Farm Credit Bank of Wichita v. Zerr, 73241

• Decision Date: 19 April 1996
• Docket Number: No. 73241,73241
• Citation: 915 P.2d 137,22 Kan.App.2d 247
• Parties: FARM CREDIT BANK OF WICHITA, Appellee, v. Clem A.J. ZERR and Pauline Zerr, et al., Appellants.
• Court: Kansas Court of Appeals

Page 137

915 P.2d 137

22 Kan.App.2d 247

FARM CREDIT BANK OF WICHITA, Appellee, v. Clem A.J. ZERR and Pauline Zerr, et al., Appellants.

No. 73241.

Court of Appeals of Kansas.

April 19, 1996.

Syllabus by the Court

1. A mortgagor's redemptive rights are zealously guarded in this state. The purpose of redemption rights is to prevent hardship and inequity.

2. It is a fundamental rule of statutory construction, to which all other rules are subordinate, that the intent of the legislature governs if that intent can be ascertained.

3. The 3-month redemption period in K.S.A. 60-2414(m) does not apply to real property executed upon in order to satisfy a deficiency judgment. The general rule is that a defendant owner is entitled to redeem real property sold under execution or order of sale within 12 months after the date of sale. K.S.A. 60-2414(a).

4. Judicial discretion is abused when judicial action is arbitrary, fanciful, or unreasonable, which is another way of saying that discretion is abused only where no reasonable person would take the view adopted by the trial court.

5. Under K.S.A. 60-2415, the trial court has the discretion to refuse to confirm a sheriff's sale if it finds the bid substantially inadequate, but the decision of whether to confirm must be supported by the evidence.

6. Where one of a number of tracts of real estate being sold together in a sheriff's sale is found to be incorrectly described, the withdrawal of the misdescribed tract before the sale will not void the sale of the other tracts, absent a showing of fraud or other circumstances affecting a party's substantive rights.

Appeal from Gove District Court; Tom Scott, judge.

William J. Madden, of Hays Legal Services, Hays, for appellants.

Larry D. Tittel, Ness City, for appellee.

Before LEWIS, P.J., PIERRON, J., and JOHN W. WHITE, District Judge, Assigned.

PIERRON, Judge:

Clem A.J. and Pauline Zerr challenge an order confirming the sale of their real estate at a sheriff's sale after Farm Credit Bank of Wichita executed on a deficiency judgment. The Zerrs also argue the district court set an improper redemption period and failed to consider the appraised value of the real estate in confirming the sale. We affirm in part, reverse in part, and remand for further proceedings.

The pertinent facts are not in dispute. In 1982, the Zerrs borrowed $620,000 from Farm Credit Bank of Wichita (FCB) and granted a mortgage on approximately 2,180 acres of farm land as security. As did many farmers, the Zerrs encountered financial difficulties and defaulted on the loan. On July 15, 1992, FCB filed its petition in district court seeking judgment for the amount owed and foreclosure of the mortgage securing the note. The Zerrs answered the petition, admitting default under the terms of the note and mortgage and requesting that the mortgaged property be sold subject to appraisement.

On September 4, 1992, FCB filed a motion for summary judgment. However, the Zerrs subsequently filed a Chapter 12 bankruptcy, leaving this matter dormant until 1994. On April 4, 1994, the bankruptcy court dismissed the Zerrs' bankruptcy, and on May 10, 1994, FCB filed a motion for judgment on the pleadings as well as summary judgment. The district court granted FCB's motion and entered a journal entry of foreclosure on June 16, 1994. The amount due and owing on the note and mortgage was $864,858.28, plus interest and the costs of the action.

Pursuant to the foreclosure action, the 2,180 acres of real estate was sold at a sheriff's sale for a total of $632,000. FCB successfully bid on all the property. The district court confirmed the sale and entered a deficiency judgment in favor of FCB for $257,948.25. To help satisfy its deficiency, FCB executed on four additional tracts of real estate owned by the Zerrs. The sheriff offered the four tracts for sale on September 23, 1994.

Prior to the sale, FCB filed a motion to establish redemption rights, and the Zerrs similarly filed a motion for a sale subject to appraisement and to establish redemption rights. The district court found that K.S.A. 60-2414(m) was applicable and set a redemption period of 3 months from the date of the sale. Three tracts of real estate were sold at a sheriff's sale on August 29, 1994.

On October 10, 1994, the district court heard FCB's motion for confirmation of the second sale. The appraiser for the Zerrs testified that one of the tracts had a value of $199,000 and that FCB had successfully bid the property at $170,200. On November 9, 1994, the district court filed its order confirming the sheriff's sale and found that a deficiency judgment of $23,416.85 still remained. The fourth tract of land, which was not sold at the sale, was later republished and sold at a subsequent sheriff's sale.

