Paramount Ins., Inc. v. Rayson and Smitley

• Decision Date: 29 July 1970
• Docket Number: No. 6124,6124
• Citation: Paramount Ins., Inc. v. Rayson and Smitley, 472 P.2d 530, 86 Nev. 644 (Nev. 1970)
• Parties: PARAMOUNT INSURANCE, INC., a Nevada corporation, and Frontier Fidelity Savings and Loan Association, a Nevada corporation, Appellants, v. RAYSON & SMITLEY, a partnership consisting of William G. Rayson and Paul V. Smitley, Paul V. Smitley and William G. Rayson, McMillan & Walker, a partnership, James B. McMillan, P.S. Walker and Pioneer Financial Corporation, a Nevada corporation, Respondents.
• Court: Nevada Supreme Court

Page 530

472 P.2d 530

86 Nev. 644

PARAMOUNT INSURANCE, INC., a Nevada corporation, and Frontier Fidelity Savings and Loan Association, a Nevada corporation, Appellants, v.RAYSON & SMITLEY, a partnershipconsisting of William G Rayson and Paul V. Smitley, Paul V. Smitley and William G Rayson, McMillan & Walker, a partnership, James B. McMillanP.S. Walker and Pioneer Financial Corporation, a Nevada corporation, Respondents.

No. 6124.

Supreme Court of Nevada.

July 29, 1970.

Albright, George, Johnson, Steffen & Simmons, Las Vegas, for appellants.

John Peter Lee, Wiener, Goldwater & Galatz, and Dale W. Beasey, Las Vegas, for respondents.

OPINION

COLLINS, Chief Justice.

This is an appeal from an order of the lower court discharging an attachment the issuance of which was obtained by appellants and levied upon property of respondent Smitley.We affirm that order.

Appellants, hereinafter referred to as Paramount, filed a complaint for judicial foreclosure and waste May 25, 1967.In their complaint they sought judicial foreclosure of 14 deeds of trust securing 1j promissory notes totaling $490,000, of which there remained unpaid $475,245 plus moneys paid by Paramount for fire insurance and taxes in the amount of $39,464.90, interest, costs, and attorney fees.Damages for waste were left open for later determination.

January 8, 1968, Paramount petitioned for the appointment of a receiver, alleging that the respondents had committed permissive waste by allowing the property secured by the trust deeds to deteriorate.The property was apartments, and some were said to be condemned as unfit for human occupation.

An order appointing a receiver was entered January 18, 1968, in which a lower court judge said that it appeared the mortgaged premises were inadequate security for the mortgage debt and the premises were continuing to deteriorate.

February 28, 1968, the receiver was granted an order permitting him to obtain appraisement and bids for repair of the property and to employ security personnel.On May 13, 1968, Paramount was authorized by the court to enter a cost-reimbursement contract to repair the premises.

October 6, 1969, Paramount filed an affidavit of attachment and directed the sheriff to levy on property of Smitley.October 9, 1969, Smitley moved to discharge the attachment on the grounds that it was improperly and irregularly issued.The grounds alleged were that Paramount's claim against Smitley was secured by a mortgage on real property; that the affidavit was insufficient to establish the security was valueless or of insufficient value; that the security had to first be exhausted before the value could be determined; and that the stay by the federal court relating to Rayson, a partner, applied also to actions concerning Smitley.

The trial judge granted Smitley's motion to discharge the attachment November 14, 1969.

The issues thus presented for our determination are these:

I.Whether the attachment provisions of NRS 31.010 apply in an action for judicial foreclosure of a trust deed on real property?

II.Whether an affidavit of a party's counsel is sufficient to establish that the security has become of insufficient value?

1.We are faced in this appeal with the problem of reconciling, if we can, and giving effect to two Nevada statutes, NRS 31.010¹andNRS 40.430² as construed by an earlier decision of this court in McMillan v. United Mortgage Co., 82 Nev. 117, 412 P.2d 604(1966).

2.In McMillan, this court held that a trust deed fell within the intendment of the 'one-action rule'(NRS 40.430); that the attachment statute, NRS 31.010, applied only when the security was 'valueless'; that the mode of determining value of the security is first to exhaust the security by sale pursuant to the trust deed; and, finally, that, 'Once the security has been sold and the debt not satisfied, an action on the note with ancillary attachment is permissible.'Id. at 121 and 122, 412 P.2d at 606.Accordingly, the issuance of a writ of attachment pursuant to NRS 31.010 by the lower court was reversed on the ground the conclusory affidavit of the creditor was not acceptable to show the security property had become valueless, but instead sale of the security was first required.

