Court Says Farm Debtor May Assign Right to Redeem

On March 20, 2019, the Iowa Court of Appeals issued a ruling on the validity of the assignment of a debtor’s right of redemption. Because the right to redeem a property is transferable, the court allowed the assignee to redeem the debtor’s farm.

Background

A bank initiated foreclosure proceedings against a debtor who was in default for 208 acres of agricultural land. The district court granted the bank’s requires to foreclosure but because the land is agricultural real estate, there was a one-year time period for the debtor to redeem the land. The decree also stated the one-year redemption would be exclusive to the debtor.

A sheriff’s sale took place and another party purchased the land. Eleven months later, a third party, the plaintiff in this case, filed a petition stating the debtor assigned his exclusive right to redeem the farm property to her. The buyer from the sheriff’s sale resisted and claimed the assignment was not valid or enforceable. The lower court found in favor of the buyer, ruling that the debtor had the exclusive right to redeem and therefore the right could not be assigned to another. The third party appealed.

Right to Redeem  

Iowa law states that the right to redeem is transferable. Iowa Code § 628.25. Similar to the way ownership is transferable, so is the statutory right of redemption. Other courts have interpreted the word “exclusive” to mean that only the debtor, a creditor, can exercise the right to redemption. Farmers Production Credit Association v. McFarland, 374 N.W.2d 654. 656 (Iowa 1985). However, the debtor can give this right to another individual. In this way, a debtor is allowed to barter with his rights. In this case, the right to redeem was transferable to the plaintiff. Therefore, the assignment was valid and enforceable. The case was remanded to the lower court to determine whether the redemption was timely filed.