Real Estate Equity Strategies, LLC v. Ohio Savings Bank, File No. 27CV06-18891.

• Decision Date: 26 May 2008
• Docket Number: File No. 27CV06-18891.
• Parties: Real Estate Equity Strategies, LLC, A Minnesota limited liability company, Plaintiff, v. Ohio Savings Bank, F.S.B., an Ohio corporation, Defendant. AmTrust Bank, Third-Party Plaintiff, v. Usset & Weingarden, P.L.L.P. and Paul A. Weingarden, Third-Party Defendants.
• Court: Minnesota District Court

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Real Estate Equity Strategies, LLC, A Minnesota limited liability company, Plaintiff, v. Ohio Savings Bank, F.S.B., an Ohio corporation, Defendant.

AmTrust Bank, Third-Party Plaintiff, v. Usset & Weingarden, P.L.L.P. and Paul A. Weingarden, Third-Party Defendants.

File No. 27CV06-18891.

District Court of Minnesota, Fourth Judicial District.

May 26, 2008.

The above entitled matter came before the Honorable Gary Larson, Judge of Hennepin County District Court, on September 11, 2007, on Defendant's Motions to Waive Affidavit of Expert Review and to Extend Time Period For Identification of Expert.

Based upon all files, records, and proceedings herein, together with the arguments of counsel.

Nicholas Nierengarten, Esq., appeared for and on behalf of Defendants.

Phillip Cole, Esq., appeared for and on behalf of Third-Party Defendants.

ORDER GRANTING DEFENDANT'S MOTIONS TO WAIVE AFFIDAVIT OF EXPERT REVIEW AND TO EXTEND TIME PERIOD FOR IDENTIFICATION OF EXPERT.

IT IS HEREBY ORDERED:

1. Defendant's Motion to Waive Affidavit of Expert Review is GRANTED.

2. Defendant's Motion to Extend Time Period For Identification of Expert is GRANTED.

3. Defendant, pursuant to Minn. Stat. § 544.42, subd. 2(2) and subd. 4, must submit an Affidavit Identifying Experts To Be Called by January 28, 2008.

4. That the attached memorandum shall be made a part hereof.

MEMORANDUM

GARY LARSON, District Court Judge.

I. PLAINTIFFS' MOTION TO AMEND THEIR COMPLAINT IS GRANTED.

A. Factual backdrop.

Defendant, Ohio Savings Bank, F.S.B. ("Ohio Savings"), was assigned a mortgage to the residence owned by the Wrights, located at 7408 Coventry Way, Edina, Hennepin County, MN ("7408 Coventry Way"). The mortgage was in the amount of $336,000.00. On December 8, 2003, a judgment was docketed in Hennepin County District Court in favor of Associated Bank Minnesota, N.A., but against the Wrights. In 2004, the Wrights defaulted on their obligations pursuant to the Ohio Savings mortgage. On April 14, 2005, Ohio Savings recorded a Notice of Pendency of Proceeding and Power of Attorney to Foreclose with the Hennepin County Recorder. On May 23, 2005, the Internal Revenue Service ("IRS") filed a federal tax lien against the Wrights with the Hennepin County Recorder. The mortgage was foreclosed and the Sheriff's sale occurred on June 27, 2005. Ohio Savings was the winning bidder. On September 7, 2005, the Associated Bank judgment was assigned to Plaintiff, Real Estate Equity Strategies, LLC ("REES"). This assignment was filed with Hennepin County District Court.

On January 9, 2006, REES redeemed the property and were provided a Sheriff's Certificate of Redemption from the Hennepin County Sheriff. This Certificate was filed with the Hennepin County Recorder on January 12, 2006. On May 4, 2006, REES requested Ohio Savings' attorney, Paul Weingarden ("Weingarden") of Usset & Weingarden ("U&W"), to provide them with an affidavit pursuant to Minn. Stat. § 580.15(4) showing that service was made upon the Treasurer of the United States. No affidavit was provided to REES.

REES filed a Summons and Complaint in Hennepin County District Court on September 28, 2006. The Complaint details two Counts: 1) Voiding of foreclosure sale, and 2) Rescission. REES alleges that Ohio Savings had a duty to terminate all interests junior to their mortgage and a duty to provide a sale purchaser title identical to that which Ohio Savings had at the time the mortgage was executed. REES alleges further that Ohio Savings breached its duties because it failed to notice the United States Treasurer of the pending foreclosure.

