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Redemption funds were late, not in compliance

A man who was unable to proffer the redemption funds for a property until a day after the expiration of the time period specified by law failed to comply with the statutory requirements to redeem an interest under Minn. Stat. sec. 580.25, the Court of Appeals has ruled.

An Anoka County District Court judge had concluded that the plaintiff was statutorily entitled to redeem the property because he had “substantially complied” with the mortgage foreclosure redemption statutes.

But the Court of Appeals disagreed.

“In order to comply with the statute, substantially or otherwise, the payment must be received by the proper party within the redemption period,” wrote Judge G. Barry Anderson. “The parties do not dispute that this did not occur. [The plaintiff] did not comply with the statutory requirements.”

However, because the plaintiff may have valid arguments for application of the doctrine of equitable estoppel, the Court of Appeals remanded the case to permit the District Court judge to make findings on that issue.

The 13-page decision is Sieve v. Rosar, Minnesota Lawyer No. CA-723-00.

Anoka attorney William K. Goodrich, who represented the defendant, said that it is important that the court make a finding that payment to the wrong person within the redemption period is not substantial compliance.

“Payment to the right person is an essential element of the statutory redemption scheme,” Goodrich stated. “[The decision creates] more certainty in commerce and statutory redemption [actions].”

The plaintiff’s attorney, Gregory Mark Miller, was wary of saying too much about the decision because the case is still pending. Miller did note, however, that he believes “the facts which will come out now will be the ones that warrant my client’s [success in the lawsuit].”

Miller also advises other attorneys that in light of the decision, regardless of how good their relationship may be with the other side, it is important to create a paper trail and document each and every term of every agreement, especially if they are working outside of what would normally be a statutorily required procedure.

Out of touch

In September 1997, the plaintiff, Maynard Sieve, loaned $35,000 to Darlene and Ronald Lantz to purchase property in Anoka County. Prior to the Sieve loan, the property was encumbered by another mortgage held by Metco Mortgage Corporation. The Metco mortgage was later assigned to Fidelity Bank.

In 1998, the Lantzes failed to make payments on both the Fidelity and Sieve loans. Fidelity commenced a foreclosure action.

On Aug. 20, 1998, the Anoka County Sheriff held a public sale of the property. At the sale, the defendant, Philip Rosar, purchased the property for more than $60,000. The Lantzes made no attempt to redeem the property.

In December 1998, the plaintiff recorded a notice of intent to redeem the property and served notice of intent on the defendant. Prior to the commencement of the plaintiff’s redemption period, his attorney notified the defendant that the plaintiff intended to redeem during his redemption period. The parties dispute whether the attorney informed the defendant or his wife that the plaintiff planned to redeem directly with them as opposed to the sheriff.

The plaintiff’s redemption period ran from Feb. 22 to March 1, 1999. On Feb. 19, 1999, the plaintiff’s attorney and the defendant’s wife had a telephone discussion about the form of payment for redemption. The defendant’s wife informed the attorney that a certified check would be acceptable.

The defendant and his wife left the country for a vacation around Feb. 22, 1999, and returned on March 1, 1999. Neither the defendant nor his wife ever informed the plaintiff or his attorney that they would be unavailable during the redemption period.

On Feb. 25, 1999, the plaintiff sent a cashier’s check in the redemption amount by courier to the defendant’s office. An individual who has an office in the same building, but allegedly is not an employee or agent of the defendant, signed for the envelope and eventually delivered it to the defendant when he returned from his vacation on March 2, 1999. Before and after the check was sent to the defendant, the plaintiff’s attorney left numerous messages with the defendant’s “assistants” seeking to arrange a time to complete the redemption. The defendant, then out of the country, did not respond.

After the plaintiff sent the redemption funds, he completed repairs on the property. Although the value of the repairs is disputed, the parties do not dispute that repairs were made.

In a letter dated March 9, 1999, the defendant first informed the plaintiff that he was returning the redemption funds because the plaintiff failed to meet redemption requirements.

