Graves v. Wayman, No. A11–1521.

Citation816 N.W.2d 655
Decision Date09 July 2012
Docket NumberNo. A11–1521.
PartiesAmos GRAVES, Appellant, v. Michael WAYMAN, et al., Respondents, REA Group, Inc., Respondent, C & M Real Estate Services Group, Inc., Respondent, Trademark Properties Group, LLC, Respondent, First Minnesota Bank, Respondent.
CourtCourt of Appeals of Minnesota

OPINION TEXT STARTS HERE

Syllabus by the Court

The grantee of a conveyance of real property from a foreclosure purchaser, as defined by Minn.Stat. § 325N.10, subd. 4 (2010),1 is not entitled to protection as a bona fide purchaser under Minn.Stat. § 325N.17(f)(3) (2010), when the foreclosure purchaser's purported transfer to the grantee constitutes a prohibited practice under Minn.Stat. § 325N.17(f)(3) and the grantee fails to prove that it received its purported interest without notice of a violation of Minn.Stat. §§ 325N.10–.18 (2010) or that it fulfilled its duty of inquiry as to the rights or interests of persons in possession of the residential real property in foreclosure.

Jeramie R. Steinert, Steinert P.A., Minneapolis, MN for appellant.

Jack E. Pierce, Pierce Law Firm, Minneapolis, MN; and Chad Anthony Kelsch, Kelsch Law Firm, P.A., Minneapolis, MN for respondents Michael Wayman, et al.

REA Group, Inc., Elk River, MN respondent.

C & M Real Estate Services Group, Inc., Elk River, MN respondent.

Trademark Properties Group, LLC, Elk River, MN respondent.

Thomas G. Wallrich, Peter L. Crema Jr., Hinshaw & Culbertson LLP, Minneapolis, MN for respondent First Minnesota Bank.

Considered and decided by KALITOWSKI, Presiding Judge, SCHELLHAS, Judge, and CHUTICH, Judge.

OPINION

SCHELLHAS, Judge.

In this foreclosed-residential-real-property dispute, appellant—foreclosed homeowner challenges the district court's order awarding title to his real property to respondent-bank, arguing that the district court erred by (1) determining that the bank was a bona fide purchaser, (2) amending the judgment to eliminate appellant's vendor's lien against the property, and (3) dismissing appellant's common-law fraud claim. Because we conclude that respondent-bank is not entitled to protection as a bona fide purchaser under Minn.Stat. § 325N.17(f)(3), we reverse the district court's award of title to the property to respondent-bank. Additionally, for the reasons set forth below, we reverse the dismissal of appellant's common-law fraud claim and remand this case to the district court for entry of judgment consistent with this opinion.

FACTS

In 1999, appellant Amos Graves and his now-deceased wife (foreclosed homeowners) purchased the residential real property that is the subject of this case and granted a purchase-money mortgage to Norwest Mortgage Inc., which assigned its interest to Wells Fargo. Wells Fargo foreclosed its mortgage and purchased the sheriff's certificate for $101,867.07 on March 13, 2007. In August 2007, respondentMichael Wayman visited the foreclosed homeowners and told them that he could save the house.” On August 15, the foreclosed homeowners signed documents provided to them by Michael Wayman, as follows: a quitclaim deed 2 in favor of respondent REA Group Inc.; a “Rent Back Agreement” with respondent C & M Real Estate Services Group Inc.; a purchase agreement with REA for the sum of $182,000; and a residential lease that names the foreclosed homeowners as lessors and C & M as lessee. Both REA and C & M were wholly owned by Michael Wayman.

On August 15, Michael Wayman also provided the foreclosed homeowners with a document entitled “Cancellation of Contract Notice,” which states in pertinent part:

Date: 8/15/07

You may cancel this transaction, without any penalty or obligation, within three business days from the above date. To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice to:

C & M Real Estate Services Inc., PO BOX 756, Anoka, MN 55303 or fax to 763–274–2786 or email to mikewayman@ comcast. net

NOT LATER THAN MIDNIGHT OF THE 3rd (reconveyance) OR 5th (if purchase strictly) BUSINESS DAY 8/18/07 (date).

On the evening of August 15, the foreclosed homeowners left C & M a telephone message cancelling the transaction, and they signed and mailed the cancellation notice to C & M on August 16. Although the foreclosed homeowners believed that they had canceled their transaction with REA and C & M, from September 2007 until May 2009, they paid rent to C & M under the rent-back agreement.

Despite the foreclosed homeowners' notice of cancellation of the transaction, REA recorded the August 15 quitclaim deed on September 5. And, on September 11, REA granted C & M a mortgage on the property in the amount of $100, C & M recorded its mortgage, and C & M recorded its notice of intention to redeem the property. No one redeemed the property during the homeowners' redemption period that ended on September 13. On September 17, respondent First Minnesota Bank (FMB) loaned C & M $145,000 to redeem the property, securing the loan with the property; C & M redeemed the property as a junior creditor by paying the sheriff $110,355.73; and C & M recorded the certificate of redemption. A HUD settlement statement prepared for the loan closing at FMB reports that the foreclosed homeowners received $30,577.16 from the proceeds of C & M's $145,000 loan. But they received nothing from the closing nor did they receive any portion of the $182,000 purchase price contained in the purchase agreement that they signed on August 15.

