United States Court of Appeals

For the Eighth Circuit

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No. 12-2656

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Mary Jane Badrawi

lllllllllllllllllllll Plaintiff - Appellant

v.

Wells Fargo Home Mortgage, Inc., 

now known as Wells Fargo Bank, N.A.

lllllllllllllllllllll Defendant - Appellee

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 Appeal from United States District Court 

for the District of Minnesota - Minneapolis

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 Submitted: May 16, 2013

 Filed: June 28, 2013

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Before WOLLMAN, MURPHY, and SMITH, Circuit Judges.

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MURPHY, Circuit Judge.

After Mary Jane Badrawi defaulted on mortgage payments, Wells Fargo Home

Mortgage, Inc. foreclosed on her home and purchased the property in a foreclosure

sale. Badrawi then filed an action in state court arguing that the foreclosure was

invalid because Wells Fargo had violated Minn. Stat. § 580.032, subd. 3 by failing

to record a notice of pendency offoreclosure before publishing the foreclosure notice. 
Wells Fargo removed the action to the federal district court which then granted its

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motion to dismiss. Badrawi appeals, and we affirm. 

I.

In 2003 Badrawi obtained a loan from MidAmerica Mortgage Corporation

secured by a mortgage on her home inRogers, Minnesota. MidAmerica subsequently

assigned the mortgage to Wells Fargo. According to Badrawi's complaint, she

thereafter "fell behind on . . . loan payments," "made an unsuccessful attempt to

modify [the] mortgage," and defaulted on the loan.

Wells Fargo elected to foreclose onBadrawi's home "by advertisement," which

allowed it to commence proceedings by publishing a foreclosure notice in a local

newspaper rather than by filing a judicial action. See Jackson v. Mortg. Elec.

Registration Sys., Inc., 770 N.W.2d 487, 494 (Minn. 2009). On April 19, 2011 Wells

Fargo recorded a pendency of foreclosure notice in the Hennepin County real estate

records. The same day it also began publishing the notice in a local legal newspaper,

where it appeared for the next six weeks. On April 21, its representative visited

Badrawi's home and served the notice on her daughter. Wells Fargo then purchased

the property at a foreclosure sale on June 13.

On December 2, 2011 Badrawi filed this action in state court seeking to

invalidate the foreclosure proceeding. She claimed that Wells Fargo had failed to

comply with Minnesota'srequirementsfor foreclosure by advertisement, and alleged

six counts including fraud, lack of standing to foreclose, improper service, failure to

disclose the loan assignment, and defective and untimely publication of the

foreclosure notice. Only count six, alleging untimely publication of the foreclosure

The Honorable Donovan W. Frank, United State DistrictJudge for the District 1

of Minnesota.

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notice, is at issue on appeal. That count states that by both publishing and recording

notice of foreclosure on the same day, Wells Fargo had violated the requirement of

Minn. Stat. § 580.032, subd. 3 that a foreclosing entity "record a notice of the

pendency of the foreclosure . . . before the first date of publication of the foreclosure

notice" (emphasis added).

Wells Fargo removed the case to federal district court. It then moved to

dismiss and Badrawi moved to remand. The district court declined to remand and

granted Wells Fargo's dismissal motion after it concluded that Badrawi had failed to

state a claim on any count. With respect to count six, the district court concluded that

Badrawi could not challenge the foreclosure based on Wells Fargo's noncompliance

with Minn. Stat. § 580.032, subd. 3. The court first observed that another statute, 

Minn. Stat. § 580.02, provided the core "[r]equisites to foreclose" by advertisement. 

It pointed out that Minn. Stat. § 580.02 required (1) an act of default by Badrawi, (2)

lack of any other proceeding to recover the debt, (3) a prior recording of the mortgage

and any assignments, and (4) the provision to Badrawi of information related to

foreclosure prevention services before the foreclosure notice was recorded. Since

Wells Fargo had complied with each of the requirements in Minn. Stat. § 580.02, the

district court concluded that its obligations to Badrawi had been satisfied.

