Title: Fitch v. Buffalo Federal Sav. and Loan Ass'n

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Fitch v. Buffalo Federal Sav. and Loan Ass'n1988 WY 41751 P.2d 1309Case Number: 87-227Decided: 03/25/1988Supreme Court of Wyoming
SALLY N. JONES FITCH, APPELLANT (DEFENDANT),

v.

BUFFALO FEDERAL SAVINGS AND LOAN ASSOCIATION, A CORPORATION 
ORGANIZED AND EXISTING UNDER THE LAWS OF THEUNITED STATES OF 
AMERICA, APPELLEE 
(PLAINTIFF).

Appeal from the District 
Court, JohnsonCounty, James N. Wolfe, 
J.

James P. 
Castberg, Cheyenne, for appellant.

John R. Perry of 
Goddard, Perry & Vogel, Buffalo, for appellee.

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT 
and MACY, JJ.

BROWN, Chief 
Justice.

[¶1.]     Appellant Sally Fitch 
challenges an order granting summary judgment in favor of appellee Buffalo 
Federal Savings and Loan Association. Appellant defaulted on a promissory note, 
and appellee foreclosed on the property securing that debt. Foreclosure was by 
advertisement and sale under a power of sale clause in the mortgage. The 
proceeds of the sale were applied to the debt and appellee sued appellant for 
the deficiency. The trial court granted appellee summary judgment on that suit. 
Appellant presents two issues in her appeal:

"I. There is no statutory 
authority or judicial precedence which gives the Appellee the right to sue for a 
deficiency after foreclosure and sale of a mortgage by 
advertisement.

"II. Appellee by its 
failure to advise and inform Appellant of her possible liability in the event of 
a deficiency should be estopped from bringing an action to recover a 
deficiency."

[¶2.]     We 
affirm.

[¶3.]     On August 2, 1982, 
appellant signed a promissory note for $130,000 principal with interest at 17 
1/4 percent. Appellee secured the debt with a real estate mortgage on property 
owned by appellant located in Johnson 
County, Wyoming. The 
mortgage contained a power of sale provision, and further stated that, upon 
default, the mortgagee could invoke "* * * any other remedies permitted by 
applicable law. * * *" The mortgage did not expressly warn the mortgagor that a 
suit for deficiency was possible after a foreclosure by advertisement and sale. 

[¶4.]     By October 22, 1986, 
appellant was in default on the note and had received notice of that fact. 
Appellee gave her until November 21, 1986, to remedy the default. She was warned 
that failure to pay the loan up to a current status would result in acceleration 
of the debt and foreclosure on the property under the mortgage by power of sale. 
The notice also told her of her rights to bring suit to assert that no default 
had occurred or for breach of the terms of the note. Appellant was unable to pay 
the loan to current status and on November 25, 1986, appellee sent her a notice 
of foreclosure by advertisement and sale.

[¶5.]     Appellee published 
proper notice in a local newspaper in December 1986 and January 1987, stating 
that public sale would occur on January 13, 1987, at 10:00 a.m. on the steps of 
the Johnson County Courthouse. The sheriff conducted the sale as advertised, 
selling the property to appellee for a high bid of $66,000, and certified that 
the sale was fair and lawful in all respects. Appellee applied the $66,000 to 
the $150,209.17 balance on the note, leaving a deficiency of 
$84,209.17.

[¶6.]     Appellee then filed a 
complaint in district court on February 17, 1987, seeking a judgment for the 
deficiency on the note, interest and attorney's fees. Appellant answered, 
admitting the facts set out above concerning the default, foreclosure and sale. 
She argued, however, that appellant's election to foreclose and liquidate the 
property under power of sale operated to extinguish the remaining debt on the 
note. The answer also asserted equitable estoppel as an affirmative 
defense.

[¶7.]     Appellee moved for 
summary judgment on May 15, 1987. After a continuance, appellant traversed 
appellee's motion and filed her own motion for summary judgment. Appellee 
traversed that motion, and argument on both motions took place on July 14, 1987. 
The court considered both motions and entered the order appealed from on August 
18, 1987.

[¶8.]     The material facts in 
this case are not disputed and the issues presented concern matters of law. 
Boehm v. Cody Country Chamber of Commerce, Wyo., 748 P.2d 704, 710 
(1987).

