Cooley v. Fredinburg
Cooley v. Fredinburg
Opinion of the Court
Fredinburg (defendant) appeals an order that determined that Federal Deposit Insurance Corporation (FDIC) had the right to redeem his real property after he had redeemed it from the purchaser at a sheriffs sale. We reverse.
FDIC was joined in a mortgage foreclosure commenced by plaintiff against defendant, the debtor, and numerous other mortgage or deed of trust lien claimants. A stipulated
FDIC did not assert its lien claim in the foreclosure proceeding and did not obtain a judgment against defendant for the amount of the outstanding debt. The judgment provides that FDIC is forever foreclosed of all interest, lien or claim in the described real property, “excepting only its 365-day statutory right of redemption pursuant to 28 U.S.C., Section 2410(c).”
The property was sold to a third party at a sheriffs sale on June 14,1990. Defendant then redeemed. On February 6, 1991, FDIC gave notice of its intent to redeem the property under 28 USC § 2410(c). After defendant objected, the sheriff declined to act, whereupon FDIC moved for an order “Establishing FDIC Right to Redemption,” which the court granted. Defendant appeals from that order.
Hogue Investment Corporation (Hogue), as successor to FDIC, makes several arguments on appeal challenging appellate jurisdiction, only one of which requires
On the merits, defendant argued below, and argues here, that when he, as the debtor, redeemed the property, the effect of the foreclosure sale was terminated; therefore, there was no sale that would give rise to a right of redemption under Oregon lav/. He is correct. ORS 23.600 provides in part:
“If the judgment debtor redeems at any time before the time for redemption expires, the effect of the sale shall terminate and the judgment debtor shall be restored to the estate of the judgment debtor.”
If that is all that there were to the case, FDIC
“A judgment or decree in such action or suit shall have the same effect respecting the discharge of the property from the mortgage or other lien held by the United States as may be provided with respect to such matters by the local law of the place where the court is situated. * * * Where a sale of real estate is made to satisfy a lien prior to that of the United*537 States[3 ] the United States shall have one year from the date of the sale within which to redeem * * *. In any case where the debt owing the United States is due, the United States may ask, by way of affirmative relief, for the foreclosure of its own lien and where property is sold to satisfy a first lien held by the United States, the United States may bid at the sale * * *.” (Emphasis supplied.)
However, defendant argues that FDIC simply neglected to protect its rights when it failed to assert its lien and obtain a judgment in the foreclosure proceeding. He points out that, if it had obtained a judgment in the foreclosure, instead of permitting its interest in the property to be foreclosed, it would have had a judgment lien that would have been revived when he, the debtor, redeemed the property. It could then have executed on that judgment without having to pay the price of redemption. He is also correct in that argument. Franklin v. Spencer, 309 Or 476, 488, 789 P2d 643 (1990). Not only would FDIC not have been required to put up any money, it would have had a lien that would remain for 10 years and would be renewable. ORS 18.360.
It is also true that, under Oregon law, the failure of FDIC to assert and establish its lien and to obtain a judgment for the amount thereof, precludes it from redeeming the property from anyone, because it no longer has a “lien by judgment, decree or mortgage” on the property. ORS 23.530(2).
The problem here is that FDIC did nothing, even though under Oregon law it could have taken the steps necessary to permit it to exercise its right to redeem or to collect on its judgment lien. Although 28 USC § 2410(c) requires Oregon to permit redemption by the government within 1 year from the date of sale, nothing entitles the government, or anybody else, to redeem when it has failed to follow the state procedures that would have permitted it to protect itself. That federal statute specifically provides:
“In any case where the debt owing the United States is due, the United States may ask, by way of affirmative relief, for the foreclosure of its own lien and where property is sold to satisfy a first lien held by the United States, the United States may bid at the sale * *
It is apparent that Congress recognized that it would or might be necessary for the government to foreclose its lien in order to be in a position to redeem or to otherwise protect its interest.
In U.S. v. John Hancock Mut. Ins. Co., 364 US 301, 81 S Ct 1, 5 L Ed 2d 1 (1960), on which Hogue and the dissent rely, the court expressly pointed out that the government had “satisfied the procedural requirements” (364 US at 304) of the state’s laws: It had sought and obtained affirmative relief on its hen claim, obtained a judgment against the debtor in the foreclosure and had followed the proper procedure to redeem. The problem was that, under Kansas law, the debtor had the sole right to redeem within the first 12 months after the sale, and that was the 12 months during which the federal statute gave the federal government the right to redeem. The state law effectively took away the government’s right to redeem, and there is nothing in the opinion suggesting that, under Kansas law, the government had any other recourse to collect its judgment by the sale of the debtor’s property. The court held that the federal statute controlled and that the state must permit the government to redeem within 12 months after the foreclosure sale.
Here, if FDIC had satisfied the requirement of Oregon law, its judgment lien would have been revived when defendant redeemed; it would not have been required to obtain an appropriation and it would have had more than 1 year within which to execute on its judgment. Thus, Oregon law more than satisfies the concerns of Congress in enacting § 2410(c).
