Nw. Loan & Trust Co. v. Bidinger

• Decision Date: 07 December 1937
• Citation: 276 N.W. 645,226 Wis. 239
• Court: Wisconsin Supreme Court
• Parties: NORTHWESTERN LOAN & TRUST CO. v. BIDINGER et al.

226 Wis. 239

276 N.W. 645

NORTHWESTERN LOAN & TRUST CO.

v.BIDINGER et al.

Supreme Court of Wisconsin.

Dec. 7, 1937.

Appeal from an order of the Circuit Court for Kenosha County; E. B. Belden, Judge.

Reversed.

The action in which the order was made was commenced by the plaintiff, the Northwestern Loan & Trust Company, as trustee, on February 25, 1935, to foreclose a trust deed or mortgage given to it by the defendant, Louis F. Bidinger, and Katherine J. Bidinger, husband and wife. The trust deed was dated December 1, 1924, and was in the usual form. It was given to secure seventy bonds, each of the denomination of $500. The mortgaged premises consisted of a parcel of land 32 feet by 106 feet, located in the business section of the city of Kenosha, upon which was erected a two-story brick building. On the ground floor thereof was a store. On the second floor there were offices and a large room used as a recital hall. At various times after the mortgage was given, and in pursuance of its terms, the defendantselected to pay ten of the bonds. On December 1, 1934, the defendant failed to pay the semiannual interest which became due on that day. Certain taxes and special assessments were delinquent. At the time the complaint was verified on February 16, 1935, the interest that had accrued subsequent to June 1, 1934, was unpaid, the taxes and special assessments that were delinquent amounted to $7,101.15, and the principal of the bonds had matured. In the complaint it was alleged that the value of the premises did not exceed $30,000 and that the security was inadequate. The plaintiff prayed for the appointment of a receiver of the rents and profits. The defendants' answer admitted most of the allegations of the complaint, but denied that the value of the premises did not exceed $30,000, that the security was inadequate, and prayed that a receiver be not appointed. The action was tried to the court on April 29, 1935. Findings of fact and conclusions of law were made. The court was of the opinion that it was not necessary at that time to appoint a receiver. The judgment of foreclosure, among other things, provided: “It is further ordered that the value of the mortgaged premises is $42,000 for all purposes of this foreclosure proceeding.”

The amount adjudged to be due on April 29, 1935, was $32,653.81. No demand for a deficiency judgment was made. On July 10, 1935, in a separate action brought by the plaintiff against the defendants in the same court on the bonds, judgment was entered in favor of the plaintiff and against the defendants for the sum of $32,063.05. On June 19, 1936, a sale of the mortgaged premises was duly held. At that sale, the premises were struck off to a committee of the bondholders who bid $18,000 plus taxes, amounting to $9,112.46-their bid amounting to $27,112.46. The notice to confirm the sale stated that the amounts due on the judgment, plus delinquent taxes and costs of sale, amounted to $44,028.52. The defendants opposed confirmation of the sale on the ground that the bid was inadequate. On July 1, 1936, the court refused to confirm the sale, ordered a resale upon condition that the defendants, within ten days, pay the costs of the sale just had, plus a reasonable attorney fee, and ordered that a receiver be appointed. The defendants paid the costs and attorney fee. On November 12, 1936, the second foreclosure sale was duly held. The bondholders' committee again bid $18,000 for the premises, assuming and agreeing to pay all taxes and tax liens then existing against the premises. The motion to confirm that sale stated that the amount of the judgment, delinquent taxes, and costs at that time amounted to $44,868.39. The defendants again opposed confirmation of the sale. A hearing was had on plaintiff's motion to confirm, and evidence was adduced for the purpose of showing the “fair value” of the premises. The court held that the bid was substantially inadequate and that the “fair value” of the premises was not less than between $45,000 and $50,000, and thereupon offered to confirm the sale upon condition that the plaintiff would credit $35,000, plus taxes amounting to about $11,000, plus accrued interest amounting to $3,428.44, a total sum of $49,428.44, upon the judgment which at that time amounted to $44,868.39. The plaintiff refused to so credit. Whereupon, on February 20, 1937, the court refused to confirm without ordering a resale. From that order the plaintiff appealed. Subsequent to the taking of the appeal, the defendants served upon the plaintiff a writing in which they consented that an order confirming the sale be entered in the event that there be credited, on the judgment debt, the entire amount of such judgment debt and no more.

Geo. W. Taylor, of Kenosha, for appellant.

L. E. Vaudreuil, of Madison, for respondents.

NELSON, Justice.

In refusing to confirm the second sale, the court apparently intended to act in pursuance of the equitable rules stated in Suring State Bank v. Giese, 210 Wis. 489, 246 N.W. 556, 558, 85 A.L.R. 1477, and in compliance with section 278.105 (2), Stats.1935, which provides: “In case the mortgaged premises sell for less than the amount due and to become due on the mortgage debt and costs of sale, there shall be no presumption that such premises sold for their fair value and no sale shall be confirmed and judgment for deficiency rendered, until the court is satisfied that the fair value of the premises sold has been credited on the mortgage debt, interest and costs,” since it appears that a hearing was held for the purpose of determining the “fair value” of the premises. Two real estate men, residents of Kenosha, testified that the fair value of the premises was $49,751.94, but it clearly appears from their testimony that their valuations were based upon cost of reconstruction less depreciation and upon an assumed income which the building did not but might some time in the future produce, if the store could be rented for nearly three times as much as it was rented for at the time of the sale, if the premises, especially the entrance to the second story and the second story, should be remodeled at an expense of between four and five thousand dollars, and if all of the offices, when so remodeled and afforded suitable janitor service, should each be rented for about $25 per month. Both witnesses admitted on cross-examination that in fixing their valuations they had in mind a purchaser who was “ready, willing and able to buy, but who did not need to buy, and a seller who was ready, able and willing to sell but who did not of necessity have to sell.” In other words, both admitted that they were talking about market value. In Suring State Bank v. Giese, supra, after adverting to that power of a court of equity which may be exercised to prevent a mortgagor's property being sold for a grossly inadequate price which shocks the conscience of the court and its notions of justice, we held that a court might refuse to confirm a sale in a given case when there was coupled with an inadequate price an emergency situation which operated to prevent competitive bidding. It was there stated that upon application for confirmation of a sale, if no upset price has theretofore been fixed, the court may conduct a hearing, establish the fair value of the property, and require the plaintiff mortgagee to credit the amount of the fair value of the premises on the foreclosure judgment as a condition of immediate confirmation. In Kremer v. Rule, 216 Wis. 331, 257 N.W. 166, 169, it...