Court Opinion

ID: 3984954
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:41:11.569796+00
Date Added: 2024-06-11T07:44:18.026895
License: Public Domain

I concur. Stated chronologically, the material facts which form the basis of this controversy are these: In October, 1930, J.R. Steele and B.W. Steele, his wife, executed a real estate mortgage in favor of the Tracy Loan  Trust Company. The mortgage was properly recorded soon after its execution. In May, 1932, the Steeles, mortgagors, conveyed the mortgaged premises to Steele 
Co., Inc., which corporation took title to the property subject to the mortgage, but did not agree to pay the same. In August, 1933, the Industrial Commission of Utah obtained a judgment against Steele  Co., Inc., for an insurance premium. November, 1933, Tracy Loan  Trust Company transferred to the Local Realty Company, plaintiff herein, the mortgage, together with the note secured thereby. Plaintiff brought this action to foreclose its mortgage. The Industrial Commission of Utah was, because of its judgment, made a party defendant in the mortgage foreclosure suit. In that suit plaintiff claimed that the lien created by its mortgage is superior to the lien created by the judgment in favor of the Industrial Commission. On the other hand, the Industrial Commission claims that its judgment lien is superior to plaintiff's mortgage lien. That is the sole question which divides the parties to this controversy. The Industrial Commission relies upon the provisions of R.S. Utah 1933, 42-1-59, to support its claim. The provision so relied upon was in effect at the time the mortgage in question was executed. It reads thus:
"All judgments obtained in any action prosecuted by the commission or by the state under the authority of this title shall have the same preference against the assets of the employer as claims for taxes." *Page 478 
In its brief the Industrial Commission stresses the facts that its judgment was secured before the mortgage was transferred to the plaintiff by the Tracy Loan  Trust Company. I am unable to perceive how that fact can affect the results which should be reached in this case. All of the rights which the Tracy Loan 
Trust Company had in or to the property in question were transferred to the Local Realty Company. If the mortgage lien, in the hands of the Tracy Loan  Trust Company, was superior to the judgment lien of the commission, such mortgage lien remained superior after the transfer was made; that is to say, the relative standing of the liens was not affected by the transfer.
That a mortgage creates in a mortgagee a property right with respect to the mortgaged property, within the meaning of our Federal and State Constitutions, is not open to doubt. That such right, regardless of the name applied to it, is entitled to the same degree of protection as is any other right touching the mortgaged property is equally clear. If we accept the doctrine contended for by the Industrial Commission, the holder of a mortgage on real estate may have such right rendered valueless if, perchance, the mortgagor conveys the property to an employer who, being subject to the Workmen's Compensation Act (Rev. St. 1933, 42-1-1 et seq.), fails to pay the premium on a policy of insurance with the state insurance fund. It is suggested that the mortgagee still has an action on the obligation to which the mortgage is a mere incident. It is reasonable to assume that such an action by the holder of the mortgage in the instant case is an empty right, otherwise the parties would not be here insisting upon the superiority of their respective liens. If I am wrong in so assuming, still, under the doctrine contended for by the Industrial Commission, other mortgagees may find themselves deprived of any and all means of realizing anything on obligations owing to them, notwithstanding the debts when contracted were amply secured. It is urged *Page 479 
that the original mortgagee, Tracy Loan  Trust Company, knew or was charged with knowing that such a result might follow when they accepted the mortgage because the law brought in question was in effect at that time. It is further urged the same results would follow if taxes levied against the mortgaged property are not paid. The nature of the lien created by unpaid taxes on real estate is so unlike the judgment lien here brought in question as not to admit of comparison. One who accepts a mortgage on real estate knows with certainty that taxes will be levied from year to year against the mortgaged property. He has some notion of the probable amount of taxes that will be so levied. The mortgagee derives the same kind of benefit from taxes levied for governmental purposes that are derived by the mortgagor. If special assessments are levied for improvements, such as streets, sidewalks, drainage, sewerage, etc., such assessments are calculated to enhance the value of the mortgaged property to the extent of the improvements made, and hence the security of the mortgagee is not destroyed. On the other hand, a mortgagee of real estate cannot reasonably anticipate that the mortgagor or his grantee will, without paying the premium, take out an