Chaney v. COMMUNITY DEVELOPMENT AGENCY

• Decision Date: 26 March 2002
• Docket Number: No. C3-01-1349, No. C1-01-1401.
• Parties: Michael CHANEY (d/b/a/ The Chaney Group) et al., Appellants, v. MINNEAPOLIS COMMUNITY DEVELOPMENT AGENCY et al., Respondents, and Gesco, Inc., Respondent/Intervenor.
• Court: Minnesota Court of Appeals

641 N.W.2d 328

Michael CHANEY (d/b/a/ The Chaney Group) et al., Appellants, v. MINNEAPOLIS COMMUNITY DEVELOPMENT AGENCY et al., Respondents, and Gesco, Inc., Respondent/Intervenor.

Nos. C3-01-1349, C1-01-1401.

Court of Appeals of Minnesota.

March 26, 2002.

Review Denied May 28, 2002.

Alan W. Weinblatt, Donna M. Kasbohm, St. Paul, for appellants.

Fred Burstein, William J. Maddix, Minneapolis, for respondents MCDA and the City of Minneapolis.

David Gronbeck, Minneapolis, for respondent/intervenor Gesco, Inc.

Considered and decided by HARTEN, Presiding Judge, ANDERSON, Judge, and STONEBURNER, Judge.

OPINION

G. BARRY ANDERSON, Judge.

Respondents, the City of Minneapolis and the Minneapolis Community Development Agency et al. (MCDA), published a request for proposals (RFP) inviting bids to rehabilitate certain property located in Minneapolis. Appellants, Michael and Robert Chaney, submitted a bid. Respondents did not sell the property to appellants but sold it to intervenor, Gesco, Inc.¹ On the same day respondents conveyed the property to intervenor, appellants brought suit claiming, inter alia, racial discrimination and breach of contract. Appellants filed and recorded a notice of lis pendens before intervenor recorded the deed from respondents. The district court then entered two orders dealing with the notice of lis pendens. The first order directed appellants to discharge the notice of lis pendens. Because appellants did not discharge the notice of lis pendens, the district court later issued a second order that did so. Appeals from both orders were consolidated by an order of this court. Because we find that this court cannot grant any effectual relief to appellants, we dismiss this consolidated appeal as moot.

FACTS

On June 28, 1999, MCDA published an RFP, which sought developers to purchase and rehabilitate the property at 1835-37 Park Avenue (the property). Of the four proposals submitted by the September 2, 1999 deadline, as counsel for appellants observed, appellants filed the only complete application.

An October 4, 1999 letter from the MCDA staff to the MCDA operating committee recommended that the property be sold to appellants. The MCDA Board of Commissioners (board) ignored the recommendation and instead approved the sale to Mark Orfield, another developer. It is undisputed that as of September 2, 1999, Orfield's application did not satisfy all of the RFP's requirements. The board's decision was controversial.

On November 12, 1999, the board referred the matter back to the operating committee. Intervenor submitted an unsolicited proposal, and, on April 24, 2000, the executive director of the MCDA recommended selling the property to intervenor. The board approved the sale and conveyed the property to intervenor by way of a quitclaim deed on June 22, 2000.

On the same day, appellants served a summons and complaint on respondents. On July 14, 2000, appellants recorded a notice of lis pendens in the chain of title of the property. The quitclaim deed from respondents to intervenor was recorded on August 2, 2000. On March 6, 2001, respondents filed a motion seeking summary judgment on all of appellants' causes-of-action as well as discharge of the notice of lis pendens. The district court only granted summary judgment on the breach-of-contract claim and did not discharge the notice of lis pendens.

On July 11, 2001, respondents again requested that the notice of lis pendens be discharged. The parties also reached an agreement allowing intervention, and the district court approved the addition of intervenor to the litigation.

On July 25, 2001, arguments were heard regarding the notice of lis pendens. Respondents requested that appellants post a surety bond, a request based on Minn.Stat. § 469.044 (2000).² The same day, the district court issued an order that required appellants to discharge the notice of lis pendens, and also denied respondents' request for a surety bond.

Appellants did not comply with the July 25, 2001 order. Another hearing was held on August 2, 2001; respondents and intervenor requested the district court set and require a supersedeas bond if appellants sought a stay of the discharge of the notice of lis pendens pending appeal. Because counsel for appellants acknowledged that appellants were financially unable to post a $500,000 bond, the district court concluded the issue of the supersedeas bond was moot. Therefore, the district court discharged the notice of lis pendens. This appeal followed.

ISSUES

I. Is this appeal moot?

II. Is intervenor a bona fide purchaser?

ANALYSIS

This court has appellate jurisdiction to review an order discharging a notice of lis pendens. Nelson v. Nelson, 415 N.W.2d 694, 696-97 (Minn.App.1987).

I.