DEFICIENCY AFTER 
FORECLOSURE UNDER POWER OF SALE

[¶9.]     The fact pattern set 
out above is a side effect of Wyoming's "boom and bust" economy. Appellant 
executed a promissory note secured by a mortgage when land prices and interest 
rates were high. She defaulted and the mortgage was foreclosed upon when land 
values were low. As a result, the mortgagee's bid on the property at the 
sheriff's sale reduced the outstanding debt on the loan by less than half. The 
lender now has the land and expects to be fully paid on the note. The mortgagor 
would rather not think about the inevitable deficiency judgment and a possible 
rendezvous with the bankruptcy courts. Chances are that the mortgagee's best 
hope to recover on the note is through a prompt resale of the property. 
Wechsler, Through the Looking Glass: Foreclosure by Sale As De Facto Strict 
Foreclosure - An Empirical Study of Mortgage Foreclosure and Subsequent Resale, 
70 Cornell L.Rev. 850, 876-878, 895-896 (1985). Unfortunately for appellant, 
Wyoming 
mortgage law convinces us that a deficiency action after foreclosure by power of 
sale is proper.

[¶10.]  Wyoming is a "lien theory" mortgage state in 
which a mortgagor has a statutory right of redemption after mortgaged property 
has been foreclosed upon and sold. Section 1-18-103(a), W.S. 1977 (Cum.Supp. 
1987) provides:

"(a) Except as provided 
with respect to agricultural real estate, it is lawful for any person, his 
heirs, executors, administrators, assigns or guarantors whose real property has 
been sold by virtue of an execution, decree of foreclosure, or foreclosure by advertisement and sale 
within three (3) months from the date of sale, to redeem the real estate by 
paying to the purchaser, his heirs, executors, administrators or assigns, or to 
the sheriff or other officer who sold the property, for the benefit of the 
purchaser, the amount of the purchase price or the amount given or bid if 
purchased by the execution creditor or by the mortgagee under a mortgage, 
together with interest at the rate of ten percent (10%) per annum from the date 
of sale plus the amount of any assessments or taxes and the amount due on any 
prior lien which the purchaser paid after the purchase, with interest. On 
payment of this amount the sale and certificate granted are void." (Emphasis 
added.)

This statutory 
right of redemption expressly applies to foreclosure sales based on judicial 
decree, execution or advertisement and sale.

[¶11.]  The Wyoming legislature has also attempted to 
promote mortgage lending by statutorily providing for foreclosure by 
advertisement and sale pursuant to a valid power of sale clause in a mortgage or 
deed of trust. See generally §§ 34-3-101 through 34-4-113, W.S. 1977. These 
statutes allow borrowers and lenders to agree ahead of time, in the mortgage, 
that foreclosure need not take place only after a long judicial procedure. Where 
the power of sale is reserved, and the statutory advertisement and sale 
procedures are followed, no judicial supervision of the foreclosure and sale is 
required. These statutes do not place any limits on the foreclosing mortgagee's 
right to seek a deficiency judgment when the foreclosure sale does not bring 
proceeds sufficient to satisfy the mortgage debt. Further, we can find no other 
legal precedent in Wyoming, statutory or otherwise, limiting this 
type of suit for a deficiency judgment. Considering the statutory right to 
redemption set out in § 1-18-103(a), the right to sue for a deficiency is 
logical to bind a mortgagor to the terms of the initial bargain and prevent 
redemption at a deflated price after foreclosure.

[¶12.]  Appellant urges that this void in the 
Wyoming 
mortgage statutes should be interpreted to mean that a mortgagee must seek his 
deficiency in an initial suit on the note and the mortgage before foreclosure. 
She directs us to the statutes of other states that protect certain mortgagors 
from post-foreclosure sale deficiency suits.1

[¶13.]  Some western states protect mortgagors by 
prohibiting deficiency judgments after foreclosure on mortgages or deeds of 
trust by advertisement and sale. See Alaska Stat. § 34.20.100 (1985) (deeds of 
trust); Ariz. Rev. Stat. Ann. §§ 33-729, 33-730, 33-814(A), (E) (1974) (purchase 
money mortgages and deeds of trust on residential property of two and one-half 
acres or less); Cal.Civ.Proc.Code §§ 580(b), 580(d) (West 1976) (purchase money 
mortgages and deeds of trust on one to four family dwellings); Mont. Code Ann. § 
71-1-304 (1987) (deeds of trust on fifteen acres or less); N.D. Cent. Code §§ 
32-19.1-01, 32-19.1-07 (1976 & Cum.Supp. 1987) (any mortgage on forty acres 
or less executed under Short Term Mortgage Redemption Act); Ore. Rev.Stat. § 
86-770(2) (1987) (deeds of trust on noncommercial property); Wash. Rev. Code § 
61.24.110 (Cum.Supp. 1987) (deeds of trust). See also Annotation, Mortgages: 
Effect Upon Obligation of Guarantor or Surety of Statute Forbidding or 
Restricting Deficiency Judgments, 49 A.L.R.3d 554 (1973 and Supp. 1987). The 
Montana Supreme Court recently broadened that state's statutory bar against 
deficiency judgments after advertisement and sale foreclosures on deeds of 
trust. The Montana statutory bar now applies even when a 
deed of trust is foreclosed upon through a judicial proceeding. First State Bank 
of Forsyth v. Chunkapura, 
Mont. 734 P.2d 1203, 1208-1209 
(1987). Montana also prohibits a deficiency judgment 
following any foreclosure on a purchase price mortgage. Mont. Code Ann. § 
71-1-232 (1987).

