Lang v. Bank of North Dakota

• Decision Date: 12 March 1990
• Docket Number: No. 890241,890241
• Citation: 453 N.W.2d 118
• Parties: 59 Ed. Law Rep. 511 Ernest R. LANG, Plaintiff and Appellant, v. BANK OF NORTH DAKOTA, Defendant and Appellee. Civ.
• Court: North Dakota Supreme Court

Page 118

453 N.W.2d 118

59 Ed. Law Rep. 511

Ernest R. LANG, Plaintiff and Appellant, v. BANK OF NORTH DAKOTA, Defendant and Appellee.

Civ. No. 890241.

Supreme Court of North Dakota.

March 12, 1990.

Ernest R. Lang (argued), McKenzie, pro se.

Kent M. Morrow (argued), Asst. Atty. Gen., Bismarck, for defendant and appellee.

MESCHKE, Justice.

Ernest R. Lang appealed from a summary judgment rejecting his damage claim against the Bank of North Dakota for deprivation of statutory post-foreclosure opportunities. We reverse and remand for trial.

This is a sequel to Lang v. Bank of North Dakota, 423 N.W.2d 501 (N.D.1988) (Lang II ), where we sketched the history of Lang's litigation with the Bank of North Dakota:

The Bank of North Dakota foreclosed its mortgage on Lang's farm. Lang did not redeem and the foreclosure became final. See Lang v. Bank of North Dakota, 377 N.W.2d 575 (N.D.1985). [Lang I ]. Proceeding without counsel, Lang sued the Bank of North Dakota for damages, arguing that the Bank of North Dakota wrongfully sold its sheriff's certificate of foreclosure sale of his farm to a second mortgagee, the Bank of Steele, before the time for redemption expired. The trial court dismissed the complaint under N.D.R.Civ.P. 12 for failure to state a claim upon which relief could be granted. Lang appealed.

Id. at 502. We reversed. While Lang's complaint did not state a claim for damages for wrongful foreclosure, we ruled that Lang did state a claim for deprivation of a statutory privilege of repurchasing the farm before its public sale.

We said in Lang II:

The effect of the cited statutes on Lang's post-redemption opportunities has not yet been explored by either evidentiary development or legal analyses. Testing application of those statutes to Lang's circumstances would be precluded if we affirm a brusque dismissal of his complaint without judicial examination or exploration.

Id. at 503. On remand, the Bank of North Dakota moved for summary judgment without any supporting affidavit or evidence about the circumstances of the transfer of the sheriff's certificate to the Bank of Steele. Lang responded, alleging that "[t]here remain significant, material disputed facts that are necessary for a complete adjudication...." In his affidavit to the trial court, Lang stated:

That ... the attorney representing the Bank of North Dakota ... acknowledged that the procedure used by the Bank of North Dakota in this case was unusual, and [its attorney] could not cite any examples of where the Bank of North Dakota had ... [sold] a Sheriff's Certificate of Sale to a second mortgagee, to dispose of land in the inventory of the Board of University and School Lands....

* * * * * *

That the action of the Bank of North Dakota in prematurely selling my property, without offering me and my family the right to repurchase the property deprived me of ... use of the land ... [and] of the opportunity for continued ownership of my farm....

That the Bank of North Dakota knew or should have known ... that by selling the Sheriffs's [sic] Certificate of Sale to the Bank of Steele, [it was] denying me and my family the opportunity to repurchase the land at private sale as provided by NDCC Chapter 15-07.

That the Bank of North Dakota knew or should have known, that my farm was valued at twice the amount bid in by the Bank of North Dakota at the Sheriff's sale, and twice the amount paid for by the Bank of Steele.

* * * * * *

That my suit against the Bank of North Dakota is based on the failure of the institution to give me the rights to repurchase my land as guaranteed by statute....

Lang argued to the trial court that "[g]ranting a motion for summary judgment at this point leaves the Supreme Court with no better record ... than it had on the first appeal."

The trial court thought that the inquiry was "whether the Bank was precluded by Sections 15-07-04 ¹ and 15-07-10 ² from selling its certificate of sale," and concluded that those sections "are inapplicable in this case. They would come into play if a deed had been issued to the Bank upon the expiration of the period of redemption from foreclosure.... The Bank of North Dakota did not acquire title so the provisions of Chapter 15-07 do not apply." Disregarding our direction and Lang's entreaties, the trial court granted judgment to the Bank of North Dakota and dismissed Lang's claim.

