage in Montana. The defendants, who were living in Medford, Or., were served by publication only. Plaintiff secured judgment against them in the Montana court for $12,000, the amount of the larger note, and for $600 attorney's fees, and costs, and, upon the sale of the land on foreclosure, he bought in the property for $8,500, leaving a deficiency of about $5,000. After crediting on the note the amount realized from the foreclosure sale, plaintiff instituted this action to recover the deficiency.

Porter J. Neff, of Medford, for appellant.

Charles W. Reames, of Medford, for respondents.

BROWN, J. (after stating the facts as above).

The Montana statute provides that, in a suit to foreclose a mortgage, it is lawful to obtain a personal judgment for any deficiency remaining after foreclosure. This is true of mortgages given for the purchase price, and mortgages of any other character as well. Rev. Codes Mont. 1921, § 9467.

The Oregon Code relating to mortgage foreclosure provides: "When judgment or decree is given for the foreclosure of any mortgage, hereafter executed, to secure payment of the balance of the purchase price of real property, such judgment or decree shall provide for the sale of the real property covered by such mortgage, for the satisfaction of the judgment or decree given therein, and the mortgagee shall not be entitled to a deficiency judgment on account of such mortgage or note or obligation secured by the same." Or. L. § 426.

The plaintiff rests his case upon the doctrine of comity between courts. The defendants, however, invoke the protection of the foregoing section of our statute, and contend that an action on a purchase-money note to collect a deficiency existing after foreclosure of the purchase-money mortgage on real estate securing the same is contrary to the public policy of Oregon, as declared by its statutes and the decisions of its courts.

In the comparatively recent case of Wright v. Wimberly, 94 Or. 1, 17, 184 P. 740, 745,

"It is a fact of which courts in Oregon should take judicial notice that in the year 1897, and for some time thereafter, great financial depression prevailed in the Pacific Coast states. Persons who had purchased real property in that territory, during the earlier flush times, by paying a part of the purchase price and giving a mortgage to secure the remainder, found it impossible, if they had not disposed of the premises prior to the monetary stagnation, to discharge their legal obligations, whereupon the foreclosure of liens became inevitable. As there was no money then easily to be secured, the creditor, upon a sale of the premises pursuant to the decree, usually became the purchaser for almost a nominal sum and far below the mortgage debt, thereby obtaining a recovery over upon the personal obligation of the mortgagor for the remainder, thus taking all the property the debtor then had and jeopardizing his prospects of ever obtaining any more land. In order to prevent a repetition of such conduct on the part of a creditor, section 426, L. O. L., was enacted and made applicable to the foreclosure of mortgages thereafter executed. That such a statute was intended to be remedial cannot well be disputed. The enactment is in the nature of an appraisement law, fixing an upset price upon the sale of real property under a decree of foreclosure equal to the amount of the debt, costs, disbursements, etc., thereby permitting the mortgagee to retain the sum of money which he had received on account of the sale, and allowing him to be restored to his original estate in the premises."

In commenting further upon this section of the statute, Mr. Justice Bennett, speaking for the court, said:

"Under the doctrine of Page v. Ford, 65 Or. 450, 131 P. 1013, Ann. Cas. 1915A, 1048, 45 L. R. A. (N. S.) 247, the creditor still has his option to proceed on the mortgage to foreclose, or to proceed on the promissory note at law; but the Legislature had a perfect right to say that he could not do both. As to future contracts and in pursuance of what it considers a correct public policy, the Legislature has a right to prohibit any contracts which may be injurious to the general public good, or it may stop with rendering such contracts unenforceable. This has been too often held to be any longer questioned. The usury law prevents the contract of the parties for a greater than a given rate of interest. Again, it is generally held that a party cannot make a contract in advance to waive his right of redemption or his privilege of exemption. Hundreds of other illustrations could be cited, but these are enough. I think the statute should be liberally construed in the interest of the purpose intended by the Legislature. It is true that arguments can be adduced pro and con, as to whether or not such a law would be in the interest of a good public policy; but the very fact that there are such arguments both ways, and considerations to be weighed on each side, makes the question preeminently one for the Legislature. And it having declared what it believes to be public policy in regard to the matter, we must accept that as good public policy and liberally construe the law for the purpose of carrying out its intention."

As early as 1889 the question of public policy was passed upon by our court in the case of Bank of Ogden v. Davidson, 18 Or. 57, 22 P. 517, where it was held:

"A provision in a note made out of this state, secured by chattel mortgage on property within the state, contained a provision that ...