Fitch v. Buffalo Federal Savings & Loan Ass'n
In Fitch v. Buffalo Federal Savings & Loan Ass'n, 751 P.2d 1309 (Wyo. 1988), the defendant signed a promissory note in favor of the plaintiff which was secured by a real estate mortgage on property owned by the defendant.
The mortgage contained a power of sale provision and which further provided that upon default, the mortgagee could invoke "any other remedies permitted by applicable law." Id. at 1310.
Defendant defaulted on the promissory note and the plaintiff invoked the provision of the power of sale and proceeded to accelerate the debt and foreclosed on the property. A sale was conducted and the property was sold to the Plaintiff. Thereafter, the plaintiff instituted an action to recover the unpaid balance on the note, interest and attorney's fees.
The Supreme Court of Wyoming held that a deficiency action after foreclosure by power of sale is proper under Wyoming mortgage law. Id. at 1311. After reviewing several statutes that allowed the lenders to reserve a power of sale in a mortgage the court held that there were no statutory limits on the foreclosing mortgagee's right to seek a deficiency judgment when the foreclosure sale does not bring proceeds sufficient enough to satisfy the mortgage debt. Id. at 1312.
It reasoned that the right to sue for a deficiency is logical to bind a mortgagor to the terms of the initial bargain and prevent redemption at a deflated price after foreclosure. Id.
The defendant in Fitch argued that a mortgagee must seek his deficiency in an initial suit on the note and the mortgage before foreclosure, and relied upon the statutes from other states that protect certain mortgagors from post-foreclosure sale deficiency suits. Id. The court surveyed these anti-deficiency statutes and concluded that:
(1) many state legislatures have decided statutorily to protect certain mortgagors from deficiency judgments; and, (2) where a state legislature has not passed such protection into law, deficiency judgments after foreclosure by advertisement and sale, on deeds of trust or purchase money mortgages, are allowed when the foreclosure and sale was proper and equitable. Id.
The court ultimately concluded that it would not legislate such protections where the legislature has not provided for them in plain and unambiguous language. Id.
The court held that power of sale mortgagors were already protected by the grant of an unqualified three month statutory right of redemption following foreclosure and sale, that the mortgagor is also free to challenge a declaration of default by lawsuit and that the defaulting mortgagor can contest the propriety of an advertisement and sale foreclosure in equity. Id.