Opinion
No. 30812
Decided March 19, 1947.
Judgments — Action on promissory note and for foreclosure of mortgage — Deficiency may exist before all mortgaged realty sold to satisfy judgment — Section 11668-1, General Code — Money judgment deficiency unenforceable after two years, when.
1. A deficiency exists where the proceeds from the sale of real estate encumbered by a, mortgage are insufficient to pay in full a judgment rendered in an action for money on a promissory note secured by mortgage and for its foreclosure. Such deficiency may exist after a part and before all of the mortgaged real estate has been sold to satisfy such judgment.
2. The provisions of Section 11663-1, General Code, rendering unenforceable any money judgment as to a deficiency after two years from the confirmation of any judicial sale of land having thereon a dwelling for not more than two families used as a home and which land was mortgaged to secure the indebtedness predicating such judgment, are applicable, even though such a property so sold is only a portion of the parcel of land originally mortgaged.
APPEAL from the Court of Appeals for Cuyahoga county.
In November of 1927, Nettie Pejsa, afterwards Nettie Pejsa Kunc by marriage, appellant herein, executed and delivered her promissory note to The Union Trust Company of Cleveland, in the sum of $2,800 with interest at six per cent, such interest rate increasing to eight per cent in case of default in payment. A mortgage securing the note was given by Nettie Pejsa on real property she owned in the village of Maple Heights, Cuyahoga county. The land included in the mortgage was described as one parcel.
In September of 1934, Nettie Pejsa Kunc and her husband, with the assent of the mortgagee, conveyed by quit-claim deed a portion of the mortgaged real estate to two persons and another portion to two other persons. The portions so conveyed were without buildings.
Nettie Pejsa Kunc retained that part upon which stood a one-family dwelling house used by her as a home. However, the entire premises remained subject to the unpaid mortgage.
Nettie Pejsa Kunc failed to make payments on the note and mortgage according to the terms thereof and in January of 1936 S.H. Squire, Superintendent of Banks of the state of Ohio, as liquidator of The Union Trust Company, brought an action in the Court of Common Pleas of Cuyahoga county for judgment on the note and to foreclose the mortgage, the petition consisting of two causes of action. The mortgaged premises were described in the petition as one parcel of land.
In March of 1937, a decree of foreclosure was entered and a personal judgment rendered against Nettie Pejsa Kunc, in the sum of $3,533.43 with interest at eight per cent from January 25, 1937. Such decree found also a further sum due on account of taxes and insurance premiums paid by the mortgagee on the property.
The decree described the real estate involved in three separate parcels, designated as parcels Nos. 1, 2 and 3. Subsequently, an order of sale was issued commanding the sheriff to sell parcel No. 1, where the house was located. This parcel was appraised at $6,900 and in April of 1937 it was sold to the liquidator of The Union Trust Company for $4,600, such sum being two-thirds of the appraised value. Confirmation of the sale promptly followed. There was left a considerable balance still due the liquidator. No order of sale has ever been issued as to parcels Nos. 2 and 3, which represent the premises conveyed by quit-claim deeds in September of 1934.
In December of 1944, Union Properties, Inc., appellee herein, having succeeded by assignment to all the rights of the liquidator of The Union Trust Company against Nettie Pejsa Kunc, in relation to the matter under discussion, caused an order in aid of execution to be filed in the Court of Common Pleas garnisheeing certain funds due Nettie Pejsa Kunc. Thereupon, she filed a motion to discharge and dismiss the proceeding in aid of execution and asked for an order declaring the judgment theretofore rendered against her unenforceable for the reason that, under the provisions of Section 11663-1, General Code, Union Properties, Inc., was precluded from attempting to collect the judgment, more than two years having elapsed since the confirmation of any judicial sale of real property on which she had given a mortgage.
Such motion was granted and a journal entry was filed in April of 1945, declaring the judgment rendered against Nettie Pejsa Kunc unenforceable.
An appeal was duly taken to the Court of Appeals on questions of law, which court, one judge dissenting, reversed the judgment of the Court of Common Pleas and remanded the cause for further proceedings, on the ground that Section 11663-1, General Code, was not invocable by Nettie Pejsa Kunc to defeat collection of the judgment, because there had been no confirmation of any sale of all the property mortgaged; and that, therefore, no deficiency had been established within the contemplation of the statute.
