Nichols v. Tingstad

Morgan, J. This action was brought by the plaintiff to foreclose a mortgage on real estate given by the defendant John E. Tingstad to the Huber Manufacturing Company on November 21, 1889, and by it assigned to the plaintiff before the commencement of this suit. The complaint states the following facts, in substance: That on October 31, 1889, the said John E. Tingstad.was a single person, and the owner of the land described in the mortgage attempted to be foreclosed in this action; that on said October 31, 1889, he executed and delivered to the Farmers’ Trust Company his mortgage on said lands to secure the payment of $1,035, which said mortgage contained a power of sale duly authorizing said mortgagee to foreclose — 175 — said mortgage by a sale of the lands mortgaged, as provided by statute, in case of a default iii the conditions of said mortgage; that said mortgage was duly assigned to one S. W. Landon on January 23, 1890, and was duly and regularly foreclosed by said Landon by advertisement under such power of sale on August 24 1895, and the premises mortgaged were on that day bid in and purchased at the sale under such foreclosure by one George H. Hollister, who received from the sheriff making the sale a certificate of sale of such premises in the form provided by law; that said Hollister duly assigned such sheriff’s certificate of sale to the defendant John B. Lockhart on August 24, 1896; that there was no redemption from such sale by the defendant Tingstad, or any other person, during the year provided by law for such redemption, or at any other time; that on August 27, 1896, the sheriff of Cass county executed and delivered to said Lockhart a sheriff’s deed of such premises, which deed was duly recorded in the office of the Register of Deeds of Cass county 011 August 29, 1896; that on sáid day the said Lockhart made and executed a warraffiy deed of said premises to the defendant Annie Tingstad, who, with her husband, John E. Tingstad, has been in possession of the same ever since said date. The complaint also sets forth other facts usually set forth in complaints for the foreclosure of mortgages, which it is not necessary to set forth here, and demands judgment for the foreclosure of such mortgage, and prays that an accounting be had of the rents and profits of said land as against the defendants in possession, and prays to be allowed to redeem from the foreclosure and sale under the Farmers’ Trust Company mortgage, and offers to pay any sum found due upon the Farmers’ Trust Company mortgage. The defendants John B. Lock-hart, Annie Tingstad, and George G. French have appeared in the action, and demurred to the complaint on the ground-that it does not state facts sufficient to constitute a cause of action as against said defendants, each defendant raising the same question by such demurrer. The plaintiff has appealed to this court from the order sustaining such demurrer. No question is raised in this court as to the regularity of the foreclosure under the Farmers’ Trust Company mortgage, but it is conceded by the plaintiff that such foreclosure was regular in all respects. It will be seen that the mortgage in suit and the Farmers’ Trust Company mortgage were executed and delivered while the Comp. Laws of 1887 were in force, and that the foreclosure of the Farmers’ Trust Company mortgage was made while such Compiled Laws were in force. The question to be determined on this appeal must be determined from a construction of the provisions of such Compiled Laws relating to the rights of mortgagees under their mortgages, both before and after deeds have been issued upon foreclosures thereof. The precise -question involved in the issue raised bv the demurrer of the defendants is whether, under Comp. Laws of 1887, a junior mortgagee has the right to redeem from a foreclosure of a prior mortgage made under a power of sale contained — 176 — in such prior mortgage after one year has elapsed from the day of sale under such foreclosure of such prior mortgage, and after a deed has been issued to a purchaser under such foreclosure sale. In other words, did the Comp. Laws of 1887 give to a second or junior mortgagee the right to redeem from a foreclosure and sale under a power of sale in a first mortgage, after one year had elapsed from such sale, and a sheriff’s deed had been delivered to the purchaser under such foreclosure, — such foreclosure being regular in every respect,' — and no equitable grounds existing or urged in favor of such demand or claim to be allowed to redeem. The plaintiff broadly contends that a second mortgagee had such a right under such laws. To determine that question, reference must be made to the several provisions of the Comp. Laws of 1887 relating to foreclosure of real estate mortgages by advertisement under a power of sale contained