Land Associates, Inc. v. Becker

Oregon Supreme Court
294 Or. 308, 656 P.2d 927 (1982)

ELI5:

Rule of Law:

A junior lien creditor whose interest is acquired after a foreclosure suit is filed (pendente lite) is bound by the foreclosure decree under the doctrine of lis pendens. Because their interest is thereby foreclosed by the decree, they possess a statutory right of redemption.

Facts:

Land Associates, Inc. sold real property to a buyer named Becker under a land sales contract.
On June 26, 1979, Land Associates initiated a foreclosure action against Becker.
After the lawsuit was filed, three of Becker's other creditors recorded liens against the property on June 27, July 2, and October 31, 1979.
On November 19, 1979, Becker conveyed his interest in the property to E & B Investors, Inc.
Following a judicial sale on April 17, 1980, Land Associates purchased the property.
On May 14, 1980, Land Associates assigned its certificate of sale to E & B Investors.
On June 13, 1980, the three junior lien creditors, whose interests arose after the suit began, assigned their lien interests to Launa H. Bautista.
On that same day, 57 days after the foreclosure sale, Bautista attempted to exercise the statutory right of redemption.

Procedural Posture:

Land Associates, Inc. filed a foreclosure suit against Becker in a state trial court.
The trial court entered a stipulated decree of foreclosure and ordered a judicial sale.
Following the sale, the trial court issued an ex parte order directing the sheriff to issue a deed to the purchaser's assignee, E & B Investors, before the 60-day statutory redemption period had expired.
Launa H. Bautista intervened in the action, filing a complaint to set aside the order and permit her to redeem the property.
The trial court dismissed Bautista's complaint in intervention.
Bautista, as appellant, appealed to the Court of Appeals, which affirmed the trial court's dismissal.
The Oregon Supreme Court granted review of the Court of Appeals' decision.

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Issue:

Does an assignee of junior lien creditors, whose liens attached to a property after a foreclosure suit had already been filed, have a statutory right to redeem that property following the foreclosure sale?

Opinions:

Majority - Campbell, J.

Yes, an assignee of pendente lite junior lien creditors has a statutory right to redeem. The doctrine of lis pendens dictates that any interest in property acquired after a suit concerning that property has commenced is bound by the outcome of that suit. Unlike unjoined creditors whose liens existed before the suit (who retain equitable redemption rights because their interests are not foreclosed), the interests of these pendente lite creditors were extinguished by the foreclosure decree. The foreclosure of their interests is the event that gives rise to a statutory right of redemption. Therefore, Bautista, as their assignee, validly holds a statutory right to redeem the property.

Analysis:

This decision clarifies the scope and application of the lis pendens doctrine with respect to statutory redemption rights in foreclosure actions. It critically distinguishes between the rights of unjoined pre-existing lienholders and those whose interests arise pendente lite, establishing that the latter are bound by the foreclosure and thus gain statutory redemption rights. The ruling also narrowly construes the statutory provision for an early sheriff's deed, holding that a purchaser must actually acquire all outstanding redemption rights, not merely convince a court that they have done so. This reinforces the procedural protections afforded to junior creditors and prevents purchasers from prematurely cutting off redemption periods through ex parte proceedings.

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