Madison Properties, Inc., a Corporation, Appellant, v. United States of America, Appellee, 375 F.2d 740 (9th Cir. 1967)

Appellant seeks to redeem realty purchased by the United States at foreclosure sale following default on an F.H.A. insured mortgage.¹  The District Court ruled that federal law controls, but observed that there are no federal provisions establishing a right to redeem or procedures therefor. It recognized that it was the custom of the U. S. Marshal in the district to follow Washington state law, allowing redemption within a year after foreclosure sale, and that the sale in this case had referred to this custom.²  It then ruled that the prescribed Washington procedures for redemption within a year had not been followed and that a differing federal rule would in no event be more generous than the state's. Accordingly redemption was denied. We agree.

It is well established that federal law controls. Clark Investment Co. v. United States, 364 F.2d 7 (9th Cir. 1966). While courts of equity have long recognized an equity of redemption in a mortgagor prior to foreclosure sale, any right of redemption after the sale is purely statutory. 9 Thompson on Real Property §§ 4822-3 (1958). Since there is no applicable federal statute extending redemption,³  redemption in this case must depend on adoption of Washington law, either as the rule of decision,⁴  or because of the prior custom.⁵  Accepting, arguendo, the District Court's judgment in this respect, we agree with the court that appellant has not complied with Washington procedures.

The foreclosure sale took place on December 4, 1964. On September 16, 1965, appellant notified the U. S. Marshal of its intent to redeem and demanded an accounting of rents, profits and expenses from operating the property. Receiving no response, appellant, on December 3, 1965, petitioned the U. S. District Court for an order requiring such an accounting and ordering redemption for the foreclosure sale price plus interest less net income. On January 4, 1966, prior to action by the court on the first petition, appellant petitioned for an order requiring redemption upon payment of the foreclosure sale price plus interest.⁶  On January 7 in open court appellant tendered the latter sum. The court ruled against redemption and ordered delivery of the Marshal's deed and bill of sale to the Federal Housing Commissioner.

Washington law requires redemption or the tender of the redemption price within one year.⁷  But state decisions would not recognize appellant's December 3, 1965, petition to the court as such a tender. Schmidt v. Worley, 134 Wash. 582, 236 Pac. 111 (1925); State ex rel. Bryant v. Starwich, 131 Wash. 101, 229 Pac. 12 (1924). The state statutes also provide a procedure whereby the redemptioner may, by demand, ascertain the net income from the property as an offset from the redemption price, but appellant has failed to follow this procedure.⁸ 

Further, the petition of December 3 was at most a tender of the sale price less net income, a tender which the United States was not obligated to accept. Clark Investment Co. v. United States, 364 F.2d 7 (9th Cir. 1966).

Petitioner's tender of January 7, which would seem to satisfy state law, came too late.

Affirmed.