No. A07-800

STATE OF MINNESOTA

IN COURT OF APPEALS

Northern Realty Ventures, L.LC., a Minnesota Limited Liability Corporation,

Appellant-Plaintiff,

vs.

Minnesota Housing Finance Agency, a public body corporate and politic of the State of Minnesota,

Respondent-Defendant.

RESPONDENT'S BRIEF AND APPENDIX

WESTRICK & McDWALL-NIX, P.L.L.P.

John G. Westrick Atty. Reg. 206581

Kirk M. Anderson Atty, Reg. 338175

450 Degree of Honor Building 325 Cedar Street StPaul, MN 55101 ( 651) 292-9603

ATTORNEYS FOR APPELLANT­PLAINTIFF

LORI SWANSON Attorney General State of Minnesota

THOMAS K. OVERTON Assistant Attorney General Atty. Reg. No. 0083355

DARRYL HENCHEN Assistant Attorney General Atty. Reg. No. 0320250

445 Minnesota Street,. Suite 900 St. Paul, MN 55101-2127 (651) 296-0985

The appendix to this brief is not available for online viewing as specified in the Minnesota Rules of Public Access to the Records of the Judicial Branch, Rule 8, Subd. 2(e)(2).

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ............................................................................................. iii

LEGAL ISSUES ................................................................................................................. 1

STATEMENT OF THE CASE ........................................................................................... 2

STATEMENT OF FACTS .................................................................................................. 2

SCOPE OF REVIEW ........................................................................................................ 10

ARGUMENT ....................................................................................................... ............ 10

I. THE DISTRICT COURT PROPERLY HELD THAT MHF A SUBSTANTIALLY COMPLIED WITH REDEMPTION REQUIREMENTS UNDER THE CIRCUMSTANCES ...................... 10

A. MHF A Substantially Complied With The Redemption Statutes By Redeeming From The Senior Creditor As Soon As The Opportunity Existed ......................................................................................................... 10

B. The Principles Of Equity Support Issuance Of The Certificate Of Redemption To MHFA ............................................................................... 14

1. MHF A was blameless and non-negligent with respect to the conflict between Northern Realty and the Sheriff over Northern Realty's failure to follow the redemption statutes ........... 15

2. Northern Realty seeks to use its own failure and its conflict with the Sheriff to unjustly enrich itself .......................................... 16

3. The district court restored all parties to the status quo .................... 17

II. BECAUSE NORTIIERN REALTY FAILED TO SATISFY THE STATUTORY

PRECONDITIONS FOR REDEMPTION, NORTHERN REALTY WAS NOT ENTITLED To REDEEM. MHF A PROPERL y REDEEMED As THE SENIOR

CREDITOR ENTITLED TO REDEEM .......................................................................... 18

A. Because Northern Realty Failed To Satisfy The Statutory Preconditions For Redemption, Northern Realty Was Not Entitled To Redeem .................................................................................................. 18

I

B. MHF A Strictly Complied With The Redemption Statutes And Properly Redeemed As The Senior Creditor Entitled To Redeem ............. 22

CONCLUSION ................................................................................................................. 23

APPENDIX

11

TABLE OF AUTHORITIES

Page

MINNESOTA CASES

Graybow-Daniels Co. v. Merchants State Bk., 255 N.W.2d 405 (Minn. 1977) ......................................................................... 19, 21

Harbal v. Federal Land Bank, 449 N.W.2d 442 (Minn. Ct. App. 1989) ................................................................ 14

In re Collier, 726 N.W.2d 799 (Minn. 2007) ................................................................. .............. 10

In re Nelson, 495 N.W.2d 200 (Minn. 1993) ..................................................................... 1, 13, 14

Peterson v. First Nat'! Bank, 162 Minn. 369,203 N.W. 53 (1925) ...................................................... 1, 13, 14, 15

Remote v. Jonathan Dev. Corp., 277 N. W.2d 362 (Minn. 1979) ......................................................................... 10, 17

Sieve v. Rosar, 613 N.W.2d 789 (Minn. Ct. App. 2000) ................................................ 1, 10, 11, 14

State ex rel. Anderson v. Kerr, 51 Minn. 417, 53 N.W. 719 (Minn. 1892) ................................................... l, 12, 13

TCM Properties, LLC v. Gunderson, 720 N.W.2d 344 (Minn. Ct. App. 2006) ............................................................ 1, 11

111

MINNESOTA STATUTES AND LAWS

Minn. Stat. § 272.44 (2004) ........................................................................................ 4, 5, 7

Minn. Stat.§ 462A.201 (2006) ........................................................................................... 3

Minn. Stat. § 462A.02, subd. 1 (2006) ................................................................................ 3

Minn. Stat. § 462A.04 (2006) ............................................................................................. 3

Minn. Stat.§ 548.09, subd. 1 (2006) .................................................................................. 20

Minn. Stat.§ 580.12 (2006) ......................................................................................... .... 11

Minn. Stat.§ 580.19 (2006) .............................................................................................. 11

Minn. Stat. § 580.23, subd. 1 (2006) ............................................................................. 8, 22

Minn. Stat. § 580.24(a) (2006) ................................................................................... passim

Minn. Stat. § 580.24(c) (2006) ......................................................................................... 12

Minn. Stat.§ 580.25 (2006) .......................................................................... 1, 6, 13, 20, 21

Minn. Stat. § 580.26 (2006) ................................................................................................ 6

Minn. Stat. § 580.27 (2006) .............................................................................................. 11

Minn. Stat.§ 645.17(2) (2006) .......................................................................................... 21

2004 Minn. Laws 724 (ch. 234 § 4) .................................................................................. 19

IV

LEGAL ISSUES

I. Assuming that Northern Realty was entitled to redeem, did MHFA substantially comply with the requirements to redeem from Northern Realty under the circumstances of this case?

