Norris v. German-American State Bank

Grace, J.

This action is one maintained by the plaintiff for the purposes of securing a permanent injunction against the defendants restraining them from molesting, disturbing, or trespassing upon the property of the plaintiffs described in the complaint, and for other relief. The property in question consists of a grain elevator and equipment, and flour and coal sheds.

*279 Plaintiffs’ complaint alleges ownership and possession of such property. Defendants interpose a general denial to the allegations of the •complaint, and also set forth other allegations in the answer, which allege the possession of such property in the German-American State Bank of Burlington, North Dakota, on February 23, 1917, and continuance thereof ever since, such possession being given to such bank by the former owner of such property, H. T. Hoge.

The facts in the case are as follows: H. T. Hoge was the owner of such grain elevator and other personal property mentioned in the complaint. Fie executed a chattel mortgage to the German-American •State Bank of Burlington for $4,575, a second chattel mortgage to Fannie W. Norris in the sum of $3,200, a third chattel mortgage to the German-American State Bank of Burlington in the sum of $13,500. The bank foreclosed its first mortgage by advertisement. On the day of •sale the second mortgagee gave notice of intention to redeem, and made redemption within the five-day period permitted by law for such redemption. H. T. Hoge was the original owner of all the property involved in this action, and was the mortgagor in each of such mortgages. The sale of the property by reason of the foreclosure of the first mortgage was on the 23d day of February, 1917. The respondent, the ■owner of the third mortgage as well as of the first mortgage, gave no notice upon the day of sale of such property of its intention to make redemption. In July, 1917, the defendant commenced foreclosure proceedings by advertisement upon the third mortgage upon the same property, and such foreclosure was enjoined on July 13, 1917, by the plaintiffs. Afterwards the defendant commenced an action to foreclose its third mortgage.

The legal propositions at the bottom of this case arise from the •construction to be placed upon redemption statutes which govern the redemption of property sold at chattel mortgage sale by advertisement. iSuch redemption is governed by §§ 6717-6719, and 8134 of the Compiled Laws of 1913, which are as follows:

“Section 6717: Every person having an interest in property, subject to a lien, has a right to redeem it from the lien, at any time after the ■claim is due and before his right of redemption' is foreclosed.

“See. 6718: One who has a lien inferior to another upon the same property has a right: 1. To redeem the property in the same manner as *280 its owner might from the superior lien; and, 2. To be subrogated to all the benefits of the superior lien when necessary for the protection of his interests, upon satisfying the claim secured thereby.

“Sec. 6719: Redemption from a lien is made by performing the act for the performance of which it is a security, and paying the damages, if any, to which the holder of the lien is entitled for delay, or by offering to perform such act and pay such damages; provided, that if the act requires the delivery of money, property or a conveyance of property the same shall be deposited and notice thereof given as provided in § 5263.”

“Sec. 8134: Any mortgagor of personal property, or his assignee, may redeem the same from a sale upon foreclosure of any mortgage within five days after such sale, exclusive of the day of sale, by paying or tendering to the owner of the mortgage at the time of sale, his agent or attorney, or the person making the sale, the amount for which said property was sold with the costs of sale and interest at the rate of 7 per cent per annum from the date of the sale. The mortgagor or his assignee desiring to redeem such property shall at the time of sale give written notice to the person making the sale of his desire to make such redemption; otherwise he shall be deemed to have waived his right to do so. In case such notice is served, the person making such sale shall retain the possession of the property sold until the expiration of said five days and shall be entitled to his reasonable expenses in caring for the same. - In case a part only of the property sold is redeemed the redemptioner shall pay or tender in addition to the price for which such part was sold such proportion of the costs of sale as said price bears to the entire price of all the property sold and also the reasonable expense of caring for the property redeemed and interest.”