On March 26, 1999, the plaintiff filed a summons and complaint seeking an order directing the defendant to accept the redemption funds. The plaintiff also asserted claims of unjust enrichment and misrepresentation seeking recovery of the amount due on its mortgage and the value of improvements made to the property.

Both parties made motions for summary judgment.

The District Court judge granted the plaintiff’s motion for summary judgment and allowed him to redeem with the sheriff. The defendant appealed.


Anderson began by identifying the statutory requirements creditors must follow when redeeming from a mortgage foreclosure sale.

The person redeeming must file all necessary documents with the county recorder within 24 hours of the redemption and the person from whom redemption is made must complete a certificate of redemption, which also must be recorded, observed the judge. A creditor who fails to properly redeem forfeits his interest in the property, he continued.

It was undisputed that the plaintiff did not pay the redemption funds within his seven-day redemption period, that he never showed the defendant the required documents, never recorded those documents, and never filed a certificate of redemption, noted Anderson.

“The district court nevertheless ruled that [the plaintiff] had sufficiently complied with the statutory requirements because he had made a ‘good faith attempt’ to redeem and [the defendant’s] interest was not ‘materially prejudiced,’” Anderson said.

Anderson observed that the District Court was faced with what it concluded were two conflicting lines of precedent on the extent of compliance necessary under the redemption statutes — one holding that a redemptioner must strictly comply with the statute and another requiring only substantial compliance.

“The statutory requirements for redemption have not changed since 1874 and, thus, even the earliest decisions speak to the issues involved in the present case,” wrote Anderson. After analyzing several appellate decisions discussing the extent of compliance required for redemption, the Court of Appeals concluded that the two strains of thought are complementary rather than contradictory.

“Substantial compliance with the redemption requirements is all that is necessary to effect a valid redemption,” observed Anderson. “While the essential elements of the statute must be strictly adhered to, failure to comply with the more formal requirements may be overlooked. Furthermore,
whether a purchaser may challenge noncompliance with a particular statutory requirement depends on whether the requirement was intended for the benefit of the purchaser.”

Turning to the specific instance of noncompliance at issue in the present case — the plaintiff’s failure to make payment to the proper party within the time limitation — Anderson said that the question was decided by the 1993 Supreme Court case of In re Petition of Nelson.

“The Nelson court held that payment received one day after the redemption period expired was untimely,” wrote Anderson. “The [Nelson] court noted that redemption is a ‘strict legal right’ … Because the mortgagor’s payment was not received by the purchaser’s attorney until after the expiration of the redemption period, it was not timely.”

Anderson noted that the resolution of this issue by the Nelson court effectively settled the first issue in the present case. Compliance with the statute, substantial or otherwise, requires that the proper party receive payment within the redemption period, the judge said.

Estoppel question

Anderson next explained that the Nelson court addressed other potential means of overcoming a late redemption — including application of equitable estoppel — and, although it rejected all theories, it did not foreclose the possibility of their application under other circumstances. “The circumstances in the present case … might demand a different result,” observed the judge.

Noting that the District Court did not reach the plaintiff’s equitable estoppel argument, Anderson said that the plaintiff may have two valid arguments in this regard.

“First,” wrote the judge, “from the evidence in the record it can be inferred that [the defendant] and his wife, by a combination of words and silence, led [the plaintiff’s] attorney to believe that he could send the redemption funds to [the defendant’s] office and that completion of the redemption would be arranged. The evidence also supports an inference that the [defendant’s] conduct was intended to induce, and did induce, [the plaintiff] to send the check to the office.”

Second, Anderson continued, “unlike the mortgagor in Nelson, [the plaintiff] has made an initial showing that he detrimentally relied on [the defendant’s] failure to make an immediate objection to [the plaintiff’s] noncompliance with the statute. More specifically, [the plaintiff] alleges that he incurred expenses in making repairs to the property.”

Concluding that “… there are genuinely disputed issues concerning the application of equitable estoppel and … the decision to apply the doctrine rests within the discretion of the district court,” the Court of Appeals reversed and remanded the case for further consideration.

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