121 F.2d 861 | D.C. Cir. | 1941
The suit is for a deficiency on deed of trust notes. The sole question is whether the cause is barred by the statute of limitations, as the trial court held.
The notes aggregated a principal sum of $25,000. They matured, after an extension, on September 18, 1934. The deed of trust, conveying real estate as security, was foreclosed and the proceeds of sale were credited on the notes December 21, 1934. A deficiency of $6,387.16 remained on account of principal, interest, taxes and foreclosure costs. Plaintiff’s suit for this
Defendant says the beginning of the statutory term was the date of maturity of the notes. Plaintiff says it was the date of foreclosure and application of the proceeds of sale. He advances two theories. The first is that the trustee was defendant’s agent to make the application and his doing so constituted a payment which revived the cause and started the running of the statute from the time it was made. The second is that the suit is for the deficiency which could not accrue until after the sale and determination of the amount, not upon the notes themselves.
To sustain the first theory, plaintiff cites no authority involving foreclosure of liens on real estate. None appears to be available.
We think this extends the “agency” beyond its intended scope and ignores its true nature as well as the basis upon which payment is held to give new life to the debt. The “agency” is not one solely on behalf of the debtor, if indeed it is truly one at all. It is rather a power coupled with an interest, irrevocable by the donor. Cf. Hunt v. Rousmanier, 1823, 8 Wheat. 174, 5 L.Ed. 589. In exercising it the donee acts on behalf of the creditor, whether himself or another, rather than for the debtor, though the latter has empowered him to do the act. The application therefore lacks the voluntary character which gives to the debtor’s own act, or to that of an agent acting solely on his account, the character of waiver of immunity and acknowledgment that the debt retains vitality. The time element, too, is important. A power of application given when the debt is incurred expresses intention as • of that time, not as of some time within or following the period of limitations. It is the present acknowledgment which gives force to the intention to extend the time of liability. Furthermore, the power to apply is one which is essential to making effective the security. It has no intended relation to any deficiency. There is no policy which favors deficiency judgments so strongly that it should convert an authority limited in terms to dealing with the security into a power to affect something not related to it in any way. For these reasons, we think the better rule, and that more widely accepted at present, is found in the authorities relied-upon by the defendant. See Zaks v. Elliott, 4 Cir., 1939, 106 F.2d 425; Brooklyn Bank v. Barnaby, 1910, 197 N.Y. 210, 90 N.E. 834, 27 L.R.A.,N.S., 843; Holmquist v. Gilbert, 1907, 41 Colo. 113, 92 P. 232, 14 L.R.A.,N.S., 479; Notes (1923) 25 A.L.R. 58, 62.
As to plaintiff’s second contention, no point is made that there is any difference as to the time available for enforcing liability for payment of the balance due for principal and interest on the notes, on the one hand, and on the other for taxes, expenses of foreclosure, etc., under the deed. To the contrary, the agreed statement of facts upon which the case has been presented here stipulates that plaintiff is entitled to recover the full $6,-387.16 or nothing. Since the larger portion of this amount consists of unpaid principal and interest, we think the fairer disposition will result from treating the entire sum as if it were comprehended within the specific terms of the notes.
Plaintiff’s argument appears to be that the deficiency became a separate and independent obligation from that represented by the notes and, since the amount could not be determined until after the sale, the statute did not begin to run until that time. In other words, determination of the deficiency is regarded as giving rise to an entirely new cause of action. In support of this view, plaintiff relies upon authorities which assert that a cause of action for a deficiency does not accrue until after a sale and determination of the amount due. Parratt v. Hartsuff, 1906, 75 Neb. 706, 106 N.W. 966; Reynolds v. Jensen, 1936, 14 Cal.App.2d 558, 58 P.2d 687, 688.
Neither case involved the question whether a deficiency judgment for unpaid principal and interest could be rendered after the notes had been outlawed. The first involved chiefly another issue,
In Reynolds v. Jensen, supra, the statute specifically prescribed the period within which independent actions for deficiency might be brought, fixing the date of sale on foreclosure as the starting point.
