In a recent published decision, on the one hand, the Minnesota Court of Appeals faced recent Minnesota Supreme Court and Court of Appeals precedent making clear that lenders are to “strictly comply” with foreclosure laws and their failure to do so would render the foreclosure sales “void.”
On the other hand, the Court of Appeals had to reconcile these relatively recent decisions with Minnesota Supreme Court decisions from the 19th Century holding that certain defects in the foreclosure sale process make the foreclosures “voidable only for good cause shown, and for fraud or prejudice resulting to the mortgagor or owner of the equity of redemption,” not outright “void.” (Hunter v. Anchor Bank, et al., at p.9.)
Which way to go (and why)?
The Court of Appeals went with the more recent case law requiring strict compliance with the foreclosure statute or otherwise rendering the foreclosure sale void.
[T]he supreme court’s reasoning in the Willard-Clark-Phelps line of cases appears to be out of step with the supreme court’s current methods of statutory interpretation, which emphasize the plain language of an unambiguous statute. … The language of this statute unambiguously states that separate mortgaged properties ‘shall be sold separately’ and that ‘no more [properties] shall be sold than are necessary to satisfy the amount due.’ Minn. Stat. § 580.08.
The foreclosing party had argued that more recent case law mandating “strict compliance” had not been applied to this particular section of Minnesota’s foreclosure statute. The Court of Appeals rejected the proposed piece-meal application of this general rule of statutory construction in the foreclosure context.
The decision triggers some questions for me.
First, as a practical matter, what does this mean? From the decision, it is unclear who currently resides in the properties, if anyone. And presumably this will just result in going through the lengthy and costly foreclosure process anew from the get-go?
Second, the Minnesota Supreme Court, in explaining why such sales should be “voidable” rather than “void,” reasoned:
The consequences of [a rule that renders void all sales that violate the separate-tracts requirement] would be disastrous. A great many titles would be open to question and doubt. The inquiry whether the land sold consisted in fact of separate and distinct tracts would often be attended with great difficulty. The question would be one of fact, dependent upon evidence dehors the record, and perhaps often doubtful or conflicting. The validity of titles ought not be made dependent upon such extraneous facts.
Judge John P. Smith highlighted this in his special concurrence. The majority opinion quotes this language but does not address it. Are the consequences of the Court of Appeals reading of the statute “disastrous”? If it is, does that not suggest that the defect should render the sale merely “voidable” and not “void”? Or do we prefer our courts to ignore “disastrous” ramifications of statutory construction in favor of strict application of the rules?
Finally, though, maybe the biggest question is why the foreclosing party had a single foreclosure sale for two separate lots when a law has been on the books probiting the practice for well over one hundred years.
[Style Question Post-Script: I note that the court of appeals does not capitalize "court of appeals" nor does it capitalize supreme court when referring to the Minnesota supreme court. Why not? Do we refer to the "Hennepin county sheriff's office" or "the governor of Minnesota"? I would have thought these are proper names. Am I alone in that respect? (My practice is to capitalize when referring to a specific court, e.g., "the Washington County District Court" or "the Minnesota Court of Appeals in the Jones decision..." but not when referring to the courts or court systems generally.]