First Sec. Bank, Underwood, N.D. v. Enyart

• Decision Date: 19 April 1989
• Docket Number: No. 880288,880288
• Citation: 439 N.W.2d 801
• Parties: FIRST SECURITY BANK, UNDERWOOD, NORTH DAKOTA, Plaintiff and Appellee, v. David ENYART, aka David W. Enyart, Defendant and Appellant, and Jane Enyart, Defendant. Civ.
• Court: North Dakota Supreme Court

Page 801

439 N.W.2d 801

FIRST SECURITY BANK, UNDERWOOD, NORTH DAKOTA, Plaintiff and Appellee, v. David ENYART, aka David W. Enyart, Defendant and Appellant and Jane Enyart, Defendant.

Civ. No. 880288.

Supreme Court of North Dakota.

April 19, 1989.

Wheeler, Wolf, Peterson, Schmitz, McDonald & Johnson, Bismarck, for defendant and appellant; argued by Gerry Gunderson.

Coles & Snyder, Bismarck, for plaintiff and appellee; argued by James J. Coles.

ERICKSTAD, Chief Justice.

David Enyart appeals from the order of the district court, dated September 8, 1988, granting First Security Bank's motion to quash the Notice of Separate Sale and Redemption filed by Enyart pursuant to Senate Bill No. 2469 (Chapter 194, Session Laws of 1987) (hereinafter SB No. 2469). ¹ We reverse and remand.

This appeal arises out of a mortgage foreclosure action against 93 acres of agricultural property Enyart inherited from his father. The land is located near the Missouri River, and of the 93 acres, approximately 45 acres is cropland and the rest is pasture and timberland. Since Enyart obtained title, the land has been farmed together with a larger tract of land owned by his mother.

In 1984, Enyart borrowed money from the Bank and mortgaged the property as security. Enyart subsequently defaulted on the note and on October 6, 1987, the Bank sent Enyart a Notice Before Foreclosure informing him that unless he paid the defaulted amount within thirty (30) days, proceedings would be commenced to foreclose the mortgage. The notice also included a warning pursuant to section 3, SB No. 2469. A judgment and decree in foreclosure was entered August 2, 1988, in favor of the Bank, adjudging the amount due to the Bank and further determining that the property "may be sold in one piece or parcel, the same being a contiguous tract of land." The sheriff was directed to sell the property and September 14, 1988, was set as the date for the sale.

On August 29, 1988, Enyart filed, and had recorded, a Notice of Separate Sale and Redemption, directing that the property be sold in separate known lots or parcels as follows:

"The East One Half of the East One Half of the Southeast Quarter (E 1/2E 1/2SE 1/4) of Section Twenty-nine (29), Township One Hundred Forty-four (144) North Range Eighty-three (83) West of the Fifth Principal Meridian, McLean County, North Dakota."

and

"The East 93 acres of the Southeast Quarter (SE 1/4) except the East One Half of the East One Half of the Southeast Quarter (E 1/2E 1/2SE 1/4) of Section Twenty-nine (29), Township One Hundred Forty-four (144) North Range Eighty-three (83) West of the Fifth Principal Meridian, McLean County, North Dakota."

The Notice further asserted that the lots were designated by an accurate legal description, and directed the sheriff to sell the lots at the Sheriff's Sale separately, and to solicit bids on each separate tract of property. It also, in essence, requested that the Enyarts be entitled to redeem the property separately.

On August 31, 1988, the Bank made a motion to quash the Notice of Separate Sale and Redemption filed by Enyart. The Bank asked that the Notice be quashed for three reasons: the property did not constitute Enyart's homestead; the designation of separate parcels was not reasonable as contemplated by statute as the property did not constitute separate known lots or parcels; and the designation was made for the purpose of harassing the Bank.

A hearing was held September 6, 1988, and the district court determined that the tract of real property subject to this mortgage foreclosure action, described as:

"The East Ninety-three (93) acres of the Southeast Quarter (SE 1/4) of Section Twenty-nine (29), Township One Hundred Forty-four (144) North of Range Eighty-three (83) West of the Fifth Principal Meridian, McLean County, North Dakota.

cannot be divided into known or identifiable lots or tracts of land and that the separate sale of such property as proposed by the defendants is contrary to any division of such real property as contemplated by this statute...."

The court ordered that the Notice of Separate Sale and Redemption be quashed. On September 14, 1988, the property was sold to the Bank at a public auction.

Enyart brings this appeal, asking whether or not the district court erred in granting the Bank's motion to quash his Notice of Separate Sale and Redemption. He asserts that the Notice complied with the provisions of SB No. 2469.

