Court Opinion

ID: 3499514
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:06:45.201681+00
Date Added: 2024-06-11T13:05:26.461971
License: Public Domain

I do not concur.
The mortgage, executed May 23, 1927, was in form a trust deed importing foreclosure by court decree. The decree directed the sale by a master in chancery, *Page 486 
with report thereof subject to confirmation by the court. The master held the sale and made report which was approved and the sale confirmed.
The foreclosure in equity in the Illinois court was a proceeding in rem. No irregularity therein is disclosed. The sale by the master was under decree and not under power conferred upon or exercised by the mortgagee.
There is a distinction between a suit for deficiency after a sale under power" and a "suit at law for deficiency after sale under decree in equity." Jones on Mortgages (8th Ed.), §§ 1583, 1584.
Where a sale is under decree and conducted by a master of the court and report thereof is made and confirmed there is a judicial determination upon which may be predicated a suit at law to recover the deficiency. While it is not a judgment, unless so adjudged, the debt, however, is evidenced by judicial action and report and, unless the sale is set aside, the inadequacy of the price is not open as a defense in an action at law to recover the deficiency.
As pointed out in Kavolsky v. Kaufman, 273 Mass. 418
(173 N.E. 499), (sale by advertisement under power):
"It is the duty of the mortgagee, where the mortgage leaves him a power of selection of methods of giving notice and of making the sale, to act reasonably and to exercise a sound discretion. In such a case it is his duty to act as a reasonably prudent man would to obtain a fair price for property which has a well known value. * * * In an action upon a mortgage note to recover the balance due after a foreclosure sale, where the mortgagor is not the owner of the equity at the time of sale — the fact in the case at bar — it is open to the maker of the note to show as bearing upon the amount due that the sale was not conducted as it should have been and that more *Page 487 
should have been realized; especially if the holder of the mortgage was himself the purchaser at the sale. Howard v. Ames, 3 Met. (Mass.) 308; Fenton v. Torrey, 133 Mass. 138; Boutelle
v. Carpenter, 182 Mass. 417, 419 (65 N.E. 799)."
Foreclosure sales, under decrees, for grossly inadequate prices, have been set aside and resales ordered but only on application to the court wherein the foreclosure was had, or by a bill in equity for such purpose charging fraud perpetrated and never by collateral attack in an action at law upon the note obligation.
If the mortgagee exercises foreclosure under a power of sale he is bound to the observance of good faith and to a careful regard for the interest of his principal, and if the mortgagor can establish a purchase by the mortgagee at such a grossly inadequate price as to shock the conscience of the court, to the point of establishing fraud, then the mortgagor, in a suit upon the primary obligation, may make such defense in an action at law.
The defense in the case at bar is a collateral attack upon the decree of the Illinois court and proceedings thereunder. As said before, the sale was under decree and not under power conferred upon or exercised by the mortgagee. The decree ordering sale, with sale thereunder, and confirmation thereof by the court, disposed of the res and, in the suit at bar, must be taken as conclusive determination of adequacy of the bid. Over such matter there exists an adjudication in rem which controls the disposition of the res and beyond successful collateral attack.
The judgment should be reversed and a new trial granted, with costs to plaintiff.
CHANDLER, J., concurred with WIEST, J. BUTZEL, C.J., did not sit. *Page 488