Futhermore, in John Hancock, the government was owed several amounts represented by separate notes. It claimed in the foreclosure that the mortgage should secure all of them. The Kansas court held that only one of them was secured under Kansas law. The United States Supreme Court, after holding that the government had the right to redeem, recognized that, if the mortgagors wished to redeem in turn from the United States, “[t]he question whether the United States is entitled to payment of its claims in full upon redemption by the mortgagors or only to such debts as have, been declared liens by the state courts is one to be decided according to Kansas law.” 364 US at 309. It is clear that § 2410 does not preempt all of a state’s laws.
FDIC failed to take the steps that the federal statute recognizes that it would, or might, be required to take in order to protect itself. It has no right to complain.
Reversed.
The stipulation was between plaintiff and FDIC only. Default orders had been entered against all defendants except FDIC and Cooley, as assignee of U.S. National Bank of Oregon.
ORS 19.010(2) provides, in part:
“For the purpose of being reviewed on appeal the following shall be deemed a judgment or decree:
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“(c) A final order affecting a substantial right, and made in a proceeding after judgment or decree.”
Defendant does not contend that FDIC is not the United States within the meaning of § 2410.
ORS 23.530(2) provides:
“Property sold subject to redemption, as provided in ORS 23.520, or any part thereof separately sold, may be redeemed by the following persons:
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“(2) A creditor having a lien by judgment, decree or mortgage on any portion of the property, or any portion of any part thereof separately sold, subsequent in time to that on which the property was sold. Such creditors, after having redeemed the property, are to be termed redemptioners.”
Dissenting Opinion
dissenting.
The majority holds that the provisions of 28 USC § 2410(c) do not preempt the requirement in ORS 23.530(2)
28 USC § 2410(c) provides, in part, that “[wjhere a sale of real estate is made to satisfy alien prior to that of the United States, the United States shall have one year from the date of the sale within which to redeem.” The next sentence in the statute provides that the “United States may ask, by way of affirmative relief, for the foreclosure of its own lien * * *.” j'jluS) the statute contemplates two separate rights of federal agencies that cannot be preempted by state law: the right to appear as a party, foreclose its lien in a state proceeding and purchase the property at the sale, and the right to redeem, even if it has not foreclosed its lien. That construction is supported by the legislative history that the one year redemption right was enacted in addition to an existing provision providing that the United States could be a party to a foreclosure proceeding in state court. Initially, the bill proposed that the government be authorized only to bid at the foreclosure sale when the property was sold to satisfy a senior lien. Congress was concerned that there would not be appropriated funds available for the agency to make the purchase. Underlying that concern was the need to protect the value of the government’s security that would otherwise be lost through the foreclosure of a senior lien. Those provisions were rejected in part and replaced when Congress adopted the provisions of section 2410(c) that provide for an absolute right of redemption for a twelve-month period. See 72 Cong Rec 1998-1999 (1930); 72 CongRec 3117-3120 (1930); 72 Cong Rec 7020 (1930); S Conf Rep, 71st Cong, 3d Sess (1930); 74 CongRec 5466-5467 (1930); 74 CongRec 5865-5866 (1930).
Congressional intent is illustrated by United States v. John Hancock Mut. L. Ins. Co., 364 US 301, 81 S Ct 1, 5 L
The purchaser also argued that the United States, by seeking affirmative relief in a state court, had subjected itself “to all the incidents of state law which govern other suitors.” 364 US at 308. In response, the Court noted that the United States is not subject to local statutes of limitations and that the proceedings were not initiated by the United States. The purchaser contended that, because the first sentence of section 2410(c) provided at that time that “[a] judicial sale in such action or suit shall have the same effect respecting the discharge of the property from liens * * * held by the United States as may be provided * * * by the local law of the place where the property is situated,” the right to redeem was qualified by state law. Again, the Court rejected that interpretation, noting that it would render the right of redemption in section 2410(c) “nugatory.” 364 US at 308.
In summary, the right of redemption in section 2410(c) is a right that cannot be impaired by state law, because Congress intended that the federal government not lose the value of the security for a debt owed to it through a state court foreclosure proceeding. The majority qualifies FDIC’s right of redemption under ORS 23.530(2). It makes the right dependent on whether FDIC reduced its lien to judgment in the foreclosure proceeding. It reads a requirement into the statute that is not there: i.e., that, in order to enforce a right of redemption, the redemptioner must have foreclosed its lien. That construction is inconsistent with the law of federal preemption, because it impairs attainment of
I dissent.
Reference
- Full Case Name
- Marion C. COOLEY, Plaintiff, v. Robert Roger FREDINBURG, Appellant, Marion C. COOLEY, as Assignee of U.S. National Bank of Oregon; First Interstate Bank of Oregon, N.A.; L. Ken Casteel; John C. Preston; Patricia J. Preston; Timotheas John Horn; Normalee D. Horn; Tischhauser, Cooper & CO. and Frieda A. Kuttig, Defendants, and FEDERAL DEPOSIT INSURANCE CORPORATION and Hogue Investment Corporation, Respondents
- Cited By
- 5 cases
- Status
- Published