Minnesota Appeals Court: Foreclosure By Advertisement Is Void Unless Strict Statutory Compliance Is Met

In a recent ruling by the Minnesota Court of Appeals, the court issued a reminder that, for a foreclosure by advertisement to be valid in Minnesota, strict compliance with statutory requirements is met. Accordingly, it reversed a lower court ruling adverse to a foreclosed homeowner.

For the court ruling, see Ruiz v. 1st Fidelity Loan Servicing, LLC, No. A11-1081 (Mn. Ct. of App., March 12, 2012) (unpublished).

From the appeals court ruling

  • In 1910, the Minnesota Supreme Court adopted a strict-compliance standard in foreclosure-by-advertisement proceedings, stating:

    Foreclosure by advertisement is purely a statutory creation. One who avails himself of its provisions must show an exact and literal compliance with its terms; otherwise he is bound to profess without authority of law. If what he does failed to comply with the requirements of the statute, it is void.

    Moore v. Carlson, 112 Minn. 433, 434, 128 N.W. 578, 579 (1910). The supreme court has recently reiterated this strict-compliance requirement, citing Moore for the principle that “[u]nder Minnesota law, a foreclosure by advertisement—non-judicial mortgage foreclosure—is only valid if the party seeking to foreclose the mortgage meets certain statutory requirements.” Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487, 492 (Minn. 2009).

    The legal question in Jackson was “what constitutes an assignment of a mortgage within the meaning of Minnesota’s foreclosure by advertisement statutory scheme.” Id. at 489. In resolving this question, the supreme court reviewed the history of Minnesota’s foreclosure-by-advertisement statutes and explained that:

    Foreclosure by advertisement was developed as a non-judicial form of foreclosure designed to avoid the delay and expense of judicial proceedings. Because foreclosure by advertisement is a purely statutory creation, the statutes are strictly construed. We require a foreclosing party to show exact compliance with the terms of the statutes. If the foreclosing party fails to strictly comply with the statutory requirements, the foreclosure proceeding is void.

    Id. at 494 (emphasis added) (quotations and citations omitted).

    Jackson concluded with a statement that “[a]s a court that reviews and interprets the laws of this state, we must apply the foreclosure by advertisement statutes as they have been written by the legislature and as they have been applied and interpreted in the past.” Id. at 502-03.

    The supreme court’s statements regarding the strict-compliance standard, although dicta, are entitled to “great weight.” In re Wylde, 454 N.W.2d 423, 425 (Minn. 1990); see Simons v. Shiltz, 741 N.W.2d 907, 910 (Minn. App. 2007) (relying on dicta in a supreme court opinion), review denied (Minn. Feb. 19, 2008). Moreover, the statements provide no indication that the court is willing to depart from the standard that it adopted in 1910.

    Despite the supreme court’s recent reiteration of the strict-compliance requirement, the district court accepted respondent’s arguments that substantial compliance with foreclosure-by-advertisement statutory requirements is nonetheless sufficient. The district court reasoned: “Although [appellant]’s reading of Jackson is technically correct, [appellant] does not take into account the entire context of decisions concerning foreclosure and real property, and that minor errors should not and do not invalidate a foreclosure.”

    In concluding that substantial compliance is sufficient, the district court relied on Hudson v. Upper Mich. Land Co., 165 Minn. 172, 206 N.W. 44 (1925), Sieve v. Rosar, 613 N.W.2d 789 (Minn. App. 2000), and State by Spannaus v. Dangers, 368 N.W.2d 384 (Minn. App. 1985), review denied (Minn. Aug. 20, 1985). This reliance was misplaced.

    Although language in Hudson is inconsistent with the strict-compliance standard, see Hudson, 165 Minn. at 174, 206 N.W. at 45 (“Whether a sale on the foreclosure of a mortgage pursuant to a power of sale is void or voidable by reason of an irregularity in the proceedings depends upon the nature of the irregularity.”), Hudson does not provide a basis to reject the supreme court’s much more recent reiteration of the strict-compliance standard in Jackson.

    And Rosar and Dangers are factually distinguishable and therefore not on point. See Rosar, 613 N.W.2d at 793 (requiring only substantial compliance to effect a valid redemption after a foreclosure sale); Dangers, 368 N.W.2d at 386 (requiring only substantial compliance in condemnation proceedings).

    The district court also reasoned that “[i]n the foreclosure and real property context, [appellant]’s reliance on Jackson and the standard of strict compliance is inflexible and does not correspond to the reality of the foreclosure process.”

    But the supreme court clearly requires strict compliance with the foreclosure-by-advertisement statutes, and “[t]he district court, like this court, is bound by supreme court precedent.” State v. M.L.A., 785 N.W.2d 763, 767 (Minn. App. 2010), review denied (Minn. Sept. 21, 2010).

Copy of the full opinion below…

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4closureFraud.org

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Ruiz v. 1st Fidelity Loan Servicing, LLC