Opinion ID: 2220719
Heading Depth: 1
Heading Rank: 3

Heading: the foreclosure sale for western's mortgage

Text: In Western I, we affirmed the district court's order foreclosing Western's mortgage and ordering the sale of the real estate. The City claimed its lien for unpaid assessments was superior to Western's mortgage. We disagreed, noting that `[f]undamental to the law of real property is the rule that one may not convey or alienate a greater interest in land than he owns, and, consistently with this axiomatic principle, it is firmly established that a mortgagor cannot, without the consent of the mortgagee, make a dedication of the mortgaged premises so as to adversely affect the interest of the mortgagee.' [Citations omitted.] 228 Neb. at 782-83, 424 N.W.2d at 593 (quoting Metropolitan Life Ins. Co. v. SID No. 222, 204 Neb. 350, 281 N.W.2d 922 (1979)). Thus, in Western I, we held that because Western did not sign or consent to the dedications ... the assessments for improvements upon the land mortgaged to Western are not valid as against Western's mortgage, and are inferior thereto. 228 Neb. at 787, 424 N.W.2d at 595. Western argues that because the City was a party to the foreclosure action, Western acquired all the rights and interests of the City when Western purchased the property at the foreclosure sale. The purpose of a foreclosure action is to satisfy, out of the proceeds of a sale of the estate in the mortgaged property as it stood at the time the mortgage was executed, the claim of the holder of the obligation when there is a default in the performance of the act it is given to secure. 4 American Law of Property § 16.186 at 446-47 (A. James Casner ed. 1952). As the result of a foreclosure sale of real estate given as security by the mortgagor, the rights of redemption of the mortgagor and junior lienholders who are joined in the action are extinguished, and upon confirmation of the sale, the purchaser obtains title to the `entire interest and estate of mortgagor and mortgagee as it existed at the date of the mortgage.' Id. at § 16.195 at 469 (quoting Rector, etc., of Christ P.E. Church v. Mack et al., 93 N.Y. 488, 45 Am.Rep. 260 (1883)). See, also, Nystrom v. Buckhorn Homes, Inc., 778 P.2d 1115 (Alaska 1989); Valentine v. Portland Timber, 15 Wash.App. 124, 547 P.2d 912 (1976). Cf. 3 The American Law of Real Property §§ 25.05[1] and 25.11[1] (Arthur R. Gaudio ed. 1992) (mortgagor cannot transfer greater interest in the property than he has; senior lienholder is entitled to be paid in full before junior lienholder receives anything). Furthermore, in Metropolitan Life Ins. Co. v. SID No. 222, supra, we held that in the absence of an estoppel, or the consent of the mortgagee to a dedication, a foreclosure sale revokes and nullifies an attempted dedication by a mortgagor. 204 Neb. at 355, 281 N.W.2d at 925. Western cites additional Nebraska decisions in support of the preceding proposition, including Hart v. Beardsley, 67 Neb. 145, 93 N.W. 423 (1903), in which this court held that the purchaser at a foreclosure sale, who had acquired the property in reliance on the law and a court decree declaring his mortgage superior and paramount, obtained every right, title, and interest of all the parties to the foreclosure action. See, also, Nuttelman v. Julch, 228 Neb. 750, 424 N.W.2d 333 (1988) (because the husband's rights and interest had passed to the purchaser upon confirmation of the judicial sale, any lien asserted by his wife was not a property right in or to the property, but merely a charge or security thereon); Butts v. Hale, 157 Neb. 334, 59 N.W.2d 583 (1953) (every interest and right held by a mortgagor, whenever acquired, pass with the mortgage at a foreclosure sale); Clements v. Doak, 140 Neb. 265, 299 N.W. 505 (1941) (a purchaser at a foreclosure sale buys at his peril, but acquires every right and interest of all parties to the action); Criswell v. McKnight, 120 Neb. 317, 232 N.W. 586 (1930) (a mortgagee which failed to protect itself against taxes could not complain about insufficiency after mortgage was satisfied); Arterburn v. Beard, 86 Neb. 733, 126 N.W. 379 (1910) (although all right, title, and interest of