George Thatcher Corporation v. Bullen

I concur with the result for the reasons stated herein:

When the petition for relief in the bankruptcy court was filed all of the defendant's right, title and interest in and to the unredeemed tracts of land had been sold to plaintiff, through a sheriff's sale, in satisfaction of plaintiff's judgment. The statutory period of redemption had expired and the sheriff's deed had been issued to plaintiff. As between plaintiff and defendant, all of the right, title and interest in this property was in plaintiff and defendant had no right, title or interest therein. See Sec. 104-37-29, U.C.A. 1943. Also, at the time the petition was filed, the First National Bank had purchased this same property through a sheriff's sale under its mortgage foreclosure judgment, but the statutory period for redemption from that sale had not yet expired. The Bank's mortgage lien being superior to plaintiff's title, in case the property was not redeemed from the sale to the bank, as between it and the bank, plaintiff would lose all its right, title and interest in the property and the bank would become the owner thereof.

11 U.S.C.A. Sec. 203, sub. n provides:

"The filing of the petition * * * praying for relief under this section, shall immediately subject the farmer and all his property, wherever located, for all the purposes of this section, to the exclusive jurisdiction of the court, including all real or personal property, or any equity or right in such property, including, among others, * * * the right or the equity of redemption where the period of redemption has not or had not expired, * * *.

"In all cases where, at the time of filing the petition, the period of redemption has not or had not expired, * * * the period of redemption shall be extended * * * for the period necessary for the purpose of carrying out the provisions of this section. * * *"

Under this section the filing of the petition automatically subjected the farmer and all his property to the exclusive jurisdiction of the bankruptcy court, and extended the period within which a redemption of the property from the sale could be made on behalf of the farmer. On the other hand there is nothing in this section which provides for an extension of the time within which the plaintiff could redeem the property from the sale to the bank, nor is there anything which would prevent the plaintiff from exercising that right within the time provided by law. The filing of the petition gave the bankruptcy court exclusive jurisdiction over the farmer and his property, which in this case included the right or equity of redemption from the sale to the bank. Since the only right the defendant had was the right of redemption, the jurisdiction of the bankruptcy court could not go beyond that. The defendant being a judgment debtor in the mortgage foreclosure judgment, and plaintiff having succeeded to all his right, title and interest in and to this property, all the defendant had was a personal right to redeem the property from the sale to the bank.Yoakum v. Bower, 51 Cal. 539; Layton v. Thayne, 10 Cir.,133 F.2d 287. This is a valuable property right and is subject to being administered in the bankruptcy court. Wragg v. FederalLand Bank, 317 U.S. 325, 63 S. Ct. 273, 87 L. Ed. 300; Layton v.Thayne, supra; Buss v. Prudential Life Ins. Co., 8 Cir.,126 F.2d 960.

Plaintiff's petition alleges that the property in question was sold in the bankruptcy court in defendant's bankruptcy proceedings for $28,273 and from the proceeds of such sale all claims listed in defendant's petition, except plaintiff's claim, have been paid. $2,046.18 thereof has been paid to defendant, but in addition thereto there is now sufficient money still held by the bankruptcy court to pay plaintiff's claim. At the time of the filing of defendant's petition in bankruptcy, as we have pointed out before, defendant's only right was a personal right to redeem the property in question from the sale to the bank, the filing of the petition gave the bankruptcy court exclusive jurisdiction to administer that right for the benefit of defendant and his creditors but did not give that court any greater right in the property than defendant had. The bankruptcy court had no right to sell that property without exercising the defendant's right to redeem the same from the sale to the bank. The legal effect therefore of the allegation that the property was sold in the bankruptcy court and from the proceeds of such sale the claim of the bank was paid, was, that the bankruptcy court exercised the bankrupt's right to redeem the property from the sale to the bank and then sold the property. The fact that it is alleged first that the sale was made and the claim paid out of the proceeds thereof, simply means that there was a contract of sale made and when the redemption was effected, the purchaser received whatever title the bankrupt obtained as a result of the redemption. Otherwise the bankruptcy court had no right to sell the property.

