Respondent John I. Zacher was convicted of defeating a security interest in real property in violation of Minn.Stat. § 609.615 (1992), received a stay of imposition of sentence, and was placed on probation not to exceed 5 years. The court of appeals reversed the conviction, holding that a mortgagor's conduct in removing fixtures after the foreclosure sale is not within the crime of defeating a security in real property because the mortgage, following foreclosure, no longer exists as a security interest. We reverse the decision of the court of appeals and reinstate the conviction.
The Staples State Bank ("the bank") made a loan to Zacher for $50,000 on May 19, 1987, secured by a mortgage on the North Fourth Office Building which Zacher owned. The appraisal of the building on which the bank based the loan included improvements Zacher intended to make with $20,000 of the proceeds: a new furnace and air conditioning system, doors, windows, paving blocks, and light fixtures. The mortgage secured repayment of the debt with interest and specified that the secured property included all existing or later added improvements and fixtures.
The mortgage was foreclosed by advertisement and at the mortgage foreclosure sale on March 13, 1990, the bank purchased the property for the full amount of the mortgage, plus back taxes of $52,491.65, subject to Zacher's statutory right of redemption at any time within 6 months. See Minn.Stat. § 580.23, subd. 1 (1992). On September 12, 1990, one day before the redemption period was to expire and Zacher was to lose possession of the office building, he removed the furnace, air conditioner, lighting fixtures, doors, and paving blocks. Zacher also cut the sewer line to the office building. The line could be accessed only through other property Zacher still owned. The items taken by Zacher were found in his storage facility during the execution of a search warrant.
Zacher was charged and convicted of defeating a security interest on real property
The trial court, in denying Zacher's motion for dismissal of judgment or acquittal based upon the extinguishment of the mortgage, held, citing Gardner v. W.M. Prindle & Co., 185 Minn. 147, 240 N.W. 351 (1932), that until the foreclosure is complete, upon expiration of the redemption period, the mortgage continues as a lien or security interest. The court of appeals reversed Zacher's conviction in a 2-1 decision, holding that the security interest evidenced by the mortgage expires when the mortgagee at the foreclosure sale receives payment fully extinguishing the debt. State v. Zacher, 490 N.W.2d 149 (Minn.App.1992). We accepted review.
The question before us is whether, when a mortgagee purchases the mortgaged property at a foreclosure sale for the full amount of the debt, the property continues to be subject to the mortgage for purposes of Minn.Stat. § 609.615 until the redemption period expires.
Prior to the enactment of the Criminal Code of 1963, Minn.Stat. § 621.20 (1961) (repealed 1963), the forerunner of section 609.615, made the removal of property from mortgaged land a criminal offense. In language virtually unchanged since 1869,
Minn.Stat. § 609.615 (1990).
Zacher argues that his conduct does not fall under the proscription of section 609.615 because after the mortgagee bid the full amount due at the mortgage foreclosure sale, the mortgage was discharged, even as security for a debt, leaving the property no longer "subject to a mortgage." Zacher further argues that the court of appeals properly reversed his conviction because Minn.Stat. § 609.615 is a criminal statute and must be strictly construed.
The state argues that the plain language of the statute and public policy considerations dictate that section 609.615 be construed to cover malicious damage to real property which occurs before the redemption period expires on foreclosed property. Quoting the language of our decision in Carlson v. Presbyterian Bd. of Relief, 67 Minn. 436, 439, 70 N.W. 3, 4 (1897), the state correctly asserts that when the mortgagee is the purchaser at a foreclosure sale, neither his mortgage as a muniment of title nor his interest in the mortgaged premises is discharged or extinguished; and that he has a lien on the premises and holds them for the security of his bid until the time to redeem expires.
Amici Mortgage Bankers Association and Minnesota Bankers Association advise us that the court of appeals' decision will have a direct and adverse impact on the availability of credit for marginal borrowers by creating uncertainty for lenders. Section 609.615 offers essential protection against waste and destruction of mortgaged property by judgment proof mortgagors, they say, and without that protection, mortgagees will be forced to invoke more cumbersome and less effective methods, such as foreclosure by action, receiverships, or injunctive relief, to secure repayment of the debt.