therein. Jn referring to prior mortgages in this case, we refer to mortgages that are prior in fact and prior of record. Section 5420, Comp. Laws of 1887, provides what a certificate of sale of real estate sold under a power of sale contained in a mortgage shall contain, and provides that the officer or person making the sale shall file such certificate of sale in the office of the register of deeds, and that such certificate may be recorded in the office of the register of deeds as provided in case of a certificate of sale of real property sold under execution, “and shall have the same validity and force.” A certificate of sale of real property under a power of sale contained in a mortgage has by this section, the same force and validity as a certificate of sale of real property sold under an execution. Section 5148 provides what force and validity is attached to such a certificate of sale of real estate under execution as follows: “Upon a sale of real property the purchaser is substituted to and acquires all the right, title, interest and claim of the judgment debtor thereto.” Under this section a purchaser under a sale of real estate under execution acquires by virtue of the certificate of sale all the interest of the judgment debtor in the lands sold at the time that the judgment was docketed in the proper county and became a lien on said lands. The interest sold on such a sale is not his interest at the time of the sale, but the judgment debtor’s interest in the lands at the time the lien of the judgment attached. Section 5428 provides as follows: “A record of the affidavits aforesaid, and a deed executed upon a sale of the real property, shall vest in the purchaser or person acquiring title thereto by redemption or otherwise, the same force and validity as the deed upon foreclosure by action provided in § 5437 of this Code.” Section 5437 reads as follows: “Whenever any real property shall be sold under an order, decree or judgment of foreclosure, ■ under the provisions of this chapter, the officer or other person making the sale must give to the purchaser, a certificate of sale, as provided by §" 5420; and at the time of the expiration of the time for the redemption of such mortgaged premises, if the same be not redeemed, the person or officer making the sale * * * must make to the purchaser — 177 — * * * a deed or deeds to such premises which shall vest in the purchaser * * * the same estate that was vested in the mortgagor at the time of the execution and delivery of the mortgage, or at any other time thereafter; and such deed shall be as valid as if executed by the mortgagor and mortgagee and shall be a complete bar against each of them, and against all the parties to the action in which the judgment for such sale was rendered,” etc. Construing these two sections last mentioned together, it is beyond question that the deed issued by the officer or person making a sale under a mortgage containing a power of sale'has the same force and validity and effect as a deed issued by the person making a sale under a foreclosure by action. What, then, is the effect of a deed under foreclosure by action, so far as persons acquiring liens on the premises between the date of the mortgage and the decree are concerned ? If such subsequent incumbrancers are made parties to the foreclosure suit, their rights are determined by such action, and, their rights are foreclosed and barred by such action, excepting the right to redeem within one year after the sale. If they are not made parties, their rights are not foreclosed nor barred by such action. But we think that the rights of such subsequent incumbrancers under foreclosures by advertisement under a power of sale are determined by the first portion of said § 5437, and determined adversely to the contentions of the appellant. The effect of a deed thus given upon a foreclosure by advertisement under a power of sale is declared in this section to vest in the purchaser the same estate that was vested in the mortgagor at the time of the execution and delivery of the mortgage, or at any time thereafter. The meaning of this sentence seems so plain and evident that nothing-can be added to it or suggested that will make it clearer. If the deed vests the purchaser with all the interest of the mortgagor at the date of the execution and delivery of the mortgage, it then necessarily, follows that the interest or liens of subsequent mortgagors or incumbrancers are cut off and barred by the foreclosure, subject to the right of redemption within the time fixed by law. To limit the first part of § 5437 by a construction that the deed would vest in the purchaser the interest of the mortgagor at the time of the sale only, would be to disregard the language used, and substitute therefor other words of entirely different meaning. In this case the mortgagor, John