Chisago County District Court File No. CV-05-346.
It is not a violation of Minn. Stat. § 58.13, subd. 1(13) (2004), for a benefactor to take a mortgage on a homeowner's property during the homeowner's redemption period and redeem the property as a junior lienholder to (1) enlarge the redemption period; (2) facilitate a sale of the home; and (3) secure the loan that the benefactor anticipates will be repaid from proceeds of the sale.
The opinion of the court was delivered by: Kalitowski, Judge
Considered and decided by Hudson, Presiding Judge; Kalitowski, Judge; and Worke, Judge.
On appeal in this mortgage-redemption dispute, appellant-mortgagors Lawrence and Kathryn Gunderson and appellant-mortgagee Timothy Menne argue that (1) Minn. Stat. § 58.13 (2004) does not create a private cause of action; (2) the district court erred by concluding that their mortgage transaction violated Minn. Stat. § 58.13, subd. 1(13); and (3) Menne complied with the statutory redemption requirements.
Appellants Lawrence and Kathryn Gunderson (Gundersons) were fee owners of their homestead in Chisago County, Minnesota. They defaulted on the mortgage on the property and the property was sold at a sheriff's sale. Respondent TCM is a real-estate investment company that acquired an interest in the Gundersons' property when it purchased a judgment against Lawrence Gunderson.
As the Gundersons' redemption period neared its end, their attorney asked appellant Timothy Menne (Menne) to help the Gundersons protect the equity in their home by taking liens on their home and redeeming them after the Gundersons' redemption period expired. Menne, who is the Gundersons' friend and had lent them approximately $3,000 over the previous three years, agreed. On April 21, 2005, the last day of their redemption period, the Gundersons executed and delivered five $100 mortgages to Menne. See Minn. Stat. § 580.23, subd. 1 (2004).
According to the testimony of Menne, Kathryn Gunderson, and the attorney who structured the transaction, they executed the mortgages for two purposes. The first purpose was to extend the statutory redemption period to allow time to sell the home and pay off the Gundersons' debts with the proceeds. The second purpose was to secure the $3,000 debt. Kathryn Gunderson testified that the Gundersons intended to repay Menne. And Menne testified that he expected to be repaid with the proceeds of the sale of the home.
Menne, through his attorney, recorded the five mortgages and notices of intent to redeem on April 21, 2005. The attorney testified that he then filed the mortgages and notices with the sheriff's department. Minutes after Menne recorded his mortgages, TCM recorded its judgment against the property. TCM then delivered the necessary redemption documents to the sheriff's office.
The clerk at the sheriff's office concluded that because the mortgages were not in the file, Menne's attorney did not file them with the notices of intent to redeem. She also testified that shortly after Menne filed his documents, a TCM representative came to the sheriff's office and looked at the file. The clerk did not remember if the file left her sight while the TCM representative was reviewing it. Finally, the clerk explained that the sheriff's office does not have a recording mechanism to keep track of what the department receives and when it receives it.
On April 22, 2005, TCM made full payment of the funds necessary to redeem as a junior creditor. Accordingly, the sheriff's office issued TCM a certificate of redemption. TCM filed an eviction action against the Gundersons, and Menne commenced an action for declaratory judgment and injunctive relief, seeking a declaration that Menne was the sole party entitled to redeem as a junior creditor. After hearing testimony concerning both matters, the district court held that Menne was entitled to redeem, and it denied TCM's request for eviction of the Gundersons until Menne's right to redeem expired.
TCM filed a motion to amend the findings or for a new trial. TCM argued that Menne should be denied equitable relief because he violated Minn. Stat. § 58.13, subd. 1(13) (2004), and that Menne had not strictly complied with the redemption procedure.
The district court issued amended findings and conclusions of law, completely reversing its previous order. In its amended order, the court more closely examined Minn. Stat. § 58.13, subd. 1(13), and found that its restrictions applied to Menne. The court acknowledged that although this court's opinion in First Nat'l Bank of Glencoe/Minnetonka v. Pletsch, 543 N.W.2d 706 (Minn. App. 1996), review denied (Minn. Apr. 16, 1996), supported the mortgage transaction, Minn. Stat. § 58.13, subd. 1(13), overruled Pletsch. Furthermore, because the transactions between the Gundersons and Menne violated Minn. Stat. § 58.13, subd. 1(13), the court found that they were precluded from seeking equitable relief because they entered the ...