STATE OF MINNESOTA
IN COURT OF APPEALS
A14-0304
A14-0620
The Bank of New York Mellon, f/k/a The Bank of New York,
as Trustee for The Certificateholders of CWABS Inc.,
Asset-backed Certificates, Series 2007-6,
Respondent,
vs.
Alan G. Keiran, et al.,
Appellants,
Provincial Bank, et al.,
Defendants.
Filed April 6, 2015
Reversed and remanded
Schellhas, Judge
Dakota County District Court
File No. 19HA-CV-11-6412
Christina M. Snow, David R. Mortensen, Wilford, Geske & Cook, P.A., Woodbury,
Minnesota (for respondent)
Jeramie Richard Steinert, Steinert, P.A., Minneapolis, Minnesota (for appellants)
Considered and decided by Schellhas, Presiding Judge; Stauber, Judge; and
Hooten, Judge.
SYLLABUS
A district court may not grant summary judgment based on a party’s failure to
satisfy the conditions of a court-ordered bond required to stay foreclosure proceedings
unless the court first determines that no genuine issue of material fact exists.
OPINION
SCHELLHAS, Judge
In this mortgage foreclosure case, appellants argue that summary judgment cannot
withstand de novo review. We reverse and remand for further proceedings consistent
with this opinion.
FACTS
Appellants Alan and Mary Jane Keiran own real property located at 7820 200th
Street West, Lakeville, Minnesota. On December 30, 2006, Keirans granted Home
Capital Inc. a mortgage against the property to secure payment of a $404,000 promissory
note signed by Alan Keiran. BAC Home Loan Servicing LP, a subsidiary of Bank of
America, was Home Capital’s servicing agent. Home Capital assigned the promissory
note to Countrywide Home Loans Inc., and the note was subsequently assigned to
respondent Bank of New York Mellon (BNY Mellon). BAC remained the servicing
agent. On August 4, 2011, Mortgage Electronic Registration Systems Inc., as Home
Capital’s nominee, assigned the mortgage to BNY Mellon.
Meanwhile, Keirans ceased making payments on the mortgage loan and, on
October 8, 2009, sent Home Capital and BAC letters, purporting to rescind the mortgage
loan on the bases that they were not provided “[s]ufficient correct copies of a Truth in
Lending Disclosure Statement . . . in a manner [they] could retain” and that “[they] did
not receive the correct Truth in Lending Disclosure Statements.” Keirans alleged that
“failure to provide effective notice of these mandatory disclosures effectively extend[ed
their] rescission rights.” On January 7, 2010, BAC sent Keirans a letter, enclosing copies
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of various documents and informing Keirans that their “request to rescind the mortgage
loan transaction [wa]s denied.”
In October 2010, Keirans sued Home Capital, BAC, and BNY Mellon in federal
district court, alleging violations of the Truth in Lending Act and seeking a declaration
that their rescission is valid, termination of any security interest in the property, an
injunction against non-judicial foreclosure proceedings, and monetary damages. The
defendants moved for summary judgment, and on November 30, 2011, the federal district
court granted the defendants’ motion on the basis that Keirans failed to commence their
lawsuit prior to the end of the three-year period of repose under 15 U.S.C. § 1635(f).
Keirans appealed the summary judgment to the United States Court of Appeals for the
Eighth Circuit.
While Keirans’ appeal in the Eighth Circuit was pending, BNY Mellon
commenced a foreclosure by action against Keirans in state district court, seeking a
monetary judgment, a decree of foreclosure, and a deficiency judgment. Keirans
answered, moved for a stay of proceedings pending their appeal to the Eighth Circuit, and
asserted as affirmative defenses their rescission of the mortgage loan, res judicata, and
collateral estoppel. BNY Mellon moved for summary judgment, and Keirans responded
to the motion, arguing that they had successfully rescinded the mortgage loan. Keirans
requested that the state district court either deny BNY Mellon’s motion or stay the
proceedings and order Keirans “to post a reasonable bond consistent with the fair market
rental value of the property, or some other reasonable monthly mortgage-like payment in
an amount to be determined by the Court.” On December 13, 2012, the court denied BNY
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Mellon’s motion for summary judgment, stayed the proceedings until the Eighth Circuit
issued an opinion, and ordered Keirans to “pay a monthly bond in the amount of
$4,020.80 while the stay is in effect.”
