Opinion ID: 1345920
Heading Depth: 1
Heading Rank: 2

Heading: availability of deficiency

Text: We next consider the effect a failure to comply with the procedures set out in the judicial sales act has on the mortgagee's right to a deficiency. Section 2001 of the judicial sales act governs the sale of realty. Section 2004 makes the procedures of section 2001 applicable to personalty. Under § 2001, a sale may be public, with the court directing the terms and conditions of the sale (28 U.S.C. § 2001(a)), or private, with the court confirming the sale after the fact. 28 U.S.C. § 2001(b). Before a private sale will be confirmed, there must be three appraisals of the property, the sale price may not be less than two-thirds the appraised price, and the terms of the sale must be published in a general circulation newspaper for at least 10 days before the sale is confirmed. It is agreed that Nate did not comply with the procedures of § 2001. [4] [2] In determining the effect of Nate's failure to comply with the procedures of § 2001, we again look to Bank of Am. Nat'l Trust & Sav. Ass'n v. Fogle, 637 F. Supp. 305, 307 (N.D. Cal. 1985) for guidance. In ruling that a deficiency judgment was unavailable, Fogle stated as follows: The legal effect of the mortgagee's failure to comply with § 2001(b) will, of course, be determined by federal law. Walter E. Heller & Co. v. O/S Sonny V., 595 F.2d 968, 971 (5th Cir.1979). Section 2001(b) does not, however, specify what follows from a failure to comply with its requirements; thus, federal common law must determine the effect of the failure on the mortgagee's right to a deficiency judgment. And, because the Court is unaware of any cases that state how a failure to comply with the requirements of § 2001(b) affects a mortgagee's right to recover a deficiency judgment under 46 U.S.C. § 954, the Court is faced with the task of developing the federal common law in this area. Fogle, at 307. The Fogle court then looked to California law for guidance, stating that state law can and should be applied interstitially to resolve the issue. Fogle, at 307. Looking to state law is appropriate in this instance because: There is no Federal law of mortgages except as is contained in specific statutes such as the Ship's Mortgage Act. Where voids appear, it is necessary for the Court to look to other sources for its answers. While the Federal Court may not be bound by State law in such an instance, nevertheless, the State law is the logical place to look for guidance. Fogle, at 308 (quoting Southland Fin. Corp. v. Oil Screw Mary Evelyn, 248 F. Supp. 520, 522 (E.D. La. 1965)). Under California law a mortgagee who fails to comply with applicable procedures in repossessing and selling the collateral securing the mortgage is barred from recovering a deficiency. The Fogle court adopted this rule. In the present case, it is agreed that Nate did not comply with § 2001. Thus, under federal common law, as set forth in Fogle, Nate is barred from recovering a deficiency and the trial court's dismissal of his action is affirmed. Finally, Wiggins has requested an award of attorney fees in his brief as required by RAP 18.1(b). However, an award of fees is not appropriate in this case because he failed to timely submit an affidavit of expenses, RAP 18.1(c), and he failed to request fees at oral argument. RAP 18.1(d). Nate did not request an award of attorney fees in his brief. In summary, we hold that the Ship Mortgage Act, in conjunction with §§ 2001 and 2004 of the judicial sales act, provides the exclusive remedy for foreclosure of a preferred ship mortgage and that federal common law, as set forth in Bank of Am. Nat'l Trust & Sav. Ass'n v. Fogle, 637 F. Supp. 305 (N.D. Cal. 1985) governs the recovery of a deficiency when proper procedures are not followed. Accordingly, we affirm the dismissal of Nate's action. CALLOW, C.J., UTTER, BRACHTENBACH, DOLLIVER, DORE, ANDERSEN, and SMITH, JJ., and PEARSON, J. Pro Tem., concur.