The district court held that MHF A substantially complied with the requirements to redeem from Northern Realty, stating that the Sheriff's actions should not preclude MHFA from redeeming and that equity requires that MHFA's redemption be allowed.

In re Nelson, 495 N.W.2d 200 (Minn. 1993) Peterson v. First Nat. Bank, 162 Minn. 369,203 N.W. 53 (1925) State ex rel. Anderson v. Kerr, 51 Minn. 417, 53 N.W. 719 (Minn. 1892) TCM Properties, LLC v. Gunderson, 720 N.W.2d 344 (Minn. Ct. App. 2006) Sieve v. Rosar, 613 N.W.2d 789 (Minn. Ct. App. 2000)

II. Was Northern Realty required to comply with the statutory preconditions of Minn. Stat. § 580.24(a) (2006) in order to be entitled to redeem?

The district court held that the preconditions requirements of Minn. Stat. § 580.24(a) (2006) did not apply to Northern Realty and that Northern Realty was therefore entitled to redeem without complying.

Minn. Stat. § 580.24(a) (2006) Minn. Stat. § 580.25 (2006)

1

STATEMENT OF THE CASE

This is an appeal by Northern Realty Ventures, LLC ("Northern Realty") from an

order of the Ramsey County District Court granting summary judgment for Respondent

Minnesota Housing Finance Agency ("MHFA"), and denying Northern Realty's motion

for summary judgment.

Northern Realty initiated this action to quiet title to a parcel of real property

located in St. Paul, Minnesota.

The parties moved for summary judgment before the Honorable Marybeth Dom,

Judge of the Second Judicial District. In its Order, dated March 22, 2007, the district

cqurt denied Northern Realty's motion for summary judgment, and granted summary

judgment that MHF A was the fee owner of the property. Judgment was entered on

March 27, 2007.

Northern Realty appealed and MHF A filed a notice of review concerning the

district court's statutory interpretation that Northern Realty was entitled to redeem even

though it did not comply with Minn. Stat. § 580.24(a) (2006),1 which establishes the

preconditions for redemption.

STATEMENT OF FACTS

This matter involves the property located at , St. Paul,

County of Ramsey, State of Minnesota ("the Property").

1 Unless otherwise indicated, all citations to Minnesota Statutes are to the 2006 edition.

2

Liens Against The Property

At one time, the Property was owned by Jendayi Place, Inc. ("Jendayi Place").

AA at A-3 (Order).2 On July 24, 2001, Jendayi Place granted a mortgage to Western

Bank securing the amount of $70,000.00. AA at A-3 (Order). The mortgage was filed

with the Office of the County Recorder for Ramsey County ("Recorder") on July 24,

2001. AA at A-3 (Order).

On March 28, 2002, Jendayi Place granted a second mortgage to Community Loan

Technologies ("CLT") securing the amount of $82,851.78. AA at A-3 (Order). The

mortgage was filed with the Recorder on April 4, 2002. AA at A-3 (Order).

On December 13, 2002, Jendayi Place granted a third mortgage to MHFA to

secure a no-interest loan in the amount of $263,725.00 ("MHFA Mortgage"). AA. at A-3

(Order); MHFA Ex. I Maher Aff. The MHFA Mortgage was filed for record with the

Recorder on January 2, 2003. AA at A-3 (Order). The MHFA is empowered to make

such loans to ameliorate the serious shortage within Minnesota of decent, safe and

sanitary housing available to persons and families with low incomes. See MHFA Ex. I

Maher Aff.; Minn. Stat.§§ 462A.201, 462A.04, 462A.02, subd. 1.

On December 27, 2002, a judgment was docketed in favor of Staff, Training and

Alternative Resources, Inc. and against Jendayi Place in the amount of $17,523.85 (the

"Judgment"). AA at A-3 (Order). The Judgment was, subsequently, assigned to

2 "AA" refers to Appellant's Appendix, and "Order" refers to the district court's Order dated March 22, 2007.

3

Northern Realty and the Assignment was entered by the Ramsey County District Court

on April 24, 2006. AA at A-3 (Order).

The CLT Foreclosure Sale

Jendayi Place defaulted on its obligations to CLT, and CLT commenced

foreclosure by advertisement ("CLT Foreclosure"). AA at A-4 (Order). On October 25,

2005, the Property was sold at a sheriffs sale for the sum of $96,518.36. AA atA-4

(Order). The sale was subject to a statutory right of redemption for a period of six

months, with an expiration of April 25, 2006. AA at A-4 (Order).

