Opinion ID: 1864007
Heading Depth: 1
Heading Rank: 2

Heading: did the trial court err in excluding evidence of the value of the subject property after the foreclosure sale?

Text: FLB argues that it should have been able to introduce evidence of falling land values and its inability, after the foreclosure sale, to sell the subject property for a sum approximating its true value. The trial court excluded this evidence as irrelevant. The two points of excluded evidence which will be considered are the following: (1) FLB had been trying to sell the subject property from the time of the foreclosure to the time of the trial, but had been unable to do so for even an amount that equaled approximately one-half of the amount it paid at the foreclosure sale; and (2) subsequent events had shown that the property was not worth the amount at which it had been appraised and the amount for which the FLB had purchased it at foreclosure. Relevant evidence is defined by Miss.R.Evid. 401: Relevant Evidence means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. See also Mississippi State Highway Commission v. Dixie Contractors, Inc., 375 So.2d 1202 (Miss. 1979) (proffered evidence must appear calculated to alter the probabilities of some fact in consequence). Relevant evidence is admissible unless excluded by the Mississippi or United States Constitutions, or by the Rules of Evidence. Miss. R.Evid. 403. The admission or exclusion of evidence due to relevance is largely within the discretion of the trial judge. Independent Life & Acc. Ins. Co. v. Peavy, 528 So.2d 1112, 1119 (Miss. 1988). Relevance must necessarily be viewed in light of previously announced guidelines concerning deficiency judgments. In Mississippi Valley Title Ins. Co. v. Horne Construction Co., 372 So.2d 1270 (Miss. 1979), this Court adopted the following rule: The mortgagee's right to a deficiency decree usually depends on the facts and circumstances of each case, and, since the mortgaged premises constitute the primary fund for the payment of the mortgage debt, it is only where the mortgagee has endeavored to collect it out of the land that a just judgment for deficiency can be entered. While it has been held that the power to render a deficiency decree is governed by the rules which would apply at law, it has also been held that the court has jurisdiction after a foreclosure sale to determine any intervening fact which would make it inequitable to enter a deficiency decree. Accordingly, no right to a deficiency judgment vests until plaintiff satisfies equity that it would be equitable, in the light of the sale price, to authorize a deficiency judgment. 372 So.2d at 1272 (quoting 59 C.J.S. Mortgages § 778 (1949)). Mississippi Valley Title was relied upon in Lake Hillsdale Estates, Inc. v. Galloway, 473 So.2d 461 (Miss. 1985). In Lake Hillsdale, the mortgagee, Louisiana Savings Association, obtained a deficiency judgment against the mortgagor, Lake Hillsdale. This Court reversed and remanded the lower court's directed verdict in favor of the mortgagee. In doing so it relied first on its decision in Mississippi Valley Title. The Court then went on to add: Our decision in Mississippi Valley Title makes it clear that something more than a difference between the price paid at the foreclosure and the amount of the indebtedness must be demonstrated before the mortgagee is entitled to a deficiency judgment. In the case sub judice, as in Mississippi Valley Title, the mortgagee was the sole bidder at the foreclosure sale and thereby established a sale price which left the mortgagee entitled to a substantial deficiency judgment. Though we have concluded above that the price paid at the foreclosure sale was not so inadequate as to require setting aside the sale, we cannot conclude that the value of the property thereby obtained is insufficient to satisfy the indebtedness of the mortgagor. In any case, no proof to that effect has been offered by the appellee. We hold, consistent with our decision in Mississippi Valley Title Insurance that in order to obtain a deficiency judgment, the mortgagee has the burden of proving its entitlement under principles of equity to a deficiency judgment. The trial court's granting of a deficiency judgment upon motion for directed verdict was therefore premature. We reverse the court's ruling and remand for a new hearing to first determine if the mortgagee has endeavored to collect the indebtedness out of the land. Then, it must be determined whether the value of the property satisfies the debt of the mortgagor or creates a surplus. 