296 N.W. 675 | Mich. | 1941
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *555 This is an action at law to recover a deficiency judgment after foreclosure of a mortgage by advertisement.
Max Kahn and wife gave a mortgage to National Bank of Commerce of Detroit on December 19, 1923, to secure their promissory note. The mortgage contained an express covenant to pay the debt. Defendant Lula E. Powers, now Lula E. Bachman, purchased the premises from the Kahns on a land contract that same year and, three years later, took a deed thereto containing a covenant in which she assumed and agreed to pay the mortgage. In 1928 defendant Powers executed a promissory note to the mortgagee in the sum of $6,500 and entered into an *556 agreement whereby she assumed the obligations of the mortgage and the mortgagee accepted her as the debtor.
On July 20, 1934, B.C. Schram, receiver of the Guardian National Bank of Commerce of Detroit, formerly known as National Bank of Commerce of Detroit, as owner of said mortgage and debt, commenced statutory foreclosure by advertisement. The property was bid in by Schram at sheriff's sale on October 26, 1934, for $5,000, leaving a deficiency balance on the mortgage debt as of that date in the sum of $822.50. Prior to the expiration of the period of redemption, defendant sought and obtained the benefit of the moratorium statute (Act No. 98, Pub. Acts 1933, as amended* [Comp. Laws Supp. 1935, § 14444 etseq., Stat. Ann. § 27.1321 et seq.]). The order entered in the moratorium proceeding was subsequently vacated because of petitioner's failure to comply with the terms thereof. Plaintiff's action for deficiency judgment was brought on January 31, 1938.
As a defense to plaintiff's claim, defendant contends that, under the provisions of Act No. 143, Pub. Acts 1937 (Comp. Laws Supp. 1940, § 14444-21 et seq. [Stat. Ann. 1940 Cum. Supp. § 27.1335 et seq.], quoted in Guardian Depositors Corp. v. Hebb,
On appeal, plaintiff does not claim that the act is unconstitutional in its entirety, but argues that, as applied to this case, the act effects an impairment of its vested substantive rights in violation of article 2, § 9, Mich. Const. 1908, and article 1, § 10, U.S. Const. This contention is based upon that provision of the act which makes it applicable to any sale under a foreclosure by advertisement made after February 11, 1933. Plaintiff, citing New York Life Ins. Co. v. Erb,
The controlling question presented for decision is: Can Act No. 143 be retroactively applied to a sale under a statutory foreclosure by advertisement, held prior to July 2, 1937, the effective date of the act?
The constitutionality of the act, as applied retroactively to mortgages executed prior to its effective date, is controlled by decision in Richmond Mortgage Loan Corp. v. Wachovia Bank Trust Co.,
Act No. 143 was first discussed in Guardian Depositors Corp.
v. Hebb, supra. The plaintiff now before us there sued Hebb to recover a deficiency after sale under foreclosure by advertisement on September 14, 1934, almost three years prior to the effective date of the act. Defendant invoked the statute in his defense, claiming the property was fairly worth the amount of the claimed debt at the time and place of sale. This court said (
"So far as the provisions of this statute are involved, we cannot say it violates the Constitution. Honeyman v. Jacobs,
"The only question for determination is whether defendant has shown the property sold on mortgage foreclosure sale was fairly worth the amount of the debt secured by it at the time and place of sale; or that the amount bid was substantially less than the true value, which showing, by the terms of the statute above quoted, constitutes a defense to such action and defeats the recovery of a deficiency judgment either in whole or in part. If the property sold on a mortgage foreclosure sale equaled in value the amount due upon the mortgage, then, by the sale thereof, the mortgagee has obtained satisfaction of his debt, and the denial by the statute of a further recovery does not violate the Constitution."
The remedial and procedural character of Act No. 143 was discussed in the Brown Case, supra. There this present plaintiff, relying on the express assumption of the mortgage as contained in a deed which it claimed was a contract for its benefit under *559
Act No. 296, Pub. Acts 1937 (Comp. Laws Supp. 1940, § 14063-1et seq., Stat. Ann. 1940 Cum. Supp. § 26.1231 et seq., the so-called third-party beneficiary statute), sought a judgment in 1938 for deficiency after foreclosure by advertisement. The sale was had in 1934, which was prior to the passage of both Acts Nos. 143 and 296. Defendant argued that Act No. 296 "was constitutionally inapplicable to agreements made prior to its passage because it created a right where none had before existed and thus impaired the obligations of contract." The Court said (
"Appellees also contend that this equitable right of plaintiff was subject to equitable limitations, and that they were protected from unconscionable action by the mortgagee through the supervisory powers of the chancellor. In equity, they urge, a sale for an inadequate price would be set aside and the amount of the deficiency consequently kept within fair and proper limits by the court. While this manifestly seems a matter of procedure rather than substance, it should be pointed out that the 1937 legislature, which passed Act No. 296, also enacted Act No. 143 (Comp. Laws Supp. 1937, § 14444-21 et seq., Stat. Ann. 1939 Cum. Supp. § 27.1335 et seq.). This latter statute enables a defendant who is sued for a deficiency after foreclosure by advertisement to show by way of defense that the property sold was equivalent in whole or in part to the amount of his debt. We know of no reason why defendants may not avail themselves of the protection of this statute should the facts warrant. The retrospective operation of almost identical legislation has only recently been sustained. Honeyman v.Clark,
A creditor, holding a real estate mortgage as security, in the event of nonpayment of the debt, may have recourse to any one of four remedies:
1. An action at law on the note.
2. An action at law on the covenant in the mortgage. (Guardian Depositors Corp. v. Savage,
3. A foreclosure in equity, with the right to a deficiency judgment in the amount fixed by the court's decree. (3 Comp. Laws 1929, § 14364 et seq., as amended [Stat. Ann. § 27.1132 etseq., as amended].)
4. Foreclosure by advertisement as was had in the instant case under the provisions of 3 Comp. Laws 1929, § 14425 etseq., as amended (Stat. Ann. § 27.1221 et seq., as amended), with a subsequent right to an action for deficiency. (New YorkLife Ins. Co. v. Erb, supra.)
Act No. 143 does not affect any of the first three rights just mentioned, and the right to a deficiency judgment at law after sale under foreclosure by advertisement still remains. The remedy, however, is affected in that defendant in the law action for the deficiency is permitted to interpose a claim of set-off for the difference between the price at which the property was sold and its fair value at the time of sale.
When a mortgagee elects to foreclose by advertisement, he looks first to the security for the realization of his debt. In the past a public sale has been thought to be the best method of enabling the mortgagor to realize the fair value of his premises. However, when the realty market is demoralized, that method of protecting the rights of the mortgagor becomes a mere formality. It is then within the province of the legislature, in order to prevent *561 injustice, to set up new machinery for the enforcement of the obligation which will safeguard the rights of the debtor and secure to the creditor that which is his due. No one has a vested substantive right to more than is his due. RichmondMortgage Loan Corp. v. Wachovia Bank Trust Co., supra, andHoneyman v. Jacobs, supra.
It has been repeatedly held that the legislature may modify and alter the manner and method of recovery as well as the time within which actions may be brought. Lutz v. Dutmer,
In State Savings Bank v. Matthews,
" 'It is within the power of a legislature to change the formalities of legal procedure.' Brown v. Kalamazoo CircuitJudge,
" 'Without impairing the obligation of the contract, the remedy may certainly be modified as the wisdom of the nation shall direct.' Sturges v. Crowninshield, 4 Wheat. (17 U.S.) 122, 200 (
" 'The rule seems to be that in modes of proceeding and of forms to enforce the contract the legislature has the control, and may enlarge, limit, or alter them, provided that it does not deny a remedy, or so embarrass it with conditions and restrictions as seriously to impair the value of the right.'Tennessee v. Sneed,
" 'A statute is void as impairing the obligations of a contract if it takes away all remedy for the enforcement of the contract, or if it leaves no substantial remedy therefor. Within these limitations, however, the legislature may alter or abolish particular remedies, and may substitute one remedy for another.' 12 C. J. pp. 1068, 1069.
"Act No. 296, Pub. Acts 1937, is, so far as applicable here, constitutional, being remedial in character."
The right to foreclose mortgages by advertisement has always been subject to change by the *563
legislature. "The right to foreclose and sell by advertisement depends wholly upon the statute. Doyle v. Howard,
It has also "been repeatedly held that a foreclosure under the statute is an act of the party and not a judicial proceeding, and that it is only possible when the mortgage is so framed as to authorize it." Lariverre v. Rains,
The act which permits foreclosure by advertisement says:
"SEC. 8. The mortgagee, his assigns, or his or their legal representatives, may, fairly and in good faith, purchase the premises so advertised, or any part thereof, at such sale." 3 Comp. Laws 1929, § 14432 (Stat. Ann. § 27.1228).
This statute, which required the mortgagee to bid "fairly and in good faith" was enacted in its present form in 1846.
In equitable foreclosures the court, in the exercise of fair discretion, may decline confirmation of the sale if the amount bid is so inadequate that it shocks the conscience of the court. Michigan Trust Co. v. Cody,
Following the decisions in Honeyman v. Clark,
In view of our decision on the controlling question, it is unnecessary to determine the claimed errors in the published foreclosure notice and the claimed estoppel of defendant to raise this question by resorting to moratorium relief.
The judgment is affirmed, with costs to appellee.
SHARPE, C.J., and BOYLES, CHANDLER, NORTH, McALLISTER, WIEST, and BUTZEL, JJ., concurred.