On July 12, 2013, the Eighth Circuit affirmed the federal district court’s grant of
summary judgment; subsequently, BNY Mellon again moved for summary judgment in
state district court. At a hearing on October 14, Keirans requested a continuance, advising
the court that they intended to petition for certiorari review by the United States Supreme
Court and had obtained an extension to file their petition. The court granted a
continuance and scheduled a status hearing for January 3, 2014. The court also addressed
Keirans’ failure to pay the monthly bond amount, stating that “if the bond is not posted,
we’re done.” And in an order filed October 14, the court stated that Keirans must “pay
the outstanding bond balance of monthly bond in the amount of $40,208 by
November 15, 2013” and that “[f]ailure to make payment by November 15, 2013 will
result in the lifting of the stay ordered on December 7, 2012.” Also at the October 14,
2013 hearing, the court granted leave to BNY Mellon to amend its complaint to include a
homestead-designation notice, required under Minn. Stat. § 582.041, subd. 2 (2014),
which was omitted from the original complaint.1 Keirans stipulated to the amended
complaint.
1
We cite the most recent version of this statute because it has not been amended in
relevant part. See Interstate Power Co. v. Nobles Cnty. Bd. Of Comm’rs, 617 N.W.2d
566, 575 (Minn. 2000) (stating that, generally, “appellate courts apply the law as it exists
at the time they rule on a case”).
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Keirans failed to pay the outstanding bond amount, and on December 20, 2013,
the district court lifted the stay of the foreclosure proceedings and granted BNY Mellon
summary judgment. By letter, dated February 10, 2014, BNY Mellon moved for a
corrected order under Minn. R. Civ. P. 60.01 and submitted a proposed amended order,
judgment, and decree to the court. On February 10, the court adopted BNY Mellon’s
proposed amended order, judgment, and decree verbatim, along with paragraph
numbering errors and factual findings supported by affidavits attached to BNY Mellon’s
motion. BNY Mellon mailed its motion to Keirans, who claim that they did not receive
notice of the motion until after the court had signed the amended order, judgment, and
decree. Keirans separately appealed the December 20, 2013 judgment and the
February 10, 2014 amended judgment. This court has consolidated the appeals.
On January 20, 2015, the United States Supreme Court granted certiorari review of
the Eighth Circuit’s opinion affirming summary judgment, vacated judgment, and
remanded to “the Eighth Circuit for further consideration in light of Jesinoski v.
Countrywide Home Loans, 574 U.S. ___, 135 S. Ct. 790, 190 L.E.2d 650 (2015).” Keiran
v. Home Capital, Inc., 135 S. Ct. 1152, 1152 (Jan. 20, 2015). In Jesinoski, the Supreme
Court determined “that rescission is effected when the borrower notifies the creditor of
his intention to rescind. It follows that, so long as the borrower notifies within three years
after the transaction is consummated, his rescission is timely. The statute does not also
require him to sue within three years.” 135 S. Ct. 790, 792.
ISSUES
I. Did the district court properly exercise jurisdiction in this case?
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II. Did the district court err by entering summary judgment against Keirans upon their
failure to satisfy the conditions of the court-ordered bond without first determining
that no genuine issue of material fact exists?
ANALYSIS
“Summary judgment is appropriate when the evidence, viewed in the light most
favorable to the nonmoving party, establishes that no genuine issue of material fact exists
and that the moving party is entitled to judgment as a matter of law.” Citizens State Bank
Norwood Young Am. v. Brown, 849 N.W.2d 55, 61 (Minn. 2014); see also Minn. R. Civ.
P. 56.03. “[Appellate courts] review de novo a district court’s grant of summary
judgment,” Dukowitz v. Hannon Sec. Servs., 841 N.W.2d 147, 150 (Minn. 2014),
“determin[ing] whether any genuine issues of material fact exist and whether the district
court erred in its application of the law,” Bearder v. State, 806 N.W.2d 766, 770 (Minn.
2011) (quotation omitted).
I.
Keirans argue that both the federal lawsuit and state lawsuit are, at least in part, in
rem proceedings and that under the doctrine of prior exclusive jurisdiction, the state
district court had no jurisdiction over the property because the federal lawsuit
commenced first. “Jurisdiction is a question of law, which [appellate courts] review de
novo.” Schatz v. Interfaith Care Ctr., 811 N.W.2d 643, 653 (Minn. 2012).
