United States Ex Rel. Farmers Home Administration v. Reed

1996 OK 77, 921 P.2d 338, 67 O.B.A.J. 2242, 1996 Okla. LEXIS 89, 1996 WL 383265

• Court: Supreme Court of Oklahoma
• Decided: July 9, 1996
• Docket: 84170, 84180
• Status: Published

Opinions

KAUGER, Vice Chief Justice:

Two issues are presented on certiorari:¹ 1) whether a deed granted pursuant to a foreclosure sale conducted after an automatic stay issues is valid; and 2) whether the recorded title to real property obtained pursuant to 12 O.S.1991 § 93(1)² is subject to attack for invalidity if the owner of record has been in actual control and possession of the property in excess of five years. The first issue is governed by our pronouncement in Bailey v. Campbell, 862 P.2d 461, 467 (Okla.1991) that judicial proceedings undertaken in violation of an automatic stay in bankruptcy are of no effect.³ Therefore, a deed issued in violation of an automatic stay is void. However, under the facts presented, the title to the property may not be attacked on the basis of its validity.

FACTS

Floyd Hobbs (appellanVHobbs/debtor) owned approximately 3,907 acres of land in Osage County subject to mortgages held by the Farmers Home Administration (FHA/ap-pellee/cross-appellant) and the Federal Land Bank of Wichita (Land Bank). After default on the loans, a foreclosure suit was filed. In July, 1985, judgment was granted to FHA and Land Bank. Hobbs filed bankruptcy and an automatic stay ⁴ was granted on September 17, 1985. The following day and again on November 6, 1985, the court clerk issued special exeeution/orders of sale covering the property. At the sale in satisfaction of the judgment, FHA purchased the land. The sale was confirmed by order of the district court on December 17,1985. FHA first filed its sheriffs deed in January of 1986. A corrected deed was filed in March.

It is undisputed that FHA was in actual control and possession of all but a 320 acre tract of the Hobbs land from the time it took title until the quiet title action was filed — a period of over five years.⁵ The 320 acre tract was conveyed by quit claim deed from Hobbs to the cross-appellee, Melvin R. Reed (Reed), in February of 1988, following the sale to FHA. FHA filed this quiet title action when Hobbs and Reed refused to clear title to the entire tract.⁶ Hobbs counterclaimed and he moved for summary judgment asserting that the deed issued pursuant to the foreclosure sale was void because the sale was conducted in violation of the automatic stay. FHA denied any defect in the judgment and it asserted that Hobbs’ claim was barred by the five-year statute of limitations under 12 O.S.1991 § 93(1) and (3).⁷ The trial court sustained Farmers’ motion for summary judgment. The Court of Appeals affirmed holding that 12 O.S.1991 § 2013(C),⁸ involving the effect of mandatory counterclaims on statutes of limitation, did not apply to titles obtained by adverse possession under 12 O.S.1991 § 93(1) and (6) which it denominated as statutes of repose rather than as statutes of limitation.⁹ We granted certiorari on May 3, 1996, to determine whether the Court of Appeals opinion was at variance with Bailey v. Campbell, 862 P.2d 461 (Okla.1991) and whether title vested in FHA pursuant to 12 O.S.1991 § 93(1) and (6).¹⁰

I.

UNDER BAILEY v. CAMPBELL, 862 P.2D 461 (OKLA.1991), A DEED, ISSUED PURSUANT TO JUDICIAL PROCEEDINGS CONDUCTED IN VIOLATION OF AN AUTOMATIC STAY IN BANKRUPTCY, IS VOID.

Hobbs asserts that FHA’s title to the land at issue is void because it was issued in violation of an automatic stay in bankruptcy. FHA contends that, under the facts presented, if the deed holder was in actual possession and control of the property, the title to the property may not be attacked on the basis of the deed’s validity.