When the legislature enacted section 609.615 in 1963, the law was well established with regard to whether property, mortgaged to secure payment of a debt, remains subject to a mortgage during the statutory redemption period after the debt has been fully paid by the mortgagee at the foreclosure sale. The rights and obligations of both mortgagee and mortgagor during the redemption period were delineated by statute and case law. "The title of the mortgagor does not pass by the foreclosure till his right of redemption expires." Buchanan v. Reid, 43 Minn. 172, 175, 45 N.W. 11, 12 (1890). The mortgagee purchaser has the "right to have the title vest by lapse of time if not prevented by redemption." Id. The mortgagor, in addition to the statutory right of redemption, retains the right of ownership including the right of possession and the right to rents and profits during the redemption period. Woodmen of the World Life Ins. Soc. v. Sears, Roebuck & Co., 294 Minn. 126, 131, 200 N.W.2d 181, 184 (1972); Pioneer Savings & Loan Co. v. Farnham, 50 Minn. 315, 318, 52 N.W. 897, 897 (1892).
In Buchanan, we said that "[t]he lien of the mortgage is not extinguished until it merges in the legal estate when that passes by lapse of time." 43 Minn. at 175, 45 N.W. at 12. To be sure, the remedy upon the mortgage as a security is exhausted by the foreclosure. Pioneer Savings & Loan, 50 Minn. at 318, 52 N.W. at 897. If the mortgagee is the purchaser at the foreclosure sale, however, and if the debt owed him by the mortgagor is paid,
Carlson, 67 Minn. at 439, 70 N.W. at 4 (citations omitted). In Carlson, we held that the mortgagee purchaser was entitled to insurance proceeds paid as a result of damages to the secured property when the damages occurred after foreclosure but before
Id. at 440, 70 N.W. at 4 (emphasis added).
Gardner v. W.M. Prindle & Co., 185 Minn. 147, 240 N.W. 351 (1932), on which respondent and the court of appeals rely, does not change the law with regard to the continuing effect of a mortgage on the secured property between the foreclosure sale and the expiration of the redemption period. Rather, it protects the mortgagor's absolute statutory right to possession of the mortgaged property during that period of time, including the right to rents and profits.
Clearly, the cases establish that a mortgage continues to exist and have vitality in protecting a security interest in the property after the foreclosure sale although the mortgage debt itself is extinguished. There is nothing in the language of the 1963 statute or in the Advisory Committee Comment, Minn.Stat.Ann. § 609.615 (West 1987), to indicate that the legislature arbitrarily intended to narrow the scope of a law that had been in effect for over eight decades. Rather, in the context of a revision that considerably expanded the reach of the statute, the legislature justifiably believed, on the basis of existing law, that the "subject to a mortgage" language of section 609.615 would cover real property after a foreclosure sale because a security interest still existed.
The state and amici express a policy concern that unless the protection provided under section 609.615 includes the redemption period when mortgagors are most likely to inflict damage to foreclosed property, mortgagors who are judgment proof, as is Zacher, would have no incentive to refrain from destruction of that property. While it is true that, as Mortgage Bankers Association of Minnesota suggests, mortgagees can ask the court for a receiver in order to protect and preserve the secured property during the redemption period, receiverships are seldom granted and when, as here, there was little to indicate that the mortgagor would harm the secured property, it is unlikely that a mortgagee would be granted the "extraordinary" remedy of receivership. Moreover, other provisions of the criminal code, such as theft, Minn.Stat. § 609.52, subd. 2 (1990), or criminal damage to property, Minn.Stat. § 609.595 (1990), provide no criminal recourse since during the redemption period a mortgagor has exclusive right to possession of and
We are mindful of Zacher's argument that, as a criminal statute, section 609.615 must be strictly construed. State v. Serstock, 402 N.W.2d 514, 516 (Minn. 1987). Strict construction, however, does not require us to assign the narrowest possible interpretation to the statute. See State v. Ford, 397 N.W.2d 875, 879-80 (Minn.1986). Nor are we required to adopt a construction which would render the statute meaningless. We hold, therefore, that when a mortgagee purchases the mortgaged property at a foreclosure sale for the full amount of the debt, the property continues to be subject to the mortgage for the purposes of Minn.Stat. § 609.615 until the redemption period expires.
In the case before us, Zacher was properly charged and convicted of intentionally impairing the value of secured property under Minn.Stat. § 609.615 (1990). Zacher testified that during the redemption period, he intentionally removed the furnace and air conditioning system, doors, light fixtures and paving blocks from the North Fourth Office building with the knowledge that, by doing so, he would impair the value of the property. Because, as we hold, the secured property continued to be subject to the mortgage during the redemption period for the purposes of section 609.615, Zacher's conduct violated the statute. We reverse the decision of the court of appeals and reinstate the conviction.
Reversed, conviction reinstated.