State Bank of Towner v. Hansen
1990 N.D. LEXIS 134, 113 Oil & Gas Rep. 297, 458 N.W.2d 264 (1990)
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Rule of Law:
A judgment is not rendered void under NDRCivP 60(b) solely by an alleged misapplication of a statute, and motions for relief must be brought within a reasonable time. A debtor's failure to redeem from a foreclosure or tax sale may eliminate their standing to challenge subsequent sales, and courts balance a junior lienholder's right to marshal assets against a debtor's right to direct the sale sequence in a foreclosure.
Facts:
- In February 1975, Albert Hansen borrowed $53,000 from the Bank of North Dakota (BND) and mortgaged 1,040 acres of property, including both surface and minerals, to secure the debt.
- In July 1981, Albert and Dianna Hansen gave the State Bank of Towner (SBT) a $200,000 promissory note, securing it with a second mortgage on only the surface of the property previously mortgaged to BND.
- In November 1984, the Hansens defaulted on their debt to SBT.
- In December 1984, James H. Williams, the president of SBT, and his wife, Connie D. Williams, purchased the property from the McKenzie County Auditor for 1983 delinquent taxes and received tax sale certificates.
- In May 1988, the McKenzie County Auditor issued notices to Dianna Hansen that the time for redemption from the tax sale would expire, but Hansen did not redeem.
- On September 12, 1988, the County Auditor issued a corrected auditor’s tax deed conveying the property to Williams.
- On April 28, 1989, at BND's senior mortgage foreclosure sale, the court ordered the minerals to be sold first, which sold for $74,680 to James Williams and others (original 'owner/directors' of SBT), satisfying the BND judgment.
- The BND foreclosure sale price for the minerals fully satisfied the BND mortgage debt, meaning the surface of the property was not sold.
Procedural Posture:
- In February 1985, State Bank of Towner (SBT) sued the Hansens in state trial court to foreclose its junior mortgage.
- The Hansens filed for bankruptcy, which stayed the SBT foreclosure action.
- After the bankruptcy was dismissed, Albert Hansen's estate was substituted as a defendant in SBT's foreclosure.
- On January 12, 1988, the trial court entered a judgment of foreclosure in favor of SBT.
- On February 16, 1988, the foreclosure sale occurred, and the property was sold in one parcel to SBT, despite Dianna Hansen's request for separate parcels.
- On February 29, 1988, the trial court signed the order confirming the SBT foreclosure sale.
- In August 1988, the Bank of North Dakota (BND) sued to foreclose its senior mortgage on the Hansen property.
- In January 1989, James H. Williams and Connie D. Williams sued to quiet title to the property based on their tax deed.
- On February 15, 1989, Dianna Hansen moved under NDRCivP 60(b) for relief from SBT's foreclosure judgment and sale.
- On March 7, 1989, BND obtained a judgment of foreclosure against Hansen.
- Hansen then moved in the BND foreclosure for an order directing that the surface be sold first, then the minerals.
- The trial court ruled that the minerals should be sold before the surface, but in separate parcels and in the sequence designated by Hansen.
- On May 4, 1989, the trial court granted summary judgment to Williams in their quiet title action.
- On May 15, 1989, an order confirmed the BND foreclosure sale of minerals to Williams and others.
- On May 19, 1989, the trial court denied Hansen’s Rule 60(b) motion for relief from the SBT foreclosure judgment and sale.
- Dianna Hansen appealed these three adverse decisions to the North Dakota Supreme Court.
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Issue:
Does a trial court err in denying a Rule 60(b) motion for relief from a foreclosure judgment when the alleged error (sheriff's refusal to sell in parcels) does not void the judgment and the motion is untimely; or in granting summary judgment quieting title based on a tax deed purchased by an officer of a junior mortgagee where the mortgagor failed to redeem; or in ordering the sale sequence of property in a senior mortgage foreclosure to protect a junior lienholder's marshaling rights over the debtor's requested sequence, especially when the debtor no longer holds title?
Opinions:
Majority - Meschke, Justice
No, the trial court did not err in denying Hansen’s Rule 60(b) motion, granting summary judgment to Williams quieting their tax title, or ordering the sequence of sale in the BND foreclosure. A judgment is void only if the court lacked subject matter or personal jurisdiction; an alleged misapplication of a statute (like NDCC 28-23-07 regarding separate parcel sales) constitutes legal error, not a jurisdictional defect, and therefore does not make a judgment void under Rule 60(b)(iv). Furthermore, Hansen's Rule 60(b) motion was untimely because she had immediate knowledge of the alleged sale irregularities after the February 1988 sale but waited until February 1989 to file, without explanation, despite notice of the judgment and order confirming sale in early 1988. Hansen's argument to invalidate Williams's tax title under NDCC 57-45-02 (mortgagee pays taxes, amount added to lien) is unavailing because she lost her right to redeem from the SBT foreclosure in February 1989 and failed to tender redemption for the tax sale or the amount of delinquent taxes as required by NDCC 57-45-10. Without a right to redeem or an effort to redeem, the statute does not apply to invalidate a tax deed. Finally, Hansen's standing to challenge the BND foreclosure sale is doubtful given she no longer had any equity of redemption in the property due to the SBT sheriff's deed and Williams's tax deed. Even if she had standing, the trial court properly marshaled the property for the protection of SBT as a junior lienholder under NDCC 13-01-04 and 35-01-15. These marshaling statutes, designed for equitable results, should be harmonized with the debtor's manner-of-sale statutes (NDCC 28-23-07 and 1987 N.D.Sess.Laws Ch. 194). The court balances these competing equities; selling minerals first protected SBT without injuring Hansen, especially since the mineral sale satisfied the BND debt, leaving the surface, including any homestead rights, untouched.
Analysis:
This case reinforces the principle that procedural errors, short of jurisdictional defects, do not render judgments void, underscoring the importance of timely appeals and Rule 60(b) motions. It clarifies that a debtor's failure to exercise redemption rights can preclude challenges to subsequent property transfers, even when tax purchases are made by parties related to original creditors. Furthermore, it provides guidance on harmonizing seemingly conflicting statutes, illustrating that courts will balance equitable principles like marshaling against a debtor's statutory rights to direct sale sequences in complex foreclosure scenarios, especially to protect junior lienholders.