Ohio Savings bank tendered REES' Complaint to U&W for defense and indemnification. U&W refused the tender—claiming that they were not culpable, that REES' claim is wholly defensible and that Ohio Savings need merely make the appropriate arguments. In response, Ohio Savings, now known as AmTrust Bank ("AmTrust"), filed a Third-Party Summons and Complaint on July 26, 2007, against U&W and Weingarden, claiming that if AmTrust is liable to REES, then U&W and Weingarden as Third-Party Defendants, are liable and that AmTrust is entitled to recover jointly and severally all or part of what REES may recover from Ohio Savings by way of indemnification, contribution, breach of contract, and/or negligence, and any damages, costs or expenses arising out of REES' claims.

This Motion stems from AmTrust's Third-Party Summons and Complaint. AmTrust has moved this Court to waive Affidavit of Expert Review and Extend Time Period For Identification of Expert. AmTrust contends that a waiver is appropriate because otherwise it must either 1) incur the time and expenses of defending U&W and Weingarden's actions; or 2) arguably provide support for Plaintiff at the outset of the litigation by submitting an affidavit that sets forth the details as to how the Third-Party Defendants breached their duty, which in turn, provides support for Plaintiff's case against AmTrust.

B. Legal framework.

Minnesota law requires that in an action alleging negligence or malpractice against a professional, the party must serve upon the opponent an Affidavit of Expert Review and an Affidavit Identifying Experts to be called. Minn. Stat. § 544.42, subd. 2(1) and (2). Failure to comply with this Section can result in a mandatory dismissal of the action. Minn. Stat. § 544.42, subd. 6; Broehm v. Mayo Clinic Rochester, 690 N.W.2d 721, 725 (Minn. 2005); see also Teffeteller v. Univ. of Minn., 645 N.W.2d 420, 430-31 (Minn. 2002) (holding that dismissal of malpractice action is required where an expert disclosure contains only broad and conclusory statements); and Lake Superior Center Authority v. Hammel, Green & Abrahamson, Inc., 715 N.W.2d 458, 470 (Minn. Ct. App. 2006). The Minnesota Supreme Court has discussed the requirements of the Affidavit of Expert Review, stating that "if we look to the purpose for section 544.42, to provide a mechanism for the early dismissal of frivolous actions, the minimum standards for such an affidavit should be that it contains meaningful information on each of the issues for which expert testimony will be required at trial to avoid a directed verdict." Brown-Wilbert, Inc. v. Copeland Buhl & Co., P.L.L.P., 732 N.W.2d 209, 218 (Minn. 2007).

Section 544.42, subdivisions 3(a), 3(a)(3) and 3(c) explain how and when a party may not be required to supply an Affidavit of Expert Review. Minn. Stat. § 544.42, subd. 3(a), 3(a)(3) and 3(c) (2006). Subdivision 3(a) and 3(a)(3) require that the party's attorney draft an affidavit which indicates that "the parties have agreed to a waiver of the expert review required by clause (1) or the party has applied for a waiver or modification by the court under paragraph (c)." Minn. Stat. § 544.42, subd. 3(a) and 3(a)(3) (2006). The Section indicates further that:

The certification of expert review required under this section may be waived or modified if the court where the matter will be venued determines, upon an application served with commencement of the action, that good cause exists for not requiring the certification. Good cause includes, but is not limited to, a showing that the action requires discovery to provide a reasonable basis for the expert's opinion or the unavailability, after a good faith effort, of a qualified expert at reasonable cost. If the court waives or modifies the expert review requirements, the court shall establish a scheduling order for compliance or discovery. Minn. Stat. § 544.42, subd. 3(c) (2006).

Thus, for good cause, this Court may waive or modify the expert review requirements.

In the present case, REES sued Ohio Savings, alleging that Ohio Savings didn't foreclose the mortgage on 7408 Coventry Way properly. REES claims that Ohio Savings improperly noticed the United States Treasury and is seeking to void the foreclosure sale or rescind the sale. Ohio Savings, after its tender to U&W was rejected, filed a Third-Pa...