Cragin v. Ocean & Lake Realty Co.

133 So. 569, 101 Fla. 1324

• Court: Supreme Court of Florida
• Decided: March 28, 1931
• Status: Published

Opinions

Brown, J.

The controlling question in both of these •cases is whether or not a complainant in a mortgage foreclosure suit, who by his pleadings invoked the exercise of the chancery court’s jurisdiction to adjudicate his alleged right to a deficiency decree and in whose behalf the court rendered a decree for a part of the deficiency claim against the mortgagor and his grantee who covenanted in the deed to assume and pay the mortgage debt, can afterwards 'go into a court of law and obtain a judgment for the remainder of the claimed deficiency against said original mortgagor on the same cause of action, after applying the proceeds of the foreclosure sale and that portion of the deficiency allowed by the equity court to the obligation secured by the mortgage.

Plaintiffs in error brought two suits, one against each of the respective defendants in error, in the Circuit Court of Palm Beach County, in January, 1929, on three certain promissory notes for approximately $225,000.00 each, dated July 27, 1925, and due one, two and three years after date respectively, together with interest thereon, and attorney’s fees. The notes were purchase money notes executed by the Ocean & Lake Realty Company and secured by mortgage. The Palm Beach Realty Company acquired title to the property on October 15, 1925, and by covenant in the deed assumed the payment of said notes.

The two cases have, by stipulation of the parties, been in effect consolidated for the purposes of appellate review, and come here under one transcript, showing the record, in the case in which the Ocean & Lake Realty Company was defendant, it being stipulated here that the judgment of this court in that case shall control the judgment in the companion case. Similar pleas of res judicata were interposed and upheld by the trial court in each case. "We will now proceed to consider the case in which the original mortgagor, Ocean & Lake Realty Company is defendant in error.

The defendant Ocean & Lake Realty Company interposed a plea of res judicata, which set up, among other things, that the plaintiffs conveyed certain lands to said defendant on July 27, 1925, at which time defendant paid to the plaintiffs $500,000.00 in cash and executed and delivered to the plaintiffs certain notes and mortgage for the balance of the purchase price aggregating $672,529.50, being the notes described in the declaration; that thereafter on October 15, 1925, the defendant, Ocean & Lake Realty Company, conveyed said lands to the Palm Beach Realty Company by warranty deed which contained a covenant by which the grantee assumed the payment of said mortgage; that the Palm Beach Ocean Realty Company went into- possession of the land and expended upwards of $250,000.00 on an extensive system of improvements, which materially enhanced the value of said land; that on February 12, 1927, the plaintiffs as complainants, instituted suit in the Circuit Court for Palm Beach County to foreclose said mortgage and in its bill prayed for a deficiency judgment against both of said' above named Realty Companies; that the final decree in said suit, rendered February 2, 1928, ascertained the balance due on said notes and mortgage, including' interest, solicitors fees, etc., to be $1,058,044.81, and provided that in default of payment of such sum the property be sold as prayed in said-decree; that upon such sale the property was sold to the complainants for $150,000.00; that the sale was confirmed and the property conveyed to the complainants; that complainants moved the court for the entry of a deficiency decree in connection with the confirmation of the Special Master’s report, and acting upon said motion the court confirmed the report of the Master and granted to the complainants a deficiency decree against both said defendants in the sum of $50,000.00, which decree was duly filed and recorded in the Chancery Order Book, and remained valid and subsisting, in no way modified, abated or reversed, and from which the complainants took no appeal; that in said chancery proceedings the plaintiffs in this common law suit were parties complainant and the two Realty Companies above named were defendants, and that the same notes and mortgage, and the same covenant of assumption were fully set up and pleaded in said chancery cause, and that the cause of action sought to be enforced in the common law action was decided by the decree rendered in said chancery cause. T'he court on motion struck certain portions of said plea of res judicata, which it was unnecessary here to set forth, but overruled the demurrer to the plea, and the suit went to final judgment in favor of defendant, on November 18, 1930. Prom the final judgments rendered in favor of the defendants in each of the cases, these two writs of error were taken. Plaintiffs in error have assigned as error the overruling of plaintiff’s demurrer to defendant’s first plea, the plea of res judicata, and the rendition of final judgment against the plaintiff.

