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Peterson v. Johnson

August 8, 2006

DARRELL T. PETERSON, RESPONDENT,
v.
ARTHUR B. JOHNSON, ET AL., DEFENDANTS AND THIRD PARTY PLAINTIFFS, APPELLANTS,
ALL HEIRS AND DEVISEES OF ANY OF THE ABOVE NAMED PERSONS WHO ARE DECEASED, ET AL., DEFENDANTS,
v.
LAKE STATE FEDERAL CREDIT UNION, F/K/A MOOSE LAKE FEDERAL CREDIT UNION, ET AL., THIRD PARTY DEFENDANTS.



Carlton County District Court File No. 90-C4-03-001406.

SYLLABUS BY THE COURT

The 15-year statute of limitations prescribed in Minn. Stat. § 541.03 (2004) applies to a claim to have a conveyance absolute on its face declared an equitable mortgage.

The opinion of the court was delivered by: Toussaint, Chief Judge

Affirmed in part and remanded in part; motion to strike denied and motion to supplement granted.

Considered and decided by Toussaint, Chief Judge; Peterson, Judge; and Minge, Judge.

OPINION

Appellants Arthur B. Johnson and Mary Ann Johnson argue that the district court erred in failing to rule that respondent Darrell T. Peterson's claim that the transaction between the parties constitutes an equitable mortgage is time barred and in granting summary judgment on the claims. Peterson argues that the district court erred by failing to recalculate the balance and interest due on the mortgage. The Johnsons moved to strike portions of Peterson's brief and appendix; Peterson moved to supplement the record with the materials in question.

Because Minn. Stat. § 541.03 (2004) governs a claim to have a conveyance absolute on its face declared an equitable mortgage and because the district court did not err by finding an equitable mortgage, we affirm on those claims. Because the district court did not calculate the balance due and the applicable interest on the mortgage, we remand for that calculation. Peterson's motion to supplement is granted; the Johnsons' motion to strike is denied.

FACTS

In 1986, Peterson and his then-wife Kathleen Peterson owed debts on their farm homestead property. In August 1986, Peterson's uncle and aunt, the Johnsons, wrote Peterson a letter proposing to give Peterson $9,200 to pay the debts. The letter states that the Johnsons would require title to 320 acres of Peterson's land "as surety" for the money. The Johnsons also noted that they would agree to sell the land back to Peterson at any time within five years. The Johnsons asked an attorney to draft an agreement and the necessary paperwork to accomplish the transfer.

Peterson and his wife signed a deed transferring the land in September 1986. Later that year, they and the Johnsons executed an agreement to convey to the Johnsons certain property "as security and surety for the payoff of the loan of said $9500 to them." The agreement further states that "when said $9500 is repaid to [the Johnsons] they in turn will reconvey the land to [Peterson and his wife]." Peterson agreed to pay back the $9,500 "within a five (5) year period, in five (5) annual installments, together with interest on the unpaid balance . . . at the rate of eleven percent (11%) per annum." The balance was due by November 1, 1991. Finally, the agreement provided that "the deed from [Peterson and his wife] to [the Johnsons] shall not be recorded at this time."

Thereafter, Peterson and his wife took out a mortgage on the entire homestead property, including the land involved in this dispute. When Peterson and his wife divorced, the land was awarded to Peterson as part of the property division. Peterson continuously exercised control over the land, including logging and haying it.

In October 1991, Peterson made the only payment, $3,200, to the Johnsons. In January 1994, Peterson received a letter from the Johnsons' attorney seeking to collect the balance due. In late 1996, the Johnsons recorded the 1986 deed. Peterson claims that he was unaware that the Johnsons had recorded the deed until shortly before filing this suit. The parties exchanged letters regarding the situation in late 2002, when the Johnsons informed Peterson that, if he wanted to repurchase the land, they would offer him "the 'right of first' refusal when it [was] offered for sale."

Peterson filed a complaint seeking a declaration that he is the rightful owner of the property, that the 1986 agreement constitutes an equitable mortgage, and that the Johnsons' interest should be limited to that arising under an equitable mortgage, thus requiring foreclosure for the Johnsons to take legal ownership of the property. Peterson also alleged that the interest rate evinced in the agreement was usurious and that the contract should either be voided or that the interest owed should be recalculated at the statutory maximum rate. Finally, Peterson alleged that the Johnsons had been unjustly enriched by recording the deed.

The district court granted in part and denied in part the parties' cross-motions for summary judgment. The district court ruled that the 15-year statute of limitations set forth in Minn. Stat. ยง 541.03 (2004) applies to a claim to have a conveyance absolute on its face declared an equitable mortgage, that the parties' agreement constituted an equitable mortgage, that the Johnsons' relief was therefore limited to a foreclosure action, and that any foreclosure action must be initiated by November 1, 2006. The district court also denied Peterson's motion to void the agreement and the Johnsons' motion to dismiss Peterson's claim for an equitable mortgage as barred by the statute of limitations contained in ...


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