[I]f . . . two suits are in rem or quasi in rem, requiring that the
court or its officer have possession or control of the property
which is the subject of the suit in order to proceed with the
cause and to grant the relief sought, the jurisdiction of one
court must of necessity yield to that of the other. To avoid
unseemly and disastrous conflicts in the administration of our
dual judicial system, and to protect the judicial processes of
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the court first assuming jurisdiction, the principle, applicable
to both federal and state courts, is established that the court
first assuming jurisdiction over the property may maintain
and exercise that jurisdiction to the exclusion of the other.
Penn Gen. Cas. Co. v. Commonwealth of Pa. ex rel. Schnader, 294 U.S. 189, 195, 55 S.
Ct. 386, 389 (1935) (citations omitted).
Keirans’ argument fails because it rests on an incorrect premise. In Minnesota, “an
action to foreclose is not an action in rem.” Whalley v. Eldridge, 24 Minn. 358, 361
(1877). On the contrary, the supreme court has held that “an action to foreclose is one in
personam,” although “in a sense it is in the nature of a proceeding in rem, because it has
for its object the enforcement of the lien of the mortgage on specific property.” Winne v.
Lahart, 155 Minn. 307, 310, 193 N.W. 587, 589 (1923); see also JPMorgan Chase Bank,
N.A. v. Erlandson, 821 N.W.2d 600, 606 (Minn. App. 2012) (“A mortgage foreclosure by
action requires a judicial decree and approval of sale and is an in personam proceeding,
although it is in the nature of a proceeding in rem since its purpose is to enforce a lien on
the mortgaged property.” (quotation omitted)). Because BNY Mellon’s foreclosure action
in state district court is in personam under Minnesota law, the doctrine of prior exclusive
jurisdiction is inapplicable. The district court therefore did not err by exercising
jurisdiction.
II.
Keirans argue that the district court erred by granting summary judgment because
BNY Mellon failed to show an absence of genuine issues of material fact. The court
granted summary judgment to BNY Mellon upon Keirans’ failure to satisfy the
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conditions of the court-ordered bond, without determining that no genuine issue of
material fact exists under Minn. R. Civ. P. 56. “The interpretation of the rules of civil
procedure . . . is a question of law that [appellate courts] review de novo.” TC/Am.
Monorail, Inc. v. Custom Conveyor Corp., 840 N.W.2d 414, 417–18 (Minn. 2013).
“Judgment shall be rendered forthwith if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that either party is entitled to a
judgment as a matter of law.” Minn. R. Civ. P. 56.03. As the supreme court has
explained, for a district court to enter summary judgment, “the court must determine on
the basis of all the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the filed affidavits, if any, that there is no genuine issue as to any
material fact.” Schmidt v. Smith, 299 Minn. 103, 106–07, 216 N.W.2d 669, 671 (1974)
(emphasis added).
In this case, neither the district court’s original order for summary judgment nor its
order of amended judgment contains any indication that the court determined that no
genuine issue of material fact exists. Rather, both judgments, along with the court’s
statement during the October 14, 2013 hearing—“if the bond is not posted, we’re
done”—suggest that the court’s singular basis for entering summary judgment against
Keirans was their failure to satisfy the court-ordered bond requirement. We conclude that
the district court erred. Our conclusion is informed by Barton v. Pfaff, 326 N.W.2d 12, 12
(Minn. 1982), in which the district court granted summary judgment to the plaintiff but,
before entry of judgment, determined that a fact issue existed. Barton, 326 N.W.2d at 12.
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The court therefore “set the matter on for hearing, upon the condition that the defendant
post a bond in the amount of $35,000.” Id. (emphasis added). When the defendant failed
to post the bond, the court entered judgment for the plaintiff. Id. The supreme court
reversed and remanded, concluding that “[o]nce the trial judge determined that there was
a factual dispute, summary judgment could not be entered.” Id.
Failure to satisfy a bond condition required to stay foreclosure proceedings is not
alone a sufficient basis upon which to grant summary judgment on the merits. We
conclude that the district court erred by granting summary judgment upon Keirans’
failure to satisfy the conditions of the bond without first determining that no genuine
issue of material fact exists.
Keirans raise various other issues. Because we are reversing and remanding this
case to the district court on other grounds, we need not reach those issues.
DECISION
The district court properly exercised jurisdiction in this case but erred by granting
summary judgment in favor of BNY Mellon without first determining that no genuine
issue of material fact exists. We therefore reverse and remand for further proceedings
consistent with this opinion.
Reversed and remanded.
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