E. Tingstad, is alleged to have .been the owner of the land mortgaged on October 31, 1889, the date of the mortgage which was foreclosed. This was before the mortgage now owned by the plaintiff had been executed. Under the express language of said § 5437, the purchaser at the mortgage sale of August 24, 1895, acquired the same estate that was vested in the mortgagor on October 31, 1889, and no more; and that estate of the mortgagor was foreclosed, provided that no redemption followed the sale during the year. If the mortgagor’s estate in said lands on October 31, 1889, was that of absolute ownership, then a deed under such a foreclosure would convey — 178 — to the purchaser an absolute ownership. If the mortgagor’s estate in the lands on October 31, 1889, was a conditional or subordinate one, then the deed to the purchaser would convey to him such an estate as he had at the time of executing the mortgage only. The word “estate,” as used in this section, means the mortgagor’s right, title, and interest in the lands at the time of executing the mortgage. Let us suppose that the mortgagor, Tingstad, had sold this land after he gave the Farmers’ Trust Company mortgage, and thus conveyed away all his interest in the land before the foreclosure. At the date of the sale under the foreclosure he would then have no interest in the land and if the interest acquired under a sheriff’s deed is only the interest of the mortgagor at the time of the sale, then the purchaser would acquire no interest or estate at such sale, nor by virtue of a sheriff’s deed based on such sale. Such cannot be the construction intended for this section. The deed relates back to the inception of the lien of the mortgage, and becomes operative as of the date of the mortgage. In foreclosures by action none are affected by the decree except such persons as are made parties, and are served with process. But in foreclosures under powers of sale pursuant to published notice all persons acquiring- interest in the land subsequently to the giving of the mortgage foreclosed are deemed in law parties to the foreclosure proceedings, and are bound thereby to the same extent as those persons who are made parties to a foreclosure action are bound by the decree. ’ “When a regular sale is made under a power contained in the instrument, not only the mortgagor, but all persons claiming any interest in the equity of redemption by privity of estate with him, are considered as parties to the proceeding, and are precluded by it as fully as if they had been made parties defendant by regular subpoena in an ordinary foreclosure suit.” Powers v. Andrews, (Ala.) 4 South. 263. As bearing somewhat on the question involved, this language of the Supreme Court of Minnesota in Hokanson v. Gunderson, 56 N. W. 172, is here quoted. “The purchaser succeeds to the equitable interest of the mortgagee, and, when no redemption is made, this interest draws to it the subordinate legal title of the mortgagor, and his title then stands under the mortgagee precisely as if the mortgage had been an absolute conveyance at its date; in other words, the mortgage ripens into a perfect title through the process of foreclosure. The purchaser is then only concerned with the state of the title at the date of the mortgage and the existence of liens affecting the rights of the mortgagee.” It is claimed that a foreclosure by advertisement under a power of sale contained in a mortgage, not followed by a redemption within the year allowed for a redemption, is effectual as a foreclosure of the senior mortgagee’s lien only, and does not bar the rights of subsequent mortgagees, for the reason that § 5424 provides for the payment of any .surplus remaining in the hands of the officer or person making the sale, after satisfying the mortgage, to the “tnort — 179 — gagor, his legal representatives or assigns.” The claim that such surplus shall necessarily be paid to the mortgagor in place of a junior mortgagee cannot be sustained. The mortgagor, having executed a second mortgage upon the premises involved in this case after executing the Farmers’ Trust Company mortgage, is deemed in law to have assigned such surplus to the second mortgagee, if there had been any. The word “assigns” is of sufficiently broad meaning, as defined by the authorities, to include a second mortgagee under such circumstances. Nopson v. Horton, 20 Minn. 268 (Gill. 239). “In the contemplation of equity, by the sale of the whole estate under foreclosure proceedings affecting and binding the junior mortgagee the land is converted into money, and, this fund being treated as a substitute for the mortgaged estate, the lien of the junior mortgage is transferred from the land to the surplus of th,e money arising from the sale. The rights of the parties as they before existed are not transposed by the sale, and the