[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 424 This is an action to recover the unpaid balance on a promissory note executed and delivered by Joe T. Brewer and Anna C. Brewer, of Medford, Oregon, to evidence a portion of the purchase price of a tract of land situate in the state of Montana, which note was secured by a purchase-money mortgage on the land. The makers of the note and mortgage defaulted in the payment thereof, and the holder brought suit in Montana to foreclose his mortgage. On foreclosure the property was sold for an amount much less than the amount due upon the mortgage note, whereupon the holder of the note brought this action to recover the deficiency. From a judgment against the plaintiff and in favor of the defendants herein, plaintiff appeals.
The history of the case is substantially as follows: In 1921, the above-named defendants bought of one P.G. Carlin real estate in Carbon county, Montana, and, as part payment therefor, transferred to Carlin property that they alleged to be of the value of $19,000. For the balance of the purchase price, they executed two notes, in the amount of $500 and $12,000 respectively, secured by a purchase-money mortgage in the *Page 425 amount of $12,500. Prior to the maturity of the notes, Carlin, for value, transferred the same to this plaintiff, who thereby became the owner and holder thereof. The defendants paid the $500 note, and accrued interest on the $12,000 note amounting to about $4,320 as well. But, when the note for $12,000 became due, notwithstanding they had paid about $23,820 on the purchase price of the property, the plaintiff refused to grant additional time and promptly foreclosed the purchase-money mortgage in Montana. The defendants, who were living in Medford, Oregon, were served by publication only. Plaintiff secured judgment against them in the Montana court for $12,000, the amount of the larger note, and for $600 attorney's fees and costs; and, upon the sale of the land on foreclosure, he bought in the property for $8,500, leaving a deficiency of about $5,000. After crediting on the note the amount realized from the foreclosure sale, plaintiff instituted this action to recover the deficiency. The Montana statute provides that, in a suit to foreclose a mortgage, it is lawful to obtain a personal judgment for any deficiency remaining after foreclosure. This is true of mortgages given for the purchase price, and mortgages of any other character as well. Revised Code of Montana, 1921, § 9467.
The Oregon code relating to mortgage foreclosure provides:
"When judgment or decree is given for the foreclosure of any mortgage, hereafter executed, to secure payment of the balance of the purchase price of real property, such judgment or decree shall provide for the sale of the real property covered by such mortgage, for the satisfaction of the judgment or decree given therein, and the mortgagee shall not be entitled to a deficiency judgment on account of such mortgage or note or obligation secured by the same. (Or.L., § 426.)" *Page 426
The plaintiff rests his case upon the doctrine of comity between courts. The defendants, however, invoke the protection of the foregoing section of our statute, and contend that an action on a purchase-money note to collect a deficiency existing after foreclosure of the purchase-money mortgage on real estate securing the same is contrary to the public policy of Oregon as declared by its statutes and the decisions of its courts.
In the comparatively recent case of Wright v. Wimberly,94 Or. 1, 17 (184 P. 740), this court said:
"It is a fact of which courts in Oregon should take judicial notice, that in the year 1897 and for some time thereafter, great financial depression prevailed in the Pacific Coast states. Persons who had purchased real property in that territory during the earlier flush times by paying a part of the purchase price and giving a mortgage to secure the remainder, found it impossible, if they had not disposed of the premises prior to the monetary stagnation, to discharge their legal obligations, whereupon the foreclosure of liens became inevitable. As there was no money then easily to be secured, the creditor, upon a sale of the premises pursuant to the decree, usually became the purchaser for almost a nominal sum and far below the mortgage debt, thereby obtaining a recovery over upon the personal obligation of the mortgagor for the remainder, thus taking all the property the debtor then had and jeopardizing his prospects of ever obtaining any more land. In order to prevent a repetition of such conduct on the part of a creditor, § 426, L.O.L., was enacted and made applicable to the foreclosure of mortgages thereafter executed. That such a statute was intended to be remedial can not well be disputed. The enactment is in the nature of an appraisement law, fixing an upset price upon the sale of real property under a decree of foreclosure equal to the amount of the debt, costs, *Page 427 disbursements, etc., thereby permitting the mortgagee to retain the sum of money which he had received on account of the sale, and allowing him to be restored to his original estate in the premises."