Redemption From The CL T Foreclosure Sale

The dispute in this matter concerns this redemption.

On March 8, 2006, MHF A filed with the Recorder a notice of its intention to

redeem from the sheriffs sale in the CLT Foreclosure. AA at A-4 (Order). Pursuant to

Minn. Stat. § 580.24(a)(3), on April 11, 2006, MHFA delivered to the Ramsey County

Sheriffs Department ("Sheriff') a copy of its recorded notice of intention to redeem and

a copy of the recorded MHFA Mortgage.3 AA at A-4 (Order).

On April 25, 2006, Northern Realty filed with the Recorder a notice of its

intention to redeem based upon its Judgment, an Additional Lien For Payment Of Real

Property Taxes And/Or Assessments By Creditors Pursuant to Minn. Stat. § 272.44

(2004) ("Additional Lien") in the amount of $1,591.32, and a notice of intention to

3 Each of these documents contained the office, date and time of filing for record stated on the first page as required under Minn. Stat. § 580.24(a)(3). Maher Aff. ¶ 6; Ex. E Pierce Aff.; MHF A Ex. 1 Maher Aff.

4

redeem based upon this additional lien. AA at A-4 (Order). Northern Realty did not file

the Judgment or the assignment of the Judgment with the Recorder as required by Minn.

Stat. § 580.24(a)(2). AA at A-4 (Order). On the same day, Northern Realty delivered the

following documents to the Sheriff:

A Notice Of Intention To Redeem from the CLT Foreclosure as a judgment creditor;

The Judgment;

The Assignment of The Judgment;

An Additional Lien For Payment Of Real Property Taxes And/Or Assessments By Creditors Pursuant To Minn. Stat. § 272.44 (2004); and

A Notice Of Intention To Redeem from the CLT Foreclosure as lien creditor for payment of property taxes and/or assessments.

AA at A-4 (Order). Because the Judgment and the Assignment of the Judgment had not

been filed with the Recorder as required by Minn. Stat. § 580.24(a)(2), they did not show

the office, date and time of filing for record stated on the first page, as required under

Minn. Stat. § 580.24(a)(3). AA at A-4 (Order).

On April 27, 2006, the Sheriff determined that although Northern Realty was the

senior creditor, it did not have the right to redeem because Northern Realty had not

delivered to the Sheriff copies of documents showing that the Judgment and Assignment

of Judgment had been filed with the Recorder as required by Minn. Stat. § 580.24(a)(3).

AA at A-4-5 (Order). The Sheriff informed Northern Realty of his determination and

also informed MHF A that it was the senior creditor with the right to redeem from the

CLT Foreclosure. AA at A-5 (Order).

5

On April 28, 2006, MHF A redeemed as senior creditor entitled to redeem by

delivering $101,195.27 to the Sheriff and an Affidavit of Additional Amounts on

Redemption stating that MHFA was owed $263,890.00 relating to the MHFA Mortgage.

AA at A-5 (Order). The Sheriff issued MHFA his Certificate of Redemption ("MHFA

Certificate of Redemption"), which MHF A filed with the Recorder, along with the

Affidavit Of Additional Amounts On Redemption, all as required by Minn. Stat.

§ 580.25, .26. AA at A-5 (Order).

On May 2, 2006, Northern Realty attempted to redeem as senior creditor from the

CLT Foreclosure by delivering to the Sheriff payment of $110,0004 and an Affidavit of

Amounts Due in Redemption, stating that Northern Realty was owed $23,974 for the

Judgment and the $1,591.32 in property taxes/assessments it paid. AA at A-5 (Order);

MHF A Ex. 6 Maher Aff. The Sheriff, who had already issued the Certificate of

Redemption to MHFA, refused to accept Northern Realty's tender based on his previous

determination that Northern Realty had not complied with Minn. Stat. § 580.24 (a)(2) and

(3). AA at A-5 (Order).

On May 9, 2006, Northern Realty's attorney sent a letter to the Sheriff and the

Ramsey County Attorney's Office stating that an action for a Writ of Mandamus would

be commenced if Northern Realty was not allowed to redeem from the CLT Foreclosure.

AA at A-5 (Order). On May 12, 2006, the Sheriff changed his determination, accepted

Northern Realty's payment of $101,276.91, and issued a Certificate of Redemption to

4 Northern Realty understood that any excess would be refunded.

6

Northern Realty ("Northern Realty Certificate of Redemption"). AA at A-5 (Order).

Northern Realty filed its Certificate of Redemption with the Recorder that day. AA

at A-5 (Order); Ex. F Pierce Aff.

Also on May 12, the Sheriff informed MHFA that it was entitled to redeem as

junior creditor after Northern Realty. AA at A-5 (Order). MHFA tendered an additional

$24,055.44 and the Sheriff issued a Revised Certificate of Redemption to MHFA

("MHF A Revised Certificate of Redemption"), for the accepted total payment of

$125,250.71. AA atA-5-6 (Order). MHFA filed the Revised Certificate of Redemption

with the Recorder on the same day. AA at A-6 (Order).

