Franklin v. Spencer
| Decision Date | 03 May 1990 |
| Citation | 309 Or. 476,789 P.2d 643 |
| Parties | Timothy FRANKLIN and Phyllis Franklin, husband and wife, Respondents on review, v. Larry D. SPENCER, Sheriff of Lincoln County, and Carl Drobnic and Irene Drobnic, husband and wife, Defendants, Ted Harber and Karen Harber, husband and wife, and Darrell Linzy, Petitioners on review. Ted HARBER and Karen Harber, husband and wife, Petitioners on review, v. Timothy FRANKLIN and Phyllis Franklin, husband and wife, Respondents on review. CC 86-1253, CC 86-1288; CA A44858; SC S36409. |
| Court | Oregon Supreme Court |
J. Christopher Minor, of Minor, Beeson & Boone, P.C., Newport, filed the petition for petitioners on review and argued the cause for petitioner Linzy. Frederick J. Ronnau, Lincoln City, argued the cause for petitioners on review Harber.
Scott W. McGraw, Salem, argued the cause for respondents on review.
Before PETERSON, C.J., and LINDE *, CARSON, JONES, GILLETTE and FADELEY, JJ.
After foreclosure of a mortgage, after sale of the mortgaged property at a sheriff's sale, and during the time within which redemption could be made, the plaintiffs herein purchased the mortgagor's right to redeem the foreclosed property, and thereafter redeemed. The main issue is: If a mortgagor, after foreclosure and sale, but during the time within which the mortgagor can redeem, assigns the right to redeem and the assignee redeems, are liens arising from unsatisfied judgments against the mortgagor/assignor, judgments that existed before the foreclosure decree and sale, "reinstated" 1 as to the redeemed property? We hold that they are.
The facts are complex. We set them forth in chronological form.
[309 Or. 479]2. In a second action, also before us, the Harbers sued the Franklins, asking for declaratory and injunctive relief. We will refer to Mr. and Mrs. Franklin as the plaintiffs, and to the other parties by name.
Date Event Person
Before
1970 Loevitaur owned real property in Lincoln County
12/70 Loevitaur gave a mortgage to Walters
6/79 & Two judgments against Loevitaur in favor of Harbers
9/81
12/81 Walters filed a mortgage foreclosure suit against
Loevitaur, also naming the Harbers as defendants
8/82 During pendency of the foreclosure suit, but before Drobnics
foreclosure decree, another judgment was entered
against Loevitaur in favor of the Drobnics (who were
then added as defendants)
2/85 Foreclosure decree
4/85 Sheriff's sale. The purchaser at the sheriff's sale was Linzy
3/86 Loevitaur conveyed his right of redemption to Plaintif-
fs
Timothy
Franklin
and
Phyllis
Franklin
4/4/86 Plaintiffs redeem
4/18/86 Drobnics assign their judgment to Linzy
Thereafter
Harbers applied to the sheriff for execution on the real
property redeemed by the plaintiffs
7/86 Plaintiffs filed this action, seeking an injunction
against Harbers, Linzy, and the sheriff, claiming that
the foreclosure of the mortgage extinguished the three
judgment liens and that the judgment liens were not
reinstated when redemption occurred. 2
The circuit court held that the judgment liens were not "reinstated" by the plaintiffs' redemption, and enjoined the sheriff from selling the plaintiffs' real property on execution. The Court of Appeals reversed, holding that " * * * a grantee of a mortgagor who redeems from a foreclosure sale takes the property subject to any judgment liens against the mortgagor that had attached to the property before the grantee's purchase." Franklin v. Spencer, 94 Or.App. 355, 361, 765 P.2d 1241 (1988). On reconsideration, the Court of Appeals withdrew its former opinion and affirmed the decision of the circuit court. Franklin v. Spencer, 97 Or.App. 202, 776 P.2d 13 (1989).
We hold:
1. A mortgagor, after foreclosure and sale of the mortgaged property and during the time that the mortgagor can redeem, holds "legal title" to the property in the form of a right to redeem.
2. Even though the purchaser at the foreclosure sale takes the property free from the lien of judgments against the mortgagor, judgment liens that existed against the mortgagor's interest in the real property before foreclosure continue to exist in the mortgagor's interest in the real property--the retained legal title following foreclosure.
