Case Name: MINERS AND MERCHANTS BANK, A Banking Corporation, Plaintiff and Appellee, v. BRADEN FORESTRY SERVICES, INC., Millard M. Braden, Edna Mae Braden, Jon P. Hallinan, and Glen L. Westberg, Defendants, and M.H. Braden, a/k/a Milford H. Braden, and Margaret M. Braden, Defendants and Appellants
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1985-09-06
Citations: 374 N.W.2d 123
Docket Number: No. 14531
Parties: MINERS AND MERCHANTS BANK, A Banking Corporation, Plaintiff and Appellee, v. BRADEN FORESTRY SERVICES, INC., Millard M. Braden, Edna Mae Braden, Jon P. Hallinan, and Glen L. Westberg, Defendants, and M.H. Braden, a/k/a Milford H. Braden, and Margaret M. Braden, Defendants and Appellants.
Judges: FOSHEIM, C.J., MORGAN, J., and WUEST, Acting J., concur.
Reporter: North Western Reporter 2d
Volume: 374
Pages: 123–127

Head Matter:
MINERS AND MERCHANTS BANK, A Banking Corporation, Plaintiff and Appellee, v. BRADEN FORESTRY SERVICES, INC., Millard M. Braden, Edna Mae Braden, Jon P. Hallinan, and Glen L. Westberg, Defendants, and M.H. Braden, a/k/a Milford H. Braden, and Margaret M. Braden, Defendants and Appellants.
No. 14531.
Supreme Court of South Dakota.
Sept. 6, 1985.
Robert A. Amundson of Amundson & Fuller, Lead, for plaintiff and appellee.
William H. Coacher, Sturgis, for defendants and appellants.

Opinion:
WOLLMAN, Justice.
This is an appeal from an order approving sale of M.H. and Margaret Braden's cabin property, pledged as collateral for a promissory note executed and delivered by Braden Forestry Services, Inc. to Miners and Merchants Bank (Bank). We affirm.
The facts here are not in dispute.
On January 8, 1981, Braden Forestry Services executed and delivered to Bank a note in the principal sum of $210,000.00. The note was secured by collateral designated in a security agreement executed by Braden Forestry on the same day. Millard M. Braden and Edna Mae Braden, president and secretary of Braden Forestry, personally guaranteed the note. Their guarantee was secured by mortgages on two separate parcels of property.
As further security on the note, M.H. and Margaret M. Braden (the Bradens), parents of Millard M. Braden, executed a guaranty, secured by a mortgage on their home located in Sturgis, South Dakota, and a security interest in their cabin located in the Black Hills.
Braden Forestry defaulted on the note. On June 9,1982, Bank brought an action to recover on the note, naming, among others, Braden Forestry Services, Millard M. Bra-den, Edna M. Braden, M.H. Braden, and Margaret Braden as defendants.
On December 17, 1982, Bank moved for summary judgment. At the January 4, 1982, hearing on the motion, all defendants failed to appear either in person or by counsel. On January 11, 1983, summary judgment was entered against all defendants. It was ordered that Bank recover the sum of $226,099.09. It was further ordered that Bank could proceed against all guarantors on the note for satisfaction of the judgment and that the several mortgages given by the various defendants be foreclosed.
On June 8, 1983, Bank's vice president, Joe GrandGeorge, submitted an affidavit to the trial court that stated that the approximate value of the mortgaged properties had been established with the assistance of a real estate appraiser. The approximate fair market value of M.H. and Margaret Braden's home in Sturgis was estimated at approximately $28,000.00; the cabin was valued at between $20,000.00 and $25,-000.00. A copy of the appraisal was attached to the affidavit.
On June 9, 1983, the trial court issued an order stating that the fair market value of the mortgaged properties was less than the total sum due on the judgment. The order further authorized Bank to enter its bid on the mortgaged property at the fair and reasonable value established by the court and that Bank would be entitled to a general execution if a deficiency remained after the sale.
Following appropriate notice, a foreclosure sale was held on the Braden's Stur-gis residence on August 23, 1983. Bank submitted a bid of $28,500.00.
On September 30, 1983, following receipt of a private offer to purchase the Braden's cabin, Bank moved the court to approve sale of the cabin and to find the sale commercially reasonable. Bradens resisted the motion.
Bradens' counsel argued that Bank had failed to comply with the statutes governing deficiency judgments, SDCL 21-47-15 through 21-47-17.
SDCL 21-47-15 provides:
In any foreclosure of a mortgage upon real estate by action, the mortgagee, his assigns or their legal representatives, may purchase the premises, or any part thereof, at such foreclosure sale, providing he bids fairly and in good faith, and bids the fair and reasonable value thereof.