[¶14.]  Other states allow deficiency suits but 
require judicial supervision in valuing the property to determine the amount of 
the deficiency after foreclosure by advertisement and sale and/or judicial 
decree.2 See Cal.Civ.Pro. Code § 580(a) 
(1976), § 726 (Cum.Supp. 1988) (nonpurchase money deeds of trust, nonpurchase 
money mortgages foreclosed by suit); Idaho Code § 6-108 (1979), § 45-1512 (1977) 
(any mortgage foreclosure, deeds of trust); Nev. Rev. Stat. Ann. §§ 40.455 
through 40.459 (1986 & Cum.Supp. 1987) (deeds of trust); N.M. Stat. Ann. § 
48-10-17 (1987 Replacement) (deeds of trust); N.D. Cent. Code §§ 32-19-06, 
32-19-07 (1976) (any mortgage foreclosures not under Short Term Mortgage 
Redemption Act, deeds of trust); Okla. Stat. Ann. § 12-686 (1960) (foreclosure 
on a mortgage or deed of trust by suit); Utah Code Ann. § 57-1-32 (1986), § 
78-37-2 (1987) (deeds of trust, mortgage foreclosures by suit). In Oklahoma, a mortgagee 
seeking a deficiency judgment after foreclosure by advertisement and sale must 
file a deficiency action within ninety days after the date of sale. The 
mortgagor then has the burden to prove that the fair market value of the 
property on the date it was sold was higher than the actual sale price. 
Okla. Stat. 
Ann. § 46-43(2)(d) (Cum.Supp. 1988). North Dakota delegates the task of valuing 
property foreclosed by suit to a jury. N.D. Cent. Code § 32-19-06 (1976). 
Washington 
allows a deficiency judgment after foreclosure by suit, but in the judicial 
proceeding the trial court may judicially notice relevant economic conditions 
and then set an "upset price" which establishes the minimum value that must be 
bid for the property to determine the amount of deficiency. Wash. Rev. Code § 
61.12.060 (1985).

[¶15.]  Other western states have no statutory 
restrictions at all on the right to sue for a deficiency remaining after 
foreclosure on a mortgage or deed of trust under power of sale. In Colorado, a deficiency 
action is most likely to follow foreclosure and sale on a deed of trust. See, 
e.g., Motlong v. World Savings and Loan Association, 168 Colo. 540, 452 P.2d 384, 
386 (1969); and Col.Rev.Stat. §§ 38-37-105 through 38-37-144 (Cum.Supp. 1987) 
(all deeds of trust are held by a public trustee and sale occurs only after 
court order). Hawaii provides mortgagees even more latitude 
because its statutes do not provide a statutory period of redemption after sale 
whether foreclosure is under power of sale or by suit. Haw. Rev. Stat. §§ 667-1 
through 667-10 (1985). Like Wyoming, these two jurisdictions have no 
appellate authority addressing the availability of a deficiency action after 
foreclosure by advertisement and sale.

[¶16.]  These statutes and our research lead us 
to two conclusions: (1) many state legislatures have decided statutorily to 
protect certain mortgagors from deficiency judgments; and, (2) where a state 
legislature has not passed such protection into law, deficiency judgments after 
foreclosure by advertisement and sale, on deeds of trust or purchase money 
mortgages, are allowed when the foreclosure and sale was proper and equitable. 
55 Am.Jur.2d Mortgages § 905, pp. 784-785 (1971 & Cum. Supp. 1986). See 
generally G. Nelson and D. Whitman, Real Estate Finance Law, §§ 8.1-8.3, pp. 
594-615 (2d ed. 1985). Our legislature has protected power of sale mortgagors by 
granting them an unqualified three-month statutory period of redemption 
following any foreclosure and sale. A 
mortgagor also is free to challenge a declaration of default by lawsuit. 
Further, a defaulting mortgagor can contest the propriety of an advertisement 
and sale foreclosure in equity. We will not legislate protections from 
deficiency judgments after foreclosure by advertisement and sale, where our 
legislature has not provided for them in plain and unambiguous language. That is 
not our function. See D & L Building, Inc. v. Maltby Tank and Barge, Inc., 
Wyo., 747 P.2d 517, 520 (1987). 

