Source: http://titlemark.com/process.php?option=com_info&task=detail&id=11
Timestamp: 2019-04-26 16:32:29+00:00

Document:
Certificate of Title after Mortgage Foreclosure Sale.
I. A valid foreclosure of a mortgage terminates all easement interests in the foreclosed real estate that are junior to the mortgage being foreclosed and whose holders are properly joined or notified in the foreclosure action.
II. A mortgage, by a declaration of its mortgagee, may be made subordinate in priority to an easement on the mortgaged real estate.
This appeal from summary judgment in a Torrens proceeding raises issues on the effect of a mortgage foreclosure on easements that were memorialized on the certificate of title after the mortgage. Because the mortgagee subordinated the mortgage to five of the easements, and the holders of the remaining easements were not named parties in the mortgage foreclosure action, we affirm the district court’s determination that the interests, as they currently exist, should not be omitted from the certificate of title.
The Cedar-Riverside Land Corporation (CRLC) obtained a loan from First Trust Company of Saint Paul in December 1971. The loan was secured by a mortgage on real property that CRLC owned in the Cedar-Riverside area of Minneapolis. First Trust assigned the CRLC mortgage to Crablex, Inc. in 1994.
Crablex filed an action to foreclose the CRLC mortgage in 1995. The parties to the action included CRLC, Minneapolis Community Development Agency (MCDA), Riverside Plaza Limited Partnership (Riverside Plaza), and Mellon Mortgage Company.
The district court entered a decree of foreclosure in February 2005. The decree ordered the sheriff to sell the property that was encumbered by the CRLC mortgage at a public sale. Crablex was the successful bidder at the sheriff’s sale, and in May 2005 the sheriff issued Crablex a certificate of sale, subject to a six-month redemption period.
2005, May 2006, and September 2007. Because of a dispute over the terms and conditions of the purchase agreement and amendments, Crablex and Fine Associates did not close the sale. At the time this appeal was argued, they were still litigating that dispute in a separate lawsuit.
About ten months after Crablex purchased the property at the sheriff’s sale, Crablex, under the Torrens act, petitioned the district court to direct the registrar of titles to enter a new certificate of title for the CRLC foreclosure property free and clear of specified encumbrances that were registered after December 13, 1971, the date on which the CRLC mortgage was registered. Based on the examiner of title’s assessment of Crablex’s petition, the district court issued an order to show cause why the proposed certificate of title should not be entered. The order was sent to forty-six parties.
certificate of title. Crablex and the five responding parties filed cross-motions for summary judgment in December 2006. The district court denied Crablex’s motion and granted the motions of the five responding parties, determining that the easements were valid, in full force and effect, and would continue to encumber the property.
Crablex appealed the district court’s summary judgment in March 2008, and oral arguments were scheduled for November 2008. Two weeks before the scheduled arguments, counsel for Crablex sent a letter to both Crablex and Fine Associates stating that, unless Crablex clarified how it wished to proceed in the appeal, counsel would withdraw from representation of Crablex. Fine Associates responded by filing an emergency motion to substitute parties and attorneys. The next day the attorneys for Crablex filed a notice withdrawing as counsel. We granted Fine Associates’ emergency motion “to the extent it [sought] to preserve Fine Associate[s]’ interest in the property and its attendant right to protect that interest on appeal,” thereby permitting counsel for Fine Associates to participate in the oral argument. Crablex did not participate in oral argument.
I. What is the status of Fine Associates in this litigation?
In permitting Fine Associates to participate in oral argument, we construed their emergency party-substitution motion as a motion to intervene. Because substitution results in the elimination of a party to the action, it is appropriate only when the record establishes that the party that would be eliminated can no longer claim any interest in the lawsuit. Walker v. Sanders, 103 Minn. 124, 127, 114 N.W. 649, 650 (1908). The record indicates that Crablex has a continuing interest in the property, and, therefore, we decline to substitute Fine Associates for Crablex in the litigation.
interventions.” Costley v. Caromin House, Inc., 313 N.W.2d 21, 28 (Minn. 1981).
224 N.W.2d 484, 488-89 (1974) (noting that timeliness is determined on case-by-case basis and depends in part on whether existing parties will be prejudiced). It has an interest in the CRLC foreclosure property evidenced by its purchase agreement. See Stiernagle v. County of Waseca, 511 N.W.2d 4, 5 (Minn. 1994) (recognizing that binding contract for sale of real estate vests equitable title in purchaser). The disposition of this action affects Fine Associates’ ability to challenge easements encumbering the property. And the failure of Crablex to participate in oral argument demonstrates that Fine Associates’ interest was not adequately represented by the existing parties.
We, therefore, conclude that Fine Associates may intervene. Because Crablex, through its appellate brief, and Fine Associates, in its intervention, raise the same issues and seek to protect the same property interest, we refer to them collectively as Crablex.
N.W.2d 320, 323 n.1 (Minn. 2003). But, if the nonmoving party fails to raise a genuine issue of fact on any element essential to establishing its case, summary judgment is appropriate. Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn. 1995). When the material facts are not in dispute, we review the district court’s application of law de novo. In re Collier, 726 N.W.2d 799, 803 (Minn. 2007).
holds necessary hearings, and makes “an order for the issuance of a new certificate of title to the person entitled thereto.” Id., subd. 1 (2008).
