Principal Residential Mortgage v. Nash

Principal Residential Mortgage v. Nash - Reply Brief

SUPREME COURT OF NORTH DAKOTA

Case No. 990132

Principal Residential Mortgage, Inc.,

)
)
Plaintiff and Appellant, )
)
vs. )
)

Zann Nash, Defendant and Appellant,

) REPLY BRIEF
)
and Montgomery Ward Credit and )
)
A.R. Audit Services, Inc., )
)
Defendants )

APPEAL FROM THE SOUTH CENTRAL DISTRICT COURT,

MORTON COUNTY,

HONORABLE BRUCE HASKELL, PRESIDING

For the APPELLANT:

John J. Gosbee, Esq.

Gosbee Law Office

103 3rd Avenue, N.W.

Mandan, ND 58554-3129

(701) 663-2225

July 16, 1999

TABLE OF CONTENTS

TABLE OF CONTENTS i

TABLE OF AUTHORITIES ii

INTRODUCTION 1
II. NASH DID NOT WAIVE NOTICE 1
III. STANDARD OF REVIEW 2
IV. APPLICATION OF EXECUTION STATUTES 3

NASH DID NOT HAVE ACTUAL NOTICE 6

VI.

VACATING THE SALE IS THE ONLY REMEDY 7

VII.

THERE WAS A SURPLUS, AND IT WAS CONVERTED 9

VIII.

BANKRUPTCY COURT'S AWARD OF ATTORNEY 12

IS NOT RES JUDICATA

IX.

CONCLUSION 13

CERTIFICATE OF SERVICE 14

Word Count 14

TABLE OF AUTHORITIES

Cases

Page(s)

Endicott-Johnson Corp. v. Encyclopedia Press, Inc. 4-5

266 U.S. 285; 45 S.Ct. 61; 69 L.Ed. 288 (1924)

Gosbee v. Bendish 8

512 N.W.2d 450 (N.D. 1994)

Hannah v. DeMarcus 4-5

390 U.S. 736; 88 S. Ct. 1437; 20 L. Ed. 2d 270 (1968)

Martin v. Rath 12

1999 ND 31, 589 N.W.2d 896

Mullane v. Central Hanover Bank & Trust Co. 5

339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950)

Past v. Rennier 4

30 N.D. 1; 151 N.W. 763 (1915)

Reed v. University of North Dakota 12

1999 ND 25, 589 N.W.2d 880

Schlosser v. Great Northern Railway Co. 11

20 N.D. 406, 127 N.W. 502 (1910)

Wills v. Schroeder Aviation, Inc. 11

390 N.W.2d 544 (N.D. 1986)

Constitutional Provisions

Page(s)

N.D. Const., Art. I, § 9 8

Statutes

Page(s)
NDCC §9-07-19 2
NDCC §9-10-06 11
NDCC §28-23-04 3, 6
NDCC §31-11-05(14) 7-8
NDCC Ch. 32-19.1 6
NDCC §32-19.1-02 6

Court Rules

Page(s)
Rule 5(a), NDRCivP 1, 3, 6, 7, 13
Rule 81, NDRCivP 5
Rule 81, NDRCivP, Table A 5
Rule 81(c), NDRCivP 5
Rule 3.2(a), NDRoC 3

Orders of Court

Page(s)
Order of Adoption, December 8, 1997, 1

Supreme Court No. 970225

I. INTRODUCTION .

On December 8, 1997, this Court amended Rule 5(a), NDRCivP, to require that "every proposed order, ... [and] every paper filed with the clerk or submitted to the judge" be served on opposing parties. Supreme Court No. 970225, Order of Adoption, December 8, 1997, emphasis added. This appeal tests whether this Court meant what it said.

PRM offers a multitude of red herrings trying to convince us that those words, plain as they are, mean something else. If a year ago PRM had spent just 77 cents mailing the papers at issue, this Court never would have heard of Zann Nash. She is before this Court now because PRM decided Rule 5(a) is meaningless.

II. NASH DID NOT WAIVE NOTICE.

PRM claims that Nash waived notice of further actions by PRM, citing ¶8 of the mortgage. PRM's Brief, p 4. That paragraph states:

Notice of the exercise of any option granted... to [PRM], is not required to be given, [Nash] hereby waiving any such notice.
Mortgage, ¶8, emphasis added. Appx., p. 12.