The district court next addressed Minn. Stat. § 580.032, subd. 3, determining

that it imposed no additional burden on Wells Fargo with respect to Badrawi. It

looked to Holmes v. Crummett, 13 N.W. 924 (Minn. 1882), in which the Minnesota

Supreme Court had concluded that a homeowner may not set aside a foreclosure

based on "an omission of some prescribed act which cannot have affected him, and

cannot have been prescribed for his benefit." Id. at 924. A homeowner is instead

entitled to challenge only the "steps in the proceeding which are calculated to protect

[her] interests." Id. The district court observed that Minn. Stat. § 580.032 protects

only those with "a redeemable interest in real property" who "request . . . notice of a

mortgage foreclosure by advertisement," Minn. Stat. § 580.032, subd. 1, and that

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Badrawi had not requested such notice because "asthe mortgagor and occupant ofthe

relevant property" she had received direct notice. Since Minn. Stat. § 580.032, subd.

3 could not have been "prescribed for [Badrawi's] benefit," Holmes, 13 N.W. at 924,

her claim to relief under that statute failed.

The district court also recognized in a footnote that its conclusion conflicted

with Ruiz v. 1st Fidelity Loan Servicing, LLC, A11-1081, 2012 WL 762313 (Minn.

Ct. App. Mar. 12, 2012) (unpublished), in which a panel of the Minnesota Court of

Appeals had granted a homeowner relief on a similar claim based on the same statute. 

Id. at *5. Since the district court considered Ruiz neither controlling nor persuasive,

it elected not to follow its reasoning. Badrawi appeals only the district court's

dismissal of count six.

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II.

We review a district court's grant of a motion to dismiss de novo, taking the

facts alleged in the complaint as true. Zutz v. Nelson, 601 F.3d 842, 848 (8th Cir.

2010). To survive a motion to dismiss, a complaint must contain "enough facts to

state a claim to relief that is plausible on its face," Bell Atl. Corp. v. Twombly, 550

U.S. 544, 570 (2007), which requires a plaintiff to "plead[] factual content that allows

the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged," Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When applying

Minnesota law under our diversity jurisdiction, we are bound by the decisions of the

Minnesota Supreme Court. Doe v. Baxter Healthcare Corp., 380 F.3d 399, 407 (8th

Wells Fargo argues that Badrawi waived her argument on count six by failing 2

to raise it below, citing Jasperson v. Purolator Courier Corp., 765 F.2d 736, 740 (8th

Cir. 1985), but Badrawi has sufficiently preserved the point by offering as a factual

and legal basis for count six that "[n]otice of pendency was filed on 04/19/2011 and

first publication was on 04/19/2011; a violation of Minn. Stat. § 580.032, subd. 3."

See PCTV Gold, Inc. v. SpeedNet, LLC, 508 F.3d 1137, 1145 n.5 (8th Cir. 2007).

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Cir. 2004). If the state supreme court has not ruled on a particular issue, we "must

determine what rule [it] would apply" by looking to other "[s]tatements made by the

. . . court" and "rulings by inferior state appellate courts." Id.

Badrawi contends first that Minnesota law requires "exact compliance" with

mortgage foreclosure laws, citing Jackson, 770 N.W.2d at 494 (citation omitted). She

argues that Wells Fargo failed to comply with Minn. Stat. § 580.032, subd. 3 by

publishing the foreclosure notice on the same day it recorded the notice, thereby

rendering "the proceedings . . . void." Clifford v. Tomlinson, 64 N.W. 381, 381

(Minn. 1895).

Badrawi also challengesthe district court's conclusion thatshe was not entitled

to enforce Minn. Stat. § 580.032, subd. 3. She cites Minn. Stat. § 559.01, which

statesthat "[a]ny person in possession of real property . . . may bring an action against

another . . . for the purpose of determining such adverse claim and the rights of the

parties." Badrawi contends that Minn. Stat. § 580.032, subd. 3 was implemented to

protect homeowners and her rights will be prejudiced if she is unable to enforce it. 

Badrawi finally relies on Ruiz, 2012 WL 762313, at *5. In that case a homeowner

had brought a similar challenge for untimely publication under Minn. Stat. § 580.032,

subd. 3, and a panel of the Minnesota Court of Appeals granted her relief after

concluding that the foreclosure was "void for failure to strictly comply with" the

statute's timing requirement. Id.

Although we agree that the Minnesota Supreme Court has strictly construed

state foreclosure statutes, Minn. Stat. § 580.032, subd. 3 does not provide Badrawi

relief in this case. The Minnesota Supreme Court concluded in Holmes that a

homeowner may not challenge a foreclosure action based on "an omission of some

prescribed act which cannot have affected him, and cannot have been prescribed for

his benefit." 13 N.W. at 924. Neither the Minnesota Supreme Court nor the state's

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lower courts have ever overruled or narrowed the ruling in Holmes, and it istherefore

binding on our court in interpreting Minnesota law. See Doe, 380 F.3d at 407.

