Jaeger v. Palladium Holdings, LLC, A14–0803.

• Decision Date: 31 August 2016
• Docket Number: No. A14–0803.,A14–0803.
• Citation: 884 N.W.2d 601
• Parties: Steven J. JAEGER, Respondent, v. PALLADIUM HOLDINGS, LLC, Appellant, Franklin Financial, LLC, et al., Defendants.
• Court: Minnesota Supreme Court

884 N.W.2d 601

Steven J. JAEGER, Respondent,

v. PALLADIUM HOLDINGS, LLC, Appellant,Franklin Financial, LLC, et al., Defendants.

No. A14–0803.

Supreme Court of Minnesota.

Aug. 31, 2016.

Mark Eldon Berglund, Berglund & Berglund, Ltd., Anoka, MN; and James W. Delaplain, Minneapolis, MN, for respondent.

Jack E. Pierce and Brooke C. Nelson, Bernick Lifson, P.A., Minneapolis, MN, for appellant.

OPINION

STRAS

, Justice.

This case arises out of the foreclosure of respondent Steven Jaeger's townhome in St. Louis Park. The validity of the foreclosure turns on whether Jaeger's townhome association properly served Jaeger's adult son with notice of the foreclosure under Minn. R. Civ. P. 4.03(a)

, which provides a method of substitute service. The district court concluded that the association's service on Jaeger's son was ineffective. The court of appeals affirmed the district court's decision. For the reasons that follow, we affirm.

I.

Jaeger purchased a townhome in St. Louis Park in August 1997. In March 2011, Jaeger took over the management of a car dealership in Wisconsin, which led to his frequent absence from the townhome. According to Jaeger, he stayed at the property fewer than 20 times in the following 3 years. Consequently, Jaeger relied on his adult son, J.C., to periodically check on the property in his absence. J.C. lived elsewhere, but he visited his father's townhome an estimated 20 to 30 times per year.

During the visits, J.C. would prepare the townhome for Jaeger's return by activating the heating or air conditioning. J.C. would also run the water, complete various maintenance tasks, and generally check on the property to make sure that no one had burglarized it since his last visit. After visiting the property, J.C. would call or text Jaeger to let him know whether the townhome was “okay.” Although J.C. had a garage-door opener and could visit the property at any time, he stayed overnight at the townhome only “a few times” over the years. Occasionally, J.C. also received mail at the property. In fact, the mailbox contained a slip of paper that stated, “[p]lease accept mail for [J.C.].” In one instance, J.C. received his motor-vehicle registration at the townhome for a vehicle that he had jointly registered in both his and his father's names. Still, J.C. did not regularly receive mail there.

By May 2010, Jaeger was delinquent on his monthly dues to his homeowner's association, Skyehill Townhome Association (“Skyehill”). Skyehill obtained a lien on Jaeger's property as security for the unpaid dues. In 2011, Skyehill foreclosed on its lien by advertisement. Skyehill purchased the property at the foreclosure sale for $4,909.31, but later assigned the Sheriff's Certificate of Sale to Franklin Financial, LLC (“Franklin”). After Jaeger failed to redeem the property within 6 months of the sale, Franklin transferred the property to appellant Palladium Holdings, LLC (“Palladium”) by quitclaim deed. Jaeger claimed that he only became aware of the foreclosure proceedings after the conclusion of the eviction proceedings in February 2013.

Following the eviction, Jaeger brought this action seeking a declaratory judgment that the foreclosure sale was legally void because Skyehill had failed to properly serve him with advance notice of the sale, as required by Minn.Stat. § 580.03 (2014)

. The district court empaneled an advisory jury to resolve a factual dispute about whether Jaeger had actual notice of the foreclosure sale.

The evidence presented to the jury established that an individual from On Time Delivery attempted to serve Jaeger on Skyehill's behalf. The process server's personal records indicated that he gave the documents to the individual who answered the door of Jaeger's townhome on May 12, 2011. The individual who accepted service signed the service log as “J.C. Jaeger.” The process server testified that, although he did not specifically recall the attempted service at Jaeger's townhome, his standard practice was to ask the person who answers the door if he or she lives there before leaving the process with someone other than the named recipient. Based on his standard practice, the process server said that he would not have attempted service unless J.C. had stated that he lived at the townhome. J.C. testified, by contrast, that he did not accept service or sign the service log.

The district court determined that service was ineffective under Minn. R. Civ. P. 4.03(a)

, the substitute-service rule, because J.C. was not “residing” in Jaeger's townhome when Skyehill attempted to serve Jaeger. The court's findings focused primarily on whether Jaeger had actual notice of the foreclosure sale, which was the factual dispute that led to the use of an advisory jury. Based on the advisory jury's finding that Jaeger did not have actual notice of the sale, the court adopted a strict interpretation of Minn. R. Civ. P. 4.03(a). Applying its strict interpretation, the court declared that the substitute service was deficient, the foreclosure sale and the subsequent transfers of Jaeger's property were void, and Jaeger was the property's rightful owner.

