Stewart v. Eaton

• Decision Date: 02 February 1939
• Docket Number: No. 88.,88.
• Parties: STEWART v. EATON.
• Court: Michigan Supreme Court

287 Mich. 466

283 N.W. 651

STEWART

v.EATON.

No. 88.

Supreme Court of Michigan.

Feb. 2, 1939.

Action in assumpsit to recover a deficiency judgment by the Right Reverend George Craig Stewart, as Bishop of the Protestant Episcopal Church in the Diocese of Chicago, and his successors in office, a corporation sole, against William L. Eaton. Judgment for defendant, and plaintiff appeals.

Affirmed.

WIEST and CHANDLER, JJ., dissenting.Appeal from Circuit Court, Ottawa County; Fred T. Miles, judge.

Argued before the Entire Bench, except BUTZEL, C. J.

Warner, Norcross & Judd and Joseph Shulsky, all of Grand Rapids, for appellant.

Lokker & Den Herder, of Holland, and Butterfield, Keeney & Amberg and Richard Lindland, all of Grand Rapids, for appellee.

POTTER, Justice.

This is an action in assumpsit brought by plaintiff against defendant to recover the balance claimed to be due upon a promissory note. The note sued upon was, when given, secured by a mortgage on Chicago real estate. The mortgage securing the note was foreclosed in chancery in Illinois and the mortgaged property sold to satisfy the mortgage. There was no personal service of process upon defendant in the Illinois suit to foreclose the mortgage. There was substituted service upon defendant by an order of publication made by the Illinois court and duly published. The mortgaged property sold in Illinois pursuant to the decree of the court there made brought less than the amount of the note sued upon. Plaintiff seeks to recover in this suit an amount arrived at by deducting from the total amount due upon the note, both principal and interest, the amount realized from the sale of the mortgaged property, less costs.

Defendant admits giving the note and mortgage sued upon but claims he sold the mortgaged property in June, 1927; that the trustees of the mortgage had, for a valuable consideration, extended the time of payment to the subsequent purchasers of the property; that no demand was made upon him for payment for a period of nine years; that no process was served upon him in the foreclosure case; that he did not enter his appearance in the Illinois court in the foreclosure proceeding; that the mortgaged property was worth much more than the amount due upon the note and mortgage; that it was worth at least $50,000 and was sold for $18,000, a price so inadequate as to shock the conscience of the court; and that plaintiff and his predecessors in title to the mortgage note were guilty of fraud and deceit, laches, and bad faith, to defendant's injury, and should be estopped from obtaining judgment.

The Illinois property was purchased by the holder of the mortgage. The case was tried before the court without a jury. There was ample evidence to sustain defendant's claim of the value of the propertyand its sale for an inadequate price, and there was proof to show that the predecessors in title of the plaintiff in the Illinois court, and plaintiff here, extended the time of payment to the subsequent owners of the real estate. This testimony was not disputed. The trial court held, for both reasons claimed by defendant, plaintiff could not recover.

It is claimed that where there is a sale of the mortgaged real estate under a chancery decree regularly made and entered, and the report thereof confirmed, there is a judicial determination upon which a suit like that at bar may be predicated to recover the balance due, and that unless the sale is set aside, there is no defense to an action at law. It will be conceded that if the Illinois court in chancery in the foreclosure proceedings had acquired jurisdiction of the subject matter and of the parties, this would have been so, because the defendant would have been bound to make any defense which he had in the foreclosure proceedings, and, having had an opportunity to litigate the question, the foreclosure proceedings, if regular, would have been conclusive upon him in this suit. It would have been sufficient to say the questions might have been raised and litigated. Bond v. Markstrum, 102 Mich. 11, 60 N.W. 282. That is not this case.

The authority of every tribunal is necessarily restricted by the territorial limits of the State in which it is established. Any attempt to exercise authority beyond those limits would be deemed in evey other forum, as has been said, an illegitimate assumption of power. D'Arcy v. Ketchum, 11 How. 165, 13 L.Ed. 648;Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565.

Many of the States prior to the adoption of the Constitution passed laws discriminating against the people of other States and providing, among other things, that nonresidents could not institute a suit therein. This was true in Massachusetts, and in Connecticut; and as late as March, 1787, the legislature of Rhode Island passed an act excluding citizens of Connecticut from the benefit of the laws of Rhode Island, and thereupon Connecticut passed a law excluding the citizens of Rhode Island from the right to sue in the courts of Connecticut. Warren, The Supreme Court and Sovereign States, p. 133. These principles which governed prior to the adoption of the Constitution were intended to be changed thereby.

