Savings Bank of San Diego Cty. v. Central Market Co.
122 Cal. 28 (Cal. 1898)
TEMPLE, J.
This action was brought by the plaintiff, a savings bank now in liquidation, to recover twenty-five thousand dollars and interest upon a promissory note...
* * *
It is alleged that the note was secured by a second mortgage upon certain real estate, that the first mortgage, which was given to secure the payment of the sum of fifty thousand dollars and interest, had been foreclosed in an action in which plaintiff was made a party defendant; that under said foreclosure the property was sold for the amount due on the first mortgage, and, there having been no redemption within the time allowed by law for a redemption, a deed had been executed to the purchaser and the security had become valueless without any fault on the part of plaintiff. Plaintiff therefore demands judgment for the amount due on the note against all of the defendants.
* * *
The note was secured by mortgage, and the mortgage has not been foreclosed. Moreover, there was a prior mortgage upon the property which was foreclosed; the plaintiff was a party defendant and duly served with summons. It did not appear in the action, and the prior mortgage was foreclosed as against it and the property sold for the debt secured by the first mortgage, and a deed had been made to the purchaser before this action was commenced. It is contended that under the provisions of section 726 of the Code of Civil Procedure the only mode in which plaintiff can obtain a personal judgment is to foreclose and take a deficiency judgment if the security proves insufficient. And, further, that as the plaintiff through its own neglect failed to apply for and obtain such judgment in the action brought to foreclose the first mortgage, but allowed judgment to go against it, it is barred of any action whatever for the recovery of its debt.
* * *
Aside from the legislative policy declared in section 726 of the Code of Civil Procedure, plaintiff was under no obligation to intervene, file a cross-complaint, and set up his mortgage and obtain a foreclosure in that action...
The question, then, is whether section 726 or the decisions of this court prohibit a suit of this character under the circumstances. It has been held that a mortgagee cannot waive his security and bring a personal action. (Barbieri v. Ramelli, 84 Cal. 154.) And in the same case it was held that he cannot maintain a personal action even if the security is worthless because of prior liens. It has also been held that, if he loses his right to foreclose through his negligence, he cannot then bring a personal action to recover his debt. (Hibernia Sav. etc. Soc. v. Thornton, 109 Cal. 427; 50 Am. St. Rep. 52.)
On the other hand, it has been held that, after the mortgage security has been exhausted, a personal action may under some circumstances be maintained for the deficiency.
* * *
Was not the security lost in this case without fault on the part of plaintiff? It was the fault of the mortgagor, and not of the junior mortgagee, that default was made in the payment of the first mortgage and that it became necessary to foreclose it. I know of no rule of law or equity which required the second mortgagee to bring suit to recover his debt when the first mortgagee saw fit to do so. It is apparent that had he foreclosed he would have received nothing. I cannot conceive upon what theory the mortgagor or any of the payors can complain that he did not do so.
Plaintiff has no longer a lien upon the property, and his debt is not now secured by mortgage. He did not voluntarily release his security. He has not waived nor lost it by his negligence. It was lost by the fault of the mortgagor in not paying the first mortgage. If there had been a surplus, and the plaintiff had failed to get it by his neglect, it might be different. I see no difference now between this case and the case suggested in Toby v. Oregon etc. R. R. Co., 98 Cal. 490, of a mortgage upon a ship which had been burned. Plaintiff has no security or lien and it has not been lost through its neglect.
The particular mode of entering the personal judgment for the deficiency is not an important matter in the policy inaugurated in section 726. The important matter was to prevent a multiplicity of suits and to compel the creditor to first exhaust his security. The mode provided for the entry of the judgment is a mere matter of convenience -- is, in fact, a privilege given to the mortgagee. As we have seen, where this cannot be done a separate personal action may be had. Here if plaintiff had filed a cross-complaint in the action to foreclose, other parties would have been necessary. I see no difference in principle or any injury to defendants in the course pursued.
Under these views, the evidence which was excluded by the ruling complained of does not seem important.
The judgment and order are reversed, and a new trial ordered.