That paragraph limits waiver of notice to options granted to PRM in the mortgage or its underlying note. The only option dealing with sale of Nash's home is in paragraph 9:

[In case of default, Nash authorizes PRM] to sell [her home] and convey the same to the purchaser, in fee simple, agreeably to the statute in such case made and provided ... .
Mortgage, ¶9, emphasis added. Appx., p. 12.

PRM never exercised its option to sell Nash's home. That is because in North Dakota the lender doesn't conduct the sale. The sheriff does. Since PRM never exercised any option to sell, Nash never waived notice of anything. PRM's predecessor is the author of this mortgage. Errors and ambiguities are construed against PRM. NDCC §9-07-19.III. STANDARD OF REVIEW.

PRM claims the standard of review is "abuse of discretion." PRM's Brief, pp. 5-6. Nash has already explained her reasoning that the trial court's decision is fully reviewable. Appellant's Brief (Nash's Brief), p. 11. However, even applying "abuse of discretion," PRM's argument destroys its theory. PRM relies on an observation that a "confirmation will not be refused ... in the absence of fraud or misconduct." PRM's Brief, p. 6, citing 47 AmJur2d, Judicial Sales §283.

It cannot be rationally denied that the Order Confirming Sale (Docket Item 43) was heard "on motion of Timothy A. Priebe, Attorney for [PRM]" (Appx., p. 30), that this motion was never served on Nash before Judge Haskell signed the Order (Rule 3.2(a), NDRoC), that both the motion and order were a "paper filed with the clerk" (Rule 5(a), NDRCivP), and that the Order had been "submitted to the judge" (Ibid.). With all these rule violations, there was indeed "fraud or misconduct."

IV. APPLICATION OF EXECUTION STATUTES.

PRM claims that the execution statutes don't explicitly require it to provide Nash notice. PRM's Brief, pp. 6-15. More accurately, they are silent on the subject. Rule 5(a) isn't silent. The two forms of notice merely complement each other. Nash's Brief, pp. 26-28.

As Nash has pointed out, PRM's reasoning would make NDCC §28-23-04 unconstitutional. Nash's Brief, pp. 23-28.

PRM cites Past v. Rennier, 30 N.D. 1, 151 N.W. 763 (1915) and Endicott-Johnson Corp. v. Encyclopedia Press, Inc., 266 U.S. 285; 45 S.Ct. 61; 69 L.Ed. 288 (1924). PRM's Brief, pp. 8-9. In 1915, PRM's conduct may well have been proper. Back then, Nash wouldn't have even been allowed to vote. If she were Black, she'd have ridden in the back of the bus. Times have changed.

The U.S. Supreme Court has intimated it should overrule Endicott-Johnson. That Court "granted certiorari to determine whether Endicott should be overruled." Hannah v. DeMarcus, 390 U.S. 736, 737; 88 S. Ct. 1437, 1438; 20 L. Ed. 2d 270 (1968), dissenting opinion of Justice Douglas (joined by Chief Justice Warren and Justice Black) to decision to dismiss writ of certiorari as improvidently granted, citing initial grant of certiorari at 389 U.S. 926; 88 S. Ct. 288; 19 L. Ed. 2d 277 (1967). Justice Douglas's comments are helpful:

Endicott was decided in 1924, and its holding that due process does not require notifying a judgment debtor of execution on his property has never been reaffirmed by this Court. Significantly, the Court in Endicott did not hold that absence of any notice at all was permissible, but rather that the judgment debtor, having had his day in court and being aware of the judgment against him, is expected to know that execution may follow.
Since the Endicott decision, there has been not only an expansion of the scope of the notice requirement itself (e. g., adoption, felon's duty to register, and property tax foreclosure), but a new approach to the constitutional sufficiency of the means of giving notice in particular types of cases. "The means employed must be such as one desirous of actually informing the [opposing party] might reasonably adopt to accomplish it." Mullane v. Central Hanover Tr. Co., 339 U.S., at 315.
390 U.S. at 740-41; 88 S. Ct. at 1440-41, internal citations omitted.

The Supreme Court dismissed the writ, after briefing on the merits, because it accepted the judgment creditor's argument that the debtor had "bypassed state grounds which might have entitled her to relief." 390 U.S. at 738; 88 S. Ct. at 1438, Justice Douglas dissenting.

PRM says the listing of statutes under Table A associated with Rule 81, NDRCivP, carves this sale out of the Rules of Civil Procedure. PRM's Brief, pp. 12-13. However:

Where any statute heretofore or hereafter enacted, whether or not listed in Table A, provides that any act in a civil proceeding shall be done in the manner provided by law or as in a civil action, such act shall be done in accordance with these rules.
Rule 81(c), NDRCivP, emphasis added.