In commenting further upon this section of the statute, Mr. Justice BENNETT, speaking for the court, said:
"Under the doctrine of Page v. Ford, 65 Or. 450 (131 P. 1013, Ann. Cas. 1915A, 1048, 45 L.R.A. (N.S.) 247), the creditor still has his option to proceed on the mortgage to foreclose, or to proceed on the promissory note at law; but the legislature had a perfect right to say that he could not do both.
"As to future contracts and in pursuance of what it considers a correct public policy the legislature has a right to prohibit any contracts which may be injurious to the general public good, or it may stop with rendering such contracts unenforceable. This has been too often held to be any longer questioned. The usury law prevents the contract of the parties for a greater than a given rate of interest. Again it is generally held that a party can not make a contract in advance to waive his right of redemption or his privilege of exemption. Hundreds of other illustrations could be cited but these are enough.
"I think the statute should be liberally construed in the interest of the purpose intended by the legislature. It is true that arguments can be adduced pro and con, as to whether or not such a law would be in the interest of a good public policy, but the very fact that there are such arguments both ways, and considerations to be weighed on each side, makes the question preeminently one for the legislature. And it having declared what it believes to be public policy, in regard to the matter, we must accept that as good public policy and liberally construe the law for the purpose of carrying out its intention." *Page 428
As early as 1889 the question of public policy was passed upon by our court in the case of Bank of Ogden v. Davidson, 18 Or. 57 (22 P. 517), where it was held:
"A provision in a note made out of this State, secured by chattel mortgage on property within the State, contained a provision that `if not paid at maturity, ten per cent. additional as costs of collection' should be added, and which provision was valid and binding in the State where the note was made. Held, that in a suit to foreclose the mortgage in Oregon, the law of that State governs the application of the remedy and such provision being contrary to the public policy in the State, will not be enforced. (Point 7, Syl.)"
In the body of the opinion the court said:
"In Balfour v. Davis, 14 Or. 47 (12 P. 89), it was held that a provision in a mortgage of 20 per cent. for counsel fees on the amount due, in case of a suit, whether judgment should be recovered or not, was in violation of the rule of just compensation, and contrary to the well-settled principles of public policy."
The case of Bank of Ogden v. Davidson, supra, involved a note that was lawfully executed in Utah, while the note involved inBalfour v. Davis was executed in California.
The case of Bond v. Turner, 33 Or. 551 (54 P. 158, 44 L.R.A. 430), is analogous. There the court approved the declaration of Mr. Justice WILLIAMS in Haskill v. Andros, 4 Vt. 609 (24 Am. Dec. 645), to this effect:
"Whatever remedy our laws give to enforce the performance of a contract will equally avail the citizen or the foreigner, and they equally must be subject to any restraints which the law imposes upon them."
In Jamieson v. Potts, 55 Or. 292 (105 P. 93, 25 L.R.A. (N.S.) 24), our court reannounced this familiar principle of law in the following language:
"The lex loci contractus must govern as to the validity, interpretation, and construction of the contract; *Page 429 but the remedy to enforce it, or to recover damages for its breach, must be pursued according to the law of the forum."
In the case of Hirschfeld v. McCullagh, 64 Or. 502 (127 P. 541, 130 P. 1131), the question was again presented and the pronouncement made that, where a contract, although legal elsewhere, is contrary to the public policy of Oregon as declared by the laws of this state, the court of this jurisdiction will not enforce the contract since the law of the forum governs as to the remedy. See list of authorities in paragraph four of the opinion.
Concerning contracts against policy of the forum, the editors of Ruling Case Law have set down the following:
"The public policy of a state, established either by express legislative enactment, or by the decisions of its courts, is supreme, and when once established will not, as a rule, be relaxed even on the ground of comity to enforce contracts, which, though valid where made, contravene such policy. (5 R.C.L., p. 944.)"
