June 6, 2013
by Eric D. Cook
Wilford Geske & Cook, P.A. – USFN Member (Minnesota)
The Minnesota Supreme Court has issued its second significant decision during the recent foreclosure crisis. On April 17, the court ruled that “strict compliance” is required for at least one more provision of Minnesota’s foreclosure statute. Specifically, a foreclosing lender must record all assignments of mortgage prior to the date of the first publication (“first legal” in Minnesota).
The court reasoned that “section 580.02(3) requires all assignments of the mortgage to be recorded before the mortgagee has the right to engage in the process of foreclosure by advertisement.” Ruiz v. 1st Fidelity Loan Servicing, LLC, A11-1081, 829 N.W.2d 53 (Minn. 2013). The statute doesn’t expressly mention the first publication date as a deadline for recording assignments and, in fact, does not have a timing component for recording assignments. Yet, the court reasoned that the plain meaning of the word “requisite” as used was the equivalent of “pre-requisite,” which then implied a timing element.
Minnesota’s 15-year statute of limitations does support the court’s decision, since it deems the commencement of a nonjudicial foreclosure to be the date of the first publication of the notice of sale. Minn. Stat. § 541.03, subd. 2 (2012). It was already a best practice in Minnesota to record all assignments prior to the first publication date to protect against the uncertainty of a decision like Ruiz. Additionally, it was a best practice to prepare the notice of pendency prior to the assignment, record it with the assignment, and make sure the recording was completed prior to the first date of publication.
Interestingly, there are federal court decisions in Minnesota that suggest a borrower has no right or standing to contest a recording delay, at least with respect to the notice of pendency, which is expressly required to be recorded prior to the first date of publication. The assignment of mortgage question is now resolved in Minnesota, but much uncertainty remains for other procedures.
The Supreme Court chose not to address the notice of pendency issue or the case law applying “substantial compliance” to most foreclosure procedures. Minnesota does have ancient case law authority that requires only substantial compliance for some procedures, which, if recognized by the court, would have meant that procedural defects could only be challenged by a borrower who can show prejudice from the noncompliance.
In 2009, the Minnesota Supreme Court decisively ruled in favor of the MERS system and meticulously described how Minnesota’s foreclosure process allows the note and mortgage to follow separate and independent paths without interfering with the foreclosure process. Jackson v. MERS, 770 N.W.2d 487 (Minn. 2009). A foreclosing lender does not need to be the owner, holder, or party with contract rights to enforce a promissory note at any time during a foreclosure proceeding. Id. In this state’s nonjudicial process, a foreclosing lender simply must be the mortgagee of record prior to the first date of publication.
Upon receiving executed documents from a servicer, Minnesota attorneys typically send them immediately for recording and attempt to schedule the first legal for the next calendar day in that county. If the county recorder’s office fails to process all of its recordings as expected, however, or if there is a delay in the mail or messenger delivery, foreclosure counsel may find themselves in the Ruiz situation of failing to record prior to the first legal date.
When the Ruiz case first arose early in 2012, there were literally hundreds of cases throughout Minnesota impacted by the decision; i.e., assignments and notices recorded exactly on the first publication date. Most or all have been resolved by now, partly due to the operation of a curative statute, so the state Supreme Court’s decision should have little remaining impact on Minnesota’s current foreclosure volume.
Going forward, it is best for Minnesota attorneys to have adequate safety features in place to halt a first legal from going forward when there is a recording delay (a tough thing to know considering that some counties have delays of over two months in making recording data public). Law firms need to be able to run reports from their case management systems and take special precautions to spot inevitable recording delays before proceeding with the first legal.
Editor’s Note: The author’s firm represented the appellant in the case summarized in this article.
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