Source: http://mnbenchbar-digital.com/mnbenchbar/may_june_2014?pg=56
Timestamp: 2017-11-21 21:04:09
Document Index: 101661252

Matched Legal Cases: ['§ 58', '§ 58', '§ 58', '§ 58', '§ 58', '§559']

54 Bench&Bar of Minnesota s May/June 2014 www.mnbar.org
Notes&Trends
n Private Right of Action; Federal Preemption; Contracts Clause. Homeowner stopped making monthly mortgage payments and applied for a loan modification to the lender’s servicer under the Home Affordable Modification Program (“HAMP”). Homeowner alleged that the servicer ignored or denied without explanation her modification requests, and that the servicer commenced proceedings to foreclose the mortgage. Homeowner filed a class-action lawsuit alleging violations of consumer protection statutes (Minn.
Stat. § 58. 13, subd. 1(a)( 5)), negligence, and breach of contract. The district court granted the servicer’s motion to dismiss, holding that HAMP does not create a private right of action and that an alleged breach of the servicer’s participation agreement (“SPA”) with Fannie Mae does not give rise to a third-party-beneficiary claim.
The court of appeals affirmed the dismissal because HAMP provides no private right of action and because the homeowner was not a party to the SPA or an intended beneficiary, and therefore, lacked standing. The sole issue on appeal to the Minnesota Supreme Court was whether Minn. Stat. § 58. 18, subd,
1 provides a private right of action for a homeowner to pursue damages for a servicer’s alleged violation of its agreement with an exempt party in which the homeowner is not a party.
The supreme court reversed and
held that § 58. 18, subd. 1 provides a
private right of action to homeowners
who have been injured by servicers who
violate an agreement with an exempt
party, such as Fannie Mae, despite the
fact that the homeowner is not a party
to that agreement. The servicer argued
that the statute did not specifically
abrogate common law, which would not
allow a private right of action and that
allowing homeowners a private right
of action would lead to unlimited and
disruptive litigation by parties with no
relationship to the myriad of agree-
ments that servicers have with other
entities. The supreme court held that
the language of the statute was unam-
biguous. The court also rejected the
servicer’s argument that federal law,
which did not provide a private right of
action, preempted state law under the
doctrine of implied conflict preemption,
reasoning that allowing a state private
right of action would not impose any
more duties on the servicer than what
it already agreed to do in its contracts
with other parties. The supreme court
noted that Congress’ failure to provide
a private right of action does not mean
federal law displaces other available
state remedies. Finally, the court held
that creating a private right of action
under § 58. 13, subd. 1 does not violate
the Contracts Clause of either the U.S.
or the Minnesota Constitution because
§ 58. 13 went into effect before the ser-
vicer signed the SPA with Fannie Mae
and existing statutes are read into future
contracts. Gretsch v. Vantium Capi-
tal, Inc., A12-2270, ___ N.W.2d ___,
2014 WL 1304990 (Minn. 04/02/2014).
Slip op. at http://mn.gov/lawlib/archive/
supct/2014/OPA122270-040214.pdf
n Purchase Agreement Cancellation.
Prospective buyers signed a purchase agreement with sellers to purchase a residential home. The purchase agreement called for a 20 percent cash down payment and financing for the remaining 80 percent of the purchase price.
A financing contingency addendum stated that the purchase agreement was contingent upon the prospective buyers obtaining financing. The prospective buyers subsequently twice applied for a loan, but both applications were denied because the property was appraised for less than the purchase price stated in the purchase agreement. The prospective buyers then delivered a Cancellation of Purchase Agreement form to the sellers. After receiving the cancellation notice, the sellers notified the prospective buyers that they would reduce the purchase price to the appraised value, but the prospective buyers declined.
The sellers sued the prospective buyers for breach of contract alleging that they did not use best efforts to obtain financing and that the cancellation was ineffective because they did not seek a declaratory cancellation under Minn.
Stat. §559.217. The district court granted summary judgment in favor of the prospective buyers.
On appeal, the court of appeals affirmed the district court. The court of appeals ruled that applying for financing on two occasions with two different lenders met the “best efforts” requirement in the financing contingency addendum. The sellers argued that even if the prospective buyers were entitled to cancel the purchase agreement, they failed to properly cancel under the provisions of the purchase agreement because they did not seek a declaratory cancellation. The court held that because the financing addendum unambiguously stated that the purchase agreement “is cancelled” if the buyer was unable to secure financing, a declaratory cancellation was not required.
The court held that the inability to obtain financing and the failure to close canceled the purchase agreement by the terms of the purchase agreement and that all that was required was for the parties to sign a Cancellation of Purchase Agreement confirming the cancellation. The Cancellation of Purchase Agreement form (created by the Minnesota Association of Realtors) did not refer to the declaratory cancellation statute and, therefore, did not require a declaratory cancellation. Language in the purchase agreement “authorizing” a declaratory cancellation did not require a declaratory cancellation. Kalen-burg v. Klein, A13-707, ___ N. W.2d ___, 2014 WL 1875584 (Minn. App. 05/12/2014). Slip op. at http://mn.gov/ lawlib/archive/ctappub/2014/opa130707- 051214.pdf
—Michael Kreun Beisel & Dunlevy, PA
JUDICIAL LAW n Son-of-BOSS: Privilege Controversy Continues. The commissioner sought to compel production of six opinion letters the taxpayer received from taxpayer’s outside tax advisor (a law firm). The commissioner argued that under the common law doctrine of implied waiver, the attorney-client privilege was waived because the taxpayer placed otherwise privileged matters in controversy. The taxpayer placed the opinions into controversy by relying on affirmative defenses to the penalties that turn on the partnerships’ beliefs or state of mind. The taxpayers claimed that they relied on their own analysis of the transaction and should not be required to turn over the opinion letters. The tax court disagreed, and ruled that if the taxpayers maintained their defense that it would be unfair to deprive the IRS of knowledge of the contents of the opinions and the opportunity to put those opinions into evidence. Additionally, the court warned that if the taxpayers fail to comply with the order directing production, the court will consider the sanction of preventing taxpayers from introducing evidence of the LLC’s reasonable beliefs and state of mind. Ad Inv.2000 Fund LLC v. Comm’r, 9177-08, 2014 WL 1492460 (T.C. 04/16/2014).
n Tax Court, Not Parties, Determines Jurisdiction. In a dispute involving classification of taxpayer’s workers for employment tax purposes, the parties