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Monti A. Moreno, et al v. Wells Fargo Bank

April 8, 2013

MONTI A. MORENO, ET AL., APPELLANTS,
v.
WELLS FARGO BANK, N.A., RESPONDENT, CENTRAL BANK, RESPONDENT, LAND TITLE, INC., RESPONDENT, CHICAGO TITLE INSURANCE COMPANY, RESPONDENT.



Washington County District Court File No. 82-CV-11-1855

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

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2012).

Affirmed

Considered and decided by Worke, Presiding Judge; Stoneburner, Judge; and Schellhas, Judge.

UNPUBLISHED OPINION SCHELLHAS, Judge

Appellants challenge the district court's grant of summary judgment, dismissing their claims against respondents. We affirm.

FACTS

This appeal arises out of a mortgage obtained by appellants Monti Moreno and Nancy Moreno on real estate located in Marine on St. Croix. The Morenos' relevant involvement with the property began in April 2003 when appellant Revocable Trust Agreement of Nancy A. Moreno purchased 22 acres of real estate located at 14890 Ostrum Trail North in Marine on St. Croix, consisting of four contiguous parcels described in a single metes-and-bounds description (the property). To secure short-term financing for the purchase of the property, the trust*fn1 conveyed a mortgage to respondent Central Bank. The mortgage encumbered all of the property, i.e., parcels one through four, plus the Morenos' residence in Stillwater and other real estate in Stillwater. Respondent Land Title closed the mortgage on behalf of Central Bank. In connection with the mortgage financing, appellants purchased an owner's title-insurance policy and mortgagee's title insurance for Central Bank through Land Title, acting as agent for respondent Chicago Title. Chicago Title issued the final owner's title-insurance policy to "Nancy A. Moreno, Trustee of the Revocable Trust Agreement of Nancy A. Moreno dated October 1, 1997," on November 4, 2003. The policy insured title to the property for $420,000.

On January 27, 2004, the trust transferred its interest in parcels one and three of the property to the Morenos, who refinanced the 2003 mortgage with respect to those parcels and conveyed a new mortgage to Central Bank to secure a loan of $333,700. By its terms, the 2004 mortgage encumbered parcels one and three of the property. Unlike the 2003 mortgage, it did not encumber parcels two and four of the property or the Morenos' Stillwater real estate. Land Title closed the 2004 mortgage on behalf of Central Bank, and Central Bank immediately assigned the loan to respondent Wells Fargo.

Sometime in 2007, the Morenos attempted to sell parcel three but were unsuccessful because parcel three was encumbered by the 2004 mortgage in favor of the assignee-mortgagee, Wells Fargo. Maintaining that the 2004 mortgage encumbrance against parcel three was erroneous, the Morenos unsuccessfully sought a release of parcel three from Wells Fargo.*fn2 The Morenos also sought assistance from Central Bank and Land Title and claimed that Land Title suggested that they contact Chicago Title in regard to their 2003 title-insurance policy. On September 17, 2007, the Morenos sent a claim letter to Chicago Title on the basis that title to parcel three of the property was unmarketable because it was encumbered-erroneously-by Wells Fargo's mortgage. The Morenos claimed that the legal description for the mortgage was changed at the mortgage closing. Chicago Title denied the Morenos' claim on two bases: (1) the trust, not the Morenos, was the named insured in the title policy and, upon the trust transferring its interest to the Morenos, the title policy terminated under its own terms; and (2) the allegedly erroneous legal description attached to the 2004 mortgage occurred after the effective date of the policy, November 4, 2003, and was outside the insurance coverage because the policy only insured covered deficiencies in title that occurred prior to its effective date of November 4, 2003.

In March 2011, appellants sued respondents, seeking various forms of relief. The district court granted summary judgment to respondents on all claims.

This appeal follows.

DECISION

"On appeal from summary judgment, we must review the record to determine whether there is any genuine issue of material fact and whether the district court erred in its application of the law." Dahlin v. Kroening, 796 N.W.2d 503, 504 (Minn. 2011). The district court properly grants summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law." Minn. R. Civ. P. 56.03. We conduct a de novo review of the district court's summary judgment decision. Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC,790 N.W.2d 167, 170 (Minn. 2010). We "view the evidence in the light most favorable to the party against whom judgment was granted." RAM Mut. Ins. Co. v. Rohde, 820 N.W.2d 1, 6 (Minn. 2012) (quotations omitted).

Summary Judgment to Central Bank

Appellants sued Central Bank on claims of slander of title, defamation, and negligence. The district court granted summary judgment to Central Bank, concluding that the claims were barred by statutes of limitations, the parole-evidence rule, and the statute of frauds. The court also concluded that the claims failed on their merits. Because we conclude that the district court properly granted summary judgment on the statute-of-limitations grounds, we do not reach the district court's other grounds for dismissing appellants' claims against Central Bank.

The district court concluded that the six-year statute of limitations under Minn. Stat. § 541.05 (2012)*fn3 barred appellants' negligence claim and that the two-year statute of limitations under Minn. Stat. § 541.07(1) (2012) barred appellants' defamation and slander-of-title claims. Appellants argue that the court erred in its application of the statutes of limitations because Central Bank waived the statute-of-limitations defense when it failed to raise it in its answer and that, even if properly raised, the statutes of limitations did not bar appellants' claims against Central Bank.