The case of Hay v. Salisbury 92 Fla. 446, 109 So. 617, and Gray v. Gray, 91 Fla. 103, 107 So. 261, state the essentials of the doctrine of res judicata, as long recognized in this jurisdiction.

This principle was recognized by the Roman law, and later by the English courts, and it is said that it pervades, not only our own, but all other systems of jurisprudence to this day, and has become a rule of universal law.

In Etter v. State Bank of Florida, 76 Fla. 203, 211; 79 So., 724, 726, it was said by this court, speaking through Mr. Justice Ellis, that:

“The rule providing for-the entry of deficiency judg ments in a suit in equity to foreclose a mortgage rests upon the general rule, that, where a court of equity obtains jurisdiction of an action, it will retain it and.administer full relief, both legal and equitable, so far as it pertains to the same transactions or the same subject-matter. Thus the parties are relieved from the expense and vexation of two suits, one equitable and the other legal.”

It was also held in that case that any defense that may be offered to a decree of foreclosure, or against the personal decree for the debt, should be presented in due course during the proceedings, or sufficient reasons given for not doing so.- The origin, foundation and scope of equity jurisdiction to adjudicate the question and render deficiency decrees in foreclosure cases, in this State, is so well reviewed in the opinion by Mr. Justice Ellis in Etter v. State Bank, supra, and in the opinion by Commissioner Davis in the recent case of Gober v. Braddock, 131 So. 407, .. Fla. .., and by Mr. Justice Buford, now Chieb’ Justice of this court, in Voorhis v. Crutcher, 98 Fla. 259, 123 So. 742, and by Commissioner Andrews in Younghusband v. Fort Pierce Bank & Trust Company, 130 So., 725, .. Fla. .., that it is unnecessary to go into that matter here. It suffices to say that such jurisdiction had long been established and recognized before the adoption of Chapter 11993 of the Acts of 1927, now appearing as section 5751 of Comp. Gen. Laws.

.We might, however, call attention to certain holdings by this court pertinent to the question now before us. In Webber v. Blanc, 39 Fla. 224, 22 So. 655, it was said:

‘ ‘ While a deficiency decree may be rendered in the foreclosure suit in equity, still, if none is asked for and none is entered, the remedy at law for the balance remains, and resort to it may be had.”

Elsewhere in the opinion in that case it ivas said that the holder of the mortgage notes might sue for the balance due on the notes after the sale under the foreclosure decree in equity, “if no judgment for the deficiency was entered in such proceedings.”

In Younghusband v. Fort Pierce Bank & Trust Company, supra, it was said:

“The rule seems to be general that an action at law may be brought for the balance due on a note after applying the proceeds of a foreclosure sale to the debt; but it does not appear that a holder may have a deficiency decree for the balance due and also institute a suit at law against the same party for the same purpose. There is no reason for authorizing deficiency decrees against anyone, except for the purpose of providing a judgment for the balance due without the expense and inconvenience of an additional suit at law.”

And in Edwards v. Meyer, 130 So. 57, .. Fla. .., Mr. Justice Ellis, speaking for this court, said:

“The purpose of the statute authorizing the entry of deficiency judgments in foreclosure proceedings was to relieve the parties from the expense and vexation of two suits, one equitable and the other legal, where the whole controversy could be adjusted on one suit. There is no reason for taking a mortgage out of that convenient and beneficent rule. See Frank v. Davis, 135 N. Y. 275, 31 N. E. 1100, 17 L. R. A. 306.

Prior to the statute, Chapter 11993, Acts 1927, section 5751, Comp. Gen. Laws 1927, amended by Chapter 13625, Acts 1929, the power was exercised under a rule having the effect of a statute. See Realty Mortgage Co. v. Moore, 80 Fla. 2, 85 So. 155; Etter v. State Bank, 76 So. 724.