SDCL 21-47-16 provides:
If the holder of such mortgage is not willing at such sale to bid the full amount of the judgment debt, it shall be the duty of such mortgage holder to establish at the time of the trial by competent proof to the satisfaction of the court, the fair and reasonable value of the mortgaged premises, and the court shall determine the same in its decree; and if the court shall find such fair and reasonable value to be less than the sum due on said mortgage, with costs and expenses of sale, it may by such decree authorize such mortgage holder to bid not less than the fair and reasonable value as thus determined, and if a deficiency remains after the foreclosure sale, such mortgagee, or his assigns, shall be entitled to a general execution for such deficiency only upon application to the court in which the judgment was rendered.
SDCL 21-47-17 provides:
Except as provided by § 21-47-16, a foreclosure by action of a mortgage upon real estate operates as a complete extin-guishment, satisfaction and payment of the debt secured by the mortgage. However, a foreclosure may not be considered to be satisfaction of an assignment of rents agreement under the mortgage.
The trial court overruled Bradens' objections, concluding that the question of compliance with the deficiency judgment statutes was raised prematurely. The court further stated that in the event Bank sought a deficiency judgment, the court would determine whether it had strictly complied with the statutes.
Subsequently, on January 16, 1984, the trial court issued an order approving the sale of Bradens' cabin and finding the sale to be commercially reasonable. It is from this order that Bradens appeal.
On appeal, Bradens argue that Bank failed to comply with that portion of SDCL 21-47-16 which requires the "mortgage holder to establish at the time of trial by competent proof to the satisfaction of the court, the fair and reasonable value of the mortgaged premises, and the court shall determine the same in its decree." Bra-dens further contend that Bank's post-summary judgment ex parte affidavit concerning the approximate fair market value of the mortgaged properties did not satisfy the requirements of the statute. Bradens argue that when Bank entered a bid on their residence in Sturgis for less than the amount of judgment, the entire debt was extinguished. Accordingly, Bradens would have us hold that Bank is precluded from selling their cabin property in further satisfaction of the debt.
In Todd v. Winkelman, 320 N.W.2d 525 (S.D.1982), the mortgagees had foreclosed on the primary security pledged by the mortgagors. Following sale, the mortgagees returned to the court to secure a deficiency judgment. The only issue on appeal was whether a deficiency existed after the sale of the primary security. Because the mortgagee had failed to make a record at the hearing on foreclosure establishing the fair value of the primary security, we held that they were not entitled to a deficiency judgment under SDCL 21-47-16.
In Perpetual Nat'l Life Ins. Co. v. Brown, 85 S.D. 330, 182 N.W.2d 216 (1970), the issue whether the mortgagee could obtain a deficiency judgment from the mortgagor on the promissory note was presented to this court only after the mortgaged property had been sold and the assets from that sale applied to the debt. The issue on appeal was whether the mortgagee had properly made a record at trial regarding the fair market value of the mortgaged property so as to be entitled to a deficiency judgment.
Unlike the mortgagee in Todd, Bank has yet to exhaust all collateral pledged as security for the guaranty. We do not read Todd as precluding Bank from doing just that. Moreover, as we said in Todd, "the judgment ordering sale and execution is a final judgment distinct from the judgment of deficiency." Id. at 527.
A deficiency judgment is an imposition of personal liability upon a mortgagor for an unpaid balance of a secured obligation after foreclosure of the mortgage has failed to yield the full amount of the underlying debt. Thus, a proceeding for a deficiency judgment is an attempt to recover something more than and distinct from the security provided by the debtor.
In re Pittsburgh-Duquesne Development Co., 482 F.2d 243, 246 (3rd Cir.1973).
We observed in Perpetual Nat'l Life Ins. Co. v. Brown, supra, that the legislative purpose in enacting the deficiency judgment statutes was to prevent unjust enrichment and gain by the holders of real estate mortgages. 85 S.D. at 334, 182 N.W.2d at 218. See also American Federal Savings & Loan Ass'n v. Kass, 320 N.W.2d 800 (S.D.1982). In short, the deficiency judgment statutes are designed to prevent a mortgage holder from obtaining a deficiency judgment without regard to the fair value of the mortgaged property.
Here, the trial court has ordered the sale of the collateral; however, Bank has not yet made application for a deficiency judgment. As we construe SDCL 21-47-16, such application for deficiency judgment cannot be made until after Bank has foreclosed on all pledged collateral.
The policy underlying the enactment of the deficiency judgment statutes is not implicated until such time as the mort gaged property has been sold and an application for a deficiency judgment has been made to the court. Therefore, the Bra-dens' contention that Bank has failed to comply with the deficiency judgment statutes has been prematurely presented to this court.
Pursuant to the trial court's unappealed-from summary judgment ordering that all collateral be sold and the assets from those sales be applied in satisfaction of the entire debt, Bank must be permitted to sell the cabin. Whether Bank is entitled to a deficiency judgment is a matter to be presented to the trial court following the sale. The order appealed from is affirmed.
FOSHEIM, C.J., MORGAN, J., and WUEST, Acting J., concur.
HENDERSON, J., concurs in part and dissents in part.