Case Name: FARMERS PRODUCTION CREDIT ASSOCIATION, Appellee, v. Daniel L. McFARLAND and Linda K. McFarland, Appellants, and Dorothy L. McFarland, Intervenor-Appellant
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1985-09-18
Citations: 374 N.W.2d 654
Docket Number: No. 84-1807
Parties: FARMERS PRODUCTION CREDIT ASSOCIATION, Appellee, v. Daniel L. McFARLAND and Linda K. McFarland, Appellants, and Dorothy L. McFarland, Intervenor-Appellant.
Judges: All Justices concur except UHLEN-HOPP, CARTER and WOLLE, JJ., who concur in part and dissent in part.
Reporter: North Western Reporter 2d
Volume: 374
Pages: 654–662

Head Matter:
FARMERS PRODUCTION CREDIT ASSOCIATION, Appellee, v. Daniel L. McFARLAND and Linda K. McFarland, Appellants, and Dorothy L. McFarland, Intervenor-Appellant.
No. 84-1807.
Supreme Court of Iowa.
Sept. 18, 1985.
Rehearing Denied Oct. 16, 1985.
Stephen J. Rapp, Waterloo, for appellants.
Marilyn S. Scheer and David J. Darrell, of Davis, Hockenberg, Wine, Brown & Koehn, Des Moines, for appellee.

Opinion:
SCHULTZ, Justice.
In this appeal a mortgagors' assignee and a junior mortgage lienholder compete for final redemption rights in a senior mortgagee's foreclosure action. Daniel and Linda McFarland (mortgagors) owned real estate that was subject to two mortgages. On June 9, 1983, the junior mortgage-holder, Production Credit Association (PCA), filed an action to foreclose its mortgage. Shortly thereafter, the senior mortgage-holder, American Federal Savings & Loan Association (AFS), filed a separate foreclosure action against the McFarlands naming PCA as a junior lienholder and party defendant. On November 11,1983, a decree of foreclosure was entered in the latter action in favor of AFS and it stated PCA had a valid second lien. The property was sold to AFS at a January 10, 1984, sheriff's sale and the mortgagors were granted a six-month period of redemption. See Iowa Code § 628.26. On April 6, 1984, the mortgagors conveyed their redemption rights to Daniel's mother, Dorothy McFarland. On that date Dorothy (assignee) tendered a check for redemption of the property. The junior mortgage-holder, PCA, on May 3, 1984, tendered its own cheek in an attempt to redeem the property. No issue is advanced concerning the validity of either tender; however, the assignee claims her redemption precluded further redemp-tions.
In its June 9, 1983, petition for foreclosure PCA alleged Daniel and Linda McFarland had entered into a collateral agreement and mortgage in the amount of $40,000 to secure other notes contracted between the parties. PCA prayed for judgment in rem against the mortgaged premises in the amount of $40,000 plus interest and other costs and requested the mortgage be foreclosed. In their answer the mortgagors requested the court to determine the amount they owed PCA. Following PCA's attempt to redeem the property foreclosed in the AFS action, Dorothy McFarland intervened in PCA's foreclosure action and claimed her redemption in the AFS foreclosure had extinguished PCA's lien. At the same time, the mortgagors amended their answer and requested the court to enter a decree denying PCA's petition for foreclosure or, in the alternative, hold their mortgage obligation was limited to $40,000 if foreclosure was ordered.
The PCA foreclosure action was submitted to the trial court for a ruling upon stipulated facts. We need not detail the stipulation because we have set out the facts necessary to determine issues on appeal. In addition, however, the mortgagors admitted in the stipulated facts they were in default on the PCA noté. As a result of Dorothy McFarland's intervention and the amendments to the pleadings, the issues before the trial court in the PCA foreclosure action were the redemption rights of parties to the AFS foreclosure action and whether PCA's lien remained effective against the assignee. On October 1, 1984, the trial court entered a three-pronged ruling: (1) PCA was entitled to recover the principal and interest on its note; (2) PCA could redeem the property from the mortgagors' assignee; and (3) PCA was entitled to a sheriffs deed to the property.