473 So.2d at 466. Several guidelines emerge from these cases. In the case at bar, FLB must show more than the fact that there was a difference in the price it paid at foreclosure for the subject property, $663,000, and the amount of the indebtedness owed by the Wolfes at that time, $733,784.88. The fact that FLB was the sole bidder who established the sale price paid for the subject property is a factor to be considered. In OMP v. Security Pacific Business Finance, Inc., 716 F. Supp. 251 (N.D. Miss. 1989), the court, while acknowledging that Mississippi courts had not expressly stated their equitable power to award a deficiency judgment based on the fair market value instead of the bid price at the foreclosure, recognized that this Court had clearly given broad equitable protection to mortgagors. If we are to extend protection to mortgagors, it follows that we have to allow FLB (the mortgagee) the opportunity to prove values at the time of foreclosure and to prove their effort to recover out of the disposition of properties foreclosed. If we are to protect mortgagors from unscrupulous mortgagees at foreclosure, it follows that the mortgagee must have wide latitude to prove his effort to diminish mortgagee's loss and thereby protect the mortgagor. Indeed, FLB has the burden of proving under the principles of equity that it had endeavored to collect the Wolfes' indebtedness out of the land and that the value of the subject property is insufficient for this purpose. In Lake Hillsdale, the mortgagee put on no proof to this effect. In the case at bar, FLB's attempt to put on what it considers relevant proof is the crux of the controversy. If as this Court held in Mississippi Valley Title and Lake Hillsdale a mortgagee seeking a deficiency must demonstrate something more than the difference between the price paid at foreclosure and the amount of indebtedness owing at the time of foreclosure, then certainly FLB must be allowed to introduce evidence that would demonstrate that it is entitled to a deficiency judgment and evidence that would portray the efforts made to recover by FLB, including evidence of unsuccessful attempted sale of the foreclosed property, decline of land values immediately before or after the foreclosure sale, and any additional effort that it may have made to reduce the deficiency of the debtor. There appears to be no specific rule as to whether subsequent sales of property and subsequent shifts in market value are admissible in a case such as this. In Federal Land Bank of St. Paul v. Bergquist, 425 N.W.2d 360 (N.D. 1988), the North Dakota Supreme Court, in considering its statute authorizing deficiency judgments, stated the following: [A]ll evidence bearing on the value of the property and the circumstances of the underlying transaction can be presented to the jury. This would include, among other things, the amount of the mortgage, the amount of any subsequent mortgage, fluctuations in land values, and the remaining amount claimed to be due on the debt. Market value is, of course, admissible as one factor for consideration by the jury, but it is not controlling. 425 N.W.2d at 364. A similar position was taken in Wachovia Realty Investments v. Housing, Inc., 292 N.C. 93, 232 S.E.2d 667 (N.C. 1977). If the language and import of Lake Hillsdale, supra, are to be carried out, it necessarily follows that subsequent valuations and actions by the creditor/purchaser at the foreclosure sale are relevant. It is, however, not just the valuation that is relevant. The totality of the actions taken by the creditor/purchaser at the foreclosure sale to satisfy the full debt from the property foreclosed become relevant to the entitlement of FLB to a deficiency judgment. Certainly FLB should have the opportunity to clearly demonstrate through its offer of evidence that it is entitled to a deficiency judgment and that it has been prudent in its attempt to satisfy the debt in full through the sale of the property. The defendants objected to this evidence going before the jury. The trial court sustained the objections, and FLB was prevented from offering proof of its entitlement to a deficiency judgment. For the reasons stated above, the judgment of the trial court is reversed and this matter is remanded for a new trial. REVERSED AND REMANDED FOR NEW TRIAL NOT INCONSISTENT WITH THE OPINION OF THIS COURT. ROY NOBLE LEE, C.J., HAWKINS and DAN M. LEE, P.JJ., and PRATHER, ROBERTSON, SULLIVAN, ANDERSON, and BLASS, JJ., concur.