The other authorities cited by plaintiff are not in point,
It is obvious, of course, that suit for deficiency cannot be instituted until after the amount is ascertained and therefore until after sale and application of the proceeds. But, except as to items for the payment of which the mortgage itself creates personal liability, this means only that applying the proceeds of sale reduces the amount due on the original promise, not that it creates a new and independent one. To do that something more than mere reduction in the amount remaining unpaid is required, as we have held in rejecting the view that the application here amounted to a voluntary payment tolling the statute’s running.
Furthermore, it is not disputed that plaintiff might have’sued upon the notes, without resorting to the security, at any time within three years from their maturity. Instead he chose to stand by, evidently relying upon the security, until the time had passed for enforcing the personal obligation on the notes. To permit enforcement now would set at nought the statutory protection afforded to the maker so far as his personal liability is concerned. This would place the holder of a secured note in better position as to enforcement of the purely personal obligation than the holder of an unsecured one. We do not believe such a result was intended by the applicable statutes of limitations, which do not purport to extend the time for suit for deficiency.
Nor do we think such a consequence was intended by the statute, D.C.Code (1929) tit. 25, § 206, which authorizes the entry of deficiency judgments. In terms it is limited to applications for such relief in judicial proceedings for foreclosure of mortgages or deeds of trust. The foreclosure here was by trustee’s sale. The purpose of the statute was to empower the court to combine in a single suit relief by way of foreclosure and personal judgment
The judgment is affirmed.
See Notes .(1923) 25 A.L.R. 58, 62.
The promise of the notes is limited to payment of principal and interest. Though there is an indorsed reference to the deed of trust, it does not purport to incorporate the terms of that instrument into the notes.
It would seem, therefore, apart from the stipulation, that the obligation, if any, to make reimbursement for taxes paid and expenses of foreclosure arises exclusively from the mortgage, rather than from the notes. The deed of trust contained no . specific covenant to reimburse the de
Whether a decree for foreclosure which contained findings tending to show a liability of the defendants for a personal judgment, but made no order for a deficiency, was final rather than interlocutory, so as to preclude objections to ■ the findings and foreclose any defenses existing when the decree was made, on application for a deficiency judgment after foreclosure and sale of the premises.
The issue was whether an amendment shortening the period within which an action for deficiency might be begun was applicable and valid if applied when the deed of trust was executed before the amendment was enacted.
E. g., cases holding that a judgment foreclosing a mortgage cannot be sued upon until the proceeds of the mortgaged property have been applied to it and the balance due definitely determined, Walker v. Garland, Tex.Com.App.1922, 235 S.W. 1078; Mollohan v. Masters, 1916, 45 App.D.C. 414, certiorari denied, 1917, 242 U.S. 652, 37 S.Ct. 245, 61 L.Ed. 546; that the power of a trustee to sell the property and apply the proceeds to the debt is not affected though the debt is barred, Robinson v. McDowell, 1903, 133 N.C. 182, 45 S.E. 545, 98 Am.St.Rep. 704; cf. Northrop v. Chase, 1903, 76 Conn. 146, 56 A. 518; Campbell v. Upton, 1898, 56 Neb. 385, 76 N.W. 910; and that the lien of the mortgage may be foreclosed although the debt is barred, cf. Cady v. Usher, 1904, 71 Neb. 236, 98 N.W. 651, 652; 2 Jones, Mortgages, 8th Ed.1928, § 1542.
See 42 C.J. § 1973, and authorities cited note 21; In re McHenry, [1894] 3 Chan.Div. 290.
See 2 Jones, Mortgages, 8th Ed. 1928, § 837, and authorities cited.
See 19 R.C.L. § 482; 3 Jones, Mortgages, 8th Ed. 1928, §§ 2205, 2208, 2210.