On appeal, Lang argued that "[t]he order for summary judgement [sic] [did] not fulfill the remand of the Supreme Court." We agree. The trial court's analysis was too simplistic and amounted to nothing more than a dismissal for failure to state a claim. We rejected that view by our reversal in Lang II. Statutes in existence at the time Lang contracted his farm mortgage with the Bank of North Dakota, acting for the board of university and school lands, became a part of that mortgage contract to the same extent as if they were expressly incorporated therein. Megarry Bros. v. City of St. Thomas, 66 N.W.2d 704, 710 (N.D.1954); Voltin v. Voltin, 179 N.W.2d 127, 134 (N.D.1970). See also Harbal v. Federal Land Bank of St. Paul, 449 N.W.2d 442 (Minn.App.1989) (Assignment of a sheriff's certificate of foreclosure sale prior to the running of the statutory period for redemption is tantamount to a sale of the property and may not be used to circumvent a statutory right of first refusal in the former mortgagor to repurchase.) Sale of the sheriff's certificate, even before foreclosure vested complete title in the Bank of North Dakota, prematurely impaired Lang's statutory opportunities.

The board of university and school lands has long been mandated to invest part of its permanent funds in first mortgages on farmland and rangeland within North Dakota. NDCC 15-03-04 ³ and 15-03-05. ⁴ An underlying purpose has been to help "actual residents of this state ... who are actively engaged in the business of farming or ranching." NDCC 15-03-07. ⁵ Keeping farmers on their farms is a valid legislative goal. See Lang I, 377 N.W.2d 575; State v. Sheridan County, 72 N.D. 254, 6 N.W.2d 51 (1942). Thus, these farm mortgages are not simply commercial investments; they are also instruments of a legislative policy to support and underwrite the principal industry in this state--agriculture.

Comprehensive and detailed procedures are set out in the statutes controlling these mortgage investments, NDCC 15-03, regulating their handling and foreclosure NDCC 15-08, and directing the disposition of "nongrant lands" acquired through foreclosures, NDCC 15-07. The Bank of North Dakota has been statutorily delegated to act as agent for the board in handling these farm mortgage investments. NDCC 15-03-04.3. ⁶ But the board of university and school lands retains the responsibility "to promulgate policies, rules, and regulations for the purchase of first mortgage farm loans" and to "set such terms, conditions, interest rates, and other guidelines ... commensurate with its fiduciary responsibilities." NDCC 15-03-04.2. See also 15-07-02. If loans become delinquent, the Bank of North Dakota "shall handle foreclosures in accordance with standard banking practices...." NDCC 15-03-04.1. ⁷ In doing so, the Bank of North Dakota must of course follow any applicable policies of the board and the statutory plan to benefit farmer-borrowers.

A farmer who borrows from the board has a panoply of protections. Several special provisions govern foreclosure, including redemption by "such mortgagor, his heirs or assigns." NDCC 15-08-13. ⁸ See also NDCC 15-03-12, 15-03-13, and 15-03-14. Thus, favored treatment for the farmer-borrower begins with the mortgage, continues throughout foreclosure proceedings, and extends thereafter until the land is put up for public sale to the highest bidder. NDCC 15-08-13, 15-07-04, and 15-07-10. These protections of the mortgagor include the right to finance his redemption or repurchase with a contract on favorable terms and conditions so long as the permanent school funds are safeguarded from direct loss. NDCC 15-07-15(5) and 15-08-13. See Fleck v. State, 71 N.W.2d 636 (N.D.1955); State v. Amerada Petroleum Corporation, 71 N.W.2d 675 (N.D.1955). The claim of a farmer-borrower that he has been deprived of these opportunities must be viewed in this statutory setting, not as a standard commercial mortgage transaction.

NDCC 15-07-04 directs that "[a]ny land sold under the provisions of this chapter shall be by public sale except purchases under the provisions of sections 15-07-10 and 15-08-13." While not a model of clarity, NDCC 15-08-13 authorized a post-foreclosure redemption by "such mortgagor, his heirs or assigns, during the period of one year from the date of such foreclosure...." And, "[i]n the event of redemption of said lands from a foreclosure of a mortgage, the commissioner shall execute and deliver a contract of sale to the purchaser, ... in the form prescribed by the board." Id. After the foreclosure is final, "such repurchase may be made at any time before such lands are offered at public sale to the highest bidder." NDCC 15-07-10. A "mortgagor or former owner" had the privilege to repurchase "at a price not less than the combined amounts of the original unpaid loan, plus costs paid by the state, and interest unpaid at the time the state acquired title to such lands," with a "cash payment" of "not less than twenty percent of the sale price." NDCC 15-07-15(5). ⁹ See Fleck v. State, supra. A farmer-borrower's preferred opportunities do not flower only when the foreclosure grows final. Those opportunities are part of a preferential legislative policy which began with the mortgage investment.

Lang's affidavit outlined some of the undetermined factual questions. What policies and procedures, if any, did the Bank of North Dakota employ in the sale of the sheriff's certificate which would justify impairment of the farmer-borrower's post-foreclosure opportunities? Could Lang have redeemed or repurchased in the favorable statutory...