Southern Idaho Production Credit Ass'n v. Ruiz ex rel. Ruiz

666 P.2d 1151, 105 Idaho 140, 1983 Ida. LEXIS 497

• Court: Idaho Supreme Court
• Decided: July 15, 1983
• Docket: Nos. 13985, 13986 and 14178
• Status: Published

Opinions

BAKES, Justice.

This case involves three trial court decisions consolidated on appeal. The three cases will be referred to according to their trial court designations, No. 4561, No. 4666, and No. 5100. This appeal is taken from a denial of motions to set aside default judgments entered in Nos. 4561 and 4666, and from a grant of summary judgment to the defendants in No. 5100. The appellant, Bernardo Ruiz, asserts that he was mentally incompetent at the time he was served in Nos. 4561 and 4666, and thus an award of a default judgment against him was improper. He also asserts that the trial court erred in granting summary judgment to the defendants in No. 5100, an equitable action to set aside the judgments in Nos. 4561 and 4666 or, in the alternative, seeking a right to redeem foreclosed property either through tolling of the statutory right of redemption, or enforcement of an equitable right of redemption.

From approximately 1968 through 1975, the Southern Idaho Production Credit Association (SIPCA) extended a line of credit to Leandro Ruiz and appellant Bernardo Ruiz, his son, as a partnership, and to Bernardo Ruiz individually. Leandro Ruiz died in 1971. In 1973 Bernardo Ruiz executed a security agreement in favor of SIPCA, covering real and personal property. On August 18, 1976, SIPCA filed action No. 4561 against Ruiz seeking foreclosure of the real property covered by the 1973 security agreement. Ruiz was personally served on August 18, 1976. On November 9, 1976, a default judgment was entered in No. 4561 against Bernardo Ruiz for a sum of $37,-620.62 representing principal, interest on the loan, costs and attorney fees. On December 2,1976, notice of the sale of the real property was posted and published. On December 28, 1976, the real property in question was sold at a sheriff’s sale to T.W. and Winifred Stivers, for $39,000. However, the sheriff refused to deliver a certificate of sale because of an error in the legal description of the property, as previously published. On February 3, 1977, SIPCA and Stivers filed an action, No. 4666, against the sheriff to compel execution of the certificate of sale. Ruiz was also named as a defendant in that case and was personally served, and his default was entered on March 2, 1977. The district court entered judgment in No. 4666 compelling the delivery of the certificate of sale.

On November 15, 1978, Bernardo Ruiz was judicially declared incompetent. Rupert Goicoechea was appointed as guardian of his estate. On December 11, 1978, an action, No. 5100, was filed by Rupert Goicoechea, on behalf of Bernardo Ruiz, against SIPCA and T.W. and Winifred Stivers, asking that the default judgments in Nos. 4561 and 4666 be set aside and Bernardo Ruiz be allowed to redeem the property. It was not until July 25,1980, however, that motions to set aside the defaults were filed in the actions themselves (4561 and 4666). Affidavits of several persons in the community were submitted on behalf of appellant in all three cases, indicating that Bernardo Ruiz had a well known reputation in that community as a mental incompetent. Affidavits were also filed on behalf of SIPCA asserting that Ruiz appeared to be rational when he dealt with them, and additionally by both SIPCA and Stivers, stating that they were unaware of Bernardo Ruiz’s alleged incompetence.

The trial court denied the motions to set aside the defaults in 4561 and 4666, because they were not filed within the time required by I.R.C.P. 60(b). The court then denied the motion for summary judgment in No. 5100, because there were two material factual disputes upon which the case would turn: (1) whether Bernardo Ruiz was incompetent (and at what times), and (2) whether the SIPCA knew that Bernardo Ruiz was incompetent. The court indicated that the plaintiff would have to prove both elements to recover. The parties later stipulated that Bernardo Ruiz was incompetent at all times on and after August 18, 1976 (the date of service in the original action, No. 4561), and that SIPCA and Stivers were unaware of his incompetence.¹ The trial judge then entered a summary judgment for the defendants, and plaintiff appeals.

We will consider the trial court’s denial of motions to set aside the defaults in Nos. 4561 and 4666 together, and then will consider the propriety of granting summary judgment in No. 5100 separately.

I

Appellant first argues that a default judgment, taken against an incompetent, violates I.R.C.P. 55(b)(2).² He urges that failure to comply with I.R.C.P. 55(b)(2) voids the default judgments. Appellant then argues that since the judgments in Nos. 4561 and 4666 are void, then under I.R.C.P. 60(b)(4),³ the judgments can be set aside within a reasonable time. Appellant claims that since he moved to set aside those judgments within a reasonable time, the trial court erred in denying the motions.

The trial court denied the motions, ruling that they were not filed within a reasonable time. We affirm the trial court’s judgment in Nos. 4561 and 4666, but not because the motions were not filed within a reasonable time. Where a trial court made the proper decision, but relied on an erroneous theory, this Court can affirm on the proper theory. Matter of Revello, 100 Idaho 829, 606 P.2d 933 (1979).