Hobbs relies on Bailey v. Campbell, 862 P.2d 461, 467-68 (Okla.1991) for the proposition that the deed, issued in violation of the automatic stay, is void. Bailey presented the question of whether an appeal by a debtor commenced after an automatic stay issued barred a second appeal of the same question once the stay lifted. This Court adopted the majority position in Bailey holding that judicial proceedings undertaken after a party files for bankruptcy and an automatic stay issues are a nullity. This issue is governed by Bailey — the deed, issued in response to the foreclosure action and the sale on execution, is void — it was executed pursuant to judicial proceedings conducted in violation of the automatic stay.¹¹

II.

UNDER 12 O.S.1991 § 93(1) AND (6), A VOID DEED WHICH IS VALIDLY RECORDED MAY NOT BE ATTACKED IF THE OWNER OF RECORD HAS BEEN IN POSSESSION OF THE REAL PROPERTY FOR THE STATUTORY PERIOD.

Hobbs recognizes that his claim falls outside the five year statute of limitations contained in 12 O.S.1991 § 93(1).¹² However, he contends that his counterclaim is timely. Hobbs relies on 12 O.S.1991 § 2013¹³ which allows counterclaims arising from the claim of the opposing party to be asserted although the limitations period has expired when the petition is filed. FHA argues that the only issue in a suit involving title by prescription is whether the real estate has been occupied by the claimant for the requisite time period. It asserts that an attack on the validity of the deed is not a counterclaim to a prescriptive suit within the meaning of § 2013. However, FHA’s amended petition in error indicates that its quiet title action was not premised on adverse possession alone. Rather, the lender also claimed title through the sheriffs deeds issued on December 10, 1985, and March 17, 1986.¹⁴ This contention puts the validity of the deed at issue.

The fundamental rule of statutory construction is to discern the Legislative intent. Generally rules of statutory construction will not be applied to a statute if the will is clearly expressed.¹⁵ We agree with Hobbs that the clear, express and mandatory language ¹⁶ of 12 O.S.1991 § 2013(C)¹⁷ provides that a counterclaim arising out of the same transaction or occurrence as the petition shall not be barred by a statute of limitations. We also agree that 12 O.S.1991 § 93 has been denominated in Oklahoma case law as a limitations statute.¹⁸ Looking at the language of these two provisions in isolation, it would appear that Hobbs’ claim would not be barred. However, this does not end the inquiry.

This Court considered the effect of a prior counterclaims statute on a quiet title action in Woods v. Phillips Petroleum Co., 207 Okla. 490, 251 P.2d 505, 509 (1952). In Woods, we held that if the title of a purchaser at a tax sale ripened into title by prescription and a former owner of land filed an answer and cross-petition seeking to have title quieted, the plea did not constitute a “set-off or counterclaim” within 12 O.S.1951 § 273.¹⁹ In so doing, the Woods Court stated:

“... It is clear that the right of plaintiffs in the ease before us to bring an action to quiet title is never barred. It follows that the cross-petition or counterclaim mentioned in Sec. 273, supra, was never intended to preserve forever the right of a former owner to seek to recover the land....”

Consistent with legislative policy, a void conveyance will, in some instances serve as a muniment of title. Legal effect has been legislatively conferred on some classes of void deeds.²⁰ In subsection (6) of § 93, the Legislature specifically provided that the five-year statute of limitations found in subsection (1) would operate even if the deed or judgment it is based upon is void or voidable.²¹ Our interpretation of the statute has also required that the deed holder be in possession and that the deed be recorded for ownership to be recognized²² — these conditions are present. The sheriff’s deed was first filed in January of 1986. A corrected deed was recorded in March. It is undisputed that FHA has been in exclusive possession and control of the property.²³ Therefore, although the judicial proceedings, sale and execution are void under Bailey, subsection (6) removes this contention as a valid contest to FHA’s title. Hobbs did not challenge the validity of Fanners’ title until October, 1991 — more than five years after the deed was recorded. The clear language of 12 O.S.1991 § 93(6) prohibits him from attacking the deed as void.