ESTOPPEL

[¶17.]  Appellant next argues that appellee 
should have expressly stated in its mortgage that it would seek a deficiency 
judgment after advertisement and sale if necessary. The absence of such a 
clause, it is urged, should estop appellee from bringing this deficiency action, 
because appellant had no notice of the possibility for a deficiency action when 
she signed the mortgage. In Roth v. First Security Bank of Rock Springs, Wyo., 684 P.2d 93, 96 (1984), we 
stated:

"Equitable estoppel 
precludes a party who knows the truth from denying the assertion of any material 
fact with which he induced another to change his position where such other 
person is ignorant of the facts, had a right to rely upon the assertions, and 
suffers an injury. 28 Am.Jur.2d Estoppel and Waiver § 27. Estoppel arises only 
when a party, by acts, conduct, or acquiescence causes another to change his 
position. Boise Cascade Corp. v. First Security Bank of Anaconda, 183 Mont. 378, 600 P.2d 173 
(1979). The elements consist of a lack of knowledge, reliance in good faith, and 
action or inaction which results in an injury. 28 Am.Jur.2d Estoppel and Waiver 
§ 35. We have stated that two necessary components of equitable estoppel are (1) 
that the party lacked the knowledge of the facts and was without means to 
discover them; and (2) that he relied upon the actions of the parties sought to 
be charged and changed his position. * * *"

[¶18.]  Appellant argues that silence in the 
mortgage concerning a possible deficiency action, was the denial of a material 
fact that induced her to sign the note and mortgage. She claims to have been 
ignorant of that possibility and to have relied upon the express terms and 
covenants in the mortgage when making her decision to sign the promissory note. 
This argument ignores the fact that appellant is imputed to have had 
constructive knowledge of the possibility of a deficiency action after 
foreclosure by advertisement and sale. As explained above, there has never been 
any indication in the Wyoming statutes or common law that a 
deficiency action could not occur following foreclosure by advertisement and 
sale. Both parties had an equal opportunity to investigate this fact. Appellant 
was informed in the mortgage that appellee could invoke any legal remedy 
available to it. Therefore, appellee's silence on the matter cannot work an 
estoppel. See 28 Am.Jur.2d Estoppel and Waiver § 53, p. 667 (1966 & 
Cum.Supp. 1986).

[¶19.]  A borrower would have less to complain 
about if all mortgagees were to spell out exactly what course they might follow 
when a borrower defaults on a promissory note or in the mortgage. The 
legislature might, at some point, require such a disclosure. For now though, a 
deficiency action after foreclosure by advertisement and sale is legal and 
mortgagors should be aware of that possibility.

[¶20.]  Affirmed.

URBIGKIT, J., filed a dissenting 
opinion.

FOOTNOTES

1 These statutes often 
arise in connection with power of sale foreclosures on deeds of trust. Deeds of 
trust are similar to power of sale mortgages because foreclosure and sale take 
place without judicial supervision. Unlike Wyoming's power of sale statutes, many deed of 
trust schemes provide for little or no time for statutory redemption after sale. 
See, e.g., Mont. Code Ann. §§ 71-1-228, 71-1-318(3) (1987) (providing no period 
of redemption when a new deed of trust issues after foreclosure and 
sale).

2 Statutes or case law in 
some western states may require that an action for deficiency remaining after judicial foreclosure and sale must be 
incorporated in the initial foreclosure action. This is often referred to as the 
"one-action rule" and does not apply where foreclosure is by statutory 
advertisement and sale of a power of sale mortgage or deed of trust. See G. 
Nelson and D. Whitman, Real Estate Finance Law, § 8.2 pp. 598-600 (2d ed. 1985). 
In Wyoming, 
mortgagees foreclosing by suit reserve the right to seek a deficiency after sale 
in the original foreclosure action. See E. Rudolph, The Wyoming Law of Real 
Mortgages, p. 42 (1969).

URBIGKIT, Justice, 
dissenting.

[¶21.]  This decision brings mortgagee, as the 
drafter of the loan documents, more rights than it chose to claim by the written 
agreement. In absence of a mortgage provision impressing an obligation for 
deficiency after a power-of-sale foreclosure, I would hold, at least where the 
lender as seller under the mortgage is also the purchaser, that no deficiency 
rights should be created by court decision for the underbidding lender. Rights 
of the mortgagee should not be expanded beyond what it did obtain by agreement 
or may be mandated by procedural statute. The latter, of course, does not exist 
in Wyoming, 
and consequently is not applicable to this controversy. I would consequently 
apply to it the standard that what you get is what you bargained to receive. 
State Farm Mutual Auto Insurance Co. v. Petsch, 261 F.2d 331 (10th Cir. 1958); 
Adobe Oil & Gas Corporation v. Getter Trucking, Inc., Wyo., 676 P.2d 560 (1984); McCartney v. Malm, Wyo., 627 P.2d 1014 
(1981).

[¶22.]  Since for whatever reasons of contractual 
attainment the printed mortgage form as used by this lender in this case did 
omit any deficiency judgment provision upon foreclosure under the power-of-sale 
statute, I would leave it with rights limited to the written bargain, and 
reverse the summary judgment.