On May 15, 2006, Northern Realty filed an Affidavit of Amounts Due in

Redemption with the Recorder. AA at A-5 (Order). The Affidavit stated that Northern

Realty was owed $23,974.00 for its Judgment5• AA at A-5 (Order).

On May 16, 2006, Northern Realty purported to redeem from itself pursuant to the

Additional Lien for Payment of Real Property Taxes and/or Assessments by Creditor

Pursuant to Minn. Stat. § 272.44 (2004), by tendering to itself the amount of

$126,842.03. AA at A-6 (Order). It issued to itself a Certificate of Redemption from

Foreclosure Sale by Holder of a Sheriff's Certificate which it filed with the Recorder on

May 18, 2006, along with an Affidavit of Amounts Due in Redemption stating that

5 This amount included the $1,591.32 in property taxes/assessments paid by Northern Realty. MHF A Ex. 6 Maher Aff.

7

Northern Realty was owed an additional $1,591.32 for payment of the property

taxes/assessments.6 AA at A-6 (Order).

By way of a letter, dated May 17, 2006, Northern Realty refused to accept tender

ofMHFA's payment for redemption as a junior creditor. AA at A-6 (Order).

The Western Bank Foreclosure Sale

While the foregoing was occurring, Jendayi Place also defaulted on its obligations

to Western Bank, and Western Bank commenced foreclosure by advertisement ("Western

Bank Foreclosure"). AA at A-6 (Order). On December 14, 2005 the Property was sold

at a 1>heriff's sale to Western Bank, for the sum of $68,337.18. AA at A-6 (Order). The

sale was subject to the mortgagor's (the Property owner's) statutory right of redemption

for a period of six months. Ex. K Pierce Aff; Minn. Stat. § 580.23, subd. I.

MHFA and Northern Realty both attempted to redeem from the Western Bank

Foreclosure sale as the successor to the mortgagor (the owner) of the Property. AA

at A-6 (Order). The Sheriff refused to accept either redemption stating that he could not

determine who was entitled to redeem due to the confusion in the redemption process

relating to the CLT foreclosure. AA atA-6 (Order). By agreement between MHFA and

Northern Realty, from the total funds tendered to the Sheriff, the Sheriff paid the

redemption amount to Western Bank and has retained the balance pending resolution of

this dispute. Ex. L Pierce Aff; Maher Aff. ¶ 16. The Property is currently managed by a

6 In this way, Northern Realty included the amount of its tax payment a second time in the amount required to redeem from it.

8

third party manager under an agreement between Northern Realty and MHFA. AA

at A-6 (Order).

The District Court Order

On March 6, 2007, both parties brought motions for summary judgment before the

district court. In its Order, dated March 22, 2007, the district court denied Northern

Realty's motion for sU1mnary judgment and granted MHFA's motion. AA at A-2

(Order). The district court held that Northern Realty did not have to comply with the

requirements of Minn. Stat. § 580.24(a), was therefore the senior creditor entitled to

redeem, and did redeem, even though the Sheriff initially refused to accept its tender.

The district court also detennined that on the very day that the Sheriff changed his mind

and accepted Northern Realty's redemption as senior creditor, MHFA redeemed from

Northern Realty as junior creditor. The district court determined that

[T]he Sheriff interfered in the statutory process in a manner that prevented NRV [Northern Realty] and MHFA from redeeming in the proper order and prevent[ed] MHFA from paying the amount due as junior creditor within the time allowed .... The Sheriffs actions should not penalize MHFA so as to preclude ... [MHFA's] redemption after NRV's redemption payment was accepted [by the Sheriff].

AA atA-10-11 (Order) (emphasis in original). Furthermore, the district court held that

"MHFA substantially and sufficiently complied with the redemption requirements and is

now the fee owner of the subject premises," and, "[e]quity also requires this

resolution .... " AA at A-11 (Order).

9

Northern Realty appealed. MHF A filed a notice of review concerning the district

court's statutory interpretation that Northern Realty was entitled to redeem even though it

did not comply with Minn. Stat. § 580.24( a).

SCOPE OF REVIEW

Where, as here, there is no dispute as to the material facts, the appellate court

reviews the district court's application of the law de nova. In re Collier, 726 N.W.2d 799

(Minn. 2007).

ARGUMENT

I. THE DISTRICT COURT PROPERLY HELD THAT MHFA SUBSTANTIALLY COMPLIED WITH REDEMPTION REQUIREMENTS UNDER THE CIRCUMSTANCES.

Mortgage foreclosure statutes are intended to permit lien creditors to redeem in the

order of their lien priority for the purposes of yielding the utmost value from the property

to satisfy as many of the lien creditors as possible. Remote v. Jonathan Dev. Corp.,

277 N.W.2d 362,363 (Minn .. 1979).

Under the substantial compliance standard, MHF A properly redeemed from

Northern Realty, assuming that Northern Realty was the senior creditor entitled to

redeem.

A. MHFA Substantially Complied With The Redemption Statutes By Redeeming From The Senior Creditor As Soon As The Opportunity Existed.