3.We are now faced with the problem of attempting to reconcile that decision with the apparently conflicting rights granted by NRS 31.010andNRS 40.430, where in a judicial foreclosure proceeding, as distinguished from the sale of security property under a trust deed, the security property is not valueless, but strong evidence is presented to show it is of insufficient value to secure the sum due.We conclude that the rule of McMillan v. United Mortgage Co., supra, should be limited in its application to sale of security property under trust deed and not to judicial foreclosure proceedings.

4.In deciding McMillan, ths court relied heavily upon Barbieri v. Ramelli, 84 Cal. 154, 23 P. 1086(1890), which construed a California statute, C.C.P. § 537, ³ from which NRS 31.010 was taken.⁴The Nevada legislature, however, added a significant factor not found in the California statute.The California statute refers only to security which has become valueless, and does not contain the additional words found in the Nevada statute which allows attachment to issue when the security has become insufficient in value.

5.It is apparent the one-action rule was legislatively adopted to change the common law rule which permitted a creditor to pursue either the remedy of sale of the land or suit on the note, or both at once.SeeMcMillan v. United Mortgage Co., supra, 82 Nev. at 119, 412 P.2d 604, andBank of Italy v. Bentley, 217 Cal. 644, 20 P.2d 940(1933).That purpose is accomplished in a judicial foreclosure proceeding.There is but one judicial action in which the sale of the security is first accomplished, and if any deficiency results in satisfying the debt owed, judgment for the deficient sum is rendered in the same action, which when docketed permits execution to issue.

Unless in that 'one-action,' attachment might be resorted to upon a proper showing the security has 'become * * * insufficient in value to secure the sum due plaintiff' statutory rights of creditor-plaintiffs conferred by NRS 31.010 are effectively denied.In that regard, we must give due consideration to rules of statutory construction previously adopted by this court.In Torreyson v. Board of Examiners, 7 Nev. 19, 22(1871), cited with approval inEx parte Smith, 33 Nev. 466, 480, 111 P. 930, 935(1910), this court said: '(N)o part of a statute should be rendered nugatory, nor any language turned to mere surplusage, if such consequences can properly be avoided.''Laws are also to be construed according to their spirit and meaning, and not merely according to their letter.'Lynip v. Buckner, 22 Nev. 426, 439, 41 P. 762, 765(1895).We see no other way to give simultaneous effect to NRS 31.010andARS 40.430.

By so holding, we do not overrule McMillan.Language in McMillan to the effect that NRS 31.010 applies only when the security is valueless was only dictum.That statute applies only in an 'action.'Thus, by its terms it is not available when a power of sale under a trust deed by the trustee is exercised.McMillan held that the action brought in that case on the note was improper because there had been no waiver of the security.We continue to approve that holding.It was unnecessary to the decision in that case to decide the applicability of NRS 31.010 to 'actions' under the 'one-action' rule.Subsequent to McMillan, this court recognized the alternative of proceeding by judicial foreclosure or trustee's sale was available to the beneficiary of a deed of trust.Nevada Land & Mtge. Co. v. Hidden Wells Ranch, Inc., 83 Nev. 501, 435 P.2d 198(1967).This decision points out and sharpens the distinctions between those alternatives.

6.In a foreclosure proceeding under NRS 40.430, all the steps required or permitted must be done under judicial scrutiny and supervision.If, in a foreclosure proceeding under that statute, a plaintiff seeks attachment where the security has become insufficient in value to secure the sum due, defendant has opportunity to seek discharge of that attachment by application to the very court in which the foreclosure proceeding is pending.SeeNRS 31.200.⁵

7.The affidavit by counsel for Paramount, upon which the attachment was issued, stated only the sum by which the affiant believed the indebtedness exceeded the value of the security.It is a conclusory affidavit which affords no basis for a court to conclude that the security has in fact diminished in value from what it had when accepted by the plaintiff as security, and, as directed by NRS 31.010, has 'become valueless or insufficient in value to secure the sum due the plaintiff.'SeeBarbieri v. Ramelli, 84 Cal. 154, 23 P. 1086(1890).We hold that an affidavit seeking issuance of a writ of attachment in a judicial foreclosure proceeding must not be merely conclusory and must contain an opinion of value by a witness qualified to express such an opinion.Furthermore, the affidavit must show that the security has decreased in value from the time the security interest attached.The affidavit relied upon in this case does not meet that test.Accordingly, the ruling of the lower court is affirmed.

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