SB No. 2469 reads in pertinent part:

"SECTION 3. Separate redemption of known lots or parcels--Notice. In any proceeding to foreclose any mortgage upon agricultural property ... the executing creditor shall notify the debtor that the debtor may redeem known lots or parcels including a lot or parcel containing the debtor's home and some of the property surrounding the home separately from the remaining property. The notice required ... must contain a statement substantially similar to the following:

"WARNING: This creditor is seeking foreclosure on agricultural property that may contain your dwelling. Under North Dakota Law, you have the right to separate known lots or parcels of property, including a lot or parcel containing your dwelling and the surrounding property, and have those known lots or parcels sold in the order or sequence you want at the foreclosure sale. The lots or parcels you designate must be described by an accurate legal description. You have the right to redeem the lots or parcels you designate and describe accurately, including the lot or parcel that contains your dwelling, separate from the remaining property that is being foreclosed upon, by paying the purchase price within the redemption period, which is generally one year from the date of the sale. The purchase price for the known lots or parcels is the price bid at the foreclosure sale for those lots or parcels. You should consult with an attorney so you do not lose these valuable rights. You must provide the sheriff and the register of deeds with a legal description of the known lots or parcels you wish to redeem at least ten business days before the date of the scheduled sheriff's sale. [Emphasis added.]

* * * * * *

"SECTION 4. Designation of known lots or parcels to be separately redeemed. The debtor may designate the known lots or parcels that are to be sold separately at the foreclosure sale. The known lots or parcels designated may include the home of the debtor, and may include its appurtenances and the surrounding contiguous land. The debtor shall serve a copy of the legal description of the designated lots or parcels on the sheriff and the register of deeds at least ten business days before the date of the scheduled sheriff's sale." [Emphasis added.]

We construed SB No. 2469 in Federal Land Bank of St. Paul v. Waltz, 423 N.W.2d 799 (N.D.1988), and Production Credit Ass'n v. Henderson, 429 N.W.2d 421 (N.D.1988). In Waltz, the Federal Land Bank failed to include the language required by section 3 of SB No. 2469 in the notice before foreclosure. After reviewing the legislative history, we were convinced that "the Legislature intended to require strict compliance with statutory provisions concerning foreclosure of a mortgage. ² Furthermore, the North Dakota Legislature stated in its declaration of findings of SB No. 2469 that it is in the best interest of the State to protect farm families from dislocation caused by the present financial crisis in agriculture." [Footnote added.] Federal Land Bank of St. Paul v. Waltz, supra, 423 N.W.2d at 802. We held that "in any proceeding to foreclose a mortgage upon agricultural property the notice before foreclosure is legally insufficient unless it includes the language required by SB No. 2469." Id.

In Production Credit Ass'n v. Henderson, the mortgage the Hendersons signed contained a paragraph which provided that, at the option of the mortgagee, the property could be offered and sold in bulk as one parcel and, further, that all provisions of statute and rules of law to the contrary were waived by the mortgagor. Nevertheless, after receiving a Notice Before Foreclosure containing the language required by section 3 of SB No. 2469, the Hendersons filed with the sheriff a document separating the property into tracts and parcels and designating the order of sale of those parcels. PCA filed a motion to quash the tract designation and the trial court, "after determining that SB No. 2469 and Section 28-23-07, N.D.C.C., were harmonious, concluded that the Hendersons expressly waived their right to have the real estate sold in parcels and therefore permitted PCA to sell the real estate in bulk." Production Credit Ass'n v. Henderson, supra, 429 N.W.2d at 423.

Hendersons' main issue on appeal was that SB No. 2469 granted rights separate and distinct from section 28-23-07, N.D.C.C., and therefore the rights under SB No. 2469 were unknown rights at the time they signed the mortgage, rendering the waiver invalid. ³ After comparing the provisions of SB No. 2469 and section 28-23-07 which were at issue in the case, we said "we do not believe that the right to designate tracts in a foreclosure sale was an unknown right which could not have been waived by the Hendersons under the real estate mortgage." Production Credit Ass'n v. Henderson, supra, 429 N.W.2d at 425.

Section 28-23-07, N.D.C.C., applies in all execution sales including mortgage foreclosure actions and provides in part:

"[W]hen the sale is of real property consisting of several known lots or parcels they must be sold separately. The judgment debtor, if present at the sale, may direct the order in which property, real or personal, shall be sold, when such property consists of several known lots or parcels or of articles which can be sold to advantage separately, and the sheriff or other officer must follow such directions."

This Court has construed section 28-23-07, N.D.C.C., and its predecessors, to permit debtors, if present at the foreclosure sale, to...