3. If after the foreclosure sale the mortgagor assigns the right to redeem to a third person, and the assignee thereafter redeems, the judgment liens theretofore existing against the mortgagor's retained legal title become a lien on the redeemed real property, and the property can be sold on execution of the judgment creditor's judgment.
The resolution of this case turns on the meaning of statutes relating to the creation of judgment liens, the execution of judgment liens, the foreclosure of mortgages, and redemption following the sheriff's sale. We turn to those statutes.
ORS 18.350(1) provides that from the time of docketing a judgment " * * * such judgment shall be a lien upon all the real property of the judgment debtor within the county where the same is docketed * * *." The lien attaches "[f]rom the time of docketing." The docketing of the judgment gives constructive notice of the lien against the property. ORS 93.643(2). Subsequent conveyances of the real property are subject to the judgment lien. ORS 18.370. Oliver v. Wright, 47 Or. 322, 327, 83 P. 870 (1905). See also Kaston v. Storey, 47 Or. 150, 153, 80 P. 217 (1905).
Two sets of statutes control the enforcement of judgment liens and mortgage liens. ORS 23.030 to 23.105 and ORS 23.410 apply to the collection of judgments by levy and execution. ORS 88.010 to 88.120 apply to the foreclosure of mortgage liens. 3
ORS Chapter 88 provides for the filing of a mortgage foreclosure "suit." ORS 88.050 directs that if multiple defendants have liens on the real property being foreclosed, the court shall specify the order of priority of the liens, and enter a decree of foreclosure and sale. The court may enter a deficiency judgment in those cases in which the proceeds of sale are insufficient to pay all creditors. 4 ORS 88.060(2).
ORS 88.080 concerns the sale of the foreclosed property. It provides:
ORS 23.410 to 23.515, incorporated by reference in ORS 88.080, prescribe sale procedures for real property sold on execution of a judgment lien. ORS 23.510 provides that "[a]t the time of sale, the sheriff shall give to the purchaser a certificate of the sale * * *." Thereafter, the sheriff returns the execution to the court, pays the proceeds of the sale to the clerk, and the court confirms the sale. ORS 23.490.
An execution and subsequent sheriff's sale have a number of effects, including these:
1. The sheriff gives to the purchaser "a certificate of the sale." ORS 23.510. The purchaser thereafter is, in most situations, entitled to possession of the real property. Lytle v. Payette-Oregon Irr. Dist., 175 Or. 276, 290-91, 152 P.2d 934 (1944).
2. If no one redeems within the period for redemption, the purchaser "shall be entitled to a conveyance from the sheriff." ORS 23.600. ORS 23.600 says nothing about warranties of title in the conveyance instrument. The last sentence of ORS 23.600 states that if the purchaser obtains, prior to the expiration of the time for redemption, "the rights of all persons entitled to redeem, the court may direct the sheriff to execute a deed of conveyance, * * * and upon the execution thereof the title of such purchaser * * * shall become absolute." The title conveyed to the purchaser is free of the liens. Call v. Jeremiah, 246 Or. 568, 573-74, 425 P.2d 502 (1967); Kaston v. Storey, supra, 47 Or. at 153, 80 P. 217; Flanders v. Aumack, 32 Or. 19, 26, 51 P. 447 (1897).
Following the sale, the redemption statutes, ORS 23.520 to 23.600--which apply alike to sales on foreclosure of mortgaged real property and sales of real property on execution of judgment liens--come into play. Interested persons may redeem by paying the amount of the purchase price, with interest. ORS 23.540 and ORS 23.560(2). If the mortgagor or judgment debtor redeems, "the effect of the sale shall terminate and the judgment debtor shall be restored to the estate of the judgment debtor." ORS 23.600.
That brings us to the key statute in this case, ORS 23.530(1). It provides:
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...Oregon law, a mortgagor retains "legal title" following the foreclosure sale and during the time for redemption. Franklin v. Spencer, 309 Or. 476, 483, 789 P.2d 643, 646 (1990). The contract subset of the "state law" theory looks to state law to determine when the mortgage contract is extin......
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...to redeem. ‘Legal title’ remains with the mortgagor/judgment debtor until the foreclosure sale is complete." Franklin v. Spencer , 309 Or. 476, 483-84, 789 P.2d 643 (1990) (internal citations omitted).Relying on Franklin , plaintiff argues that the rights of a purchaser of foreclosed proper......
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