In a 2–1 decision, the court of appeals affirmed the district court's decision and adopted a bifurcated reading of the substitute-service rule. Jaeger v. Palladium Holdings, LLC, No. A14–0803, 2015 WL 1513982 (Minn.App. Apr.6, 2015)

. The court reasoned that substantial compliance with the substitute-service requirements is sufficient when a party has received actual notice of the action. Id. at *1 (citing Thiele v. Stich, 425 N.W.2d 580, 584 (Minn.1988) ). The court of appeals also determined, however, that “strict compliance with rule 4 [was] required” in this case because Jaeger did not have actual notice of the foreclosure sale. Id. at *3–4. The process server, in other words, had to strictly comply with the requirement that the “person of suitable age and discretion” receiving the documents—in this case, J.C.—was “then residing” in the townhome. Because “J.C. did not live at the property when substitute service upon him was attempted,” the service was ineffective. Id. The dissent, in contrast, adopted a functional approach to substitute service, reasoning that there was a sufficient nexus between J.C. and his father to give “some reasonable assurance” that the notice would reach Jaeger. Id. at *5 (Connolly, J., dissenting) (citing O'Sell v. Peterson, 595 N.W.2d 870, 872 (Minn.App.1999) ).

II.

The question presented by this case is whether Skyehill adequately served Jaeger with the notice of foreclosure by advertisement. To initiate foreclosure-by-advertisement proceedings, Minn.Stat. § 580.03

requires two forms of notice. The first type of notice is publication of the foreclosure sale at least 6 weeks before the sale occurs. Id. The second type of notice is that, at least 4 weeks before the foreclosure sale, a copy of the published notice must “be served in like manner as a summons in a civil action in the district court upon the person in possession of the mortgaged premises, if the same are actually occupied.” Id. The parties do not dispute that Skyehill published notice at least 6 weeks in advance of the foreclosure sale and that Jaeger was “in possession of the mortgage premises.” Rather, Jaeger argues that Skyehill did not comply with Minn. R. Civ. P. 4.03(a), which governs the service of a “summons in a civil action in the district court.”

Service upon an individual of notice of a foreclosure sale or a summons in a civil action can occur in one of two ways under Rule 4.03(a)

. First, the process server can deliver “a copy to the individual personally.” Minn. R. Civ. P. 4.03(a) ; Walsh v. U.S. Bank, N.A., 851 N.W.2d 598, 606 (Minn.2014) (discussing the requirements of personal service). Second, the process server can leave “a copy at the individual's usual place of abode with some person of suitable age and discretion then residing therein.” Minn. R. Civ. P. 4.03(a).

This case turns on the residency requirement of the second form of service, which is commonly known as substitute service. Walsh, 851 N.W.2d at 606

.

A.

To evaluate the adequacy of the substitute service, we must first determine what it means for an individual to be “then residing therein” under Rule 4.03(a)

. We interpret the Minnesota Rules of Civil Procedure de novo and follow a rule's plain language when it is unambiguous. See

Walsh, 851 N.W.2d at 601. “Ambiguity exists only if the language of a rule is subject to more than one reasonable interpretation.” Id.

When a statute or a rule does not contain a definition of a word or phrase, we look to the “common dictionary definition of the word or phrase” to discover its “plain and ordinary meaning.” See State v. Brown, 792 N.W.2d 815, 822 (Minn.2011)

. We can separate a phrase into its “component terms” and then reconstruct it to determine its meaning if the phrase is not a term of art, lacks a technical meaning, and is not otherwise defined in the statute or rule. See

Nelson v. Schlener, 859 N.W.2d 288, 293 (Minn.2015) ; KSTP–TV v. Ramsey Cty., 806 N.W.2d 785, 790 (Minn.2011). This separate-and-reconstruct method of interpretation is a corollary of our obligation to give words and phrases their plain and ordinary meaning.

The parties dispute what it means for the individual who receives the substitute service to have been “then residing therein.” The plain and ordinary meaning of the word “reside,” of which “residing” is a form, is “[t]o live in a place permanently or for an extended period.” The American Heritage Dictionary of the English Language 1493 (5th ed.2011); see also 4A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1096 (4th ed.2015)

(stating that the recipient of substitute service “must be actually living in the same place as the defendant who is to be served”). The word “then,” which precedes the word “residing,” requires that the analysis of residency occur at the point in time when the process server attempts service. See The American...