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Abstract

A North Carolina statute provided that when a mortagee purchases property at his own sale conducted under a power of sale, and then brings action for the deficiency, the debtor may as a matter of defense show that the true value of the property at the time and place of sale exceeded the sale price and thus defeat the deficiency claim in whole or in part. In a recent case the plaintiff, mortagee of an $8,000 mortgage, conducted a sale according to law and bought the land for $3,000. On the plaintiff's subsequent action for the deficiency the defendant pleaded the statute. The defendant alleged and the jury found that the property at the time and place of sale was fairly worth the entire amount of the debt. The plaintiff admitted that the statute affected only the remedy for enforcing the contract, but challenged its validity on the ground that the alteration of the remedy was so substantial as to impair the obligation of the contract. The United States Supreme Court, affirming the decision of the state court, held that the statute did not so circumscribe or deny the existing remedies as to seriously impair the value of the contractual right. In its opinion the Court pointed out that the plaintiff was not entitled to be enriched at the expense of the defendant. The essence of the contract was a loan and the plaintiff's right was to have repayment of the loan plus interest. The altered remedy still allows the plaintiff to recover what he contracted for-namely payment in full. It was also pointed out that there still remained to the plaintiff the classic remedy of equitable foreclosure or foreclosure by suit. This remedy has always been considered fair to both parties, and so the legislature could have gone further and, abolished the power of sale had it so desired. Richmond Mortgage & Loan Corporation v. Wachovia Bank & Trust Co., (U.S. 1937) 57 S. Ct. 338.

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