industrial insurance policy with the state insurance fund, fail to pay such premium, suffer a judgment to be entered therefor, resulting in a lessening or destruction of the value of a valid subsisting mortgage. The obligation to pay the premium which forms the basis of the judgment lien here in controversy is in no sense an obligation of the plaintiff mortgagee. Nor may it be said that the mortgaged property derives any benefit from the payment of premiums to the state insurance fund. In its final analysis, a construction placed upon the statutory provision under review such as that urged by the Industrial Commission will permit the taking of mortgaged property to pay an obligation of the grantee of the mortgagor. Even though it may be said that a statute which has for its purpose the accomplishment of such a result is permissible within constitutional limitations, which I seriously *Page 480 
doubt, still it is difficult to perceive the lawmaking power intended that result. A construction of the statute which renders it oppressive or against principles of natural justice, or its constitutionality doubtful, should be avoided if the statute may reasonably be construed so as to escape such results. To deprive a mortgagee of its security because perchance a mortgagor transfers his interest to an employer subject to the industrial act, who fails to pay a premium on his insurance policy with the state insurance fund is, to say the least, both oppressive and against the principles of natural justice. Nor is the risk of being oppressed and unfairly dealt with under a statute, construed as the Industrial Commission would have us construe the statute under review, confined to a mortgagee. The burden of paying the judgment lien may fall upon the mortgagor or one claiming under him who has assumed and agreed to pay the debt secured by the mortgage, as well as all others who are liable for the payment of the debt. They are so burdened notwithstanding the amount of the mortgage may have been deducted from the sale price of the mortgaged property whenever a deficiency judgment is occasioned by applying proceeds derived from the sale of the property to the payment of the judgment lien. Before the courts conclude that the law-making power intended such results, the language used by it should clearly so indicate.
It will be observed that the statutory provision under review is by its express language intended to affect only the assets
of the employer. The construction of the statute urged by the commission would extend the judgment lien to a preference not only against the assets of the employer, but against property standing in his name even though, because of the mortgage, it is not an asset to him. It permits the taking of a property right of a mortgagee to pay an obligation even though he owes no duty to pay the same. A mortgage is clearly an asset of the mortgagee when the obligation which it secures is otherwise valueless. One who *Page 481 
acquires property subject to a valid, subsisting mortgage for as much or more than its value does not thereby acquire anything of value unless those obligated to pay the debt are either able and willing or can be compelled to pay the same. To regard as of controlling importance the distinction between the rights of a mortgagee who has, by virtue of his mortgage, a lien upon property and the rights of a mortgagee who, by virtue of his mortgage, owns the title to the property subject to the right of the mortgagor to redeem the same is to magnify the shadow and ignore the substance. The mortgagee has no occasion to be especially concerned with who owns the legal title to the mortgaged property. His chief concern is to be able to resort to his security in the event the obligation is not paid. Property, whether mortgaged or not, is an asset to the extent of and not beyond its value. Real estate worth $1,000 subject to a mortgage for $1,000 may not well be said to be an asset of the mortgagor to the extent of $1,000 and at the same time an asset of the mortgagee to the extent of $1,000. Assets, that is, values, are not so created. Had the defendant Steele  Co., Inc., rendered a financial statement after it acquired title to the mortgaged property, it could truthfully say that the debt secured by the mortgage was not one of its liabilities because it never agreed to pay the same, but it could not truthfully claim as an asset the full value of the mortgaged property if those liable for the payment of the debt secured by the mortgage were unable to pay the same. If the Legislature intended to make such judgment liens as that here in question superior to prior mortgages on the judgment debtor's property, it would have been a simple matter to have expressly so provided. I am unable to agree that the language under review shows any such intention.
I concur in the view that the judgment should be reversed and the court below directed to recast its conclusions of law and decree to the end that the proceeds derived from the sale of the mortgaged property should be first applied to the *Page 482 
satisfaction of plaintiff's mortgage, and that appellant should be awarded its costs on appeal.