Douglas County State Bank, a Banking Corporation v. Steele
| Decision Date | 11 October 1926 |
| Citation | 210 N.W. 657,54 N.D. 686 |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Foster County, Coffey, J.
Remanded for further proceedings.
Case remanded.
C. B Craven, for appellant.
The doctrine of marshalling can never be invoked so as to deprive a debtor of his homestead or other exempt property by a creditor as to whose lien there has been no waiver of such homestead or exempt property. 26 Cyc. 933 cases cited in note 24; 29 C. J. 877, § 242 and cases cited; Smith v Wait, 29 Wis. 512; Hanson v. Edger, 34 Wis. 653.
Marshalling will never be required where an injury will be done to other persons. Comp. Laws 1913, § 6716; 26 Cyc. 931 and cases cited in notes 15 and 16.
The rule, requiring sale of separate parcels in the inverse order of alienation, does not apply where the different parcels have been conveyed subject to the mortgage sought to be foreclosed. 27 Cyc. 1371 and cases cited in note 47; Newby v. Norton (Kan.) 47 L.R.A. (N.S.) 302, 133 P 890; Chancellor v. Towell, 80 N.J.Eq. 223, 39 L.R.A. (N.S.) 359, 82 A. 861, Ann. Cas. 1914A, 710.
C. W Burnham and Kelly & Morris, for respondent.
Marshalling may be had against a subsequent assignee of a singly charged fund who takes it for an antecedent debt and thus is chargeable with all equity enforceable against his assignor. Hunt v. Townsend, 4 Sandf. Ch. (N.Y.) 510.
"This rule is generally held to apply to subsequent mortgages of the equity of redemption, as well as absolute conveyance of it." Jones, Mortg. 7th ed., § 1622; Fassett v. Mullock, 5 Colo. 466; Payne v. Avery, 21 Mich. 524; Dawes v. Commus, 23 N.J.Eq. 456.
On December 19th, 1913, the defendant, William A. Steele, owned the south half of section 21, township 147, range 67, Foster county, North Dakota. On that date he, together with his wife, the defendant, Belinda Steele, executed and delivered a mortgage upon these premises to the Minneapolis Trust Company. This instrument was duly recorded. At the date of the execution and delivery of this mortgage, and thereafter until about December 24th, 1924, the Steeles occupied the southeast quarter of section 21 as a homestead. In November, 1921, William A. Steele executed two certain mortgages on the southwest quarter of section 21, and in November, 1922, he executed and delivered another mortgage on the southwest quarter of section 21. These instruments each recited that the land mortgaged was free of encumbrances "except mortgages of record." The plaintiff now is, and since June 1923, has been, the owner, by assignment or otherwise, of the three mortgages last above described. The amount due and unpaid on these three several mortgages was, at the time of the trial, approximately $ 7,000. On July 12th, 1923, the plaintiff became the owner, by assignment, of the first mortgage executed by Steele and his wife on December 19th, 1913. At the time of the trial there was due and unpaid on this mortgage the sum of about $ 3,600. In April, 1924, William A. Steele and Belinda Steele executed and delivered a warranty deed of the southeast quarter of section 21, the homestead quarter, to the defendant, the Foster County State Bank. This instrument, in form a warranty deed, was really executed and delivered as a mortgage. The consideration recited is $ 1, and the instrument further recites: "That the premises are free of encumbrance except a mortgage for $ 4,000 on the land herein conveyed and the southwest quarter of section 21-147-67." In fact, this deed was executed and delivered as security for the payment of past due indebtedness of some $ 4,700, due to various of Steele's creditors. Steele and his wife abandoned the homestead premises in December, 1924. In October, 1924, the plaintiff began the instant action to foreclose the mortgage of December 19th, 1913. William A. Steele, Belinda Steele, and the Foster County State Bank were named in the foreclosure action as parties defendant and were duly served. The Steeles defaulted. The Foster County State Bank, answering, set up the facts with reference to its claims and the claims of the plaintiff, and prayed judgment that if the foreclosure be ordered, as demanded by the plaintiff in its complaint, that the mortgaged premises be sold in separate parcels, and that the plaintiff be required to satisfy the mortgage debt out of the proceeds of such sale from each parcel sold in the proportion that the selling price of each bore to the full amount of the mortgage debt. The plaintiff, replying, set out its ownership of the first mortgage on the half section and of the three junior mortgages on the southwest quarter, prayed judgment as demanded in its complaint and that the mortgaged premises be sold in the inverse order of the encumbrances on the separate tracts, and that the southeast quarter, being subject to the youngest and fewest subordinate liens, be sold first and the proceeds of such sale applied upon the first mortgage indebtedness, and if the same were not satisfied thereby that the southwest quarter then be sold. At the time of the trial of the action the southeast quarter was worth $ 4,500, and the southwest quarter, $ 3,000. Judgment was ordered for the plaintiff as prayed in the complaint and the premises were ordered sold as demanded by the plaintiff in its reply. Judgment was entered accordingly on April 28th, 1925. A special execution was immediately issued and put into the hands of the sheriff of Foster county. He proceeded to execute the same and sold the property on June 1st, 1925, first selling the southeast quarter for $ 3,600, and then selling the southwest quarter for $ 162.55. Plaintiff was the purchaser in each case. The amount due on the judgment at the date of sale with costs was $ 3,762.55, the amount realized at the sale. Thereafter, and on June 3d the sale was approved and confirmed by the district court. On June 23d the defendant perfected the instant appeal to this court demanding a trial de novo.
This controversy is in fact between junior lien holders on two different parcels of land to determine the manner in which the senior lien holder having a lien on both parcels shall be required to resort to his security in order to satisfy his claim. It so happens that in this particular case the junior lien holder on the one parcel is also the holder of the superior lien on both. But, as we view it, this can make no difference, either as to the power of a court of equity to command the holder of the superior lien as to how it shall resort to its security, as affecting the holder's rights with reference to its security, or as enhancing or diminishing the rights of either of the junior lien holders. The plaintiff, as the holder of the first mortgage and as the junior lien holder on one of the parcels, contends that as the first mortgagee it has the legal right to resort to either parcel of its security, or both, in any manner that it may see fit, and that if it so exercises that right as to be advantageous to itself as junior lien holder on one of the parcels that the defendant, the other junior lien holder, has no right to complain. Plaintiff further contends that in any event, the statute, § 6716, Comp. Laws 1913, determines the order in which the security shall be resorted to and that the judgment of the district court was in accordance with this statutory direction. On the other hand, the defendant insists that at the time the junior liens were created and at the time of the initiation of the instant case, the southeast quarter of section 21 was the homestead of the Steeles; that all of the plaintiff's junior mortgages were given and received subject to the first mortgage, and that under the circumstances as disclosed in this case true equity requires that the several parcels of land shall bear the burden of the first mortgage in proportion to their value.
Section 6716, Comp. Laws 1913, reads as follows:
In the instant case the plaintiff's junior liens on the nonhomestead quarter were prior in point of time to the defendant's lien on the homestead quarter. Plaintiff contends that the court, in ordering the sale of the mortgaged premises in satisfaction of the first mortgage debt and directing that the homestead quarter be first sold followed the provisions of this statute. The statute is merely an enactment of the equitable rule. See Union Nat. Bank v. Moline, M. & S. Co., 7 N.D. 201, 73 N.W. 527; Merchants State...
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