CONCLUSION

FHA’s deed is void under our pronouncement in Bailey v. Campbell, 862 P.2d 461, 467 (Okla.1991) that judicial proceedings -undertaken in violation of an automatic stay in bankruptcy are invalid. Nevertheless, the specific language of 12 O.S.1991 § 93(6) provides that even a void or voidable deed issued pursuant to subsection (1) is fully operative.²⁴ Case law construing the statute has imposed additional requirements of recordation of the deed and actual possession.²⁵ Because FHA has met all requirements necessary to guarantee that even a void deed will pass good title, we find that, under the facts presented, the title to the property may not be attacked on the basis of its validity.

CERTIORARI PREVIOUSLY GRANTED; COURT OF APPEALS OPINION VACATED; TRIAL COURT AFFIRMED.

KAUGER, V.C.J., and HODGES, LAVENDER, HARGRAVE, SUMMERS, WATT, JJ. concur. WILSON, C.J. concurs in part and dissents in part. SIMMS, J. concurs in result. OPALA, J. concurs in judgment but not in Court’s opinion.

1 . In April 1987, Hobbs leased 320 acres of the parcel to the cross-appellees, Melvin L. Reed and Ron P. Reed (Reeds). The Reeds later purchased the land from Hobbs. The trial court and the Court of Appeals found that the Reeds were bonafide purchasers of this tract and that the sale, even in violation of the automatic stay, was valid. This portion of the property is not at issue on certiorari. Title 11 U.S.C. § 549 (1996) provides in pertinent part:

"... (c) The trustee may not avoid under subsection (a) of this section a transfer of real property to a good faith purchaser without knowledge of the commencement of the case and for present fair equivalent value unless a copy or notice of the petition was filed, where a transfer of such real property may be recorded to perfect such transfer, before such transfer is so perfected that a bona fide purchaser of such property, against whom applicable law permits such transfer to be perfected, could not acquire an interest that is superior to the interest of such good faith purchaser. A good faith purchaser without knowledge of the commencement of the case and for less than present fair equivalent value has a lien on the property transferred to the extent of any present value given, unless a copy or notice of the petition was so filed before such transfer was so perfected....”

2 . Title 12 O.S.1991 § 93 provides in pertinent part:

"Actions for the recovery of real property, or for the determination of any adverse right or interest therein, can only be brought within the periods hereinafter prescribed, after the cause of action shall have accrued, and at no other time thereafter:

(1) An action for the recovery of real property sold on execution ... within five (5) years after the date of the recording of the deed made in pursuance of the sale or proceeding ...

(6) Numbered paragraphs 1, 2, and 3 shall be fully operative regardless of whether the deed or judgment or the precedent action or . proceeding upon which such deed or judgment is based is void or voidable in whole or in part, for any reason, jurisdictional or otherwise ...”

3 . See also, South Western Oklahoma Development Auth. v. Sullivan Engine Works, Inc., 910 P.2d 1052, 1056 (Okla.1996).

4 . Title 11 U.S.C. § 362 (1996) provides in pertinent part:

“(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entitles, of—

(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title ...

(e) Thirty days after a request under subsection (d) of this section for relief from the stay of any act against property of the estate under subsection (a) of this section, such stay is terminated with respect to the party in interest making such request, unless the court, after notice and a hearing, orders such stay continued in effect pending the conclusion of, or as a result of, a final hearing and determination under subsection (d) of this section....”

5 .FHA’s response in opposition to Hobbs’ motion for summary judgment and its cross motion for partial summary judgment and brief in support provides in pertinent part:

"... STATEMENT OF UNDISPUTED FACTS ... Plaintiff took possession of the subject property on or before the 3rd day of January, 1986, which possession has been and continues to be open, notorious, adverse, exclusive and continuous as against the defendant Hobbs, for a period of more than five (5) years. That a period of more than five (5) years elapsed prior to plaintiff filing this action....”

