Court Opinion

ID: 9742168
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:07:57.797498+00
Date Added: 2024-06-11T07:24:29.047225
License: Public Domain

MINGE, Judge
(concurring specially).
I concur in the opinion of the court and add the following analysis. Parties are generally accorded the right to contract between themselves with respect to their business affairs and to enforce their contracts according to their terms. Pollock-Halvarson v. McGuire, 576 N.W.2d 451, 454-55 (Minn.App.1998), review denied (Minn. May 28, 1998). Similarly, real-estate documents are commonly recorded and third parties rely on those documents. Cf. In re Bernard, 584 N.W.2d 272, 275 (Minn.1995) (noting that “[t]he vast number of people who rely on the real[-]estate recording system as a valid and efficient process rely on the genuineness of the documents recorded thereunder”). Predictability and enforceability of contracts is important in our legal system. This principle is subject to limitations that reflect important public policies. Important among these limitations is the doctrine of equitable mortgages. This doctrine is designed to protect borrowers from overreaching by lenders who seek to use absolute deeds to avoid the delay and expense of a foreclosure and to obtain the borrower’s residual equity in real estate. See Restatement (Third) of Property: Mortgages § 3.2, cmt. a (1997) (discussing the courts’ use of equitable-mortgage doctrine to counter attempts by lenders to avoid mortgagors’ “equity of redemption”).
In Minnesota, the contract for deed is a well established, specifically recognized arrangement for financing the purchase of real estate. In re Butler, 552 N.W.2d 226, 230 (Minn.1996). Cancellation of such contracts must follow certain statutory procedures. MinmStat. § 559.21 (2004). These accord the buyer notice and opportunity for cure. Also, with respect to family farmers purchasing farmland, the statute provides a right to mediation. MinmStat. § 559.209 (2004).5
One of the issues before us is whether the parties have the flexibility to structure this transaction as a contract for deed. There is no dispute that the father intended to finance the purchase of the property. The terms of the contract are not onerous; it uses the uniform conveyancing blank format. In fact, if this transaction is classified as a mortgage, the parties agree that the same terms would be used and that the entire balloon payment is due. But the statutory redemption period for this contract is short compared to the redemption period that would be required if the transaction had been set up as a mortgage with foreclosure by advertisement. Compare MinmStat. § 559.21 with Minn.Stat. § 580.23 (2004). In addition, given the evidence of the actual value of the land, the wife’s apparent financial circumstances and likely title complications, refinancing or sale may be difficult and a quick contract-for-deed cancellation exposes her to a substantial risk of forfeiting all equity while the public sale and redemption process in a mortgage foreclosure minimizes that risk. See Butler, 552 N.W.2d at 230 (stating that in contrast to a mortgage foreclosure sale, cancellation of a contract for deed restores full ownership to vendor and terminates all rights between the parties to the contract for deed).
*294Furthermore, as this court’s opinion demonstrates, the transaction is not a good fit for a contract for deed. The original seller is not financing the sale. Instead, the buyers served as a conduit to transfer nominal title to father to give him the status of seller and to then sell the premises back to the buyers on what the parties agreed would be a “contract for deed.” This unusual combination of transactions appears in the real-estate record and should be adequate to place third parties on notice that the arrangement is unusual.
On balance, I concur in the result. The district court did not err or abuse its discretion in treating the transaction as an equitable mortgage. This is a heavily regulated area of real-estate financing. It is not a commercial transaction. Although the buyers had counsel, they were economically stressed. The father was not the real seller. The nominal price did not reflect the son’s contribution to the purchase or the apparent fair market value of the property. The father knew the risks involved. The public record discloses that the parties deeded the property in a fashion that is inconsistent with the normal contract for deed transaction. Thus, predictability and stability in contractual arrangements is not sacrificed by the result reached in this case. Probably the most difficult aspect of the result is that the flexibility of financing is denied. This may be a detriment and may preclude some transactions that are not so unfair as to require application of the equitable-mortgage doctrine. But given the debtor’s rights in real estate transactions, this limitation on flexibility reflects a deeply-rooted policy in this state.

. This section has been repealed as of June 30, 2005. 2001 Minn. Laws 1st Spec. Sess. ch. 1, art 2 § 25.