The Statute is for the benefit of the debtor in that it is designed to save him from the annoyance, vexation, and expense of two suits; therefore, though enacted after the date of the execution of the mortgage foreclosed in these proceedings and affecting only a matter of procedure, they are applicable here; and the statute, Chapter 11993, supra, is broader in its terms than the rule which is number 89, Rules Circuit Courts Equity Actions. ’ ’

The second headnote in Malone v. Meres, 91 Fla., 709, 109 So. 677, reads as follows:

“If the court has acquired jurisdiction of the subject-matter and of the parties, the judgment or decree entered is binding, even though erroneous, because of irregularity of procedure; and such judgment or decree will not be set aside, reversed, or modified, except by appropriate direct appellate procedure.”

As was said in Fagan v. Robbins, 96 Fla. 91, 117 So. 863, which was decided in June, 1928, there had been considerable diversity of opinion among the lawyers and judges of the State as to whether the use of the word “shall” in section 2 of Chapter 7839 of the Laws of 1919, made it mandatory upon the equity courts to render deficiency decrees in foreclosure cases, thus precluding the exercise of any discretion based upon equitable considerations arising from the circumstances of the case, but this court held in that ease that the act of 1919 should be construed as conferring authority, to grant deficiency decrees against obligors other than the makers of the mortgage without denying the exercise of the judicial discretion previously vested by rule 89.

It was probably to clarify the meaning of the statute of 1919 in this respect, and to limit its scope in certain other respects, and without any intention to vary or upset the settled doctrine of res judicata, that the legislature, in May, 1927, before this court had decided the ease of Fagan v. Robbins, enacted Chapter 11993, section 5751 C. G. L., which reads as follows:

“In all suits for,the foreclosure of mortgages, heretofore or hereafter executed, the entry of a deficiency decree for any portion of a deficiency, should one exist, shall be within the sound judicial discretion of the court, but the complainant shall also have the right to sue at common law to recover such deficiency.”

But the legislative intent to also give the mortgage holder the right to sue at law if he was not granted a deficiency decree for the full balance due on' the mortgage debt, except as against the original mortgagor in a purchase money mortgage when the mortgagee became the purchaser at foreclosure sale, was clearly indicated -by Chapter 13625 of the Acts of 1929, which reads in part as follows:

Section 1. That Section 1 of Chapter 11993, Acts of 1927, being Section 5751, Compiled General Laws of Florida, 1927, be amended to read as follows:

Section 5751. Deficiency Decree: Common Law Suit to Recover Deficiency. — In all suits for the foreclosure .of mortgages heretofore or hereafter executed the entry of .a deficiency decree for any portion of a deficiency, should one exist, shall be within the sound judicial discretion of the court, but the complainant shall also have the right to sue at common law to recover such deficiency, provided no suit at law to recover such deficiency shall be maintained against the original mortgagor or mortgagors in eases where the mortgage is for the purchase price of the property involved and where the original mortgagee becomes the purchaser thereof at foreclosure sale and also is granted a deficiency decree against the original mortgagor, or mortgagors.”

(It might also be noted here that in June, 1927, by Chapter 12325, the legislature expressly repealed the act of 1919.)

Iu the light of rule 89 and the statute of 1927, construed in connection with the settled doctrines of res judicata, were it not for the statute of 1929, above quoted, there might have been strong ground for holding that where the holder of a' mortgage, in his foreclosure proceedings in equity, elect to submit to the court the matter of his right to a deficiency decree, and that court had ■exercised its jurisdiction and adjudicated the matter thus submitted to it, its decree thereon, unless reversed or modified on appeal, would have been final, and might have been successfully pleaded as res judicata in any subsequent suit in any other court between the same parties, or their privies, on the same cause of action; at least in cases where the court of equity had granted to the complainant a decree for any portion of the deficiency claimed. See Witter v. Neeves 78 Wis., 547, 47 N. W. 938; Lawrence v. Beecher, 116 Ind. 312, 19 N. E. 143.