Assuming, as the parties have stipulated, that appellant was incompetent at the time judgment by default was entered, in violation of I.R.C.P. 55(b)(2), that violation would, at most, render the resulting judgment voidable, not void. Several courts have examined this question, and ruled that an entry of judgment against an incompetent, even in the absence of a guardian, does not render the judgment void. See, e.g., Kemppainen v. Finckh, 12 Wash.App. 175, 528 P.2d 485 (Wash.App.1974); Brandt v. Brandt, 9 Or.App. 1, 495 P.2d 1205 (Or.1972). Thus, I.R.C.P. 60(b)(4) would be inapplicable in the present case, and appellant’s only avenue for relief to set aside the default would be under I.R.C.P. 60(b)(6).⁴

The time period during which a motion must be made under Rule 60(b)(6) is specifically limited, by the rule itself, to six months. Since appellant failed to file his motion within the time period prescribed, the trial court did not err in denying the motions in Nos. 4561 and 4666.

II

In No. 5100 the issues are somewhat different. Rupert Goicoechea, Bernardo Ruiz’s guardian, filed No. 5100 asserting either a tolling of the statutory right of redemption or an equitable right of redemption.⁵

Appellant’s first argument is inapposite. He bases his argument on I.C. § 5-213,⁶ which provides for a tolling of a statute of limitations during the incompetency of a plaintiff. He argues that this section, included in Title 5 of the Idaho Code, should also apply to Title 11 of the Idaho Code, which applies to redemptions of property. I.C. § 5-213 applies to extend the time for filing of civil actions. A redemption such as the one we are concerned with here is a different situation. A mortgagor, to redeem his property, need not file an action, but must merely tender the proper amount to the seller at the foreclosure sale, and he redeems his property. The sale itself places title in the seller, but upon redemption the effect of the sale is terminated. Because of the effect of redemption on the finality of the sale, and upon title to real property, the legislature has expressly limited the statutory right to redemption to one year. We see nothing to indicate that the legislature intended the tolling provisions for civil actions to apply to the redemption procedures under Title 11. Not only is there no mention of Title 5 in Title 11 itself, but I.C. § 5-213 is itself expressly limited to “time in this title,” which deals only with the time for commencement of civil actions. I.C. § 5-201. Thus, I.C. § 5-213 does not apply to toll the statutory right of redemption.

The trial court ruled that in order to claim an equitable right of redemption, Goicoechea would have to prove that the Stiverses or SIPCA knew of Ruiz’s incompetence, or show wrongful conduct on the part of SIPCA or the Stiverses. The trial court relied on Steinour v. Oakley State Bank, 45 Idaho 472, 262 P. 1052 (1928). In Steinour, this Court recognized that the common law equitable right of redemption was not subject to the time restraints of the statutory right of redemption. In Steinour, this Court allowed an equitable right of redemption after the one year statutory time to prevent a party with unclean hands from benefitting from his wrongful conduct. Relying upon Steinour, the trial court concluded that an equitable right of redemption could be granted only upon a showing of wrongful conduct. Because the parties later stipulated that SIPCA and the Stiverses did not know of Ruiz’s incompetence, the trial court granted a summary judgment to the defendants.

The trial court was correct in noting that Idaho does recognize an equitable right to redeem property, as do many states.- In Steinour, the debtor was misled by the purchaser into believing that the statutory period for redemption would be extended. The Court found that an equitable right of relief might exist based upon the facts alleged which indicated that the purchaser was guilty of wrongful conduct.

Like Steinour, nearly all states require a showing of some sort of wrongful conduct on the part of the purchaser before allowing the debtor an equitable right of redemption. This Court in Steinour noted policy reasons for allowing an equitable right of redemption.

“Courts of equity ... may, upon a proper bill declaring ... fraud, mistake or other circumstances appealing to the discretion of the chancellor, relieve a debtor whose property has been sold from failure to redeem within the statutory period. ... The court cannot award the right to redeem under the statute, but merely refuses to allow a party with unclean hands to benefit from his wrongful induction of a debtor into a trap from which the law cannot extricate him, and strips the wrongdoer of the title which the debtor intended to and would have otherwise redeemed; the debtor being required to pay at a later date what he would have paid at the time demanded by law.” 45 Idaho at 482, 262 P. at 1053.

In allowing an equitable right of redemption upon a showing of wrongful conduct, the Court in Steinour was applying the limited common law right based on equitable principles. However, the Court in the Steinour case did acknoweldge that in addition to wrongful conduct, a court of equity may “relieve a debtor whose property has been sold from failure to redeem within the statutory period” based upon “other circumstances appealing to the discretion of the chancellor.” 45 Idaho at 482, 262 P. 1052.