It will be noticed that § 8134 provides the method and manner in which the mortgagor or his assignee may make redemption. If the mortgagor did not wish to make redemption he could assign all his interest to another person, who would then be the assignee of the mortgagor, and such assignee could make redemption in the same manner and with the same effect as the mortgagor, and with the same rights and privileges as such mortgagor. This section makes no provision for redemption by one holding a lien inferior to another upon the same property, but, as we shall hereafter see, the provisions of this *281 section are also rules to be observed by redemptioners holding-inferior liens upon the same property. Under § 6717 every person having an interest in property subject to a lien has a right to redeem it from the lien at any time after the claim is due and before his right of redemption is foreclosed. Passing from this section to the immediate consideration of § 6718, we find one who has a lien inferior to another upon the same property has a right to redeem the property in the same manner as its owner might from a superior lien, and be subrogated to all the benefits of the superior lien when necessary for the protection of his interests upon satisfying the claims secured thereby. The rule then to be followed by a redemptioner holding an inferior lien upon the same property is the same as that of the mortgagor or the owner of the property. If, therefore, we determine what the owner or mortgagor must do in order to place himself in position to make a redemption, we will have at the same time determined what rule must be followed by one holding an inferior lien upon the same property, who -desires to make redemption. The mortgagor or owner of personal property, or his assignee, may redeem the same from a sale upon foreclosure of any mortgage within five days after such sale, exclusive of the day of sale'. In what manner may he do this ? By paying or tendering to the owner of the mortgage at the time of sale, within five days after time of sale, his agent or attorney, or the person making the sale, the amount for which such property was sold, with the costs of sale and interest at the rate of 7 per cent per annum from the day of sale. Provided, however, that the owner or mortgagor or his assignee shall at the time of sale give written notice to the person making the sale of his desire to make such redemption; otherwise he shall be deemed to have waived his right to do so. These are the requirements with which the mortgagor or owner of the property must comply before he has any right of redemption. If he fails to comply with them he has lost his redemption right, and the absolute title of the property on sale would pass to the purchaser on such sale in the event of failure of the mortgagor or owner to comply with these requirements, assuming there were no other redemptioners. All that has been said in regard to the mortgagor or owner of the property applies with equal force and effect to the holder of an inferior lien upon the same property. In order to put himself in position to redeem, he must follow *282 "the same method and rule as that followed by the mortgagor or the ■owner, or the assignee of either. He must tender, within five days .after the time of sale, the amount for which said property was sold at the mortgage foreclosure sale, together with costs and interest; and he must also at the time of the sale serve written notice of his intention to redeem; and if he omits to do either one of these things he is not a redemptioner, and is not in position to claim any of the rights and privileges of redemption. Applying this reasoning to the case at bar-, the first mortgage to the German American State Bank of Burlington in the sum of $4,500 was foreclosed on the 23d day of February, 1917. Upon said day there existed other and inferior liens upon said property, of $3,200 to Fannie W. Norris, the appellant, and one of •'$13,500 to the German American State Bank of Burlington, being the ■same party as the owner of the first mortgage. Upon the day of sale Fannie W. Norris, the holder of the second mortgage, legally served upon the proper party written notice of her intention to redeem, tendered the proper amount of money, and was allowed to make redemption, and procured a certificate of redemption, which operated as a discharge of the first mortgage. The owner of the third mortgage failed to serve notice of redemption, and failed to tender either the amount for which the property was sold at the mortgage foreclosure sale, or that <due any other prior inferior lien holder who had made redemption. In fact, the third mortgagee or inferior lien holder made absolutely no tender of any kind or character, and failed to serve any written notice, ■or any notice, on the day of sale, of intention to make redemption; and therefore, as we view it, by such failure lost all right to make redemption. The second mortgagee, or inferior lien holder, having properly made redemption, was subrogated to all the rights of the purchaser at the sale. What are the rights of the purchaser to which the inferior lien holder is subrogated in case redemption is properly made? To answer this question clearly it is necessary to determine the effect of a chattel mortgage sale. If the chattel mortgage sale is legally held, and all the requirements of law complied with, and the sale is actually and properly made of the property covered by the mortgage, if there is no lawful tender of the amount for which the property was sold at such mortgage sale, and no tender of such other matters as are required to be tendered, and no written notice of redemption is served at the *283 •time of sale, either by the owner, mortgagor, or their assignees, if any, nr by any other redemptioner having an interest in the property, immediately upon the close of snch sale the absolute title to the property so sold passes from the original owner or mortgagor to the purchaser •of such property at such sale, whether it be the mortgagee, or some other person. Where, however, there is a legal redemptioner, which is one who has complied with all the requirements enjoined upon a redemptioner, the purchaser at such foreclosure sale holds the absolute title ■to the property subject to the right of the redemptioner to succeed to such right in case a redemption is legally effected. In other words, the redemptioner succeeds and is subrogated to all the rights which the purchaser at such sale has, including the absolute right and title to the property. The title to the property becomes absolute in the purchaser at. the time of sale as to all persons who have not made any tender as required by law, or served any written notice of intention to redeem. This applies to the mortgagor and owner as well as others who might have become redemptioners. The purchaser at such foreclosure sale, therefore, has absolute title to the property, subject only to the right of other proper and legal redemptioners, to be subrogated to that right by the payment of all that is properly due to the purchaser of such property at the sale, so that each legal redemptioner as he made the redemption and paid the amount due to prior lien holders who have qualified as redemptioners, if done within the five-day period, would in turn be subrogated to the absolute right and title to the property.