On appeal the mortgagors and assignee maintain the trial court erred in ruling PCA was entitled to redeem. They claim a junior lienholder cannot redeem after an as-signee of the mortgagor has redeemed because a redeeming assignee takes the property unencumbered by liens on the property. Although we hold the junior lienholder cannot redeem in this ease, the reason for our decision is different from that asserted by the mortgagors and assignee. Since the assignee redeemed within the exclusive statutory period granted a debtor, we hold the junior lienholder has no right to redeem. However, we further hold that a redemption by the debtor or assignee dur ing the exclusive period does not allow either party to take the property free and clear of liens on the property.
Several sections of Iowa Code chapter 628 are relevant. Under section 628.3 the debtor's right to redeem is for a period of one year from the date of a sale "and for the first six months thereafter such right of redemption is exclusive." Section 628.5 provides for redemption by creditors: "If no redemption is made by the debtor as above provided, thereafter, and at any time within nine months from the day of sale, said redemption may be made by a mortgagee . " The "as above provided" is an obvious reference to the debtor's exclusive right to redeem pursuant to section 628.3. Section 628.26 permits an agreement to reduce the period of redemption, as in this case, so that the mortgagor's period of redemption set forth in section 628.3 is reduced from twelve to six months, the exclusive right to redeem is the first three months, and the creditors' period of redemption is after three months and within four months from the date of sale.
The plain language of section 628.3 gives the debtor the exclusive right to redeem during the appropriate six or three month period. "An exclusive right is one which only the grantee thereof can exercise, and from which all others are prohibited or shut out." Black's Law Dictionary 507 (rev. 5th ed. 1979). We interpret the use of the term "exclusive" to vest the right of redemption in the debtor only and to shut out all creditors. In the instant case the mortgagors have assigned their redemption rights to Dorothy McFarland. Such assignments are permitted under section 628.25 which provides "[t]he rights of a debtor in relation to redemption are transferable, and the assignee has the like power to redeem." "Like" is defined as "[e]qual in quantity, quality, or degree or exactly corresponding." Black's Law Dictionary at 834. The plain words of the statute give the assignee the same quantity and quality of rights as the debtor, which would include the "exclusive" right to redeem within three months of the sheriff's sale.
PCA claims, however, that under our holding in Tirrill v. Miller, 206 Iowa 426, 429, 218 N.W. 303, 304 (1928), a creditor is entitled to redeem from a mortgagor's grantee who redeemed within the exclusive period. The author of a law review article was puzzled by the Tirrill holding and stated:
Apparently creditors cannot redeem from a mortgagor who redeems within the first six months. Id. § 628.5. This rule would seem logically to apply as well to redemption by the mortgagor's assignee. But see Tirrill v. Miller, . (intimating that redemption may be made from an assignee by creditors since the assignee takes title free from all claims against the debtor-assignor).
Blum, Iowa Statutory Redemption After Mortgage Foreclosure, 35 Iowa L.Rev. 72, 73 n. 17 (1949). In Tirrill neither the debt- or nor assignee raised the issue of the exclusive right to redeem. In any event, we now find unpersuasive any language in Tirrill indicating a junior lienholder has a right to redeem from a debtor or debtor's assignee who has redeemed during the exclusive statutory period. Consequently, we reverse the portion of the district court's order which granted the junior lienholder, PCA, the right to redeem the property from the assignee and allowed PCA to obtain a sheriff's deed to the property.
Although redemption by the mortgagor or assignee during the exclusive period prevents redemption by a junior lienholder, it does not provide the redeemer complete relief from junior liens. We do not agree with the claim of the mortgagors and as-signee that the assignee is the owner of the property free and clear of liens. The trial court did not address this issue because it ruled PCA's redemption was valid. In equity our review is de novo and our responsibility is to decide as the trial court should have. Farmers Savings Bank, Joice, Iowa v. Gerhart, 372 N.W.2d 238, 242 (Iowa 1985). Consequently, we determine the respective rights of a mortgagor's assignee and junior lienholders in a foreclosure action.