While we agree with the general rule set out in the Steinour case that in order to allow an equitable right of redemption there must be some showing of wrongful conduct on the part of the person against whom relief is sought, we conclude that where the debtor, whose statutory rights of redemption have passed was an incompetent from the date of the filing of the original complaint, that such incompetency is an “other circumstance” within the meaning of the rule set out in Steinour which would justify a court of equity to examine the transaction to determine whether equitable relief should be granted to the debtor. Since it is admitted that the debtor Ruiz was incompetent from and after the time of filing of the foreclosure action by SIPCA, we reverse the order of the trial court which determined as a matter of law that he was precluded from giving equitable considerations to the plaintiff’s claim, and remand for further consideration.

It is appropriate that we give some direction to the trial court in making the equitable evaluation in this case, particularly where the record discloses no fault or wrongful conduct on the part of the purchaser at the foreclosure sale. A granting of an equitable right of redemption is, in effect, a balancing of the equities that exist on either side of the dispute. By reversing the trial court’s summary judgment, we do not intimate that such a right should be affirmatively granted in this case. For example, in Mollerup v. Storage Systems Int., 569 P.2d 1122 (Utah 1977), the court balanced the equities, but came out in favor of the purchaser at the redemption sale. We hold only that the appellant should be allowed a chance to fully develop the facts before the trial judge in an attempt to show that the equities are balanced in his favor. The respondent should have an equal opportunity, recognizing that the burden of proof lies with the appellant.

One of the factors which should be considered by the trial court on remand in arriving at its decision is the adequacy of the sale price at foreclosure. It appears from the record that the price paid by the Stiverses, $39,000, while less than what the record suggests was the market value, is nevertheless substantial and not the nominal price considered by some courts as a factor in favor of the debtor. See Arnold v. Gebhardt, 43 Colo.App. 387, 604 P.2d 1192 (Colo.App.1979); Humpich v. Drake, 44 S.W. 632 (Ky.1898). See also Graffam v. Burgess, 117 U.S. 180, 6 S.Ct. 686, 29 L.Ed. 839 (1886) (sale will not be set aside for inadequacy of price unless coupled with other circumstances indicating its unfairness). Another factor present in this case, as it appears from the record, is that Bernardo Ruiz is still in possession of the land in question and thus the granting of an equitable right of redemption would not necessitate the dispossessing of the Stiverses from the property. Conversely, the Stiverses paid their $39,000 at the time of purchase, and from the record it appears that they have had no income from the property, may have incurred some expenses regarding taxes, etc., to preserve the property, and have not had the benefit of any return on their $39,000. They should be entitled to a reasonable rate of return on their money. Furthermore, it is our opinion that, in view of the fact that the Stiverses appear to be without fault in this transaction, consideration should be given to the costs and legal expenses incurred by them in preserving their property.

These and other equitable considerations should be considered by the trial court in determining whether or not in its discretion the appellant should be given an equitable right of redemption. As in all other cases, the trial court’s decision, whether pro or con, will be sustained by this Court if supported by substantial competent evidence.

The judgment of the district court is reversed and the cause remanded for further proceedings consistent with this opinion.

Reversed and remanded. No costs or attorney fees allowed.

DONALDSON, C.J., and HUNTLEY, J., concur. SHEPARD, J., would affirm the orders and judgment of the trial court and dissents without opinion.

1 . Bernardo Ruiz was never actually dispossessed of the real property involved in this case, and as far as the record reflects he still remains in possession.

2 . “RULE 55(b)(2). DEFAULT JUDGMENT BY THE COURT — PERSONS EXEMPT FROM.— In all other cases the party entitled to a judgment by default shall apply to the court therefor; but no judgment by default shall be entered against an infant or incompetent person unless represented in the action by a general guardian, or other such representative who has appeared therein.....”

3 .“RULE 60(b). MISTAKES, INADVERTENCE, EXCUSABLE NEGLECT, NEWLY DISCOVERED EVIDENCE, FRAUD, GROUNDS FOR RELIEF FROM JUDGMENT ON ORDER. —On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: ... (4) the judgment is void; .... ”

4 . Rule 60(b)(6) reads “any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2), (3) and (6) not more than six (6) months after the judgment, order, or proceeding was entered or taken.”

5 . “VI. That despite the expiration of the strict statutory period for exercising the right of redemption, the Court may under such circumstances grant plaintiff, for and on behalf of Bernardo Ruiz, an additional period of time to exercise the right of redemption granted by Idaho Code § 11 — 401 et seq.”

6 . “5-213. PERSONS UNDER DISABILITIES — RECOVERY OF REAL PROPERTY. — If a person entitled to commence an action for the recovery of real property, or for the recovery of the possession thereof, or to make any entry or defense founded on the title to real property, or to rents or services out of the same, be at the time such title first descends or accrues, either:

“2. Insane; or,

“The term during which such disability continues is not deemed any portion of the time in this title limited for the commencement of such action or the making of such entry or defense, but such action may be commenced, or entry or defense made, within the period of five (5) years after such disability shall cease, or after the death of the person entitled who shall die under such disability; but such action shall not be commenced or entry or defense made after that period.”