Ingstad v. Farmers' State Bank of Mandan, 5937.

• Decision Date: 14 July 1931
• Docket Number: No. 5937.,5937.
• Citation: 61 N.D. 194,237 N.W. 704
• Parties: INGSTAD v. FARMERS' STATE BANK OF MANDAN.
• Court: North Dakota Supreme Court

61 N.D. 194

237 N.W. 704

INGSTAD

v.FARMERS' STATE BANK OF MANDAN.

No. 5937.

Supreme Court of North Dakota.

July 14, 1931.

Syllabus by the Court.

The pledgee of notes and mortgages securing them owes no duty to the pledgor which is violated by attaching and selling at execution sale the property mortgaged, subject to the pledged mortgages, to satisfy an obligation owing by the mortgagor to the pledgee.

Syllabus by the Court.

Where estates and interests in property meet in the same person, there is no merger in law unless they are held by such person in one and the same right.

Syllabus by the Court.

Where a pledgee of a mortgage, who is a creditor of the mortgagor, purchases at execution sale the title of the mortgagor to satisfy a judgment in favor of such pledgee creditor, the mortgage pledged does not become merged with the title of the creditor thus acquired.

Syllabus by the Court.

Mergers in equity proceed upon the basis of the intention of the party in whom the estates meet, and, where the interests of such owner would be opposed to the merger, an intention to merge will not be presumed.

Syllabus by the Court.

Though a pledgee of notes and mortgages is authorized to collect them (section 6790, Compiled Laws of 1913), he is not required to proceed promptly at his peril to realize upon the security, and this is especially true where the pledgor knows of the defaults and makes no demand upon the pledgee to proceed and also renews the note secured by the pledge while the pledge securities are in default.

Syllabus by the Court.

Where a pledgor claims damages by reason of the pledgee delaying to collect the pledged securities, he has the burden of proving that he has sustained loss. Held, in the instant case, that there is no evidence of damage to the plaintiff.

Syllabus by the Court.

Where a pledgee of a mortgage proceeds to foreclose it and notifies the pledgor of his intention to bid at the sale only up to the amount of the indebtedness for which the mortgage was pledged, and furnishes an opportunity to the pledgor to protect himself, the duty of the pledgee to exercise good faith is fully performed.

Appeal from District Court, Morton County; F. T. Lembke, Judge.

Action by Lula Cole Ingstad against the Farmers' State Bank of Mandan. Judgment for defendant, and plaintiff appeals.

Affirmed.

Freerks & Freerks, of Jamestown, for appellant.

Kelsch & Higgins, of Mandan, for respondent.

BIRDZELL, J.

The plaintiff brought action against the defendant to recover an amount alleged to have been realized by the defendant in the course of dealing with certain property upon which the plaintiff held mortgages which were in turn pledged with the defendant as collateral security for an obligation owing by the plaintiff. The relief demanded is a money judgment for an excess alleged to have been received by the defendant over and above the obligation owing by the plaintiff in circumstances pleaded. The action was tried to the court without a jury as a suit in equity and, without regard to the real character of the action, it will be treated as one founded upon the alleged fiduciary relation between the plaintiff as pledgor and the defendant as pledgee of the collateral involved and for an accounting therefor. In the district court the defendant had judgment of dismissal and for costs, and the plaintiff appeals, demanding a trial de novo and also assigning certain errors in the trial and disposition in the lower court. The facts though somewhat complex, are not in dispute. Those that are essential to an understanding of the controversy and the questions presented on appeal may be stated as follows:

In May, 1925, the plaintiff, then Lula Cole, owned a meat market in the city of Mandan, also certain real property upon which was located a slaughterhouse. She sold the market and the real property to one Rassilyer for a consideration of $4,000. She received $2,000 in cash, and took from Rassilyer two notes of $1,000 each, secured by chattel and real estate mortgages on the property sold. At that time the plaintiff was indebted to the defendant bank on a note due October 19, 1925, in the amount, with interest, of $1,391.50. To secure this note the plaintiff pledged to the defendant the two Rassilyer notes and assigned the mortgages, which notes and mortgages the bank subsequently held as collateral security for the indebtedness. The plaintiff from time to time renewed her note at the bank. In September, 1926, after the maturity of the Rassilyer notes, Rassilyer absconded. At the time of his disappearance he was indebted to the defendant bank upon past-due notes in an amount aggregating $1,514. In September, 1926, the bank brought action against Rassilyer and levied attachments upon the identical personal and real property covered by the mortgages which it held as collateral to the plaintiff's indebtedness. In this action it recovered a judgment against Rassilyer for $1,634.05, which judgment directed the sale of the attached property. The personal property was sold on execution on December 15, 1926, subject to the chattel mortgage lien. It was bid in by the defendant for the sum of $200. The sheriff duly made a report of the sale, and it was confirmed by order of court. In March, 1927, the real property was likewise sold on execution, subject of course to mortgages, the defendant bidding it in for the sum of $100, which sale was likewise confirmed. The defendant at the time of the trial of the instant action was still the owner and holder of the sheriff's certificate. After the defendant had obtained its judgment in the attachment suit and before the sale, it procured, on or about the 6th day of December, 1926, a renewal of the plaintiff's note which was then past due. The renewal note was for $1,496.15, including interest to December 6, 1927, and fell due on the latter date. When this note fell due the defendant notified the plaintiff, demanding payment and stating that, in the event it was not paid, the defendant would foreclose the chattel and real estate mortgages pledged to secure it. Thereafter in July, 1928, the defendant proceeded to foreclose the chattel mortgage, notifying the plaintiff by registered mail and inclosing notice of the sale. At the sale the property was bid in by a third person in bulk for $600, and, deducting the expense of the sale, $486.14 was credited on plaintiff's note.

In May, 1929, the defendant commenced proceedings to foreclose the real estate mortgage, still held as collateral, notifying the plaintiff by registered mail, and in the notice informed the plaintiff that the defendant would not bid at such sale more than the amount which she (the plaintiff) was still owing the defendant on her note, to wit $1,090.41, with interest. Upon the sale the property was bid in by the same person who had purchased the personalty, J. A. Timmerman, for $1,238, the plaintiff not appearing or bidding and the defendant applying the proceeds to the payment in full of the plaintiff's note and thereafter returning the same to her.

[1] The principal contention of the plaintiff and appellant is that, in attaching and selling the property covered by the plaintiff's mortgages, which had been pledged by her to the defendant as collateral to her indebtedness, the defendant was guilty of a breach of faith with respect to obligations arising out of the relation of pledgor and pledgee. More specifically, as we understand the appellant's argument, it is contended that any attempt by a pledgee to acquire an interest in the mortgaged property in realizing upon a personal indebtedness of the mortgagor to it is so far inconsistent with its obligation to the pledgor that it should be held accountable to her to the full extent of her special property, and that particularly is this true in this case by reason of the fact that the defendant had bid upon property at the execution sales subject to the mortgages; or, in other words, had manifested a willingness to pay the price bid over and above the mortgages. It is said, in substance, that, after so bidding, the bank, had it been the owner of the first mortgage notes given by Rassilyer, could not have enforced payment as against him; that as it was the bank's duty to collect the collateral it should not be heard to say that it did not receive the full amount of the mortgages subject to which the sale to it was made; that as between the bank and Rassilyer there was in legal effect a merger of the mortgage note obligations in the title to his equity which the bank acquired upon the...