## Facts

- The Olsons owned real property encumbered by a first mortgage to Equitable ($1,250,000) and a second mortgage to First National Bank (FNB) ($870,000).
- After default, Equitable obtained a foreclosure judgment on its senior lien for approximately $1,212,500, and the sheriff scheduled a public auction for October 15, 1998 at 11:05 a.m.
- The day before the sale, Equitable and FNB agreed in writing that FNB would purchase Equitable’s interest for $1,300,000, and FNB initiated a wire transfer to Equitable.
- Equitable’s counsel told the sheriff he was not yet certain the sale would be cancelled and would notify the sheriff when funds were confirmed.
- On the morning of the sale, Equitable confirmed receipt of the wire transfer and attempted to contact the sheriff before the scheduled start time but could not reach him.
- The sheriff started the auction as scheduled; after bidding began, Equitable’s counsel told a deputy and then the sheriff that Equitable had been paid, its interest had been assigned to FNB, and the sale should be stopped.
- The sheriff nevertheless completed the auction, selling the property to a third-party purchaser (Mathews) for $1,810,000.
- The circuit court confirmed the sheriff’s sale; Equitable, FNB, and the Olsons appealed the confirmation order.

## Issues

1. Whether a mortgagee/judgment creditor may cancel a sheriff’s foreclosure sale after bidding has begun when its judgment has been satisfied and its interest assigned.
2. Whether the sheriff acted improperly by continuing the sale after being notified that the judgment was paid and the creditor directed cancellation.
3. Whether the circuit court erred by confirming the sale conducted under those circumstances.

## Decision

- The Supreme Court of South Dakota reversed the order confirming the sale and remanded.
- Equitable, as the judgment creditor initiating execution, retained authority to cancel the foreclosure sale even after bidding began once its judgment was satisfied and its interest assigned.
- Upon notice that Equitable had been paid and directed cancellation, the sheriff should have terminated the sale; proceeding to completion exceeded the sheriff’s authority under the satisfied judgment.
- Because the sale was improperly continued, confirmation was improper.

## Legal Principles

- A foreclosure sale conducted by a sheriff is an execution process derivative of, and limited by, the judgment being enforced.
- Satisfaction of the foreclosing creditor’s judgment eliminates the sale’s enforcement purpose; the creditor may withdraw or cancel the sale even after bidding has commenced, so long as purchaser rights have not vested in a way that legally precludes cancellation.
- A court’s confirmation of a sheriff’s sale is not automatic; confirmation should be denied when the sale was not conducted consistent with the judgment, applicable law, and equitable considerations.

## Conclusion

The court held that once the foreclosing creditor’s judgment was paid and the creditor directed cancellation, the sheriff had no proper basis to continue the auction; the resulting sale could not be confirmed, and the confirmation order was reversed and remanded.


Equitable Life Assurance Soc'y of the U.S. v. First Nat'l Bank, 602 N.W.2d 291 (S.D. 1999)