Before addressing this issue, however, we find it necessary to review the rights of a junior lienholder. After the debtor's exclusive period of redemption has expired, any creditor can redeem the property as long as its claim against the debtor has matured into a lien before the creditor's period of redemption has ceased. Iowa Code § 628.5. A creditor's period of redemption is either after six months and within nine months from the date of sale pursuant to section 628.5 or after three and within four months from the sale under section 628.26. Creditors can even redeem from each other. Iowa Code § 628.8.
A judgment creditor who fails to redeem within the statutory period of time loses his lien on the property. Paulsen v. Jensen, 209 Iowa 453, 458, 228 N.W. 357, 359 (1929). Additionally, a junior mortgagee who is a party to the foreclosure action and fails to redeem has his lien on the property extinguished. Anderson v. Renshaw, 229 Iowa 93, 98-99, 294 N.W. 274, 277-78 (1940). A judgment lien, lost by the failure to redeem by the junior judgment lienholder, will attach again to the property when the debtor redeems the property, but the junior mortgage lien is not re-established. Id. at 99, 294 N.W. at 278. This is because a judgment lien automatically attaches to after acquired real estate of the debtor. Id.; see Iowa Code § 624.23(1). The extinguishment of the junior mortgage lien, however, does not destroy the debt itself and the mortgagee can later obtain a judgment against the debtor. Anderson, 229 Iowa at 99, 294 N.W. at 278.
There is no question that our decisions have distinguished between redemption by a mortgagor and that by an assign-ee with respect to the rights of junior lien-holders that have failed to redeem within the statutory period. Under those circumstances we have indicated that while a judgment creditor's lien is re-established when the mortgagor redeems, neither the judgment creditor nor junior mortgagee's rights attach to property redeemed by the assignee. Cadd v. Snell, 219 Iowa 728, 733-35, 259 N.W. 590, 592-93 (1935); Paulsen, 209 Iowa at 458, 228 N.W. at 359 (1929); Cooper v. Maurer, 122 Iowa 321, 326-27, 989 N.W. 124, 125-26 (1904); Moody v. Funk, 82 Iowa 1, 4, 47 N.W. 1008, 1009 (1891). In Cooper we gave the reason for the distinction when we stated:
If, when the process of redemption is complete, the property is again vested in the debtor either by his having been the last to redeem or by conveyance from the holder of a sheriff's deed, then the unsatisfied creditor may reach it, for the simple reason that all the debtor's property is liable for the payment of his debts unless specifically exempted by statute. If, however, when the last redemption has been made, the property is in a third person, it cannot be so subjected for the equally simple reason that the property of one man cannot be subjected to the payment of the debts of another.
122 Iowa at 327, 98 N.W. at 126.
These cases, however, do not benefit the assignee in this action. All those cases addressed the issue of whether liens that have been extinguished become re-established when the assignee redeems. Under the facts in the present action, the mortgagors had subjected their property to the PCA lien, which was in force at the time of the assignment. By redeeming within three months of the sheriff's sale the as-signee prevented any redemption by the mortgagor's creditors. Therefore, PCA's lien was not extinguished because no creditor redemption period existed. PCA's lien remained viable and the assignee's right to the property is subject to the PCA lien. The titleholders could not divest PCA's lien on the property merely by assigning their redemption rights to Daniel's mother.
The mortgagors and assignee assert our language in Tirrill indicates that when a mortgagor's assignee redeems, the assign-ee takes the property free from liens and debts of the mortgagor and the property is subjected only to the debts of the assignee. 206 Iowa at 429, 218 N.W. at 304. Al though the assignee's redemption in that case was within the exclusive period, we note again that the issue of the exclusive right to redeem was neither raised nor discussed in Tirrill. Additionally, under the facts in that case the court acknowledged the creditor had a right to redeem. Id. Therefore, statements made in the Tir-rill decision were under circumstances in which the court recognized the lienholders could have protected themselves by redeeming. In the present case PCA attempted to redeem, but we determined PCA had no right of redemption. Despite language in Tirrill to the contrary, we hold the liens of a junior lienholder or creditor are not extinguished when a mortgagor or assignee redeems during the exclusive statutory period.