As PRM notes (PRM's Brief, p. 20), this case is governed by the Short-Term Mortgage Redemption Act, NDCC Ch. 32-19.1. Under that Act:

Where not inconsistent with the provisions of this chapter, the procedure for foreclosures set forth in the laws of the state of North Dakota as now enacted or hereinafter amended shall apply and be followed in any foreclosure hereunder.
NDCC §32-19.1-02, emphasis added.

Even if it could be argued that Rule 5(a) doesn't apply, PRM faces the problem that NDCC §28-23-04 is constitutionally inadequate if construed as PRM suggests. PRM stands on gelatinous ground in believing that due process does not require it to tell Nash the date it's going to sell her home at public auction. V. NASH DID NOT HAVE ACTUAL NOTICE.

PRM misleads this Court as to the record on whether Nash or her counsel had actual notice of the sheriff's sale:

Here, it is admitted by Nash's attorney that she had actual notice of the pending sale. On page 39 of her brief to the trial court, she states that her attorney had actual notice of the "special execution" issued by the clerk as early as July 9, 1998.
PRM's Brief, p. 17, emphasis added, internal citations omitted.

Nash's attorney admitted no such thing. The real story is:

Nash's counsel represents ... that he never received a copy of these items from opposing counsel or anyone else. On July 9, 1998, counsel called the clerk's office to learn if any further pleadings had been filed in the case. He was told about Register Item 39, and concluded that, as required by Rule 5(a), NDRCivP, he would receive copies of any further pleadings filed in the case.

Motion to Vacate, etc., pp. 3-4. Docket Item 44.

Counsel learned only that the execution (Docket Item 39) had been "returned per request of attorney." Register of Actions, No. 39. A fair conclusion from that information is that PRM had for some reason decided to wait before going forward. PRM claims Nash's counsel had some duty to "inquire" of PRM to learn its plans. PRM's Brief, p. 18. There is no duty to tease the sleeping dog. Rather, in what PRM must view as insane delusion, counsel believed he could rely on Rule 5(a):

I literally relied on [Rule 5(a)]. I honestly relied [on] those [words], that's why I figured, as soon as something happens, I'm going to hear about it.
Transcript, 16:20-22, emphasis added.

VI. VACATING THE SALE IS THE ONLY REMEDY.PRM contends that vacating the sale is inappropriate. PRM's Brief, pp. 18-22. Yet PRM suggests no other remedy. "For every wrong there is a remedy." NDCC §31-11-05(14). Further, Nash has a right of access to the courts of this state. N.D. Const., Art. I, §9.

PRM made its ill-gotten gains by improperly procuring an order confirming the sale. Docket Item 43. The only possible remedy is to vacate that order. Doing so does nothing more onerous to PRM than putting it and Nash back to where they were before the sheriff's sale. Nothing prevents PRM from setting another sale in motion. This time Nash will be allowed to be heard on how much is owed. The redemption price will properly exclude PRM's attorney fees.

This Court does not exercise appellate review when it is "unable to render effective relief." Gosbee v. Bendish, 512 N.W.2d 450, 453 (N.D. 1994) (Citizen, having obtained disputed document during pendency, but before trial on the merits, of open public records case, was not entitled to appellate adjudication of trial Court's decision that the document was not a public record in the first place.) Although the citizen in Gosbee had obtained the document he was looking for, Nash has yet to have any effective relief.

This Court can provide effective relief. Vacating the sale will give Nash valuable relief obtainable no other way. She can bid at the sale. She can file a Chapter 13 petition. She can at least be heard on the issue of how much she owes.

VII. THERE WAS A SURPLUS, AND IT WAS CONVERTED.

PRM contends that it didn't "collect" attorney fees because it only submitted a "credit bid" and there were "no cash sale proceeds." PRM's Brief, pp. 22-26, esp., pp. 23, 24. Yet PRM concedes:

A creditor's bid is nothing more than a calculation of the amount the debtor owes to pay off the loan. It generally includes principal, interest, costs[,] and fees. It sets the price for which the debtor, or any other potential buyer[,] may purchase the property (by outbidding the creditor/mortgage company).
Ibid., p. 23, emphasis added.