Badrawi is not among the class whose interests Minn. Stat. § 580.032, subd.

3 was enacted to protect. Minn. Stat. § 580.032 protects those with "a redeemable

interest in real property" by allowing them to "record a request for notice foreclosure

. . . with the county recorder." Minn. Stat. § 580.032, subd. 1. This provision is most

sensibly read to protect the interest of third parties who own a "redeemable interest"

in mortgaged property which might be jeopardized if the mortgagor foreclosed

without notice. A secondary mortgagor's interest would be at risk, for example, if the

primary mortgagor foreclosed on the property and the sale proceeds were insufficient

to pay both claims. In that case a secondary mortgagor would require notice before

the commencement of foreclosure proceedings in order to protect its interest.

Homeowners do not require the same particular type of notice protection since

a separate Minnesota statute requires personal service of foreclosure notice to "the

person in possession of the mortgaged premises." See Minn. Stat. § 580.03. There

is no dispute at this stage that Wells Fargo properly served Badrawi with notice in

compliance with Minn. Stat. § 580.03. Since Badrawi received personal service of

the foreclosure notice, she could not have been among those for whose benefit the

separate notice requirement of Minn. Stat. § 580.032, subd. 3 was enacted. She is

accordingly unable to seek relief bychallenging Wells Fargo's alleged noncompliance

with the statute. See Holmes, 13 N.W. at 924.

Our conclusion is also consistent with "rulings by inferior state appellate

courts." Doe, 380 F.3d at 407. In Farm Credit Bank of St. Paul v. Kohnen, 494

N.W.2d 44 (Minn. Ct. App. 1992), a panel of the Minnesota Court of Appeals noted

that "[i]f the rights of the parties to be foreclosed upon were not prejudiced by the

lack of notice . . . [Minnesota] courts have uniformly held that service was valid." Id.

at 48. Badrawi's rights could not have been prejudiced by Wells Fargo's alleged

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failure to comply with the notice requirement of Minn. Stat. § 580.032 because she

had received personal notice under Minn. Stat. § 580.03. In such circumstances

Wells Fargo's service was thus valid under the law. Id.

The intermediate court's decision in Ruiz does not alter our conclusion. A

"decision of an intermediate state appellate court is not binding on a federal court that

seeks to determine state law." Pleasants v. Am. Exp. Co., 541 F.3d 853, 858 (8th Cir.

2008). We will only "follow the decisions of the state's intermediate courts when

they are the best evidence of what the state's law is." Swope v. Siegel-Robert, Inc.,

243 F.3d 486, 496 (8th Cir. 2001). We are unpersuaded that Ruiz is "the best

evidence" of Minnesota law on the particular issue before our court. Id.

The parties in Ruiz did not raise, and the Minnesota Court of Appeals did not

address, the legal argument Wells Fargo presents here. Wells Fargo's precise

argument isthat Minn. Stat. § 580.032 does not provide relief to homeowners because

it was not enacted for their benefit, an issue not addressed in Ruiz. Moreover, the

Minnesota Supreme Court has "stress[ed] that unpublished decisions of the court of

appeals are not precedential," and Ruiz was not designated for publication. Vlahos

v. R&I Const. of Bloomington, Inc., 676 N.W.2d 672, 676 n.3 (Minn. 2004).

While the Minnesota Supreme Court did grant review in Ruiz, it was a limited

review and the court specifically declined to consider the parties' arguments

"regarding compliance with the notice of pendency requirement in Minn. Stat.

§ 580.032, subd. 3." Ruiz v. 1st Fid. Loan Servicing, LLC, 829 N.W.2d 53, 59

(Minn. 2013). The state supreme court instead affirmed on the basis that the

foreclosing party had not complied with all four "[r]equisites for foreclosure" by

advertisement contained in Minn. Stat. § 580.02. It emphasized that a foreclosing

party “must strictly comply with" that statute, id. at 54, but did not discuss the effect

of noncompliance with any other state foreclosure statute. There is no dispute that

Wells Fargo complied with the four requirements of Minn. Stat. § 580.02 in the case

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now before our court, and Ruiz istherefore not instructive of the Minnesota Supreme

Court's view on the issue before us.

