March 4, 2014
by Kevin T. Dobie
Usset, Weingarden & Liebo, PLLP - USFN Member (Minnesota)
In a helpful case for those wishing to evict occupants following a mortgage foreclosure, the Minnesota Court of Appeals determined in Deutsche Bank National Trust Company v. Hanson, __ N.W.2d __, 2014 WL 30389 (Minn. App. Jan. 6, 2014), that a district court can enter an eviction judgment in favor of a foreclosing lender without addressing the defendant’s claim that the lender’s title is flawed. A pending lawsuit regarding the validity of the mortgage does not require a stay of the eviction proceedings.
The pertinent eviction statute and prior decisions from the Minnesota Court of Appeals provide that to evict a holdover occupant a foreclosing lender need only show that (1) a foreclosure occurred, (2) the redemption period expired, (3) the eviction plaintiff is the holder of the sheriff’s certificate of sale, a successor, or assignee, and (4) the defendant is holding over. Evictions are summary proceedings and lawsuits contesting title must be filed in a separate action.
Following a mortgage foreclosure and expiration of the statutory redemption period, former owners and eviction defendants seeking to challenge the eviction in Minnesota often claim that a lender’s foreclosure is defective and, therefore, the lender cannot proceed with the eviction. These eviction defendants often start a lawsuit quickly after the eviction complaint is filed or have already filed a separate lawsuit disputing the lender’s title.
The eviction defendants frequently claim that Bjorklund v. Bjorklund Trucking Co., 753 N.W.2d 312 (Minn. App. 2008), requires the eviction court to stay the eviction pending the outcome of a separate lawsuit because, in Bjorklund, the Minnesota Court of Appeals held that a district court abused its discretion where it refused to stay an eviction action when defenses or counterclaims that are essential in the eviction are also at issue in a previously-filed lawsuit.
The Hansons argued that Bjorklund required the district court to stay the eviction until Deutsche Bank could establish the validity of the foreclosed mortgage. The Hansons did not dispute that they executed a mortgage. Instead, they claimed it was invalid because they had rescinded the loan transaction under the Truth in Lending Act. The holding in Hanson concluded that Bjorklund did not govern the foreclosure-related eviction, with the court determining that the most significant distinction was that in Bjorklund the occupant’s defense hinged on an alleged agreement to transfer the real estate to the occupant and the district court in Bjorklund found that some of the claims in the previously-filed lawsuit were essential to the transfer agreement defense. Also of note, the Bjorklund plaintiff sought to evict based on an alleged oral lease and a lease termination notice.
The Hanson court ruled that because eviction proceedings adjudicate only the right to present possession, a dispute over the validity of the mortgage [or likely the foreclosure] did not trigger the Bjorklund stay requirement. The Hansons’ claim that the lender’s title was flawed was not an issue central to the eviction proceeding and “the district court correctly concluded that it could proceed without addressing [the Hansons’ title claims].”
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