Again, we carve from 8 C.J., p. 86, § 141:
"All judicial recognition of foreign law is subject to the well-established principle that no court will enforce the provisions of foreign law which are repugnant to the public policy of its own forum. A bill or note executed or made payable in another state or country will not be enforced in the forum where it is contrary * * * or * * * violates the positive legislation of the state of the forum, that is, where it is contrary to its Constitution or statutes. The same rules apply to bills and notes as to other contracts."
The case of Farley v. Fair, 144 Wash. 101 (256 P. 1031), was an action at law brought in the courts of Washington, to collect a commission for the sale of real estate in Oregon; and, in disposing of the case, the Washington court said: *Page 430
"But it is argued the agent lived and did business in Oregon; the commission contract was signed and delivered to him in Oregon; * * * the negotiations took place in Oregon; and that the Oregon law, which is pleaded, should be applied. Still, even though we concede, for the sake of argument, that, so far as other reasons are concerned, the laws of Oregon would govern, yet our statute of frauds declares a public policy (Chambers v.Kirkpatrick, 142 Wash. 630 (253 P. 1074), and we may not subordinate that which has been made a public policy of this state to the laws of some other jurisdiction (citing authorities)."
The case of Carstens Packing Co. v. S. Pac. Co., 58 Wash. 239 (108 P. 613, 27 L.R.A. (N.S.) 975), involved an action that was instituted in the courts of Washington for loss and damage to cattle shipped from California to Tacoma, Washington. The action was predicated upon the negligence of the Southern Pacific company in failing to provide safe unloading facilities at Gazelle, California. The defendant, in answer, set forth the contract between the parties, which recited that in no event should the shipper be liable for any loss not proved to have been caused by its gross negligence, and pleaded that this exemption from liability was provided by the laws of California, where the contract was made. In its treatment of the case the supreme court of Washington, discussing the doctrine of comity between courts, and the public policy established in Washington, said:
"Of course, the general rule is that the law of the place of the making of a contract controls in determining the rights and liabilities of the parties thereto. This rule, it is contended by learned counsel for respondent, has its exceptions and qualifications, and does not control in this case, because the limitations attempted to be placed upon appellant's liability resulting from its negligence other than its gross negligence is in contravention of the public policy of this state, and therefore, when sought to be enforced in *Page 431 the courts of this state, should be regarded as void, and that appellant's liability for its negligence should be determined regardless of such provision. At the time of the making of the contracts it was a part of the statute laws of this state, Laws of 1907, p. 691. `That no contract, receipt, rule or regulation shall exempt any corporation engaged in transporting livestock by railway, from liability of a common carrier, or carrier of livestock, which would exist had no contract, receipt, rule or regulation been made or entered into.' It hardly needs argument to demonstrate that this is a declaration of public policy. Clearly its enactment was prompted by a concern for the public welfare."
To similar effect is Barbour v. Campbell, 101 Kan. 616 (168 P. 879). See, also, notes, 55 Am. St. Rep. 775, 61 L.R.A. 433.
Each party to this controversy has cited valuable authority in support of his particular view as to what is, and what is not, the public policy of this state as applicable to the cause at issue. But this controversy is not involved in confusion or uncertainty. The law of the case is aptly stated in 41 C.J., at § 646b, where the editor, in discussing the effect of statutory provisions such as the provision involved in the case at bar, has written:
"Statutes of this nature do not apply where the mortgaged premises are situate in another state, but, if in force in the state where the mortgaged land lies, may be pleaded in defense to an action on the note or bond in another state, although there is authority for the view that such statutes are mere limitations on the remedy in the states in which they are in force and consequently that they are no bar in an action on the debt in another state, or in a federal court having jurisdiction of the parties."
It follows that the decree appealed from must be reversed. It is so ordered.
BEAN, BELT and McBRIDE, JJ., concur. *Page 432