United States v. Gary Meyer ( 2003 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 02-1876
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United States of America, *
*
Plaintiff-Appellee, *
*
v. *
*
Shawn S. Vilhauer; State of North *
Dakota, Office of Tax Commissioner; *
State of North Dakota, doing business *
as State Bank of North Dakota, *
*
Defendants, * Appeal from the United States
* District Court for the
Gary Meyer, * District of North Dakota.
*
Defendant-Appellant, * [UNPUBLISHED]
*
Leon Keller; Rocky Ulrich, *
*
Defendants, *
*
v. *
*
Nodak Mutual Insurance Company of *
Fargo, successor, Virgil J. Hertz, *
*
Defendant-Appellee. *
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Submitted: December 13, 2002
Filed: February 27, 2003
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Before HANSEN, Chief Judge, LAY, and BYE, Circuit Judges.
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PER CURIAM.
I.
The United States, acting through the Farm Service Agency and Rural Housing
Service (formerly known as Farmers Home Administration), commenced a
foreclosure action against farmland owned by Shawn Vilhauer in Grant County,
North Dakota. Vilhauer had granted mortgage liens on the property as security for
several promissory notes with the Farm Service Agency and Rural Housing Service.
The Government named several defendants in its complaint. Gary Meyer was
listed among these defendants due to his leasehold interest in the real estate. The
complaint acknowledged Meyer’s leasehold but averred that it was inferior to the
rights of the Government. None of the defendants answered the complaint, and the
district court entered default judgment. The Judgment provided that “[t]he defendants
shall be entitled to redeem the real property within a period of sixty (60) days from
the date of the foreclosure sale . . . .”
The U.S. Marshal sold the real estate to the highest and best bidder, Virgil J.
Hertz. The Marshal then issued a Marshal’s Report for Sale and Marshal’s Certificate
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of Sale. The United States District Court for the District of North Dakota1 entered an
Order Confirming Sale. This Order contained the following redemption provision:
IT IS FURTHER ORDERED that the United States Marshal for the
District of North Dakota, at the expiration of sixty (60) days from the
date of the sale of the real property, shall issue to the purchaser of said
real property a Marshal’s deed conveying to it all of the interest in said
property purchased at the Marshal’s sale herein unless said property is
redeemed.
Order Confirming Sale at ¶ 4.
During the sixty-day time period, on October 5, 2001, Meyer presented the
Marshal with a cashier’s check and a Notice of Redemption. Subsequently, on
October 9, 2001, Virgil Hertz presented the Marshal with a cashier’s check and
Notice of Redemption, along with an assignment of lien from Nodak Mutual
Insurance Company. On October 22, 2001, the Government filed a Motion for
Determination of Redemption Rights and Award of Certificate of Redemption asking
the district court to evaluate the redemptioners’ rights and order the U.S. Marshal to
award the Certificate of Redemption to the party entitled to it. The Government took
no position as to which party should be awarded the Certificate.
On January 30, 2002, following a hearing, the district court entered its
Memorandum and Order finding that neither Meyer’s leasehold interest nor Hertz’s
assignment constituted a basis for redemption. The court then ordered that a
Marshal’s Deed be issued to Hertz, the highest bidder. The district court denied
Meyer’s Motion for Relief from its order. Meyer now appeals.
1
The Honorable Patrick A. Conmy, United States District Judge for the District
of North Dakota.
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II.
Meyer argues that he had a right to redeem the farmland as a matter of law. He
concedes that there is no federal redemption right or procedure. However, he
contends that the language of the district court’s Judgment: “The defendants shall be
entitled to redeem the real property . . .” unambiguously provided a redemption right
to all the named defendants. Meyer urges that the district court had the discretion to
grant an equitable right of redemption, and did so in its Judgment. As such, he argues
that the district court was unjust in later denying him the right to redeem.
We review the district court’s findings of fact for clear error and its conclusions
of law de novo. Walker v. Maschner, 270 F.3d 573, 576 (8th Cir. 2001). Meyer
argues that under the district court’s original foreclosure order, he has an absolute
right to redeem as a matter of law. We disagree.
This court has held that there is no federal statutory right of redemption after
a foreclosure. See United States v. Victory Highway Village, Inc., 662 F.2d 488, 498
(8th Cir. 1981). In the instant case, the district court exercised its discretion and
provided a post-sale equitable period of redemption. Following the attempts to
redeem, the district court reconsidered the part of its original Judgment dealing with
redemption rights. The court noted that redemption rights are granted solely as an
equitable matter in federal foreclosures. It then determined that Meyer and Hertz did
not quality for redemption under its Judgment and denied their attempts to redeem.
This court has held that “the terms and methods of judicial sale are largely in
the discretion of the district judge directing the sale.” United States v. Great Plains
Gasification Assocs., 813 F.2d 193, 196 (8th Cir. 1987) (quoting Revere Copper &
Brass, Inc. v. Adriance Mach. Works, Inc., 68 F.2d 708, 709 (2d Cir. 1934)). Thus,
the methods of the judicial sale were in the district court’s discretion. The court
exercised that discretion by denying Meyer the right to redeem. We see nothing
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arbitrary in the district court’s denial. An equitable right to redemption, after all, is
no more than “equitable grace” to redeem. Here, as it had the discretion to do, the
district court simply failed to allow Meyer the grace to redeem.
III.
Meyer argues that he has a right to redeem under North Dakota state law. As
the district court correctly noted, it was not bound by North Dakota law in making its
findings. Nevertheless, because of a lack of federal law on point, the district court
reviewed principles of North Dakota law for guidance before making its decision.