A motion to require the Court of Appeals to certify its record having been allowed, the cause is now in this court for decision on its merits.
Mr. Harold E. Ziegler and Mr. Sylvester Marx, for appellee.
Mr. James E. Paduano and Mr. Joseph L. Newman, for appellant.
Section 11663-1, General Code, in its present form, became operative in August of 1939 and states in terms that it "shall apply to all actions and proceedings pending and all judgments existing at the effective date thereof." Such statute was held constitutional in the case of Montalto v. Yeckley, 138 Ohio St. 314, 34 N.E.2d 765. See, also, Lash, Admx., v. Mann, 141 Ohio St. 577, 49 N.E.2d 689.
It is at once apparent that the controlling question before us is the applicability of Section 11663-1, General. Code, to the facts of this case.
So much of the statute as is pertinent to the pending controversy reads as follows:
"Any judgment for money rendered * * * upon any indebtedness, which is secured * * * by a mortgage * * * on real property * * * upon which real property there has been located a dwelling * * * for not more than two families which has been used in whole or in part as a home * * * shall be unenforceable as to any deficiency remaining due thereon, after the expiration of two years from the date of the confirmation of any judicial sale of such property completed subsequent to the rendition of such judgment, or after August 19, 1939, whichever shall be later."
Although Section 11663-1, General Code, is, in effect, a statute of limitation ( Lash, Admx., v. Mann, supra) and should not be extended beyond its plain objective, it is also a statute of repose, designed to protect the individual from being pursued upon stale claims and should be approached and construed in the spirit of its enactment. Townsend v. Eichelberger, 51 Ohio St. 213, 216, 38 N.E. 207, 208.
Here, an action for personal judgment on the promissory note signed by Nettie Pejsa Kunc was joined with an action to foreclose the mortgage on the real estate given to secure such note. Judgment was rendered for the full amount due upon the note prior to any sale of the mortgaged property. This procedure was authorized and proper. Simon v. Union Trust Co., 126 Ohio St. 346, 185 N.E. 425. The judgment creditor might have attempted to collect the personal judgment without resort to the mortgaged property, or he might have had such property sold, with the application of the proceeds of sale for the purpose of reducing or satisfying the personal judgment.
In the present instance, the judgment creditor elected to have only a part of the mortgaged premises sold, although the whole of it was amenable to sale.
The principal contention of Union Properties, Inc., is that it had the right to resort to a proceeding in aid of execution to subject monies due Nettie Pejsa Kunc to the reduction or satisfaction of the balance of the money judgment rendered against her; and that Section 11663-1, General Code, does not affect such right because no "deficiency" can exist within the meaning of that term as used in the statute until all the mortgaged property has been sold.
A majority of this court finds itself in disagreement with such contention. In the instant case, as has already been noted, there was a money judgment rendered on an indebtedness secured by a mortgage on real property containing a single family dwelling used for a home. After the rendition of the money judgment, that part of the mortgaged real estate upon which the house stood was sold in 1937 pursuant to court order and the sale was confirmed. When the proceeds of such sale were credited against the original money judgment the difference represented a deficiency — a shortage — then and there, which deficiency might have been lessened or wiped out by proceeding promptly against other property or monies of the debtor or by selling the remainder of the real estate covered by the mortgage.
Black's Law Dictionary (3 Ed.), defines "deficiency" as "a lack, shortage or insufficiency. The difference between the total amount of the debt or payment meant to be secured by a mortgage and that realized on foreclosure and sale when less than the total."
Nothing further was done toward collecting the "deficiency" until 1944. Section 11663-1, General Code, plainly says that after the expiration of two years from the date of the confirmation of any judicial sale of mortgaged real estate of the character described, completed subsequent to the rendition of the money judgment, or after August 19, 1939, whichever date shall be later, the original money judgment shall be unenforceable as to any deficiency remaining due thereon.
In our opinion, Nettie Pejsa Kunc comes within the protection afforded by the statute and properly interposed it in opposition to the efforts of Union Properties, Inc., to collect the balance of the original money judgment entered against her.
Upon the conclusion reached, the judgment of the Court of Appeals is reversed and that of the Court of Common Pleas is affirmed.
Judgment reversed.
TURNER, MATTHIAS, HART and SOHNGEN, JJ., concur.
WEYGANDT, C.J., dissents.
STEWART, J., not participating.