This Court has acknowledged that strict compliance with redemption statutes is

not always necessary. See Sieve v. Rosar, 613 N.W.2d 789 (Minn. Ct. App. 2000). The

Court, in Sieve, stated:

10

Substantial compliance with the redemption requirements is all that is necessary to effect a valid redemption. While the essential elements of the statute must be strictly adhered to, failure to comply with the more formal requirements may be overlooked.

Id. at 793.7

If, as the district court determined, MHF A was a "junior creditor," strict

application of the redemption statutes would require MHF A to have redeemed from

May 3, 2006 through May 9, 2006. Minn. Stat. § 580.24(a). AA at A-8 (Order).

However, during that entire time MHFA, not Northern Realty, held the certificate of

redemption from the foreclosure sale. Because Northern Realty was not issued a

certificate of redemption until May 12, 2006 (AA at A-5 (Order)), there was no senior

redeeming creditor from whom MHFA could redeem until well after the May 9 deadline.8

"It was not until May 9, the last day MHFA could redeem if this process had occurred as

it should have, that NR V [Northern Realty] advised the Sheriff by letter that it intended to

proceed by Writ of Mandamus, and it was not until May 12, 2006 that the Sheriff

reconsidered his position." AA at A-10 (Order). In addition, " ... there is no evidence that

NRV [Northern Realty] could not have taken more immediate action in challenging the

7 See also TCM Properties, LLC v. Gunderson, 720 N.W.2d 344, 350 (Minn. Ct. App. 2006) ("strict construction does not preclude redemption when formal defects do not prejudice the rights of junior lienors.").

8 The purchaser at the sheriff's sale receives the sheriff's certificate of sale. Minn. Stat. § 580.12. After the time for redemption expires, that certificate becomes prima facie evidence that the certificate holder has fee title to the property. Minn. Stat. § 580.19. Unless and until a certificate of redemption is issued, the holder of the sheriff's certificate has the right to the fee title. A certificate of redemption operates as an assignment of the sheriff's certificate of sale. Minn. Stat. § 580.27.

11

Sheriffs initial determination .... " AA at A-11 (Order). Furthermore, "[i]t cannot

reasonably be expected that MHF A would refuse to redeem under these circumstances or

that it had an obligation to persuade the Sheriff that his interpretation of statutory law

may be wrong." AA at A-11 (Order).

The same day that Northern Realty was issued a certificate of redemption, MHFA

redeemed from Northern Realty by submitting an additional $24,055.44 to the Sheriff and

received a Revised Certificate of Redemption from the Sheriff. AA at A-5-6 (Order). It

is important to note that MHF A could not have redeemed from Northern Realty by

submitting the additional amount necessary to cover Northern Realty's lien until

Northern Realty successfully redeemed and such additional amount became applicable to

a junior creditor's redemption amount. Minn. Stat. § 580.24(c) specifically refers to

"[t]he amount required to redeem from a person holding a certificate of redemption .... ")

Further, unless and until a certificate of redemption is issued, presumptive title to the

property remains with the holder of the sheriffs certificate, and a redeeming creditor

would not pay the redemption amount to another creditor who did not have a certificate

of redemption.9

Northern Realty argues for strict compliance with the redemption statutes and

relies on State ex rel. Anderson v. Kerr, 51 Minn. 417, 53 N.W. 719 (Minn. 1892) to

support its notion that the district court cannot extend the redemption period. App. Br.

at 8. Northern Realty neglects to note the exceptions to strict compliance acknowledged

9 Id.

12

by the courts in Anderson and subsequent cases. Anderson acknowledges that the time

can be waived or extended by the party whose interests are affected. Anderson, 51 Minn.

at 420, 53 N.W.2d at 719. Subsequent cases indicate that relief may be appropriate

where redemption according to the strict statutory terms is "practically ineffective" or

where a blameless, non-negligent redeeming creditor is entitled to equitable relief. See In

re Nelson, 495 N.W.2d 200, 203 (Minn. 1993); Peterson v. First Nat. Bank, 162 Minn.

369, 378-79, 203 N.W. 53, 56-57 (1925).

In the current situation, Northern Realty necessarily seeks to extend the

redemption period to encompass its redemption. The most senior credit entitled to

redeem had until May 2, 2006 to successfully redeem. AA at A-8 (Order). Northern

Realty asserts that it redeemed on May 2, 2006. 10 App. Br. at 9. If that were correct,

then Northern Realty failed to comply with Minn. Stat. § 580.25, which requires that

"[w]ithin 24 hours after a redemption is made, the person redeeming shall cause the

documents so required to be produced [the documents that the redeeming creditor was

required to produce to the sheriff, including an Affidavit Of Additional Amount Due] to

be filed with the county recorder .... " Filing with the Recorder makes the redemption

information available in a single office for notice to other creditors, like MHF A, and for

preservation. Northern Realty did not record its Certificate of Redemption until May 12,

10 Northern Realty states that "it is undisputed that Appellant did redeem on May 2, 2006." App. Br. at p. 9. However, the district court specifically stated that Northern Realty "attempted to redeem" and "the Sheriff refused NRV's [Northern Realty's] tender." AA at A-5 (Order).

