Lake Region Credit Union v. Crystal Pure Water - 502 N.W.2d 524 (N.D. 1993)

Rule:

Forced sale of a homestead for a mortgage debt, in accordance with N.D. Cent. Code § 47-18-04(2), does not violate N.D. Const. art. XI, § 22. The legislature has provided for a broad exemption of a homestead from judgment liens and forced sales for other unsecured indebtedness, while allowing each family to use the homestead as necessary by mortgaging it.

Facts:

The creditor agreed to loan $125,000 to defendant debtor corporation. The creditor took real estate mortgages against both tracts and received security interests in all of the corporation's personal property, including a water permit. The corporation’s owners each personally guaranteed the corporate debt. The parties agreed that, upon refinancing, title to both tracts of land would be held by the corporation. The corporation defaulted on the loan, and the creditor brought the present action to foreclose its mortgages and security interests, and to recover on the personal guaranties. Judgment was entered in favor of the creditor. One of the corporation’s owners appealed, arguing that the real estate constituted her homestead and could not be foreclosed as a matter of law.

Issue:

May a homestead be subject to a sheriff's sale in a foreclosure action? 

Answer:

Yes.

Conclusion:

The court affirmed the trial court’s judgment, and held that the debtor had relinquished her claim to the real property when the redemption period in the prior foreclosure action had expired. Further, the court pointed out that a forced sale pursuant to N.D. Cent. Code § 47-18-04(2) did not violate N.D. Const. art XI, § 22. The court also rejected the debtor's argument that the credit union did not have the authority to foreclose a security interest in the state water permit. The court found that the state water permit was akin to a state liquor permit and constituted a general intangible under N.D. Cent. Code § 41-09-06 and thus was a proper subject of a security interest. Finally, the court determined that the debtor's failure to provide a transcript of the trial court's proceedings resulted in a waiver of her right to appeal any other issues.