The main opinion suggests that the bankruptcy court obtained authority to sell the property by the mutual acquiescence of all the parties interested therein, and therefore no redemption was effected. There is no such allegation in plaintiff's petition, but even if it were so alleged and it was shown that the bank had executed a quitclaim deed to the purchaser to perfect his title, it would still be in effect a redemption from the sale to the bank. The reason why the bank would be willing to consent to such an arrangement would be because of the right of the bankrupt to redeem, coupled with the fact that it would get its claim paid in full, and the balance would be equitably administered. Under such circumstances, in my opinion, the whole transaction would amount to a redemption from the sale to the bank and the rights of the other interested parties should be determined on that basis.

After this property had been redeemed from the mortgage foreclosure sale for the benefit of the bankrupt, defendant here, what were the resulting rights of defendant and plaintiff to such property? Sec. 104-37-32, U.C.A. 1943, provides that: "If the [judgment] debtor redeems, the effect of the sale is terminated and he is restored to his estate * * *." Under that provision when the defendant redeemed from the mortgage foreclosure sale the effect of that sale was terminated and the mortgage lien being paid, the ownership in the property was the same as though no mortgage foreclosure sale had taken place. Prior to the sale plaintiff, as purchaser under the sheriff's sale on his judgment, had been substituted for and had acquired all of the right, title, interest and claim of the defendant in and to this property. Thus, as between plaintiff and defendant, plaintiff was the sole owner thereof and defendant had no interest therein, and by this redemption they were restored to their former estates. Yoakum v. Bower, supra; SouthernCalifornia Lumber Co. v. McDowell, 105 Cal. 99, 38 P. 627;Bateman v. Kellogg, 59 Cal. App. 464, 211 P. 46; Livingston v. Arnoux, 56 N.Y. 507; Harvey v. Spaulding, 16 Iowa 397, 85 Am. Dec. 526.

In Bateman v. Kellogg, supra, Walker owned certain lands, subject first to a mortgage which was eventually owned by Boals, second a judgment lien which Stickney finally owned, and third a judgment lien of the plaintiff Bateman. Thereafter, Walker conveyed to a trustee to secure his debt to Woodruff, then plaintiff purchased the property under a sheriff's sale on an execution issued on his judgment; the trustee sold the property to Woodruff for the amount of his debt and the mortgage was foreclosed and the proceeds of the sale directed to be applied first to the payment of the mortgage debt and the balance, if any, to be applied to the judgment liens in their order of priority. At the sale Stickney purchased the property for the full amount of the mortgage debt and his judgment lien, leaving plaintiff's judgment lien unpaid and then Woodruff redeemed from Stickney. No one redeemed from plaintiff's judgment lien and a sheriff's deed was issued to him thereunder. Plaintiff did not redeem from Woodruff who received a sheriff's deed under the mortgage foreclosure sale and later sold to defendant. Plaintiff brought this action to quiet title against the defendant. The court held that the redemption by Woodruff was made as the successor in interest of the judgment debtor under a statute similar to our Section 104-37-30, U.C.A. 1943, and that by such redemption, under a statute similar to our Section 104-37-32, the effect of the mortgage foreclosure sale was terminated and plaintiff and Woodruff were each restored to his estate prior to the sale, but that the mortgage and first judgment lien had been paid. Since plaintiff had a superior title prior to the mortgage foreclosure sale, after the redemption he was restored to a superior title and the court ordered plaintiff's title to the property be quieted as against the defendant.

Under that decision, had defendant redeemed from the mortgage foreclosure sale without resorting to a sale of the mortgaged property, such redemption would have terminated the effect of the mortgage foreclosure sale and the plaintiff, as between him and defendant, would have become the absolute owner of the property covered by the sheriff's deed to him. However, since plaintiff's right to redeem had expired and the money to redeem was obtained out of the proceeds of the sale in the bankruptcy court, plaintiff cannot now assert ownership to the property because his interest in that property was restored to him as a result of that sale. He can, however, ratify the sale and claim the net proceeds thereof after deducting therefrom the costs of sale and the amount paid therefrom to redeem. Here plaintiff is claiming only the amount of his judgment which is only a small part of the net proceeds of the sale of the property. Defendant cannot complain because plaintiff did not claim all that he was entitled to, particularly since defendant by his petition listed plaintiff as a creditor for the amount of the judgment.

I therefore concur with the result reached by Mr. Justice Turner.