The defendants and respondents claim that the statute makes no provisions for a redemption from a redemptioner, and contend that, in order for the third mortgagee to have a chance to make redemption, 'it is necessary for the second mortgagee, after making his redemption from the purchaser at the foreclosure sale, to foreclose his second mortgage in order to give the third mortgagee a chance to redeem. If this logic is sound, then, when the second mortgagee foreclosed his mortgage and the third mortgagee made redemption, paying the whole •amount for which the property was sold at the foreclosure sale of the •second mortgage, and in addition thereto the amount which the second mortgagee had paid as purchaser for the property at the first foreclosure ■sale, then, when the third mortgagee had made such redemption under *284 the theory of the defendants, he would also have to foreclose his third mortgage so as to afford the fourth mortgagee the same opportunity that the third mortgagee had, and so on with the fifth, sixth, and seventh, and any number of mortgages.

We are positive that the defendants’ theory is unsound, illogical, and fails to take into consideration the plain language of our statute. All chattel mortgagees of any given property have a perfect right and remedy under our law to make redemption. All they need do is, on the day of sale, to serve written notice upon the proper person of their intention to make redemption, and make a lawful tender of the amount necessary to pay the amount to the purchaser for which the property was sold upon foreclosure sale, together with the actual amount due upon other senior mortgages and which are prior liens to their mortgage, where such senior mortgagees have legally qualified and brought themselves within the law regarding redemptioners concerning chattel mortgage sales. We are satisfied that every mortgagee of personal property under the law has a plain and adequate remedy of redemption in his. proper order as shown by the order in which such chattel mortgages are filed, by complying with the requirements of law and qualifying himself as a redemptioner by serving written notice of his intention to redeem and making a proper tender, — all in accordance with law and at the proper time and place as defined by law.

The second mortgagee herein having made proper and legal redemption from the purchaser of the property at the foreclosure sale, as we-have seen, became the absolute owner of the property, there being no. other redemptioners, and she became entitled to, and was subrogated to, all the rights of the purchaser of such property at the mortgage foreclosure sale. The rights of the purchaser at the mortgage foreclosure-sale were the possession and right of possession, ownership, and absolute title to the property which the purchaser at such foreclosure sale-purchased. These are the rights to which the second mortgagee herein succeeded. The purchaser at such sale was the first mortgagee. It accepted all its money for the purchase price of such property on such sale from the second mortgagee, the only redemptioner, and a certificate of redemption was issued to the second mortgagee; and the redemption having been made as required by law, she became the absolute *285 owner of such property, and the absolute title to such property passed to her by reason of her redemption, as hereinbefore set forth.

At the inception of this action a temporary injunctional order was applied for by plaintiff, restraining the defendants or any of them from intruding upon or entering upon said premises, or any part thereof, or interfering with the full, absolute, and undisputed possession of such premises pending the suit. Such order was based upon the complaint, which alleged ownership and possession of the property and a conspiracy on the part of the defendants to deprive the plaintiffs of the possession thereof. The plaintiffs further state that the defendants have no right, title, or interest, property or estate, in or to any of said property. The court accordingly issued such injunctional order to be effective pending the litigation. Subsequently an application was made by the defendants upon affidavit to vacate the injunctional order, which application was granted upon the theory and reasons contained in the memorandum decision of the court below. It appears from plaintiffs’ complaint that they are entitled to the relief therein demanded; and having attached an appropriate prayer to such complaint, and the case being one in which a restraining order pending suit should be granted, as we view the case, the court was in error in vacating such restraining order pending suit, and was in error in making its order vacating such injunctional order, and was in error in refusing to continue in force such injunctional'order pending the litigation.

Plaintiffs in the court below, and also during the argument .before this court, offered to take all their money, which included the whole ■amount paid the purchaser at the foreclosure sale of the first mortgage, the amount of the second mortgage, together with all the interest due on either, and all the costs and expenses of the litigation, — all to be paid in cash by the defendants. This court, acting upon such offer, and in the interests and spirit of equity, if any equity there be in this case, permits and orders that the defendants may have ten days from the day the remittitur of the court is filed in the court below in which to pay the plaintiffs in cash all the amounts of money hereinbefore referred to as owing to the plaintiffs by reason of their making redemption from the purchaser at the foreclosure sale, the amount of their second mortgage, together with all costs and expenses which they have *286 paid out or disbursed and wbicb they are entitled to recover, together with interest on all such sums.

The order of the District Court vacating and setting aside such injunctional order pending litigation is reversed, and the case is remanded,, with instructions that the injunctional order of date August 3, 1917,, be reinstated by the Honorable K. E. Leighton, judge of the district court of Ward county, North Dakota, and be continued in full force-pending the litigation and the determination of this case upon its merits at the trial thereof, and for other proceedings in harmony with this opinion. Plaintiffs are granted their costs upon this appeal.