Iowa Court Says Failure to Record Sheriff’s Deed Not Enough to Set Aside Farm Sale

December 16, 2022 | Kitt Tovar Jensen

On November 2, 2022, the Iowa Court of Appeals affirmed that a sheriff’s sale should not be set aside for failure to record the sheriff’s deed within the statutory time period. See Iowa Code § 654.16A. The purpose of Iowa Code § 654.16A(1) is to give the debtor notice of his right of first refusal. The court held that the debtor did not suffer prejudice because the deed was not recorded in a timely manner and that there was no statutory authority to set aside the sale.

Foreclosure on Agricultural Land

A credit union made multiple loans to an agricultural landowner. After the debtor defaulted, the credit union petitioned to foreclose its mortgages. The district court entered a foreclosure decree. In September 2019, the credit union purchased the property at a sheriff’s sale. The debtor filed for bankruptcy in January 2020 which prevented the credit union from selling the property.

On February 12, 2021, the debtor petitioned the district court to set aside the sale because the sheriff’s deed had not been recorded within the statutory one year and sixty days. The credit union claimed that the deed had not been recorded because the sheriff had not issued the deed. The district court rejected the debtor’s motion to set aside the deed and ordered the sheriff to issue the deed. The debtor appealed.

Debtor’s Right of First Refusal  

After the sale of agricultural land in a foreclosure action, the grantee must “record the sheriff’s deed within one year and sixty days from the date of the sheriff’s sale.” Iowa Code § 654.16A. The grantee must also notify the debtor of his right of first refusal to repurchase the land within ten days of the proposed sale. Id. at 654.16A(4).

Unless there is fraud, collusion, or substantial prejudice, there is “a strong presumption in favor of an execution sale” S. Ottumwa Sav. Bank v. Sedore, 394 N.W.2d 349, 351 (Iowa 1986). Here, there was no evidence the debtor experienced prejudice. Because of the bankruptcy stay, the debtor had not had the chance to exercise his right of first refusal.

Nevertheless, the debtor claimed that the failure to record the sheriff’s deed prevented him from learning the correct redemption amount to procure within the one year statutory right of redemption. See Iowa Code § 628.3. However, § 654.16A allows the grantee to record the sheriff’s deed up to sixty days after the one year right of redemption has expired.

Additionally, the record showed that the debtor knew of his right of redemption, but never attempted to exercise this right. The Court of Appeals concluded that that debtor still had the right to receive notice once the sheriff’s deed was recorded; but there is no statutory authority to set aside the sheriff’s sale for failing to record the sheriff’s deed.