Nor would this conclusion have been necessarily shaken by the fact that under rule 89 and the statute of 1927, the court of equity may exercise “a sound judicial discretion” in determining whether the complainant in'foreclosure is entitled to a deficiency decree “for any portion of a deficiency, should one exist.” The complainant would have been charged with knowledge of the existence of that power in the equity court when he voluntarily invoked the exercise of that power and jurisdiction, and when he did so, his only remedy for an abuse of such discretionary power would have been by appeal. He was not compelled to submit the adjudication of this question to the court of equity, but if he did so, he would have been bound by its decision, subject only to his right of appeal where such discretion was abused. The discretion so vested is not an absolute and unbridled discretion, but a “sound judicial discretion” which must be supported by established equitable principles as applied to the facts of thé case, and the exercise of which is subject to review on appeal. See Taylor v. Prine, decided at the present term. Thus the mortgage holder was given an election of remedies in this respect. He could submit the matter to the court of equity in his foreclosure proceeding, or, under the statute, he also had the right to sue at common law to recover such deficiency. If he had desired to stand on his rights in a suit at law to recover in full any deficiency that might have existed after the application to the mortgage debt of the proceeds of the foreclosure sale in equity, he could have done so; but, if he desired to do this, he should in his foreclosure proceeding have refrained from submitting the adjudication of that question to the equity court. Without the amendment of 1929, by which the legislative intent to the contrary is shown, we doubt if he could have submitted the same question to both courts.

But the statute of 1927 as amended by the statute of 1929, Chapter 13625, above quoted, clearly shows that the legislature contemplated that while á court of equity, in its sound judicial discretion, should be empowered — not required — to enter a deficiency decree for any portion of a deficiency, should one exist, its decision on this question, whether it granted a decree for any portion of such deficiency, or denied it altogether, (as in the case of Gober v. Braddoek, supra) would not bar the complainant from also suing at common law to recover any balance remaining due on the mortgage debt, after crediting the proceeds of the sale and any portion of the deficiency which might have been allowed, except in cases falling within the pro viéo set forth in the statute, which reads: “provided no suit at law to recover such deficiency shall be maintained against the original mortgagor or mortgagors in cases where the mortgage is for the purchase price of the property involved and where the original mortgagee becomes the purchaser thereof at foreclosure sale and also is granted a deficiency decree against the original mortgagor or mortgagors. ’ ’

It has been several times held by this court that the office of a proviso is, as a general rule, to restrain the enacting clause; to except something which would otherwise be within it. See cases cited in 3rd Vol. Florida Digest, -Page 183. So the legislature evidently contemplated that the first clause in the statute of 1927, as amended by Chapter 13625, was broad enough to authorize a suit at law to recover a deficiency in the purchase price secured by mortgage, as against the original mortgagor, even where a deficiency decree had been granted in the foreclosure proceedings for some portion of the deficiency, and that in order to prevent such an operative effect of the statute, it was necessary to expressly restrain the enacting clause by putting in this proviso. It is the duty of the courts to give effect to the legislative intention as thus shown, even though it infringes to some extent upon the doctrine of res judicata.

Statutes should, when reasonably possible, be so construed as not to conflict with the constitution or with long and well settled legal principles, but 'the language of this statute, considering it as a whole, cannot be given its apparent meaning and purpose without upsetting to some extent the principle of res judicata, and thus creating a' ■somewhat anomalous situation, which will in some cases require a circuit judge to grant to a party a judgment at law on a cause of action, which, sitting as chancellor in a court of equity, he had already held such party was not, in equity and good conscience, entitled to enforce.

Counsel for plaintiffs in error contend that the judgment of the court below should be reversed on the authority of the recent ease of Gober v. Braddock, 131 So. 407. But the decision in that case was, that where no deficiency decree was rendered, a motion therefor having been denied, the complainant could sue at law to recover such deficiency. Here a deficiency decree for a portion of the deficiency was rendered, and according to the plea of res judicata, it was granted under such circumstances, as to bring this case within both the letter and the spirit of the proviso in Chapter 13625 of the laws of 1929. The court below was therefore correct in overruling the demurrer to the plea of res judicata, and in denying a judgment in favor of the plaintiffs. The judgment of the court below, in the case brought before us by the transcript, in which the Ocean & Lake Realty Company is the defendant in error, will be affirmed, which, under the stipulation filed here, carries with it a like judgment of affirmance in the other case in which the Palm Beach Ocean Realty Company is the defendant in error.

Affirmed.

Buford, C J., and Whitfield, Ellis, Terrell and Davis, JJ., concur.