That's the point. The key issues are determining how much the debtor owes and what the property is worth. PRM's credit bid is its assertion that Nash owed at least $33,367.19. Nash contends she owed roughly $27,000. Nash's Brief, p. 34. Nash has never had a day in court to determine who is right. PRM acknowledges that Nash's home is worth somewhere between $35,000 and $40,000. Ibid., p. 8. If so, someone is going to make a profit when Nash's home is ultimately sold to a third party.

PRM makes much of Nash's failure to bid at the sheriff's sale. Of course that's because she wasn't told when it was. Even if Nash decided just to silently watch the sale, she had a stake it its outcome. She was entitled to "the overplus, if any." Mortgage, ¶9. Appx., p. 12. The "overplus" (or deficiency) is the difference between the successful bid and the debtor's debt. There is no dispute about the amount of PRM's supposedly successful bid. The dispute is over how much Nash owed.

Regardless of whether PRM tendered cash, a check, or (as it did here) just a letter to the sheriff, it bid $33,367.19. If Nash owed more, there is a deficiency. If she owed less, there is an "overplus" that hasn't been paid to her.

PRM's law firm, Mackoff Kellogg (MK), howls about Nash's request to include MK as a party in an amended counterclaim for conversion. PRM's Brief, pp. 25-26. Although Nash appeals from the trial Court's determination that there is no conversion, she has not appealed the trial Court's denial of her motion to add MK, so is puzzled by PRM's inclusion of this issue in its brief.

The trial Court said that, because it had granted PRM's motion for summary judgment, Nash had no answer to amend, but a conversion claim could be the subject of a separate lawsuit. Transcript, 11:18-23.

MK claims it was merely PRM's agent. PRM's Brief, p. 26. That defense has been discredited since Nuremberg. Further, an agent is personally responsible to third parties for torts he commits on behalf of his principal. "Everyone is responsible ... for the result of his willful acts ... ." NDCC §9-10-06. Wills v. Schroeder Aviation, Inc., 390 N.W.2d 544 (N.D. 1986) (Corporate president responsible for negligent acts he commits on behalf of corporation.) Schlosser v. Great Northern Railway Co., 20 N.D. 406, 127 N.W. 502 (1910). (Agent is liable to third parties for negligence resulting from discharge of agency.)

Therefore, if Nash can show that her property was converted and that MK did the acts amounting to the conversion, MK is liable.

VIII. BANKRUPTCY COURT'S AWARD OF ATTORNEY

FEES IS NOT RES JUDICATA.

PRM contends that the Bankruptcy Court's decision on attorney fees is res judicata in state court. PRM's Brief, p. 24. "Res judicata precludes the same parties ... from relitigating claims ... raised in a prior action resulting in a final judgment on the merits by a court of competent jurisdiction." Reed v. University of North Dakota, 1999 ND 25, ¶10, 589 N.W.2d 880, emphasis added. The Bankruptcy Court has no competent jurisdiction to award attorney fees anywhere outside a bankruptcy petition. The Bankruptcy Court (Nash's Brief, pp. 29-30) recognized that PRM wouldn't be entitled to attorney fees in state court. The Bankruptcy Court is not an alchemist with the power to transform attorney fees to collectible status in state court.

Further, the "doctrine of res judicata does not apply to matters which are incidental or collateral to the determination of the main controversy." Martin v. Rath, 1999 ND 31, ¶9, 589 N.W.2d 896 (Child support award in earlier divorce proceeding not res judicata to later claim of interest on unpaid support.) Here, PRM and Nash have never litigated in state court the issue of attorney fees because PRM simply isn't entitled to them.

IX. CONCLUSION.

Struggle as it might, PRM cannot escape the fact that it ignored Rule 5(a), NDRCivP, and never told Nash when her home would be sold on the courthouse steps. PRM's failure to obey that rule led to an error in its computation of what Nash owed, an error that could have been corrected if PRM had just given Nash notice. The only appropriate remedy is to vacate the sale and put the parties in the positions they were in just before PRM violated Rule 5(a). Dated July 16, 1999.

_________________________

John J. Gosbee (#3967)

Attorney for Appellant

103 3rd Avenue, N.W.

Mandan, ND 58554-3129

(701) 663-2225

CERTIFICATE OF SERVICE

In accordance with Rule 25(d), NDRAppP, I certify that I have served the Reply Brief by mailing a copy of that document to:

Glen R. Bruhschwein, Esq.

Mackoff, Kellogg, Law Firm

P.O. Box 1097

Dickinson, ND 58602-1097

Dated July 16, 1999.

_________________________

John J. Gosbee

Word Count (entire document):

2,963

Word Count (main body of brief):

2,489