III.

Since Badrawi's claim was properly dismissed under the facts of this case and

the Minnesota law, we affirm the judgment of the district court.

SMITH, Circuit Judge, dissenting.

I respectfully dissent from the majority's affirmance of the district court's grant

of Wells Fargo's motion to dismiss. 

The majority resolves this case as though we sat in the place of the Minnesota

Supreme Court. We do not. Our task in this diversity action is clear. "We must predict

how the Supreme Court of Minnesota would rule, and we follow decisions of the

intermediate state court when they are the best evidence of Minnesota law."

Friedberg v. Chubb &Son, Inc., 691 F.3d 948, 951 (8th Cir. 2012) (emphases added);

While an on-point Minnesota Supreme Court decision would be controlling

precedent, we are not bound by that State's inferior court decisions. Nonetheless, the

decisions of those courts can indeed be helpful in making the best prediction of what

the Minnesota Supreme Court would do. See Grinnell Mut. Reinsurance Co. v.

Schwieger, 685 F.3d 697, 703 n.5 (8th Cir. 2012) ("'Although federal courts are not

bound to follow the decisions ofintermediate state courts when interpreting state law,

state appellate court decisions are highly persuasive and should be followed when

they are the best evidence of state law.'" (quoting Baxter Int'l, Inc. v. Morris, 976,

F.2d 1189, 1196 (8th Cir. 1992))). "Further, while unpublished decisions 'are not

precedential,' Minn. Stat. § 480A.08, subd. 3(c), they 'can be of persuasive value.'"

Id. 

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In Ruiz, the Minnesota Supreme Court voided a foreclosure because the

mortgagee did not strictly comply with Minn. Stat. § 580.02(3). "[B]ecause [the

Minnesota Supreme Court] conclude[d] [in Ruiz] that the foreclosure [was] void for

failure to strictly comply with Minn. Stat. § 580.02(3) . . . , [it] decline[d] to address

the parties' other arguments, including those regarding compliance with the notice of

pendency requirement in Minn. Stat. § 580.032, subd. 3 . . . ." Ruiz, 829 N.W.2d at

59. Therefore, the Minnesota Court of Appeals's decision in Ruiz, which did address

§ 580.032, remains "the best evidence of Minnesota law" for the case before us. See

Friedberg, 591 F.3d at 951. In its review of the Ruiz case, the Minnesota Court of

Appeals concluded that "the [Minnesota] [S]upreme [C]ourt clearly requires strict

compliance with the foreclosure-by-advertisement statutes." Ruiz, 2012 WL 762313,

at *4. Therefore, the court "reviewe[d] [the bank's] foreclosure by advertisement for

strict compliance with the relevant statutory requirements." Id. Applying the strictcompliance standard to the case, the court concluded that the bank "failed to satisfy

[Minn. Stat. § 580.032, subd. 3], because it recorded the notice of pendency on the

first date of publication," not "'before the first date of publication of the foreclosure

notice.'" Id. (quoting Minn. Stat. § 580.032, subd. 3). "Because [the bank] failed to

strictly comply with section 580.032, subd. 3," the court held that "'the foreclosure

proceeding [was] void.'" Id. (quoting Jackson, 770 N.W.2d at 494). Because the

bank's "foreclosure by advertisement [was] void for failure to strictly comply with

. . . [§ ] 580.032," the court "reverse[d] the district court's summary-judgment

dismissal of [the plaintiff's] claims under these sections" and "remand[ed] for entry

of judgment for [the plaintiff] on these claims, as well as on her quiet-title claim." Id.

at *5; see also Sari v. Wells Fargo Bank, N.A., 2012 WL 4820148, at *2 (D. Minn.

Oct. 10, 2012) (slip copy) (explaining that although "[t]he Minnesota Supreme Court

has not ruled directly on the question of compliance with Minn. Stat. Section

580.032, subd. 3," "the language of the statute is clear" and "the state courts would

require strict compliance with this state law"). I believe that the Minnesota Court of

Appeals decision in Ruiz is our best indicator of what the Minnesota Supreme Court

would do if it had chosen to address § 580.032.

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Here, Wells Fargo failed to strictly comply with § 580.032, subd. 3. Therefore,

consistent with the Minnesota Court of Appeals's decision in Ruiz, I would reverse

and remand to the district court for further proceedings.

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