United States v. John Hancock Mutual Life Insurance Co

• Decision Date: 07 November 1960
• Docket Number: No. 18,18
• Citation: 81 S.Ct. 1,364 U.S. 301,5 L.Ed.2d 1
• Parties: UNITED STATES, Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE CO., George Hetzel and Grace Marie Hetzel
• Court: U.S. Supreme Court

364 U.S. 301

81 S.Ct. 1

5 L.Ed.2d 1

UNITED STATES, Appellant,

v JOHN HANCOCK MUTUAL LIFE INSURANCE CO., George Hetzel and Grace Marie Hetzel.

No. 18.

Argued Oct. 13, 1960.

Decided Nov. 7, 1960.

Mr. George C. Doub, Washington, D.C., for appellant.

Mr. Harry L. Hobson, Wichita, Kan., for appellees.

Mr. Chief Justice WARREN delivered the opinion of the Court.

The issue in this case is whether the United States, as the second mortgagee of real estate judicially foreclosed in a proceeding to which the United States was made a party under 28 U.S.C. § 2410, 28 U.S.C.A. § 2410,¹ can redeem within one year from the date of sale pursuant to 28 U.S.C. § 2410(c), 28 U.S.C.A. § 2410(c), despite a conflicting state statute giving the mortgagor the exclusive right to redeem within that period.

The facts are not in dispute and, insofar as here pertinent, may be summarized as follows. Appellee John Hancock Mutual Life Insurance Co. held a note for $25,000, secured by a mortgage on certain Kansas real estate. The note was in default and the insurance company instituted proceedings in the District Court of Edwards County, Kansas, seeking a declaration that its mortgage constituted a first lien on the property and asking foreclosure to satisfy this lien. An agency of the United States, the Farmers' Home Administration, held four notes executed by the mortgagors against whom the insurance company was proceeding and one of these notes, in the face amount of $10,565, was secured by a mortgage on the property securing appellee's note. It is undisputed that the United States' secured note was junior in priority to that held by appellee. However, under Kansas law, a senior lienor must join junior lienors in the foreclosure proceeding in order to cut off the junior liens. Motor Equipment Co. v. Winters, 146 Kan. 127, 69 P.2d 23. And the only way in which the United States can be joined in its capacity as junior lienor is pursuant to the terms of 28 U.S.C. § 2410, 28 U.S.C.A. § 2410, since the United States has not otherwise waived sovereign immunity in this type of situation. Consequently, appellee insurance company joined the United States and the United States cross petitioned for an adjudication that it held a second lien on the property, inferior only to appellee's lien, in the amount owed on all four notes. The Kansas District Court held that appellee enjoyed a first lien entitling it to a judgment of $26,944.78 and that the United States held a second lien by virtue of its secured note, entitling it to $10,402.61.² The court ordered both liens foreclosed. At the foreclosure sale, the insurance company bought in the property in the amount of its own judgment. The United States did not bid and the sale was confirmed by the District Court on February 5, 1958. Four months later—on June 5, 1958—the United States instituted proceedings to redeem the property pursuant to the terms of 28 U.S.C. § 2410(c), 28 U.S.C.A. § 2410(c). This section specifies that, when the United States is joined in a foreclosure proceeding under § 2410 in particular § 2410(a)—and a sale is held to satisfy a lien prior to that of the United States, 'the United States shall have one year from the date of sale within which to redeem.' Although the United States satisfied the procedural requirements of Kansas law, Kan.Gen.Stat., 1949, § 60—3451, its tender was refused and, consequently, it moved the court to compel the clerk to issue it a redemption certificate. The District Court denied relief and the Kansas Supreme Court affirmed,³ holding that the United States' action was barred by the provisions of state law granting the mortgagor the exclusive right to redeem his property during a period of twelve months following the date of a foreclosure sale.

The pertinent Kansas law provides that the mortgagor shall have the exclusive right of redemption for twelve months following the date of sale; thereafter, if the mortgagor has not redeemed, the lien creditors enjoy a three-month period during which they, or the mortgagor, may redeem.⁴ Kan.Gen.Stat., 1949, § 60—3440. If the mortgagor redeems at any time, all redemption rights are cut off. Sigler v. Phares, 105 Kan. 116, 181 P. 628, 5 A.L.R. 141. In this case, the mortgagors redeemed within twelve months of the date of sale but subsequent to the attempt of the United States to redeem.

The narrow question for our decision is whether that part of § 2410(c) which grants the United States a right to redeem applies to the present situation. If it does, then the inconsistent provisions of state law must fall under the Supremacy Clause of the United States Constitution.⁵ U.S.Const. Art. VI.