Section 2 of article 4 of the Constitution of the United States, U.S.C.A., provides that the citizens of each State shall be entitled to all privileges and immunities of citizens in the several States.

Section 1 of article 4 provides that full faith and credit shall be given in each State to the public acts, records and judicial proceedings of every other State.

Article 5 of the amendments to the Constitution of the United States, U.S.C.A., provides that no person shall be deprived of life, liberty or property without due process of law.

And section 1 of article 14 of the amendments to the Constitution provides that no State shall deprive any person of life, liberty or property without due process of law.

One of the effects of these various constitutional provisions and amendments is to give to the citizens of any State the right to sue in the courts of this State upon the same terms as citizens of this State may sue.

A plaintiff resident in this State may not institute and maintain a suit for the unpaid balance of a real estate mortgage note after a Michigan decree foreclosing the mortgage securing the same, unless authorized so to do by the court. 3 Comp.Laws 1929, § 14367.

If plaintiff herein may maintain a suit in this State for an unpaid balance claimed to be due upon the note in question without being authorized so to do by any court, he, as a nonresident plaintiff, may exercise a privilege and power denied by statute to residents of this State who may seek to sue to recover a deficiency judgment on a mortgage note after foreclosure decree in this State. It was once said that ‘ye shall have one manner of law, as well for the stranger, as for one of your own county.’ Leviticus XXIV, 22. Though this is still the rule, we find it unnecessary to decide whether compliance with the statute above cited prescribed by the lex fori was necessary, and, if so, how it should be complied with, for in Goodrich v. White, 39 Mich. 489, it was held this statute was waived by defendant not moving to stay the proceedings and in going to trial, as was done in this case.

Passing this question, any judgment or decree which might have been rendered in the State of Illinois could have no binding effect upon the defendant personally. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565. The doctrine of full faith and credit was not designed to displace the principle of natural justice which requires a person to have notice of a suit before he can be conclusively bound by the result, nor those rules of public law which protect persons and property within one State from the exercise of jurisdiction over them by another. Lafayette Insurance Co. v. French, 18 How. 404, 15 L.Ed. 451;Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565. To give such proceedings any validity, there must be a tribunal competent by its Constitution, that is, by the law of its creation, to pass upon the subject matter of the suit, and if that involves a determination of the personal liability of the defendant, he must be brought within its jurisdiction by service of process within the State or by his voluntary appearance. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565. A foreign judgment, to be valid and enforceable, must have been rendered on a service of process which is the due process of law within the Federal Constitution. A judgment recovered in another State will not be accorded recognition as a valid and binding adjudication unless there was actual personal service on defendant or a voluntary appearance by defendant. Baker v. Baker, Eccles & Co., 242 U.S. 394, 37 S.Ct. 152, 61 L.Ed. 386. Such a judgment has no extraterritorial force or validity whatsoever as a personal judgment against the defendant and may not, therefore, be pleaded against him in the courts of his domicile as an adjudication of the same subject matter. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565;Galpin v. Page, 18 Wall. 350, 21 L.Ed. 959;Cooper v. Reynolds, 10 Wall. 308, 19 L.Ed. 931;Green v. Van Buskirk, 7 Wall. 139, 19 L.Ed. 109.

To secure personal jurisdiction over nonresidents, a personal service beyond the limits of the State is equally ineffective as is constructive service by publication. The process of a court runs legally only within the limits of its jurisdiction and it is only by service made within those limits that a right to recognize a personal judgment against a nonresident without his consent is acquired. Sugg v. Thornton, 132 U.S. 524, 10 S.Ct. 163, 33 L.Ed. 447;De la Montanya v. De la Montanya, 112 Cal. 101, 115, 44 P. 345, 32 L.R.A. 82, 53 Am.St.Rep. 165; Atherton v. Atherton, 181 U.S. 155, 21 S.Ct. 544, 45 L.Ed. 794; McGehee, Due Process of Law, p. 92. The same rule obtains in a proceeding quasi in rem as to the validity of a personal judgment attempting to determine the obligations of the...