Court Opinion

ID: 3986646
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:42:47.337627+00
Date Added: 2024-06-11T07:44:19.957364
License: Public Domain

I concur. I have questioned the doctrine which has long been the law of this state and upon which the prevailing opinion rests, to the effect that a mortgagee would be compelled to resort first to his security before he could come against general assets of the mortgagor. I questioned whether that doctrine was a necessary or even a logical result of our section 7230, Comp. Laws Utah 1917, now carried as section 104-55-1, R.S. Utah 1933. I had doubt whether that section which provided that there could be but one action for the recovery of any debt or enforcement of any right secured by mortgage on real estate or personal property should be pushed beyond the direct import of its language. That import as I conceived it was that if the holder of the note secured by the mortgage brought an action on the note alone without seeking to foreclose the mortgage, he lost all right to go back and foreclose the mortgage. The statute appears not to preclude a choice. I had thought that that section meant only that a person could either forego the security and bring an action on the note, *Page 584 
or bring an action on the note and at the same time foreclose the security, but that he could not have two actions; one to take a chance on the note by executing on a judgment obtained thereon, and, if that did not suffice, then to have the mortgage foreclosed. For that reason, I have, in the study of this case, taken such time as was available to re-examine the principle that a person must first resort to the security before he can come against any of the other assets of the maker of the note. My exploration has been by no means exhaustive, but as far as I can determine by a cursory examination, the doctrine seems to have been first announced in the case of Salt Lake Valley Loan Trust Co. v. Millspaugh, 18 Utah 283, 54 P. 893. Before that, in the case of Bacon v. Raybould, 4 Utah 357, 10 P. 481, 11 P. 510, the court held that the mortgagee could not bring an action on the note, and sue out a writ of attachment based on the affidavit that the security had been rendered nugatory by the act of the defendant (one of the requirements of the affidavit for a writ of attachment under the law as it stood in the compilation of 1876 when the plaintiff having the mortgage sued out a writ of attachment) and then later bring an action to foreclose his mortgage. But that case did not pronounce the doctrine that the security could not be waived and an action brought on the note alone. It was apparently in the Millspaugh Case that that doctrine was first announced in this state. In the same Utah volume, page 11, 54 P. 892, 72 Am. St. Rep. 765, is contained the case of Mallory v. Kesler, in which it was held that an action at law could be maintained for a deficiency after sale under a power contained in a trust deed. The opinion there states, referring to section 3460, Comp. Laws Utah 1888, which is as respects the requirement of one action the same as our section 104-55-1, R.S. 1933, as follows:
"The object of the statute doubtless is to compel the mortgagee to exhaust his security before having recourse to the general assets of the debtor. The balance or deficiency, after it has been properly ascertained, whether by sale under a power or by foreclosure in equity constitutes a subsisting indebtedness, as well as did the original debt." *Page 585 
We need not be concerned about the holding in the Kessler Case as to permitting another action to be brought for a deficiency. The difference in the laws relating to the foreclosure of mortgages in the compilation of 1888 as compared with the later enactments in that regard which is the ancestor of our present chapter 55, R.S. 1933, may sufficiently account for the holding in the Mallory decision as compared to the later decisions. We are calling attention to the Mallory Case because it did express the thought that the purpose of the statute was to require the mortgagee to first exhaust the security before recourse to the general assets of the debtor. But the first definite holding which could not be said to be dicta was contained in the Millspaugh Case, supra. This case seems to be founded upon the case of Barbieri v. Ramelli et al., 84 Cal. 154, 23 P. 1086, where it was held that under section 726 of the California Code of Civil Procedure (which reads, as far as the requirement for a single action for the recovery of any debt secured by mortgage is concerned, exactly as our section 104-55-1), that even where at the time of the giving of the mortgage there were mortgages prior to the plaintiff's mortgage of such amounts as to take up the entire value of the property, the plaintiff was still compelled to foreclose his subsequent mortgage and come against the general assets of the defendant only by way of a deficiency judgment.
Since the Millspaugh Case, the doctrine has been reiterated in the case of Boucofski v. Jacobsen, 36 Utah 165, 104 P. 117, 26 L.R.A. (N.S.) 898, and subsequent decisions of this court so that it is the law of this jurisdiction. Considering that section 7230, Comp. Laws Utah 1917, and its successor section 104-55-1, R.S. 1933, provide that the action "must be in accordance with the provisions of this chapter," I may not, even if I desired to, question the soundness of the doctrine. It not only provides there must be "but one action for the recovery of any debt or the enforcement of any right secured by mortgage upon real estate or personal property," but provides that it "must be *Page 586 
in accordance with the provisions of this chapter." When one examines the provisions of the chapter it is discovered that:
"Judgment shall be given adjudging the amount due, with costs and disbursements, and the sale of the mortgaged property, orsome part thereof, to satisfy said amount and accruing costs, anddirecting the sheriff to proceed and sell the same according tothe provisions of law relating to sales on execution." (Italics supplied).
Section 7231, Comp. Laws Utah 1917, provides for the return of the sheriff showing the proceeds of the sale and for execution for the balance if the return shows there is not sufficient after the deduction of costs to pay the debt. Consequently, it transpires that not only must there be but one action for the recovery of the debt, but that the judgment obtained in said action must first provide for the sale of the security, unless proper allegation and proof is made that the security has become valueless, and that the only personal judgment that can be obtained is a deficiency judgment. This is a judgment obtained in the one action according to the provisions of that chapter and in no other way.
The consequence is that not only is the law of our state settled in regard to the requirement that the holder of a mortgage on real estate or personal property must first exhaust that security before he can come against the general assets of the debtor, but as I see it there is no escape from the logic of that holding. This being so, it is decisive of the instant case. The principle that one must exhaust the security before coming against the general assets of the debtor results in making the security, for all practical purposes, the primary debtor. This is an apt, if not an accurate, way of expressing the situation. It is therefore the same as if a creditor had one primarily and another secondarily liable to him and he applied a debt that he owed to the one secondarily liable upon the debt which the one primarily liable owed him. Certainly this could not be done under section 104-9-4, R.S. 1933. If the bank could reach out and apply *Page 587 
the $857 owed by its depositor Rouse to its secured indebtedness it would, in effect, be coming against the general assets of Rouse before exhausting its security. This is what the law says cannot be done. Of course, Rouse himself could have compelled the bank to apply the credit because nothing can prevent the debtor of a secured debt from making payment when payment is due. He can either give cash or he can apply as payment what the secured creditor owes him. This is by way of payment and not by way of set-off. As I see it, therefore, there is no escape from the logic of the prevailing opinion that a secured creditor cannot control a credit against him belonging to his debtor so as to require it to be offset or offset it himself against his credit, but his unsecured creditor who is also his debtor under the secured debt may, if he desires, offset his unsecured credit as payment as far as it will go to pay off the secured debt.