13

2006, (AA at A-5 (Order); Ex. F Pierce Aff.) and did not record its Affidavit of Amount

Due In Redemption, until May 15, 2006 (AA at A-5 (Order)), long past the statutory

24-hour period. Northern Realty's failure to file deprived MHFA of the recorded notice

that Northern Realty had redeemed and the amount necessary to redeem from Northern

Realty. Just as Northern Realty must have relief from its failures to comply with the

statute on grounds that the Sheriff made it impossible to comply, the district court

properly determined that MHFA should not be penalized for the Sheriff's actions.

In light of the circumstances, MHF A redeemed from the senior creditor as soon as

it was chronologically possible in view of the actions of the Sheriff. Such redemption

substantially complied with the redemption statutes and MHF A was properly issued the

Revised Certificate Of Redemption.

B. The Principles Of Equity Support Issuance Of The Certificate Of Redemption To MHF A.

Redemption statutes are broadly construed to effect their purpose. Harbal v.

Federal Land Bank, 449 N.W.2d 442, 446-47 (Minn. Ct. App. 1989). Even if a

redemption is untimely, the Court's look to "the totality of the circumstances" to

determine whether to grant equitable relief. 11 In re Nelson, 495 N.W.2d 200, 203 (Minn.

1993). See also Peterson v. First Nat'! Bank, 162 Minn. 369, 378-79, 203 N.W. 53,

11 See Sieve v. Rosar, 613 N.W.2d 789, 794 (Minn. Ct. App. 2000) (discussing In re Nelson and stating, "The Nelson court addressed other potential means of overcoming a late redemption and, although the court in Nelson rejected all theories, it did not foreclose the possibility of their application under other circumstances." (citing Nelson at 202-03)).

14

56-57 (1925). In Peterson, the Court applied the following factors to determine whether

their equitable powers relieved a party of its untimely redemption:

(1) A blameless plaintiff fallen into serious error, whether of fact or law is immaterial, which promises a disastrous result, wholly unintended by any of the parties to the transaction wherein the mistake occurred;

(2) Absence of negligence of the person seeking relief;

(3) Defendants with knowledge of the mistake attempting to secure by inequitable conduct an unconscionable advantage of plaintiff and to enrich themselves unjust at his expense;

( 4) The ability of the court to restore the status quo as to all of the interests involved.

Peterson, 162 Miun. 379,203 N.W.2d at 56-57.

The application of these factors to the unique circumstances of this case support

MHFA's redemption from Northern Realty.

1. MHFA was blameless and non-negligent with respect to the conflict between Northern Realty and the Sheriff over Northern Realty's failure to follow the redemption statutes.

The unique circumstances of this case were solely the result of Northern Realty's

failure to follow the redemption statutes and its resulting conflict with the Sheriff

regarding its redemption rights. Northern Realty is now attempting to inflict a substantial

financial penalty on MHFA for Northern Realty's own conduct and its resulting conflict

with the Sheriff. MHF A is both blameless and non-negligent, and it should be protected.

MHF A at all time acted appropriately. MHF A initially redeemed at the first

available opportunity from the entity holding the only existing title document-the

Sheriff's certificate-and received a Certificate of Redemption. AA at A-5 (Order).

15

MHF A thus became the holder of the title document. That status remained until the

Sheriff and Northern Realty "resolved" their conflict, and the Sheriff issued a certificate

of redemption to Northern Realty. AA at A-5 (Order). Immediately thereafter, MHFA

redeemed from Northern Realty as the holder of the then existing title document and the

Sheriff issued MHFA a revised certificate of redemption. AA at A-5-6 (Order).

MHF A did not cause the dispute between Northern Realty and the Sheriff and was

not a party to that dispute. "It was the Sheriff, not MHF A, who interfered in the statutory

process in a manner that prevented NRV [Northern Realty] and MHFA from redeeming

in the proper order and prevent[ ed] MHF A from paying the amount due as junior creditor

within the time allowed." AA at A-10 (Order). MHFA simply did everything it could to

redeem, as it was entitled to do. 12

2. Northern Realty seeks to use its own failure and its conflict with the Sheriff to unjustly enrich itself.

If Northern Realty were allowed to redeem and MHFA were prevented from

redeeming from Northern Realty, then MHF A would loses the value of its mortgage on

the Property- $263,725.00. At the same time, Northern Realty would gain a windfall

from elimination of the $263,725.00 mortgage. Northern Realty would be unjustly

enriched by such a windfall.

12 Northern Realty's cite to State v. King (Appellant's Br. at p. 11 f.4) is not only improperly cited, but inapplicable. MHFA was not ignorant of the law, but, to the contrary, did all that was possible to meet the requirements of the applicable statutes.

16

3. The district court restored all parties to the status quo.

The district court maintained all parties in the position that they would have had if

Northern Realty had precisely followed the redemption statutes and not caused a conflict

between it and the Sheriff. "The Sheriffs actions should not penalize MHFA so as to

preclude their redemption after NRV's [Northern Realty's] redemption payment was

accepted." AA at A-11 (Order). Recognizing MHFA's redemption from Northern

Realty achieves this objective. Northern Realty would receive the amount it paid to

redeem from the Sheriffs sale and the amount due on its judgment. MHF A would

recover something on its $263,725.00 mortgage by becoming the owner of the Property.