It could be argued that junior creditors' liens are extinguished either by the entry of the foreclosure decree or the completion of the sheriff's sale. Under such an argument the creditors then possess only a statutory right of redemption which is cut off when the debtor or the debtor's assignee redeems during the exclusive period. Although this cut-off theory was not advanced by either party at trial or on appeal, we deem it necessary to address it. We conclude, however, that such a theory is not in line with our statutory scheme and is contrary to our case law.
Our statutes indicate that junior creditors' liens are still in effect after the entry of a foreclosure decree and the sheriff's sale. Chapter 654 of the Code outlines procedures for the foreclosure of real estate mortgages and makes reference to "liens upon the property" at a time subsequent to the foreclosure decree and sale. See Iowa Code § 654.7 (disposal of over-plus "if there is no other lien upon the property"); § 654.8 (providing "a person having a lien on the property which is junior to the mortgage" can be assigned the interest of the holder of the mortgage); § 654.9 (provision for the payment of "any other liens on the property sold"). Likewise, the chapter on executions, chapter 626, recognizes liens on the property after the foreclosure and sale. See Iowa Code § 626.82 (overplus paid to the debtor "unless there are liens upon the property").
Our case law also supports the proposition that junior creditors' liens continue after the foreclosure decree and sheriff's sale. We have determined that the purchaser at a foreclosure sale acquires only an equitable lien for the amount of the purchase money, and legal title remains in the mortgagor and is not divested until the expiration of the statutory periods of redemption. In re Jensen, 225 Iowa 1249, 1252-53, 282 N.W. 712, 714 (1938); Wissmath Packing Co. v. Mississippi River Power Co., 179 Iowa 1309, 1324, 162 N.W. 846, 851 (1917); Greenlee v. North British & Mercantile Insurance Co., 102 Iowa 427, 429, 71 N.W. 534, 535 (1897). Language in our cases indicates that the junior lienholders' rights are extinguished with the expiration of their period of redemption. See Anderson, 229 Iowa at 99, 294 N.W. at 278 ("the lien of appellee's mortgage upon the foreclosed property was lost at the expiration of nine months"); Paulsen, 209 Iowa at 458, 228 N.W. at 359 ("[wjhen the junior creditor fails to redeem before the expiration of nine months, he loses his lien upon that property").
[8] In light of our statutory scheme and case law addressed to mortgage foreclosures, we conclude that junior creditors' liens continue after the foreclosure decree and sheriff's sale. Junior lienholders can protect their claims either by bidding at the foreclosure sale or redeeming in a deliberate manner. See Iowa Code chs. 626 and 628; Stiles v. Bailey, 205 Iowa 1385, 1388, 219 N.W. 537, 539-40 (1928) ("Stiles, as a judgment-creditor had the right to bid at the sale or to redeem therefrom."); Witham v. Blood, 124 Iowa 695, 700, 100 N.W. 558, 560 (1904) ("they [junior lienholders] are required to protect their claims either by bidding the property up to its fair value at the foreclosure sale or by redemption from such sale within the prescribed period"); Cooper, 122 Iowa at 326, 98 N.W. at 126 ("the junior lienholder has it in his power to protect himself either by bidding at the sale or by exercising his right of redemption").
In summary, the trial court erred in allowing PCA to redeem the property from Dorothy McFarland, and PCA is not entitled to a sheriffs deed from the foreclosure sale in the AFS action. Although Dorothy McFarland has a right to title under the assignment, her title is subject to the rights of PCA against the property in this action. The district court should amend its order to allow foreclosure in rem on the PCA lien.
AFFIRMED IN PART, REVERSED IN PART AND REMANDED.
All Justices concur except UHLEN-HOPP, CARTER and WOLLE, JJ., who concur in part and dissent in part.