The affidavit of William G. Terrell, the Osage County Supervisor for FHA, is attached to the motion and it provides in pertinent part:

"... Title to the 'Hobbs Ranch’ was acquired by the FHA through a Sheriff's Deed in Janu-aiyofl986. That the FHA through its officers, employees and tenants, have been in possession of the Hobbs’ property since early 1986, and are currently in possession thereof....”

Hobbs’ reply to the motion does not dispute the FHA’s control and possession of the land at issue. [If a party opposing a summary judgment motion does not contest proposed uncontrovert-ed facts, the facts are deemed admitted if the movant shows that it is entitled to judgment as a matter of law. Mooney v. Young Mens Christian Ass'n of Greater Tulsa, 849 P.2d 414, 416 (Okla.1993) ]; Rule 13(a), Rules for the District Courts, 12 O.S.Supp.1993, Ch. 2, App. provides in pertinent part:

"... All material facts set forth in the statement of the movant which are supported by admissible evidence shall be deemed admitted for the purpose of summary judgment unless specifically controverted by the statement of the adverse party which is supported by admissible evidence....”

We note that Hobbs' failure to respond to this particular fact did not result in a confession of judgment. Spirgis v. Circle K Stores, Inc., 743 P.2d 682, 684-85 (Okla.Ct.App.1987) (Approved for publication by the Supreme Court.).

6 . Title to this tract is not at issue on certiorari. See note 1, supra.

7 . Title 12 O.S.1991 § 93(1) and (6), see note 2, supra.

8 . Title 12 O.S.1991 § 2013(C) provides in pertinent part:

"... C. COUNTERCLAIM EXCEEDING OPPOSING CLAIMS; STATUTES OF LIMITATION. A counterclaim may or may not diminish or defeat the recovery sought by the opposing party. It may claim relief exceeding in amount or different in kind from that sought in the pleading of the opposing party. Where a counterclaim and the claim of the opposing party arise out of the same transaction or occurrence, the counterclaim shall not be barred by a statute of limitation notwithstanding that it was barred at the time the petition was filed, and the counterclaimant shall not be precluded from recovering an affirmative judgment....”

⁹

10 . Tifie 12 O.S.1991 § 93(1) and (6), see note 2, supra.

11 . We need not determine the effect of an apparent request by the Land Bank to lift the automatic stay in bankruptcy. Exhibit "B" to FHA’s answer brief and brief in chief is a copy of the docket sheets in the bankruptcy proceeding. It appears from this copy that the Land Bank filed an application to lift the automatic stay on October 10, 1985. FHA asserts that the application was unopposed in the bankruptcy action and that under 11 U.S.C. § 362(e) (1996), see note 4, supra, a request for relief from an automatic stay which is not contested within thirty (30) days results in the stay being lifted. However, the docket sheet attached as an exhibit to the brief is not found in the record on appeal. [A party may not supplement the record on appeal by injecting into it material that was not before the trial court. Dyke v. Saint Francis Hosp., 861 P.2d 295, 299-300 (Okla.1993); Hulsey v. Mid-America Preferred Ins. Co., 777 P.2d 932, 936 (Okla.1989); Chamberlin v. Chamberlin, 720 P.2d 721, 723 (Okla.1986).]

12 . Tide 12 O.S.1991 § 93(1), see note 2, supra.

13 . Title 12 O.S.1991 § 2013(C), see note 8, supra.

14 . FHA's first amended petition provides in pertinent part on pp. 2-3:

"... That pursuant to a special execution and Order of Sale entered by this Court on the 6th day of November, 1985, in Case No. C-85-18 in the District Court in and for Osage County, State of Oklahoma, the Sheriff of Osage County.did, on the 10th day of December, 1985, at 10:00 o'clock a.m., sell the above described real estate to the Plaintiff. That on December 18th, 1985, pursuant to Order Confirming said Sheriff's sale in Case No. C-85-18, the Sheriff of Osage County, Oklahoma, executed his Sheriff's Deed in favor of the Plaintiff, conveying to the Plaintiff all of the above described real estate, said Sheriff's Deed being recorded in the Office of the County Clerk of Osage County, Oklahoma, on January 3rd, 1986, at 10:38 o’clock a.m., in Book 688 at Page 803.