A statute of limitations is an affirmative defense. Minn. R. Civ. P. 8.03. A "failure to plead an affirmative defense, without later amendment of the pleading, waives the defense." Rehberger v. Project Plumbing Co.,295 Minn. 577, 578, 205 N.W.2d 126, 127 (1973). The Eighth Circuit has stated that this "pleading requirement is intended to give the opposing party both notice of the affirmative defense and an opportunity to rebut it" and therefore has "eschewed a literal interpretation of the Rule that places form over substance." First Union Nat'l Bank v. Pictet Overseas Trust Corp.,477 F.3d 616, 622 (8th Cir. 2007); see Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 350, 91 S. Ct. 1434, 1453 (1971) (noting that purpose of requiring pleading of affirmative defenses of res judicata and estoppel is to "give the opposing party notice" of affirmative defense and "chance to argue" that it should not be imposed); Snyder v. City of Minneapolis, 441 N.W.2d 781, 788 (Minn. 1989) (noting that Fed. R. Civ. P. 8(c) is "identical" to Minn. R. Civ. P. 8.03, considering policies underlying rule 8.03, and stating that rule 8(c) "serves the purpose of giving the opposing party notice of the defense and an opportunity to argue why his claim should not be barred completely." (quotation omitted)). "Where the language of the Federal Rules of Civil Procedure is similar to language in the Minnesota civil procedure rules, federal cases on the issue are instructive." T.A. Schifsky & Sons, Inc. v. Bahr Constr., LLC, 773 N.W.2d 783, 787 n.3 (Minn. 2009).

Negligence Claim

The district court concluded that the six-year statute of limitations began to run on appellants' negligence claim on the date on which appellants executed the 2004 mortgage, January 24, 2004, and that therefore the period within which to assert a negligence claim had expired by 2011, when appellants attempted to assert their negligence claim.

Central Bank did not specifically raise the statute-of-limitations affirmative defense in its answer to appellants' complaint; it merely pleaded that appellants' claims were "barred in whole, or in part, as a result of [their] failure to state a claim against Central for which relief can be granted" and "reserve[d] the right to assert additional affirmative defenses, as may be determined during the course of additional investigation and discovery in this litigation." But Central Bank did raise the statute-of-limitations defense in its memorandum of law supporting its motion for summary judgment as to appellants' negligence claim, and appellants addressed the merits of the defense in their responsive memorandum.

The district court concluded that summary judgment based on the statute of limitations was appropriate even if it was not initially pleaded by Central Bank. Because the parties litigated the issue by consent, we agree. "'Issues litigated by either express or implied consent are treated as if they had been raised in the pleadings.'" Septran, Inc. v. Indep. Sch. Dist. No. 271, Bloomington, Minn.,555 N.W.2d 915, 919 (Minn. App. 1996) (quoting Roberge v. Cambridge Coop. Creamery Co.,243 Minn. 230, 234, 67 N.W.2d 400, 403 (1954)), review denied (Minn. Feb. 26, 1997). "Consent may be commonly implied where the parties fail to object to issues not raised by the pleadings." Id. Appellants therefore consented to Central Bank raising the statute-of-limitations defense by addressing the merits of the defense in their responsive memorandum, and the district court properly dismissed appellants' negligence claim against Central Bank on that ground. See id. at 919--20 (concluding that "appellant consented" to litigating affirmative defense raised by district court at motion hearing by not objecting to court raising issue or court "requesting . . . additional briefs").

Appellants claim that they first became aware that the 2004 mortgage encumbered parcel three in 2007, and they argue that the six-year statute of limitations did not begin to run until they incurred damages in 2007 when they attempted to sell parcel three. Appellants' argument is unavailing. "A cause of action accrues when all of the elements of the action have occurred, such that the cause of action could be brought and would survive a motion to dismiss for failure to state a claim." Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 832 (Minn. 2011). "The damage triggering the accrual of a negligence cause of action may be any damage caused by the negligent act and is not limited to the damage or cause of action specifically identified in the complaint." MacRae v. Grp. Health Plan, Inc., 753 N.W.2d 711, 720 (Minn. 2008) (quotation omitted) (emphasis omitted). The damage must be "compensable" and not "abstract." Id. (quotation omitted). "[I]gnorance of a cause of action does not toll the running of the statutory limitations period." Id. at 719. Here, appellants' negligence claim could have survived a motion to dismiss for failure to state a claim on January 27, 2004, the date appellants executed the 2004 mortgage with the allegedly erroneous legal description. Central Bank's allegedly negligent acts took place during the drafting of the mortgage, and appellants sustained "compensable damage," id. at 720 (quotation omitted), when the mortgage was recorded because it encumbered parcel three.

We conclude that the district court properly dismissed appellants' negligence claim on the basis that the six-year statute of limitations began to run on January 27, 2004, and expired before appellants attempted to assert their claim against Central Bank. The court properly concluded that appellants' negligence claim against Central Bank was time-barred.

Slander-of-Title and Defamation Claims

Appellants similarly argue that Central Bank waived the statute-of-limitations defense to the slander-of-title and defamation claims by not pleading the defense in its answer. We disagree. Central Bank raised the statute-of-limitations defense in its summary-judgment reply memorandum to which appellants orally objected at the summary-judgment hearing on April 27, 2012. The district court therefore allowed appellants until May 8 to submit a written response regarding the statute of limitations. Appellants submitted ...


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