Equitable Life Assurance Society of the United States v. First National Bank

The Olsons owned property subject to two mortgages. The first mortgage was for $1,250,000, payable to Equitable Life Assurance Society of the United States (Equitable) (plaintiff). The second was for $870,000, payable to First National Bank (FNB) (defendant). The Olsons defaulted on both loans, and Equitable obtained a foreclosure judgment for $1,212,500, the superior lien. The property was ordered to be sold by the Sherriff at a public auction according to South Dakota law at 11:05am on October 15, 1998. On October 14, 1998, Equitable and FNB entered into an agreement where FNB would purchase Equitable’s interest in the property for $1,300,000. FNB wired the funds to Equitable. Before receiving the funds, Equitable’s attorney, Brian Hagg, told the Sheriff he was “95 percent sure” the sale would be called off. Hagg said he would personally inform the sheriff when Equitable received the funds from FNB. Equitable did not receive confirmation of the funds until the following morning, the date of the scheduled sale. Hagg tried to call the Sheriff between 10:00am and 10:30am, but could not reach anyone because the telephone line was busy. The Sheriff commenced the sale at 11:05am. Hagg called again and reached the Deputy Sheriff at 11:15am. He was informed the sale already began. Hagg told the Deputy that the sale should stop as Equitable had been paid and the mortgage was already assigned to FNB. Hagg communicated this directly to the Sheriff at 11:30am. Despite this information, the Sheriff continued the sale and sold the property to Carl Mathews for $1,810,000. Hagg petitioned the circuit court for review. The circuit court upheld the public auction sale. Equitable, FNB, and the Olsons appealed.