On analysis the question is not only narrow but also susceptible to rapid solution, since the plain language of § 2410(c) reveals no impediment to its applicability once resort is had to § 2410(a). Moreover, an examination of the legislative history of § 2410 shows that Congress considered the redemption provision of § 2410(c) an important and integral feature of § 2410. The pertinent excerpts reveal that Congress feared a situation where the United States, as junior lienor, would find its lien dissolved pursuant to § 2410 without having had a chance to protect its right to any amount the foreclosed property might be worth in excess of the senior lien.⁶ As Congress recognized, one method of protection for junior lienors is to bid competitively at the foreclosure sale, thereby preventing property worth more than the amount due on the senior lien from being sold at a discount. However, it was noted that, barring special circumstances, the United States could not pursue this procedure unless it first secured an appropriation from Congress and, thus, the one-year period of redemption was inserted to afford the United States sufficient time to secure an appropriation and protect its interests. The protective nature of the redemption proviso in § 2410(c) was recognized in United States v. Brosnan, 363 U.S. 237, 246, 80 S.Ct. 1108, 1114, where this Court stated that 'the Government is guaranteed a one-year right to redeem if the plaintiff proceeds under § 2410 * * *.' This proposition is in line with the well-settled rule that Congress may impose conditions upon a waiver of the Government's immunity from suit. See e.g., Soriano v. United States, 352 U.S. 270, 276, 77 S.Ct. 269, 273, 1 L.Ed.2d 306, where we added that these protective conditions 'must be strictly observed and exceptions thereto are not to be implied.'

Appellees concede, as they must, that § 2410 was mandatorily applicable to the present situation since Kansas law required joinder of the United States and the United States can only be joined pursuant to § 2410. However, they would have us find a superseding congressional intent to afford the United States a right of redemption only when no such right is granted under state law; when some privileges of redemption are given by the State to junior lienors, although of lessor magnitude than that provided in § 2410(c), then the federal right is no longer pertinent. The short answer to this contention is that no indication of such a limitation appears in the body of the statute—which specifies that the United States 'shall' have one year to redeem—or in its legislative history. See Soriano v. United States, supra.

Appellees also press upon us the fact that the federal agency here concerned, the Farmers' Home Administration, could have protected its junior lien without insisting on a right to redeem under § 2410, since 7 U.S.C. (1952 ed.) § 1025, 7 U.S.C.A. § 1025 authorizes the Secretary of Agriculture, who supervises the Farmers' Home Administration, to bid at foreclosure sales.⁷ But the significance of this section and its effect on § 2410 is not clear. Concededly, if there were some indication in § 1025 that the power of the Secretary of Agriculture is limited to bidding at the foreclosure sale, then we would be faced with a problem of resolving the two statutes. Cf. United States v. Stewart, 311 U.S. 60, 61 S.Ct. 102, 85 L.Ed. 40. However, there is no conflict, either express or implied, between § 1025 and § 2410. In effect, appellees would have us read § 2410 as authorizing redemption 'except where another federal statute authorizes the particular agency concerned to bid at foreclosure sales.' The only support for such an interpretation is the fact that some federal agencies are authorized to bid at foreclosure sales. We think that the logical connection is insufficient to support such a violent graft on the language of the statute.

Appellees advance several other contentions which require only brief discussion. They argue citing Guaranty Trust Co. of New York v. United States, 304 U.S. 126, 58 S.Ct. 785, 82 L.Ed. 1224, that the United States, by seeking affirmative relief in a state court, subjects itself to all the incidents of state law which govern other suitors. See Hart & Wechsler, The Federal Courts and the Federal System 1112. However, we need go no farther than the Guaranty Trust case to uncover one of the several special rules which favor the United States in preference to other plaintiffs the rule that the United States is not subject to local statutes of limitations. See United States v. Summerlin, 310 U.S. 414, 60 S.Ct. 1019, 84 L.Ed. 1283. Other such rules, applicable in both federal and state courts, can be found in 28 U.S.C. §§ 2404, 2405, 2407, 2408, 2413, 28 U.S.C.A. §§ 2404, 2405, 2407, 2408, 2413. Furthermore, the present proceedings were not initiated by the United States but by appellee insurance company when it joined the United States pursuant to § 2410.

Appellees also point to the first sentence of § 2410(c)—'(a) judicial sale in such action or suit shall have the same effect respecting the discharge of the property from liens * * * held by the United States as may be provided * * * by the local law of the place where the property is situated.' The contention is that this sentence governs...