defendants in property passed to purchaser at a foreclosure sale, because purchaser had notice of an easement, he bought subject to that easement); Kerr v. McCreary, 84 Neb. 315, 120 N.W. 1117 (1909) (a purchaser at a foreclosure sale acquires the title of all parties to the action, but not the rights of nonparties); Currier v. Teske, 84 Neb. 60, 120 N.W. 1015 (1909) (the purchaser at a foreclosure sale acquires the title only of those who were parties to the action); Young v. Brand, 15 Neb. 601, 19 N.W. 494 (1884) (whatever estate or title mortgagor held was merged in the decree and extinguished by the deed thereunder). However, the City points out that this court has also held that the purchaser of real property at a judicial sale buys at his peril, Hitchcock County v. Cole, 80 Neb. 375, 114 N.W. 276 (1907), and that the deed obtained at such a sale conveys only the estate which would have been conveyed by a quitclaim deed from the execution debtor to the purchaser, Peterborough Savings Bank v. Pierce, 54 Neb. 712, 75 N.W. 20 (1898). Moreover, the City argues that according to § 25-1533, a deed obtained at a judicial sale shall be sufficient evidence of the legality of such sale and the proceedings therein until the contrary be proved, and shall vest in the purchaser as good and as perfect an estate in the premises therein mentioned as was vested in the party at or after the time when such lands and tenements became liable to the satisfaction of the judgment. According to the City's interpretation of § 25-1533, Western, as purchaser at a judicial sale, could obtain only that estate which was vested in BRG at or after the time of the foreclosure action. Although the language of § 25-1533 (the purchaser at a judicial sale takes only the interest that the owner had in the land) might appear to conflict with Nebraska case law (the purchaser at a foreclosure sale takes every right and interest of all parties to the foreclosure action), the language of § 25-1533 contemplates that only one party is liable to the satisfaction of the judgment. In a foreclosure action in which junior lienholders are joined in the action against the mortgagor, they, in a sense, share in liability for the satisfaction of the judgment by being stripped of their interest in the property foreclosed upon. Thus, the rule providing that when a senior mortgagee purchases the mortgaged real estate at a foreclosure sale, the confirmed purchase and sheriff's deed extinguish the rights of junior lienholders who were parties to the action, does not conflict with § 25-1533. See Valentine v. Portland Timber, 15 Wash.App. 124, 547 P.2d 912 (1976). Cf. Hart v. Beardsley, 67 Neb. 145, 93 N.W. 423 (1903) (sections 499 and 853 of the Code of Civil Procedure did not change the common-law rule that in the absence of any reservation in the decree, a foreclosure sale transfers every right, title, and interest of all parties to the suit). Thus, in this case, the City's junior lien was extinguished when Western purchased the property at the foreclosure sale for less than the amount owed on its mortgage, see, Northwestern Mut. Life Ins. Co. v. Nebraska Land Corp., 192 Neb. 588, 223 N.W.2d 425 (1974), and Hadley v. Schow, 146 Neb. 163, 18 N.W.2d 923 (1945), and Western obtained on the date of the mortgage the entire estate belonging to BRG and the property described in the mortgage, less the one parcel whose dedication to the City Western had previously approved. That estate, described in Exhibit A of the mortgage, included the majority of Lots 1 and 2, and the South Half of Northeast Quarter, Section 2, Township 24 North, Range 48, West of the 6th P.M. However, the sheriff's deed given to Western following the confirmation of the foreclosure sale described the property as Lots 1 through 10 inclusive, Block 2.... Thus, although the land was described by metes and bounds in the mortgage, in the sheriff's deed the property was described by lots and blocks. Because the deed uses different terminology to describe the land than does the mortgage, and the record does not reconcile the different descriptions, a question of fact exists as to whether the two documents describe the identical estate.