Court Opinion

ID: 3889158
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:18:28.863389+00
Date Added: 2024-06-11T07:42:08.846133
License: Public Domain

I am not able to agree with the disposition made of this case by the majority of the court. It appears to be the theory of the majority that when a junior incumbrancer forecloses his mortgage and purchases the mortgaged property at the foreclosure sale and then purchases the notes secured by the prior mortgage, and takes on assignment of such mortgage, that the mortgaged property becomes a "primary fund" for the payment of both incumbrances and that the owner of the prior mortgage having acquired title to the property through a foreclosure of the junior mortgage, the prior debt becomes extinguished; and this regardless of whether the value of the land equals the amount of both debts or not. This appears to be the rule followed in Bank of Ipswich v. Wilson,52 S.D. 563, 219 N.W. 246, but that case was tried and determined on its own facts, and the facts are that the bank foreclosed a second mortgage and bought the property for the full amount of the mortgage debt. The bank then purchased notes secured by a first mortgage and brought suit to obtain a judgment on the notes. The trial court admitted evidence which showed that the mortgaged property was worth more than the aggregate amount of both the incumbrances. In that situation the trial court applied the "primary fund" doctrine and held that both debts were extinguished and dismissed the action on the notes. The same procedure was followed with the same result in Sletten v. Bank,37 N.D. 47, 163 N.W. 534.
Where the owner of a junior incumbrance purchases property at the foreclosure sale, he is presumed to bid the value of the property less the amount of the prior incumbrance. In that case the value of the property is sufficient to pay both debts and equity will declare that the prior debt is extinguished, but this presumption is rebuttable and where the full amount of the property is *Page 455 
paid on the second mortgage, the above rule does not apply. The court erred in rejecting evidence of the value of the property, and the judgment and order appealed from ought to be reversed.