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Real Estate Equity Strategies, LLC v. Jones

August 8, 2006

REAL ESTATE EQUITY STRATEGIES, LLC, RESPONDENT,
v.
MICHAEL E. JONES, ET AL., APPELLANTS.



Washington County District Court. File No. C0-05-5749.

SYLLABUS BY THE COURT

1. An eviction appeal is not moot when the landlord obtains possession of the premises based on a tenant's involuntary vacation of the premises as a result of an eviction judgment.

2. In an eviction proceeding, a purported tenant's assertion of a claim to title to the property under Minn. Stat. § 504B.121 (2004) does not deprive the district court of subject-matter jurisdiction to hear the eviction proceeding.

3. A district court hearing an eviction proceeding has discretion to decide whether to stay that proceeding pending resolution of a related action under Minn. Stat. §§ 325N.01-.18 (2004) and does not abuse its discretion by declining to stay the eviction proceeding when the parties seeking to stay the eviction proceeding have other options for seeking to protect any interests they may have in the property at issue.

4. An eviction court's refusal to stay an eviction proceeding pending resolution of a related rescission action brought under Minn. Stat. §§ 325N.01-.18 (2004) does not necessarily violate chapter 325N.

The opinion of the court was delivered by: Hudson, Judge

Affirmed

Considered and decided by Hudson, Presiding Judge; Kalitowski, Judge; and Worke, Judge.

OPINION

When the mortgage on the home of Michael and Edith Jones (owners) went into foreclosure, they entered an agreement with Real Estate Equity Strategies (REES) and related entities under which owners purportedly sold their home to a REES-related entity and leased it back with an option to purchase. Owners later defaulted on the lease and REES filed an eviction action against owners. Owners filed a separate equity-stripping action against REES and the related entities under Minn. Stat. §§ 325N.01-.18 (2004) (hereinafter chapter 325N). Owners also filed an answer in the eviction proceeding noting the pendency of the chapter 325N action and moved for the district court to dismiss the eviction proceeding or to stay it pending resolution of the chapter 325N action. The district court denied that motion and awarded REES an eviction judgment. Owners appeal, arguing that the district court should have dismissed or stayed the eviction proceeding. REES argues that because owners are no longer in possession of the property, the appeal is moot. Because the appeal is not moot and because the district court properly applied the law and did not abuse its discretion in declining to stay the eviction proceeding, we affirm.

FACTS

In spring 2005, the mortgage on owners' home was in foreclosure. In May, owners entered an agreement with REES, under which owners purportedly sold their home to a REES-related entity and leased it back, with an option to repurchase the home after making a limited number of timely lease payments. Part of owners' incentive to enter the arrangement was that some of the equity in their home could be used to pay debts while their payments on the lease were supposed to be approximately what the payments had been under the mortgage that was in foreclosure. The sale-lease-back transaction closed in early June.

After the closing, owners learned that their lease payment would be substantially greater than their mortgage payment had been. Owners defaulted on the REES lease, and REES filed an eviction action against owners. Owners responded by filing (a) an equity-stripping action under chapter 325N against REES and the related entities, alleging, among other things, equity stripping by REES and the related entities, that the parties' arrangement was not an actual conveyance of the home but an equitable mortgage, and that any agreement between owners and the REES entities should be rescinded; (b) an answer in the eviction proceeding asserting the pendency of the chapter 325N action; and (c) a motion in the eviction proceeding asking the eviction court to dismiss the eviction proceeding or to stay that proceeding pending resolution of the chapter 325N action. The eviction court denied owners' motion to dismiss or stay the proceeding, and, after a trial in which owners admitted that they defaulted on the REES lease, granted REES an eviction judgment.

Owners appeal. REES argues that because owners vacated the property, the appeal is now moot. Also, Mid-Minnesota Legal Assistance and the State of Minnesota have combined to ...


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