Northern Cattle Co. v. Munro , 83 Minn. 37 ( 1901 )

START, C. J.²

This is an appeal by the plaintiff from an order sustaining a general demurrer to its complaint. Tbe material facts alleged in tbe complaint are to the effect following: A mortgagee in a real-estate mortgage containing tbe usual power of sale and securing five promissory notes of $280 each sold one of tbe notes, which came to the bands of tbe plaintiff as owner in tbe usual course of business. No written assignment of the mortgage or any interest therein was ever made by tbe mortgagee or any one' else. Tbe mortgagee, after default in tbe conditions of tbe mortgage, and on February 21, 1895, foreclosed it by advertisement, pursuant to tbe power of sale therein. In bis notice of sale be claimed as due and unpaid upon tbe mortgage the. full amount originally secured thereby. The foreclosure sale was made by tbe defendant as sheriff, and ,the mortgaged premises sold for an amount, plus tbe costs of foreclosure, equal to tbe entire indebtedness secured by tbe mortgage, including tbe amount due upon tbe note owned by tbe plaintiff, which was then, and ever since has been, in its actual possession. He bad no notice of the foreclosure sale until after tbe date thereof’. The defendant, as sheriff, received tbe amount for which tbe premises were sold, and prior to tbe commencement of this action, which was about February, 1898, tbe plaintiff demanded from tbe defendant the amount of bis note, and it was refused.

Tbe complaint does not allege that tbe defendant bad any knowledge at any time that tbe plaintiff , was tbe owner of one of tbe notes secured by tbe mortgage, or that be bad any interest or equity in tbe proceeds of tbe foreclosure sale, or that tbe defendant bad in bis bands such proceeds, or any part thereof, at tbe time such demand was made. Tbe appellant, however, claims that it appears from tbe complaint that tbe defendant still retains in his possession tbe proceeds of the foreclosure sale, because it is alleged therein that they were paid to him at tbe time tbe sale was made, some three years before tbe commencement of- this action. Such is not tbe necessary or reasonable inference from tbe allegations of tbe complaint. Tbe rule that a condition of things once shown to exist is presumed to continue until the contrary is made to appear has no application to this case, for it was not tbe duty of the sheriff to retain tbe money, but to pay it to the party appearing to be entitled thereto; and it cannot be presumed that he neglected his duty in this respect for the purpose of helping out the allegations of the complaint.

. The only question, then, for our decision, is whether a sheriff who makes the sale on the foreclosure by the mortgagee of a real-estate mortgage by advertisement, and pays the whole proceeds of the sale to him, without any notice that one of the notes secured by the mortgage has been sold to a third party, is liable to such party for the amount of his note. We answer the question in the negative. The plaintiff, by the transfer of one of the notes secured by’ the mortgage, acquired an equitable pro rata interest in the security, but no legal title to the mortgage, nor any right to exercise the power of sale by virtue of which the mortgage was foreclosed. The legal title to the mortgage and the right to exercise the power of sale remained in the mortgagee, and he alone had the right to foreclose the mortgage by advertisement. But he held the plaintiff’s equitable pro rata interest therein in trust for him, and when he received the proceeds of sale he held so much thereof as belonged to the plaintiff in trust for him. Wilson v. Eigenbrodt, 30 Minn. 4, 13 N. W. 907; Bottineau v. Aetna L. Ins. Co., 31 Minn. 125, 16 N. W. 849; Solberg v. Wright, 33 Minn. 224, 22 N. W. 381; Burke v. Backus, 51 Minn. 174, 178, 53 N. W. 458. It was the right and duty of the defendant, as sheriff, to pay the whole amount necessary to satisfy the mortgage to the mortgagee, who had the sole legal right to foreclose it by advertisement, unless he had notice of the plaintiff’s interest therein. The complaint does not state a cause of action, because it fails to allege that the defendant had such notice.

Order affirmed.

2 BROWN, J., having heard the case in the court below, took no part.