court will apply the fund in accordance with their-rights as they existed in respect to the land.” This principle is sustained by the following authorities: Jones, Mortg. § 1935; DeWolf v. Murphy, 11 R. I. 630; Douglass’ Appeal, 48 Pa. 223; Fowler v. Johnson, 26 Minn. 338, 3 N. W. 986, 6 N. W 486; Brown v. Association, 34 Minn. 545, 26 N. W. 907; C. Aultman & Co. v. Siglinger, (S. D.), 50 N. W. 911. It is further contended by the appellant that § 5411, Comp. Laws, conclusively shows that a junior mortgagee has the right to redeem from a foreclosure sale under a prior mortgage after the lapse of one year from the date of sale. This section gives to the mortgagor, upon a proper showing by affidavit, a speedy remedy to restrain the sale in case he has any defense or counterclaim to the mortgage then being foreclosed, and transfer all proceedings under such foreclosure to the District Court, where such alleged defense or counterclaim may be litigated the same as though an action had been commenced for the foreclosure of the mortgage. This section does not in any way affect or change any rights which a subsequent mortgagee may have had prior to the enactment of this section. It leaves his rights just as they were before its enactment. A junior mortgagee may still resort to a court of equity for any redress to which he was entitled before the enactment of this section in case of fraudulent conduct on the part of the prior mortgagee and the mortgagor detrimental to his interests under his mortgage, and may apply to the court for relief upon any other equitable grounds. And, in case judgment of foreclosure is rendered on the prior mortgage, his rights are again protected by his right to redeem from such judgment or sale. The provisions of § 5421, Comp. Laws, in our judgment, conclusively negative the right of subsequent mortgagees to redeem from a sale under a power contained in a mortgage after one year has elapsed from such sale. That section gives a creditor having a lien by judgment or mortgage the right to redeem from a — 180 — prior sale under a prior mortgage within one year from the day of sale under such prior mortgage. This limits the time of redemption to one year. When this statute prescribes that a subsequent mortgagee may redeem from a prior sale within one year, it would be ignoring its plain meaning to say that redemption might be made after one year had elapsed from the sale. When a statute prescribes the conditions under which the privilege of redemption from a valid foreclosure sale may be exercised, these conditions must be performed in the manner and within the time prescribed, or the privilege is lost. So far as the naked right to redeem from a valid foreclosure is concerned, independent of an action to redeem, based upon equitable considerations, the rule stated is without exception, as statutes permitting exemptions must be strictly followed to secure this privilege. Wilts. Mortg. Forec. § 1082; Powers v. Andrews, supra. We therefore hold that neither the plaintiff nor his assignor had the right to redeem from the foreclosure sale under the Farmers’ Trust Company mortgage after one year from such sale, and that the District Court did not err, so far as this question is raised, in sustaining the demurrer. Careful consideration has been given to the authorities cited by the appellant. None of them are based on statutory provision such as are contained in the Compiled, Laws of 1887. This is especially true as to the case of American Loan & Trust Co. v. Atlanta Electric R. Co., (C. C.) 99 Fed. 313, principally relied upon by the appellant. The statutes of Georgia, on which that decision is based, are so radically different from the Compiled Laws of 1887, so far as redemption is concerned, that the decision throws no light on the question involved here. (86 N. W. Rep. 694.) The District Court ordered that the action be dismissed as to all the defendants. This should not have been done so far as the defendant John E. Tingstad is concerned, as a personal judgment may be obtainable against him for the debt set forth in the complaint. No judgment has been entered, however, and, as such order dismissing the action as to said defendant was undoubtedly a clerical inadvertence, it does not require a reversal of the order, as the main question involved and decided in this court and -in the court below arose upon the demurrer. The mistake in the order can be hereafter corrected without any prejudice to any of the parties. The District Court also ordered the plaintiff to pay $10 as costs of hearing on the argument of the demurrer, payment of the same to abide the final disposition of the case. If this was erroneous, and this item of costs is insisted on hereafter, it can be corrected when the costs are finally adjusted. The order sustaining the demurrer is affirmed. All concur.