Respondents contend this appeal was rendered moot by appellants' failure to file a supersedeas bond, which resulted in the discharge of the notice of lis pendens. This court has held that

[a] supersedeas bond is not required to perfect an appeal. The trial courts may not compel a party "to file a supersedeas bond as a condition to his right to an appellate review of the merits of the court's decision."

All Lease Co. v. Peters, 424 N.W.2d 320, 321 (Minn.App.1988) (quoting Tourville v. Tourville, 289 Minn. 544, 545, 185 N.W.2d 281, 282 (1971)). A supersedeas bond is simply a prerequisite for a stay while an appeal is heard. Therefore, the failure to post a supersedeas bond, in and of itself, does not render this appeal moot. See Minn. R. Civ.App. P. 108.01, 1998 cmt. (stating "[t]he posting of a supersedeas bond or a request for stay on other grounds is not required for an appeal to be perfected or proceed. However, because the order or judgment that is the subject of the appeal is not generally stayed automatically, a matter may, in some circumstances, become moot while the appeal is pending.")

The doctrine of mootness dictates that an appellate "court will hear only live controversies and will not pass on the merits of a particular question merely for the purpose of setting precedent." In re Inspection of Minn. Auto. Specialties, Inc., 346 N.W.2d 657, 658 (Minn.1984). Mootness can be described as

the doctrine of standing set in a time frame: The requisite personal interest that must exist at the commencement of the litigation (standing) must continue throughout its existence (mootness).

Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189, 120 S.Ct. 693, 709, 145 L.Ed.2d 610 (2000) (quotations omitted). If an appellate "court is unable to grant effectual relief," the issue will be deemed moot. In re Schmidt, 443 N.W.2d 824, 826 (Minn. 1989).

As this court has observed, "we would deem the appeal [of a discharged notice of lis pendens] moot if [respondents] had transferred the property to a bona fide purchaser." Marque Plumbing, Inc. v. Barris, 380 N.W.2d 174, 176 (Minn.App. 1986), review denied (Minn. Mar. 24, 1986). Therefore, if this court concludes that intervenor was a bona fide purchaser, this appeal is moot.

II.

Statutory construction is a question of law, which this court reviews de novo. Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn.1998). Here, two statutes are at issue: Minn.Stat. § 557.02 (2000) (providing for notice of lis pendens) and Minn.Stat. § 507.34 (2000) (Minnesota's race-notice recording statute).

Minn.Stat. § 507.34 protects bona fide purchasers against unrecorded property interests in the form of a race-notice recording statute. See Minn. Cent. R.R. Co. v. MCI Telecomms. Corp., 595 N.W.2d 533, 537 (Minn.App.1999) (recognizing that Minnesota is a race-notice state), review denied (Minn. Sept. 14, 1999). The recording statute "does not protect a purchaser who has actual or constructive notice of outstanding rights in another, as the purchaser is then not a bona fide purchaser." In re Inv. Sales Diversified, 38 B.R. 446, 453 (Bankr.D.Minn.1984) (citing Anderson v. Graham Inv. Co., 263 N.W.2d 382 (Minn.1978)).

A. Actual or Implied Notice

The district court found that "[i]ntervenor was unaware that the [notice of] Lis Pendens had been filed * * * until sometime in January of 2001." Findings of fact shall not be set aside unless clearly erroneous. Minn. R. Civ. P. 52.01. If there is reasonable evidence to support the district court's findings of fact, we will not disturb those findings. Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn.1999) (citation omitted).

The record supports the finding that intervenor did not have actual or implied³ knowledge of the notice of lis pendens; intervenor's president testified that he had no knowledge of the notice of lis pendens until January 2001. We defer to a district court's determination of credibility. See Vangsness v. Vangsness, 607 N.W.2d 468, 472 (Minn.App.2000) (holding appellate courts defer to district court's credibility determinations). Here, the district court's determination that there was no actual or implied notice was based on testimony presented at the hearing and was not clearly erroneous.

B. Constructive Notice

Since actual or implied notice is not present, intervenor is not bound by the notice of lis pendens absent constructive notice of the action. See Roberts v. Friedell, 218 Minn. 88, 94-95, 15 N.W.2d 496, 499-500 (1944).

"Pursuant to Minn.Stat. § 507.32 [(2000)], a purchaser is charged as a matter of law with constructive notice of any properly recorded instrument." Howard, McRoberts & Murray v. Starry, 382 N.W.2d 293, 296 (Minn.App.1986). The supreme court has defined constructive notice as

a creature of statute and, as a matter of law, imputes notice to all purchasers of any properly recorded instrument even though the purchaser has no actual notice of the record.

Miller v. Hennen, 438 N.W.2d 366, 369-70 (Minn.1989) (quotation omitted); see also Latourell v. Hobart, 135 Minn. 109, 113-14, 160 N.W. 259, 260-61 (1916).

The right to file a notice of lis pendens is a...