C & M defaulted on its loan from FMB, FMB foreclosed its mortgage, and FMB purchased the property at a sheriff's sale on August 12, 2009, for $145,000. No one redeemed the property during the six-month redemption period.

Graves commenced this action against Michael Wayman, Cori Wayman, REA, C & M, FMB, and respondent Trademark Properties Group LLC. Graves sought a declaration that the August 15 transaction be deemed an equitable mortgage against the property and that he be deemed the owner of the property, free and clear of any of respondents' interests; alternatively,on a sale theory, Graves sought a superior vendor's lien against the property, requesting that the property be sold to satisfy the lien. He also alleged multiple violations of mortgage, lending, and consumer-protection laws; common-law fraud; and unjust enrichment. In its answer, FMB asserted that it was a bona fide purchaser of the property. Before the court trial commenced, the district court required Graves to choose one theory of recovery, and Graves chose to proceed under the sale theory—that he had sold the property to REA/C & M and was entitled to a superior vendor's lien. Graves testified at trial that, although he sought financial assistance from public and nonprofit entities, he never completed a loan application to secure funding to redeem the property and never had enough money to redeem the property from Wells Fargo's foreclosure.

FMB Executive Vice President Charles Blair testified that FMB Loan Officer Bryan Guse, who did not testify, closed FMB's September 17 loan to C & M. Blair also testified that the $145,000 loan was part of a master loan agreement that C & M had with FMB to finance its business of redeeming sheriff's certificates. Blair testified that Guse was responsible for reviewing title conditions prior to funding the loans, and Blair was not aware of any correspondence between anyone at FMB and the foreclosed homeowners. But months before FMB closed its $145,000 loan with C & M, FMB obtained a title-insurance commitment for the property. In addition to the interest of the foreclosed homeowners as fee owners, Schedule B–Section II of the title commitment reported the 1999 mortgage; Wells Fargo's foreclosure of that mortgage; Wells Fargo's purchase of the sheriff's certificate on March 13, 2007; and the rights of tenants and others in possession of the property. Blair testified that handwritten initials on the title commitment signaled to FMB that these matters had been “addressed” by the title company.

On January 18, 2011, the district court issued its findings of fact, conclusions of law, and order, declaring that Defendant Waymans and their solely owned corporate entities” violated Minn.Stat. §§ 325N.10–.18 (the Minnesota homeowner's equity-protection act (MHOEPA)); awarding Graves title to the property, “free of the interest of any Defendant; declaring the quitclaim deed, rent-back agreement, lease agreement, and purchase agreement “between [Graves] and Defendants Wayman” void; awarding Graves exemplary damages against REA, C & M, Cori Wayman, and Michael Wayman jointly; declaring that [Graves's] vendor's lien against the subject property is ... superior to that of [FMB];” and awarding Graves “attorney's fees in an amount to be determined by separate application made within twenty (20) days from the Date of this Order.” The court denied FMB's claim that, because “it ... discharged [Graves's] debt,” it should have a first-priority lien against the property based on the doctrine of equitable subrogation. The court explained in its conclusion of law:

This theory fails for numerous reasons. First, [Graves] had no debt because the debt was extinguished at a sheriff's sale, leaving only a right to redeem, which is not a debt. Second, [FMB] has an adequate remedy at law under the promissory note with C & M and the Waymans. Third, [FMB] will lose nothing because it already has a judgment against C & M and the Waymans for its full amount. It cannot claim it will sustain an injury. Fourth, there was no justifiable or excusable mistake of fact involved. [FMB] knew the transaction involved a foreclosure reconveyance and received a copy of the Purchase Agreement. By viewing the Settlement Statement, it knew or should have known that [Graves] was owed money. Finally, Minn.Stat. § 325N.17(b) requires that [Graves] be paid according to the statute. Therefore [Graves is] entitled to both a statutory and vendor's lien on these proceeds.

[FMB] has not sustained its burden of proof.

FMB...

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6 cases
  • Finnegan v. SunTrust Mortg.
    • United States
    • U.S. District Court — District of Minnesota
    • October 21, 2015
    ...implied notice of Grave's competing interest in the property and violation of MHOEPA. Id. at 796–97; see also Graves v. Wayman, 816 N.W.2d 655, 665–69 (Minn.Ct.App., 2012).23 Consequently, First Minnesota was not a bona fide purchaser. Id. at 797. Alternatively, the appellate court held tha......
  • Graves v. Wayman, A11–1521.
    • United States
    • Minnesota Supreme Court
    • February 25, 2015
    ...the house “free and clear of any encumbrances of other parties.”Graves appealed, and the court of appeals reversed. Graves v. Wayman, 816 N.W.2d 655 (Minn.App.2012). The court of appeals ruled in favor of Graves on two separate theories. Under the first theory, the court of appeals conclude......
  • Little v. Little
    • United States
    • Minnesota Court of Appeals
    • January 14, 2013
    ...did not file a notice of related appeal, wife's argument is not properly before us. See Minn. R. Civ. App. P. 106; Graves v. Wayman, 816 N.W.2d 655, 669 (Minn. App. 2012). We observe, however, that the district court's rejection of wife's claim that she did not consent to expenditures beyon......
  • Luethmers v. Luethmers
    • United States
    • Minnesota Court of Appeals
    • May 12, 2014
    ...it is not properly before us because wife did not file a notice of related appeal. See Minn. R. Civ. App. P. 106; Graves v. Wayman, 816 N.W.2d 655, 669 (Minn. App. 2012). ...
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