That subsequent thereto, a Correction Sheriff's Deed was executed by the Sheriff of Osage County, Oklahoma, under date of March 17th, 1986, in favor of the Plaintiff, said Correction Sheriff's Deed of Conveyance being recorded in the Office of the County Clerk of Osage County, Oklahoma, on March 23rd, 1986, at 2:53 o'clock p.m., in Book 693 at Page 19; a copy of said Sheriff's Deeds of Conveyance being attached hereto, marked Exhibits 'A' and ‘B’ and incorporated herein by reference....”

15 . Cox v. Dawson, 911 P.2d 272, 276 (Okla.1996); Oklahoma Ass'n for Equitable Taxation v. City of Oklahoma City, 901 P.2d 800, 803 (Okla.1995); Oglesby v. Liberty Mut. Ins. Co., 832 P.2d 834, 839-40 (Okla.1992); Fuller v. Odom, 741 P.2d 449, 452 (Okla.1987).

16 . The use of "shall" by the Legislature is normally considered as a legislative mandate equivalent to the term “must,” requiring interpretation as a command. Heirshberg v. Slater, 833 P.2d 269, 275 (Okla.1992); Fuller v. Odom, see note 15, supra; McDonald's v. Groves, 652 P.2d 281-82 (Okla.1982).

¹⁷

18 . See, Boecking-Berry Equipment Co. v. Ansay, 453 P.2d 251, 257 (Okla.1969); Hester v. Watts, 203 Okla. 97, 218 P.2d 641, 643 (1950); Long v. City of Tulsa, 199 Okla. 217, 184 P.2d 800, 802 (1947); Mitchell v. Graham, 193 Okla. 347, 143 P.2d 815, 818-19 (1943); Newbern v. Gould, 162 Okla. 82, 19 P.2d 157, 160 (1933); Clark v. Keith, 103 Okla. 20, 229 P. 613, 614-15 (1924); Lowen-stein v. Sexton, 18 Okla. 322, 90 P. 410-11 (1907).

19 . Title 12 O.S.1951 § 273 provides in pertinent part:

"... Such setoff or counterclaim shall not be barred by the statutes of limitations until the claim of the plaintiff is so barred....”

20 . Title 12 O.S.1991 § 93(6), see note 2, supra. Mobbs v. City of Lehigh, 655 P.2d 547, 551, 31 A.L.R.4th 1 (Okla.1982).

21 . Title 12 O.S.1991 § 93(6), see note 2, supra.

22 . Bearing v. State ex rel. Commissioners of the Land Office, 808 P.2d 661, 668 (Okla.1991); Kizzire v. Sarkeys, 361 P.2d 1082, 1084 (Okla.1961); Williams v. Bailey, 268 P.2d 868, 871 (Okla.1954).

23 . See note 5, supra.

24 . Tide 12 O.S.1991 § 93(1) and (6), see note 2, supra. The prohibition against an attack on the validity of a deed contained in 12 O.S.1991 § 96(6) applies only to subsections (1), (2) and (3) of the statute. It does not apply to subsection (4), relating to a cause of action for adverse possession within fifteen years or to subsection (5), relating to an action for forcible entry and detention or forcible detention of real property. Those subsections provide:

"(4) An action for the recovery of real property not hereinbefore provided for, within fifteen (15) years.

(5) An action for the forcible entry and detention or forcible detention only of real property, within two (2) years."

25 . Bearing v. State ex rel. Commissioners of the Land Office, see note 22, supra; Kizzire v. Sarkeys, see note 22, supra; Williams v. Bailey, see note 22, supra.