Court Opinion

ID: 9699150
Source: CourtListenerOpinion
Date Created: 2023-08-25 20:11:39.147006+00
Date Added: 2024-06-11T18:20:46.926022
License: Public Domain

WUEST, Chief Justice
(concurring in part and dissenting in part).
I would affirm.
Agnes M. Carlson, mother, sold her ranch to her son, L. Melford Carlson and his wife. The property was sold under a contract for deed for a price of $295,000.00. After the down payment was made, the balance due mother was $269,000.00 with interest at the rate of six percent per an-num. Thereafter, the son and his wife mortgaged the property to the Federal Land Bank of Omaha. The mortgage was given to secure a promissory note of even date executed by the son and his wife in the principal sum of $267,000.00 with interest. The mother executed a subordination agreement which subordinated her interest as seller in the Contract for Deed to the mortgage held by the Federal Land Bank of Omaha. She never signed the note or mortgage nor did she transfer fee title to the son. The only interest he and his wife had to mortgage was his equitable interest acquired by the contract for deed. The subordination agreement contained the following provision:
This subordination is limited to the amount actually loaned by the lender to the borrower for the foregoing purposes, but shall not exceed Two Hundred Sixty-Seven Thousand Dollars ($267,000.00).
When son defaulted on the mortgage, the Federal Land Bank foreclosed. When Judgment was entered, the mortgage balance was $385,502.00 with interest accrued through May 21, 1986. The amount due to the mother on her Contract for Deed, with interest, was $343,000.00.
SDCL 21-47-15 provides:
*419In any foreclosure of a mortgage upon real estate by action, the mortgagee, his assigns, or their legal representatives, may purchase the premises, or any part thereof, at such foreclosure sale, providing he bid fairly and in good faith, and bids the fair and reasonable value thereof.
SDCL 21-47-16 provides:
If the holder of such mortgage is not willing at such sale to bid the full amount of the judgment debt, it shall be the duty of such mortgage holder to establish at the time of the trial by competent and reasonable value of the mortgaged premises, and the count shall determine the same in its decree; and if the court shall find such fair and reasonable value to be less than the sum due on said mortgage, with costs and expenses of sale, it may by such decree authorize such mortgage holder to bid not less than the fair and reasonable value as thus determined, and if a deficiency remains after the foreclosure sale, such mortgagee, or his assigns, shall be entitled to a general execution for such deficiency only upon application to the court in which the judgment was rendered.
The court permitted the Federal Land Bank to bid the amount of the subordination, i.e., $267,000.00. The court gave the following reasoning in its memorandum opinion which was adopted as a part of the decision.
The reasonable value of the premises considering the equity of Defendant, Agnes M. Carlson, under the unsubrogat-ed portion of her mortgage is not the appraised value, but rather the amount of subrogation, i.e., $267,000.00. Therefore, it will be the decision of the Court that Plaintiff may bid the sum of $267,-000.00 at foreclosure sale. Of course, Defendant Agnes M. Carlson may raise said bid but $267,000.00 of the amount bid shall inure to the benefit of Plaintiff. Defendant Agnes Carlson could also make redemption or convey her redemp-tory right after sale during the statutory redemptory period.
In the past we have referred to SDCL 21-47-15, 21-47-16, and 21-47-17, as the deficiency judgment act, and their legislative purpose is “to prevent unjust enrichment and gain by holders of Real Estate Mortgages through the foreclosure thereby by action.” See Chapter 146, S.L.1939; Miners & Merchants Bank v. Braden Forestry, 374 N.W.2d 123 (S.D.1985); Perpetual National Life Insurance Co. v. Brown, 182 N.W.2d 216 (S.D.1971).
When the court entered its judgment holding the Federal Land Bank could bid the amount of the subordinated ($267,-000.00), it further provided the Federal Land Bank could recover a deficiency against the son and his wife. A deficiency judgment is an imposition of personal liabilities upon a mortgagor for an unpaid balance of a secured obligation after foreclosure of the mortgage has failed to yield the full amount of the debt. Miners & Merchants Bank, supra. The mortgagors, son and wife, never appealed the decision of the trial court. Since the son and his wife never appealed, we do not review their rights in the case. Mother, however, claims the court violated the provisions of SDCL 21-47-15 and 21-47-16 by finding the fair and reasonable value of the premises to be $267,000.00, the subrogated maximum which affect her rights.
At the time of judgment, the son owed the Land Bank $385,502.00, and under the provisions of the subordination agreement the bank is entitled to the first $267,000.00 from the sale of the property. The mother is entitled to the next $343,000.00 for the balance due on her contract with accrued interest. After the mother is paid, the Federal Bank is entitled to the balance due on the mortgage, which, after deducting the $267,000.00 subordination by the mother, amounts to $118,502.00. Anything left would go to the son and wife as mortgagors. The property, however, was appraised by the Carlsons’ appraiser at $484,-000.00, and the court found the property was worth less than the total encumbrances.
The court in this case found the fair and reasonable value of the premises was *420$267,000.00 (the subrogated amount) since the mother owned the fee of the property pursuant to her Contract for Deed and a life estate reserved in the “family” home. I believe the court’s finding was not clearly erroneous considering the fee title of the mother in the property and the Carlson’s own appraisal. The only estate the Federal Land Bank had to sell was the subordinated $267,000.00 interest. There was no value left after deducting the subordinated sum of $267,000.00 and the sum of $343,-000.00 owed the mother. All the son and his wife owned and could mortgage was the equitable interest they acquired from the mother pursuant to the Contract for Deed. This equitable interest upon default was subject to strict foreclosure of a real estate contract under the provisions of SDCL ch. 21-50.
I concur with the majority opinion the trial court did not abuse its discretion in ordering the ranch sold as a single tract.