We, in turn, are not bound by North Dakota law.
Under North Dakota redemption law, only the judgment debtor, his successors
in interest, or a creditor having a lien by judgment, mortgage or otherwise on the
property sold, may redeem. See N.D. Cent. Code § 28-24-01 (1991). Consequently,
even under North Dakota law, Meyer would have to meet one of these designators in
order to redeem. He argues alternatively that he is a creditor of the property and that
his interest in the land as a leasehold tenant entitled him to a right to redeem.2
A. Lessee as Creditor
Meyer asserts that his lease contract makes him a creditor under North Dakota
common law. The North Dakota Supreme Court has not specifically ruled upon
whether or not a tenant is a redemptioner under section 28-24-01. Meyer relies upon
Mehlhoff v. Pioneer State Bank, 124 N.W.2d 401, 405 (N.D. 1963). Meyer
specifically cites the North Dakota Supreme Court’s statement that “an approved
2
Since the North Dakota Supreme Court has not passed directly on this issue,
we review North Dakota law under a standard of predicting how the North Dakota
Supreme Court might resolve this claim. ANR Western Coal Dev. Co. v. Basin Elec.
Power Coop., 276 F.3d 957, 964 (8th Cir. 2002).
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definition of a creditor is ‘He who has a right to require the fulfillment of an
obligation or contract.’” Mehlhoff, 124 N.W.2d at 405. Meyer argues that because
he could have enforced his rights as a tenant during Vilhauer’s sixty-day redemption
period, he fits this definition of a creditor. See Clement v. Shipley, 51 N.W. 414(N.D. 1892). We disagree with Meyer’s reliance upon Mehlhoff. In Mehlhoff, the
issue was whether the assignee of a junior mortgage qualified as a redemptioner.
Mehlhoff contains no suggestion that a land tenant, or indeed anyone with a claim
other than a lien, qualifies as a redemptioner.
Meyer fails to note that section 28-24-01(2) requires that a redeeming creditor
have a “lien by judgment, mortgage, or otherwise.” Even if Meyer could be
considered a “creditor” under some liberal definition, he does not have a lien on the
property in question. His only claim is as a leasehold tenant. A lease is not
correlative to a lien. A lien creditor attaches itself to the real property. The property
is, therefore, security for a debt. A leasehold tenant, in contrast, merely pays a rental
fee for the right to possess the property. There is no debt involved. Consequently,
unless specified by contract, such a tenant does not have a secured interest in the real
property itself. Although a leasehold establishes rights and obligations on both
parties (even through the redemption period), Meyer has provided no authority for the
proposition that a tenant is a creditor of a landlord for the purposes of statutory
redemption. There is no lien involved.
B. An Interest in Land
Meyer next argues that he has an interest in the real estate as a successor in
interest to Vilhauer. Meyer claims that North Dakota law classifies a real property
lease an as interest in land. See Diocese of Bismarck Trust v. Ramada, Inc., 553
N.W.2d 760 (N.D. 1996). Meyer’s reliance on this case is remiss. Diocese of
Bismarck found that a real estate property lease conveys an “interest in land.” Id. at
766. However, the court’s finding on this issue was based on a need to establish the
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appropriate statute of limitations. It made no comment on the strength of the interest
a leasehold creates.
Meyer next relies on Kulm Credit Union v. Harter, 157 N.W.2d 700 (N.D.
1968), to demonstrate that those with an “interest in land” have a right to redemption.
Meyer’s interpretation of the language in Kulm is suspect. In Kulm, the North
Dakota Supreme Court disallowed a claimed right of redemption because “the
[claimed redemptioner] had no interest in the land at the time of the foreclosure sale
and did not qualify as a redemptioner under th[e] statute.” Id. at 706. The North
Dakota Supreme Court did not specify in Kulm that any “interest in land” would have
qualified the claimed redemptioner for redemption rights. Rather, it merely
recognized that the party did not have an interest in the land and did not meet the
qualifications of section 28-24-04 prior to the foreclosure sale. Id. The court did not
comment on whether the creditor’s interest would have been sufficient had its lien
been timely filed. The Kulm court held that the right to redemption was a purely
statutory right, and that right could only be exercised by those persons expressly
described in section 28-24-01. Id.
Certainly, a leasehold is an interest in land; it diminishes the lessor’s “bundle
of sticks” and increases the lessee’s bundle. However, the “bundle of sticks” for any
given property is quite amorphous; an “interest in land” is a very broad term of art.
A leasehold interest could cloud the title in a foreclosure action, and Meyer is correct
that he should have been named as a defendant.3 However, we do not believe that a
leasehold interest automatically qualifies as an interest in land such to give a lessee
the statutory right to redeem under North Dakota law. Not all such defendants are
equitably or statutorily entitled to redemption. As noted above, Meyer had no lien.
3
As Appellee Hertz points out, this would be true for anyone who may have a
remote interest in the real property, i.e. a neighbor who built his fence across the
boundary line.
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He only had a right to possess the property during the period of his contract with
Vilhauer. Without a lien of some sort, Meyer does not have any redemption rights
under state law.
IV.
Regardless of our final determinations of North Dakota law, the district court
was not bound by it. Although North Dakota law is helpful in advising us on the
issues before the court, it is not dispositive. As such, our discussion of North Dakota
law does not change the fact that the district court was exercising its judicial
discretion in denying Meyer a chance to redeem. As noted supra, the district court
did not err in this exercise of discretion. The decision of the district court is thereby
AFFIRMED.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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