The Zerrs contend the district court erred in setting a redemption period of 3 months. They argue the provisions of K.S.A. 60-2414(m) establishing a 3-month redemption period are not applicable.

The statutory right of redemption is a judgment debtor's privilege to regain property lost by sale under process by permitting purchase at the price at which the property was sold. Southwest State Bank v. Quinn, 198 Kan. 359, Syl. p 2, 424 P.2d 620 (1967). Kansas case law on redemptive rights shows that the right of redemption is controlled by statute. See Federal Land Bank v. Hart, 157 Kan. 664, 143 P.2d 649 (1943); Piatt v. Flaherty, 96 Kan. 42, 149 P. 734 (1915); Federal Land Bank of Wichita v. Brown, 15 Kan.App.2d 302, 305, 807 P.2d 702, rev. denied 248 Kan. 995 (1991) (ability of holder of first mortgage to redeem property from a successful purchaser at sale); Federal Savings & Loan Ins. Corp. v. Treaster, 13 Kan.App.2d 305, 770 P.2d 481 (1989) (court's discretion in extending the redemption period).

Our standard of review is clearly one of statutory interpretation. "Interpretation of a statute is a question of law. An appellate court's review of a question of law is unlimited." Foulk v. Colonial Terrace, 20 Kan.App.2d 277, Syl. 1, 887 P.2d 140 (1994), rev. denied 257 Kan. 1091 (1995).

The general rule is that a defendant owner is entitled to redeem real property sold under execution or order of sale within 12 months after the date of the sale. K.S.A. 60-2414(a) provides in applicable part:

"Except as stated in subsection (m) and as otherwise provided by law, the defendant owner may redeem any real property sold under execution, special execution or order of sale, at any time within 12 months from the day of sale, for the amount paid by the current holder of the certificate of purchase, including expenses incurred by the holder of the certificate of purchase in accordance with subsection (d), together with interest at the rate provided for in subsection (e)(1) of K.S.A. 16-204, and amendments thereto, costs and taxes to the date of redemption."

An exception to the 12-month redemption period is found in K.S.A. 60-2414(m). Even in early Kansas redemption law, one who had paid less than 1/3 of an agreed purchase price for realty was only entitled to a 6-month redemption period in a foreclosure action. G.S.1909, § 6098. See Ruf v. Grimes, 104 Kan. 335, Syl. p 4, 179 P. 378 (1919); Hines v. Kays, 93 Kan. 209, 211, 144 P. 240 (1914); Neef v. Harrell, 82 Kan. 554, 109 Pac. 188 (1910). This 6-month redemption period was recently embodied in the 1992 Kansas Legislature's amendment to 60-2414. L.1992, ch. 320, § 1. These amendments became effective July 1, 1992.

In 1994, the Kansas Legislature again amended 60-2414(m), reducing the redemption period in specified situations from 6 months to 3 months. L.1994, ch. 230 § 1. The 1994 amendments became effective July 1, 1994. K.S.A. 60-2414(m) currently provides:

"In the event a default occurs in the conditions of the mortgage or instrument of the most senior lien foreclosed before 1/3 of the original indebtedness secured by the mortgage or lien has been paid, the court shall order a redemption period of three months. If, after proper showing, the court finds that the total outstanding amount of all mortgages or liens is less than 1/3 of the market value of the property, the court shall order a redemption period of 12 months. If the court finds after a hearing with not less than 21 days' notice to all parties, that the defendant owner has involuntarily lost such owner's primary source of income after the date of the foreclosure sale and prior to expiration of a three-month period of redemption, the court may extend the three-month period of redemption an additional three months. If the court orders a redemption period of six months or less, the right of the defendant owner or successors and assigns to redeem is exclusive for the first two months of the redemption period. This subsection shall not apply in the event redemption rights have been shortened, waived or terminated pursuant to subsection (a)."

The question before the court is whether the present case falls within this exception. Does the reduced redemption period in the above-cited subsection apply to real property that has been executed upon in order to satisfy a deficiency judgment? The answer is no.

In the case at bar, FCB foreclosed the Zerrs' mortgage and note and sold all the property at the sheriff's sale. The Zerrs had not paid 1/3 of the original indebtedness on this mortgage and pursuant to K.S.A. 1992 Supp. 60-2414(m), the district court correctly granted a 6-month period of redemption. After the sale of all the mortgaged property, a deficiency of approximately $258,000 still remained. The Zerrs argue that at this time FCB was nothing more than a unsecured creditor with a deficiency judgment. FCB then executed on four other tracts of real estate, and the district court decided pursuant to K.S.A. 60-2414(m) that the Zerrs would only have 3 months after the sheriff's sale in which to redeem the property.

The Zerrs raise two arguments as to why the 3-month redemption period is inapplicable to...