Johnson v. First National Bank

Curtis and Gloria Jean Johnson (defendants) defaulted on mortgages totaling $950,000 owed to First National Bank of Montevideo (First National) (plaintiff), which foreclosed and purchased the property at auction for $566,355.34, triggering Minnesota's one-year statutory redemption period after which title would automatically vest in the bank absent repurchase. About three weeks before that period expired, the Johnsons filed for Chapter 11 bankruptcy and sought a stay of the redemption period's expiration, arguing substantial equity in the property; based on testimony valuing the property well above its encumbrances, the bankruptcy court invoked its equitable powers under 11 U.S.C. section 105 to indefinitely suspend the state redemption period, and the district court affirmed, prompting First National's appeal.