Such a result also fulfills the purpose of the redemption provisions by obtaining the

maximum from the Property to satisfy the debts of the owner. Remote v. Jonathan Dev.

Corp., 277 N.W.2d at 363. (Mortgage foreclosure statutes are intended "to permit lien

creditors to redeem in the order of their priority for the purpose of yielding the utmost

value from the property to satisfy as many of the lien creditors as possible.")

The district court properly determined that MHF A substantially complied with

redemption requirements, that it redeemed as soon as it was chronologically able to do so,

that it should not be penalized for the actions of the Sheriff, and that equity demands that

MHFA's redemption be recognized.

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II. BECAUSE NORTHERN REALTY FAILED TO SATISFY THE STATUTORY PRECONDITIONS FOR REDEMPTION, NORTHERN REALTY WAS NOT ENTITLED TO REDEEM. MHFA PROPERLY REDEEMED AS THE SENIOR CREDITOR ENTITLED TO REDEEM.

MHF A submits that the foregoing is controlling in this case and that the Court

need not determine whether Northern Realty was, in fact, entitled to redeem.

Nevertheless, examination of the law shows that Northern Realty was not entitled to

redeem because it did not comply with the provisions of Minn. Stat. § 580.24(a), the

preconditions for redemption that every creditor must meet before that creditor is entitled

to redeem.

A. Because Northern Realty Failed To Satisfy The Statutory Preconditions For Redemption, Northern Realty Was Not Entitled To Redeem.

Northern Realty attempted to redeem from the CLT Foreclosure based upon an

assignment of the Judgment, docketed on December 27, 2002, with the District Court for

Ramsey County. AA A-3-4 (Order). The Judgment was senior to the MHFA mortgage

recorded on January 2, 2003. Northern Realty obtained an interest in the Judgment by an

Assignment, filed on April 24, 2006, with the District Court for Ramsey County.

AA A-3 (Order).

Although Northern Realty was the "senior creditor," Northern Realty did not

comply with the provisions of Minn. Stat. § 580.24(a), which provides as follows:

However, no creditor is entitled to redeem unless, within the period allowed for redemption by the mortgagor, the creditor:

(I) records with each county recorder and registrar of titles where the foreclosed mortgage is recorded a notice of the creditor's intention to redeem;

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(2) records in each office where the notice is recorded all documents necessary to create the lien on the mortgaged premises and to evidence the creditor's ownership of the lien; and

(3) after complying with clauses (1) and (2), delivers to the sheriff who conducted the foreclosure sale or the sherijJ's successor in office a copy of each of the documents required to be recorded under clauses (1) and (2), with the office, date and time of filing for record stated on the first page of each document

Minn. Stat. § 580.24(a) (emphasis added).

It is critical to note ( which the district court failed to do) that the foregoing

requirements all must be accomplished before the mortgagor's (the owner's) six-month

period for redemption expires, which is prior to the time that any creditor can redeem. In

other words, the foregoing are all preconditions that must be accomplished before a

creditor is entitled to redeem. Once a creditor has qualified to redeem by fulfilling the

preconditions, the actual act of redemption is governed by the following section, Minn.

Stat. § 580.25.

In accordance with the pre-redemption requirements, Northern Realty filed a

notice of its intention to redeem. Minn. Stat. § 580.24(a)(l). The Minnesota Supreme

Court has held that, just as the statute states, the filing of the notice is a precondition to

redemption and a creditor that does not file such a notice is not entitled to redeem.

Graybow-Daniels Co. v. Merchants State Bk., 255 N.W.2d 405 (Minn. 1977).

While the filing of the notice is a longstanding requirement, the legislature added

the additional requirements of Minn. Stat. § 580.24(a)(2) and (3) in 2004. 2004 Minn.

Laws 724 (ch. 234, § 4). Northern Realty failed to meet the three recently added

pre-redemption requirements. Northern Realty failed to evidence the Judgment by

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recording it with the Recorder (where the Notice Of Intention To Redeem was filed) as

required by Minn. Stat. § 580.24(a)(2). While the judgment becomes a lien upon

docketing (Minn. Stat. § 548.09, subd. 1), Northern failed to follow the additional

preconditions for redemption that the Judgment be recorded with the Recorder. This

filing requirement furthers the purpose of making all the documents relating to the

redemption available in the same office for notice, inspection and preservation.

Second, Northern Realty also failed to record the assignment of the judgment with

the Recorder. The statute expressly required Northern Realty to file "evidence of the

creditor's ownership of the lien" with the Recorder.

Third, Northern Realty failed to deliver to the Sheriff copies of the forgoing with

the Recorder's filing noted thereon as required by Minn. Stat. § 580.24(a)(3). See AA

at A-4; App. Br. at 3; MHFA Exs. 2, 3 Maher Aff; Maher Aff. ¶ 8.

The statute provides that "no creditor is entitled redeem" unless it complies with

the above statutory preconditions for redemption. Minn. Stat. § 580.24(a). Because

Northern Realty did not comply, it was not entitled to redeem and can have no Property

interest.

