interpreting predecessor to OCGA § 44–14–161Summary of this case from Greenstein v. Bank of the Ozarks
ARGUED APRIL 5, 1966.
DECIDED APRIL 15, 1966.
Action for deficiency judgment. DeKalb Superior Court. Before Judge Guess.
George George, William V. George, for appellant.
Parks Eisenberg, David S. Eisenberg, for appellees.
1. The provisions of Code § 37-608 relating to the confirmation of sales of property under powers contained in security deeds have no application to an action brought against Georgia residents for a deficiency judgment, where the contract was made and its performance required in Florida, the land was situated in Florida, the defendants were not served and no in personam judgment was rendered in the foreclosure action, and the note and mortgage contained stipulations that the obligation was to be construed and enforced according to the laws of Florida.
2. Such a decision violates no public policy of this State, especially where, under Florida law, the mortgagors who were only constructively served are not bound by the value of the property as established by the foreclosure sale.
ARGUED APRIL 5, 1966 — DECIDED APRIL 15, 1966.
Jerome and Sheila Nadler, residents of Georgia, purchased land in Florida from M. B. Goodman, a resident of Florida, assumed an outstanding first mortgage and executed a second mortgage to Goodman with covenants to continue the first mortgage payments. A note was contemporaneously executed which is set out in the second mortgage and contains the following clause: "This note is secured by a 2nd mortgage of even date herewith and is to be construed and enforced according to the laws of the State of Florida; upon default in the payment of principal and/or interest due on any note secured by said mortgage, all notes so secured and remaining unpaid shall forthwith become due and payable notwithstanding their tenor." There was also an acceleration clause in case of default. The place of payment of the installment debt was Miami, Florida.
Upon default in first mortgage payments in violation of the covenant contained in the second mortgage, Goodman foreclosed on the Dade County, Florida, real estate. No personal service was effected in this case and no deficiency judgment sought. Goodman then brought this action in DeKalb County, Georgia, county of the defendants' residence, seeking a deficiency judgment, setting out the foregoing facts, pleading that the rights of the parties are governed by the laws of the State of Florida, and setting out the applicable Florida statute as follows: "702.06 Deficiency Decree: Common Law Suit to Recover Deficiency. In all suits for the foreclosure of mortgage 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 mortgage in cases where the mortgage is for the purchase price of the property involved and where the original mortgage becomes the purchaser thereof at foreclosure sale and also is granted a deficiency decree against the original mortgagor."
The plaintiffs in error complain of the action of the trial court in sustaining a general demurrer to the petition.
1. It appears from the record that the mortgage deed was signed by the Nadlers in Georgia. "Where a contract is made in one State to be performed in another, the laws of the latter State will govern as to the validity, nature, obligation, and construction of the contract, where they are duly pleaded and proved, and such laws will be enforced by comity in this State unless they are contrary to public policy or prejudicial to the interests of this State." Pratt v. Sloan, 41 Ga. App. 150 ( 152 S.E. 275). This action involves an obligation to pay created and subject to enforcement under the laws of Florida. The real estate was located in Florida, the mortgage was necessarily foreclosed in Dade County, and whether or not the obligors are liable for the balance due after such foreclosure cannot be said to be a matter of procedure only. It is contended that since the action for deficiency judgment is brought in Georgia, the provisions of Code § 37-608 regarding confirmation of foreclosure sales under powers of sale contained in security deeds should apply to bar this action for deficiency judgment. "[N]o action may be taken to obtain a deficiency judgment unless the person instituting the foreclosure proceedings shall, within 30 days after such sale, report the sale to the judge of the superior court of the county in which the land lies for confirmation and approval and obtains an order of confirmation and approval thereof." However, the statute is obviously drawn so as to apply only to foreclosure sales in Georgia. There are no "superior courts" in Florida, where the land was situated and where the action was necessarily commenced. "It is axiomatic to say that no law has any effect of its own beyond the limits of the sovereignty from which its authority is derived." Clark v. Baker, 186 Ga. 65, 76 ( 196 S.E. 750). In Florida, obtaining a deficiency judgment at the time of the foreclosure proceedings is discretionary with the judge of the court in which the proceedings are instituted, but failure to apply for and obtain such judgment does not preclude a separate action on the common law right, which the creditor has unless otherwise restricted by statute. 37 Am. Jur. 240, Mortgages, § 864. There was quite properly no attempt made to secure a deficiency judgment in Florida because the defendants, who were residents of Georgia, were not personally served and did not appear and defend. Georgia has held that a motion to set aside a judgment confirming the sale will lie where there has been no service ( DuPree v. Turner, 99 Ga. App. 332 ( 108 S.E.2d 171)), and Florida has held that the denial of such a decree has no effect on a subsequent suit for the deficiency where the denial was based on jurisdictional grounds. The plaintiff is not barred, under these circumstances, from bringing the action in personam in the county of the defendant's residence because of any requirement contained in Code § 37-608.
2. The only other ground on which it could be held that the plaintiff is foreclosed from his remedy is that of public policy. Where the question has arisen in other jurisdictions it has generally been held that recovery of a deficiency judgment otherwise allowable under the law of the situs of the mortgaged property and the contract indebtedness which it secures is not violative of the public policy of the state of the forum on grounds of public policy although contrary to the rule in effect in such state. 136 ALR, Anno., p. 1057 et seq. See generally Provident Savings Bank Trust Co. v. Steinmetz, 270 N.Y. 129 ( 200 N.E. 669); Porte v. Polachek, 270 NYS 807 ( 150 Misc. 389); Harris v. Metropolitan Cas. Ins. Co., 282 NYS 449 ( 156 Misc. 692); Franklin Soc. v. Wesman, 293 NYS 909 ( 162 Misc. 109); Fidelity Bankers' Trust Co. v. Little, 178 S.C. 133 ( 181 S.E. 913); Conn. Mutual Life Ins. Co. v. Conley, 194 Minn. 41 ( 259 NW 390); Continental Bank Trust Co. v. Scotch Presbyterian Church, 64 NYS2d 27. The strongest ground of public policy which occurs for the enforcement of statutes requiring confirmation in foreclosure proceedings is to protect the debtor from being subjected to double payment in cases where the property was purchased for a sum less than its market value. Code § 37-609 requires that evidence satisfactory to the court of the true market value of the property is a condition precedent to the confirmation. We reach the same conclusion on an action in Georgia based on a Florida judgment and applying Florida law, for in Florida a nonresident mortgagor not personally served in the foreclosure proceeding is not bound by the amount brought in at the foreclosure sale, but may offer evidence to show the true value of the property. The traditional test used in determining whether the public policy of the forum prevents the application of otherwise applicable conflict-of-laws principles was well expressed by Justice Cardozo in Loucks v. Standard Oil Co. of N.Y., 224 N.Y. 99 ( 120 N.E. 198), to the effect that foreign law will not be applied if it "would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal." No such reason exists here.
The trial court erred in sustaining the general demurrer and dismissing the petition.
Judgment reversed. Nichols, P. J., and Hall, J., concur.