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PRICE v. LEVERS

August 15, 1979

Ruth PRICE
v.
William E. LEVERS.



The opinion of the court was delivered by: KNOX

MEMORANDUM OPINION

On April 18, 1977, plaintiff, Ruth Price, brought an action against defendant, William E. Levers, for payment on a promissory note dated May 9, 1974, in the amount of $ 20,000 with interest at seven per cent per annum. Payment of the note was secured by a third priority mortgage on certain property located in Orangeburg County, South Carolina. As a result of foreclosure proceedings instituted by the senior mortgagee plaintiff's lien on the Orangeburg County property was discharged. Plaintiff neither received proceeds from the sale of the property nor sued for a deficiency in the foreclosure proceedings. Defendant has answered that since the note was secured by a third priority mortgage on the property and inasmuch as such property has been sold pursuant to the court's order in the foreclosure action, plaintiff is barred or estopped from recovering payment on the note. The parties have agreed to all the evidentiary material relevant and have submitted cross motions for summary judgment.

 The pretrial stipulation contains the following facts. Defendant executed and delivered to plaintiff a promissory note dated May 9, 1974, in consideration for certain motel and restaurant properties located in Santee, Orangeburg County, South Carolina. The note contained the following terms:

 TABLE

 The two senior mortgages were held by the original sellers of the property, H. G. Peddycord, Nell R. Peddycord, Harvey G. Peddycord, Jr., and Larry E. Peddycord, and by a brokerage firm, Southern Brokers, Ltd., which arranged the sale to the partnership. The first mortgage in priority was granted to the Peddycords to secure a note for the unpaid purchase price of the property in the amount of $ 355,000 and was recorded on November 30, 1972. The second mortgage in priority was granted to the broker to secure a note in the amount of $ 20,000 and was recorded on November 30, 1972.

 In the fall of 1974 defendant defaulted on his respective mortgage payments and on October 14, 1974, the Peddycords filed a complaint in the Court of Common Pleas of Orangeburg County, South Carolina, seeking foreclosure of the first priority mortgage. The junior mortgagees, Southern Brokers, Ltd., and plaintiff herein, were named as defendants in the South Carolina action. Plaintiff Ruth Price neither entered a defense nor asserted any claim for a deficiency. Judgment was entered on December 11, 1974 in the mortgage foreclosure proceedings on the note of the Peddycords in the amount of $ 328,456.10 and a sale of the property was ordered by the court. On January 6, 1975 the Peddycords bid $ 10,000 for the property at a public auction and the property was sold to them. No net proceeds were distributed to either of the junior mortgagees.

 Ralph F. Cothran, Esq. was the attorney for both plaintiff and defendant in the preparation of the note and the third priority mortgage. Plaintiff considered Cothran as her attorney for all matters concerning the mortgaged property prior to the filing of the mortgage foreclosure proceedings by the senior mortgagee. Having consummated the sale of her interest in the property in 1974, plaintiff moved her residence from South Carolina to Virginia. Counsel in Virginia advised plaintiff to forego litigation in the South Carolina proceedings and to institute an action for payment on her note at a later date.

 Defendant made three payments of $ 155.06 on the note in June, July, and August, 1974, in timely fashion and has made no further payments. Interest has accumulated from September 1, 1974 to the present, August 15, 1979 at the rate of seven per cent per annum and the principal and interest now due is $ 27,812.55 plus ten per cent of that amount, or $ 2,781.26 for attorneys fees, plus costs of the suit. Default in payment renders the entire debt due and payable at once at the option of the holder under the terms of the note.

 Federal jurisdiction in this court is based on diversity of citizenship. 28 U.S.C. § 1332(a)(1). Plaintiff is a resident of Roanoke, Virginia, and defendant is a resident of Mt. Lebanon, Pennsylvania. As the obligations in question are South Carolina contracts and the properties to which they refer are located in South Carolina, the case clearly turns on South Carolina law. Artisti-Kote Co. v. Benefactor Building and Loan Association, 64 F.2d 407 (3d Cir. 1933). We shall, therefore, look to the law of South Carolina in respect to a debt whose payment is secured by a promissory note and a mortgage.

 In Perpetual Building and Loan Association of Anderson v. Braun, 270 S.C. 338, 340-341, 242 S.E.2d 407, 408 (1978), the Supreme Court of South Carolina stated the general principles of mortgage law, as follows:

 
"A mortgage represents security for an obligation, not full payment thereof. It is not implicit in the taking of a mortgage that the creditor is to look only to the property for satisfaction of the debt. Indeed, he may ignore the security and bring an action at law on the indebtedness, or he may proceed by foreclosure to satisfy his lien.
 
It is generally accepted that if the mortgaged premises are sold under a foreclosure decree and fail to bring a sufficient amount to satisfy the debt, the mortgagee is entitled, absent any statutory limitation or waiver on his part, to a personal judgment for the remaining deficiency. 55 Am.Jur.2d, Mortgages, § 905. "If the mortgagee does not ask for a deficiency decree in the foreclosure suit, and no ...

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