The district court rejected MHFA's argument and held that Northern Realty did

not have to comply with the pre-redemption, statutory requirements. It held Minn. Stat.

§ 580.24(a) only requires the a creditor to file documents with the Recorder if the filing

with the Recorder will then create the lien. If the lien already exists, then filing with the

Recorder is unnecessary. AA atA-10 (Order). The district court based this construction

of the statute on the fact that Minn. Stat. § 580.25(2) states that when redeeming based

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upon the assignment of a judgment, the creditor shall present the sheriff with a certified

copy of the judgment and assignment entered on the court docket and "[n]o further

evidence of the assignment of the judgment is required."

In making its decision, the district court erroneously conflated the statutory

preconditions that a creditor must satisfy in order to be entitled to redeem (Minn. Stat.

§ 580.24(a)), with the statutorily prescribed acts that constitute actual redemption (such

as payment and presentation of documents to the sheriff) (Minn. Stat. § 580.25). The

district court then erroneously held that because the act of redemption only requires

submission of payment, a certified copy of the judgment and assignment showing the

entry on the court docket, and an affidavit of the amount to be paid by any junior

redeeming creditor (Minn. Stat. § 580.25), the preconditions for redemption did not

require that the judgment be recorded with the Recorder.

The district court's construction of the statute confuses the preconditions to

become eligible to redeem with the act of redemption itself, and defeats the statutory

purpose of having all relevant documents filed and preserved in a single office. Both

statutes and both sets of requirements should be given effect. Minn. Stat. § 645.17(2)

("the legislature intends the entire statue to be effective and certain"). Each applies to the

procedure to which it is directed. Minn. Stat. § 580.24(a) governs a creditor's eligibility

to redeem. Minn. Stat. § 580.25 governs the act of redemption.

In this case, Northern Realty was not eligible to redeem because it did not comply

with the preconditions for redemption. This is consistent with the Supreme Court's

determination in Graybow-Daniels: if a creditor did comply with the preconditions for

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redemption, the creditor is not entitled to redeem, and it does not matter that, after failing

to qualify to redeem, the creditor later presents to the sheriff the payment and other

documents required to redeem.

B. MHFA Strictly Complied With The Redemption Statutes And Properly Redeemed As The Senior Creditor Entitled To Redeem.

Under the initial, correct determination by the Sheriff, Northern Realty was not

entitled to redeem, and MHFA was the most senior creditor entitled to redeem. This was

the information conveyed to MHFA by the Sheriff on April 27, 2006. AA at A-5

(Order). Because Jendayi Place's right of redemption expired April 25, 2006 (AA at A-4

(Order); Minn. Stat. § 580.23, subd. 1), MHFA had until May 2, 2006, to redeem as the

senior creditor entitled to redeem. Minn. Stat. § 580.24(a). On April 28, 2006, MHFA

successfully redeemed13 by tendering the amount of $101,195.27 (AA at A-5 (Order)),

and by complying with all applicable redemption requirements:

Filing the Notice Of Intention To Redeem with the Recorder on March 8, 2006 (AA at A-4 (Order));

Recording the MHFA Mortgage with the Recorder on January 2, 2003 (AA at A-3 (Order));

Delivering copies of the recorded Notice Of Intention To Redeem and MHF A Mortgage to the Sheriff on April 11, 2006 (AA at A-4 (Order));

Filing the Affidavit of Additional Amounts on Redemption with the Recorder on April 28, 2006 (AA at A-5 (Order)); and

13 Northern Realty states that, "It is undisputed that Respondent did not redeem on or before May 9, 2006 (App. Br. at 9]), when the facts clearly show that MHFA initially redeemed on April 28, 2006. AA at A-5 (Order).

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Delivering the Affidavit of Additional Amounts on Redemption to the Sheriff on April 28, 2006 (AA at A-5 (Order)).

As the senior creditor entitled to redeem, MHFA properly redeemed and is the fee owner

of the Property. 14

CONCLUSION

For the reasons advanced in Part I of this brief, the decision of the district court

that the MHF A substantially comply with the requirements to redeem from Northern

Realty under the circumstances of this case should be affirmed.

In the alternative, MHFA urges that Northern Realty did not satisfy the statutory

preconditions that a creditor must meet in order to be eligible to redeem (Minn.

Stat.§ 580.24(a). Northern Realty was therefore ineligible to redeem, and MHFA

14 As the new fee owner, MHFA is the successor to the rights of the prior fee owner (the mortgagor) and is entitled to redeem from the Western Bank mortgage foreclosure sale.

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therefore properly redeemed directly from the mortgage foreclosure sale as the senior

creditor entitled to redeem.

Dated: May 23, 2007

AG· #1801466-vl

Respectfully submitted,

LORI SWANSON Attorney General State of Minnesota

THOMAS K. OVERTON Assistant Attorney General Atty. Reg. No. 0083355

DARRYL HENCHEN Assistant Attorney General Atty. Reg. No. 0320250

445 Minnesota Street, Suite 900 St. Paul, MN 55101-2127 (651) 296-0985

ATTORNEYS FOR RESPONDENT MINNESOTA HOUSING FINANCE AGENCY

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