Crablex seeks a court order that would effectively omit the easements in which the respondents in this case claim an interest. Crablex asserts that the easements were eliminated by the mortgage foreclosure because the easements had been memorialized on the certificate of title after the mortgage. The respondents dispute that assertion and contend instead that the easements continue to encumber the foreclosed property, notwithstanding the foreclosure.
recorded property interest through a subordination declaration or agreement. Restatement (Third) of Property (Mortgages) § 7.7 (1996); see also id., cmt. a (stating that subordination can be accomplished by the mortgagee executing “a simple statement identifying [the interest that will gain priority] and declaring the mortgage to be subordinate to it”).
Minnesota caselaw has not directly addressed whether easements receive the same treatment as other encumbrances recorded after the recorded mortgage, but we are unable to discern a reason to treat them differently. The Restatement (Third) of Property (Mortgages) § 7.1, cmt. a, states that easements recorded after a recorded mortgage are terminated when the mortgage is foreclosed. Relying on the restatement and the absence of a reason to treat easements differently from other encumbrances, we conclude that a valid foreclosure of a mortgage terminates all easement interests in the foreclosed real estate that are junior to the mortgage being foreclosed and whose holders are properly joined or notified in the foreclosure action.
520 (Minn. 1979) (noting that first mortgage holder agreed to subordinate its prior lien to that of second mortgage holder); Peaslee v. Hart, 71 Minn. 319, 320-21, 73 N.W.
than other property interests. A mortgage, by declaration of its mortgagee, may be made subordinate in priority to an easement on the mortgaged real estate.
With these principles in place, we turn to our analysis of whether, as a matter of law, the easements at issue survived the foreclosure.
Crablex contends that we need not address Riverside’s arguments that the easements survived the foreclosure because their claims are barred under the doctrine of res judicata. Specifically, Crablex argues that the claims were settled in the foreclosure action and emphasizes that the foreclosure decree states, “If no redemption is made during the time period allowed by law, [Crablex] shall be deemed to be the absolute owner of the [f]oreclosure [p]remises, subject only to prior encumbrances of record, if any.” But res judicata only bars claims that the estopped party had a full and fair opportunity to litigate in an earlier proceeding. State v. Joseph, 636 N.W.2d 322, 327 (Minn. 2001). And Riverside did not have a full and fair opportunity to litigate the easement issue in an earlier proceeding.
Under these circumstances, Riverside’s claims in the Torrens action were not barred by res judicata. Thus, we examine whether the claims have merit.
666 N.W.2d at 323. When the parties express their intent in unambiguous words, we give effect to the contract’s plain and ordinary meaning. Id. The interpretation of a settlement agreement is an issue of law we review de novo. Philip Morris, 713 N.W.2d at 355.
Crablex argues that the settlement agreement has no effect because it is unenforceable. Specifically, Crablex contends that the agreement is unenforceable because CRLC’s attorney did not sign the signature block that was provided for him and because the agreement was obtained in violation of Minnesota Rule of Professional Conduct 4.2, which prohibits dealing directly with another lawyer’s client. Neither of these arguments is persuasive.
1 A variety of these forms are available online in a blank, printable format. See Minnesota Department of Commerce Real Estate Uniform Conveyancing Blanks, http://www.state.mn.us/portal/mn/jsp/home.do?agency=Commerce (follow “Industry Info and Services” to “Real Estate” and scroll to “Uniform Conveyancing Blanks”).
without advising his attorney). Furthermore, the agreement states, “It is acknowledged that the undersigned are represented by their own counsel in connection with the foregoing, that this mutual release has been read and explained and a copy thereof delivered.” By signing the document, CRLC’s general partner indicated that she had consulted with her attorney and was satisfied that it had been explained to her. From an objective standpoint, she assented to the agreement.
We are also unpersuaded by Crablex’s argument that relies on Minnesota Rule of Professional Conduct 4.2. Crablex fails to demonstrate that the rule provides authority for voiding contracts. And we find no evidence in the record indicating that CRLC’s general partner was taken advantage of by other lawyers in the absence of counsel.
In summary, the district court properly concluded that the parties’ settlement agreement is enforceable and that Riverside is entitled to summary judgment under the Torrens act with respect to all five easements.
a party in the [foreclosure action], that interest is neither terminated nor otherwise prejudiced by the foreclosure”). Thus, the district court did not err when it granted summary judgment to the city and Cedar Cultural and held that as a matter of law their registered easements should not be omitted from the certificate of title.
Crablex argues that the city’s and Cedar Cultural’s easements were extinguished nonetheless because they did not have statutory rights of redemption, and, thus, were not entitled to be joined in the foreclosure. Not so. As parties claiming under CRLC, the mortgagor, the city, and Cedar Cultural had a statutory right to redeem. Minn. Stat.
§ 581.10 (2008); see also Grant S. Nelson & Dale A. Whitman, Real Estate Finance Law § 7.2, at 570-71 (5th ed. 2007) (stating generally that “law favors redemption by anyone who has an interest in the mortgaged premises who would be a loser by foreclosure,” including “the holder of an easement”).
Crablex also points to Gerdin v. Princeton State Bank, 384 N.W.2d 868 (Minn.
that easement holder remained subject to foreclosure with equitable right of proportional redemption); Recent Cases, 50 Harv. L. Rev. 978, 990 (1936-37) (discussing Monese). We need not and do not address that question. We conclude only that, whatever the status of the city’s and Cedar Cultural’s junior interests are now, they were not extinguished by the foreclosure action in which they were not parties. Summary judgment in their favor was proper.
Because the doctrine of res judicata did not bar the claims of Riverside, and Crablex agreed to give priority to the five easements in an enforceable settlement agreement, summary judgment was proper in precluding omission of the easements from the certificate of title. Because the city and Cedar Cultural were not joined in the foreclosure action, their easement interests were unaffected by the action and the district court properly granted their motions for summary judgment.

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