Schultz v. McGowan , No. 27CV06-6918
| Decision Date | 26 May 2008 |
| Docket Number | No. 27CV06-6918 |
| Parties | Daniel Schultz and Rebecca J. Schultz, Plaintiffs, v. Patrick D. McGowan as Hennepin County Sheriff, TCM Properties, LLC, a Minnesota limited liability company, and Kevin Lamson, Defendants. |
| Court | Minnesota District Court |
The above-entitled matter came on for hearing before Judge Janet N. Poston on June 15, 2006 pursuant to Plaintiffs' Motion for a Temporary Injunction. Under Minnesota Rule of Civil Procedure 65.02(c), the Court advanced and consolidated the trial of the action on the merits with the temporary injunction hearing. The parties' post-trial submissions were received on June 23, 2006.
Based upon the stipulated facts, the evidence adduced, the argument of the parties, and all of the files, records, and proceedings herein, the Court makes the following,
Bruce A. Boeder, Esq. and Andrew Arndt appeared for Plaintiffs. Jay L. Arneson, Esq., Assistant Hennepin County Attorney, appeared for Defendant Patrick D. McGowan as Hennepin County Sheriff. Matthew A. Anderson, Esq. appeared for Defendant TCM Properties, LLC. Defendant Kevin Lamson appeared pro se.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER
FINDINGS OF FACT:
1. Plaintiffs Daniel and Rebecca J. Schultz owned property legally described as follows ("the subject property"):
Lot 1, Block 1, Chippewa. Hennepin County, Minnesota.
The subject property is commonly known as 4325 Chippewa Lane, Orono, Minnesota 55359. The Hennepin County Tax Assessor values the subject property at $290,000.00 for taxes due and payable in 2006.
2. On June 30, 1999, Plaintiffs granted a $125,250.00 mortgage against the subject property to Rescue Mortgage, Inc.
3. Plaintiff Daniel Schultz subsequently became severely ill with liver disease. He had previously been self-employed as a cabinet maker, but his serious illness and ensuing liver transplant surgery rendered him unable to work. As a result, Plaintiff Daniel Schultz's business failed.
4. In 2005, Plaintiffs defaulted on the terms of their promissory note and mortgage; the mortgage was subsequently foreclosed by advertisement pursuant to Minnesota Statutes Chapter 580.
5. On October 6, 2005, Sergeant James Ross from the Hennepin County Sheriff's Office ("Sheriff's office") sold the subject property to John and Stacey Elfelt for $150,001.00. At the time of the Sheriff's sale, there were no junior creditors holding liens against the subject property.
6. The Elfelts' $150,001.00 bid was $17,386.79 more than the balance that Plaintiffs actually owed under their promissory note and mortgage. The Sheriff held the surplus proceeds pending claims by junior creditors or instructions from Plaintiffs.
7. On February 23, 2006, a $7,599.59 judgment was entered and docketed in Hennepin County District Court, File No. 27CV06-2661, against Daniel Schultz in favor of Discover Bank. This judgment was subsequently assigned to Defendant TCM Properties, LLC ("TCM") on March 23, 2006.
8. On April 1, 2006, unaware of TCM's judgment, Plaintiffs sent a letter to the Sheriff's office demanding payment of the $17,386.79 surplus from the October 6, 2005 sale. The Sheriff's office received Plaintiff's letter on April 3, 2006. That same day, TCM filed a notice of intent to redeem ("TCM's Notice") under its judgment lien pursuant to Minnesota Statute section 580.24, preserving a seven (7) day period in which to redeem in the event that Plaintiffs did not redeem under Minnesota Statute section 580.23. Both Plaintiffs' letter and TCM's Notice were time-stamped on April 3, 2006 and forwarded internally to Deputy John Villerius, who is the finance manager for the Sheriff's office and oversees the Sheriff's real estate transactions.
9. Deputy Villerius testified that his general duties include overseeing the Sheriff's real estate sales, foreclosing liens, satisfying writs of execution, and overseeing property redemptions. Deputy Villerius also testified that he is familiar with mortgage foreclosure sales, noting that Hennepin County had approximately 1,680 foreclosure sales in 2005, as well as redemptions by junior creditors, noting that approximately 450 redemptions were done through the Sheriff's office in 2005.
10. On April 4, 2006, at approximately 10:00 a.m., Deputy Villerius saw both Plaintiffs' letter and TCM's Notice almost simultaneously. While Deputy Villerius was examining both documents, he received a telephone call from Plaintiffs' counsel, attorney Bruce Boeder, who had just become aware of TCM's judgment against Plaintiff Daniel Schultz. Attorney Boeder asked Deputy Villerius if he was still holding the surplus funds or if he had already mailed them to Plaintiffs. Deputy Villerius responded that he had not mailed the surplus funds to Plaintiffs and that he had, in fact, just received TCM's Notice. Attorney Boeder then instructed Deputy Villerius to satisfy TCM's judgment with the surplus funds. Deputy Villerius agreed to satisfy TCM's judgment with the surplus funds as instructed by Plaintiffs' attorney Boeder.
11. Shortly after speaking with Plaintiffs' attorney Boeder on April 4, 2006, Deputy Villerius telephoned Mark Kneer, TCM's Chief Manager, and told him that Plaintiffs had instructed him to satisfy TCM's judgment with the surplus funds held by the Sheriff's office. Kneer questioned Deputy Villerius' authority to satisfy TCM's judgment and stated that he would have to speak with his attorney.
12. Deputy Villerius then confirmed the amount of TCM's judgment with the Hennepin County District Court Clerk's office and called Kneer a second time at approximately 11:00 a.m. on April 4, 2006. Kneer did not answer Deputy Villerius' telephone call, so Deputy Villerius left a message on Kneer's voicemail that the amount due TCM was $7,632.90.
13. Deputy Villerius left a second voicemail message with Kneer on the afternoon of April 4, 2006, stating that a $7,632.90 check to satisfy TCM's judgment was waiting to be picked up at the Sheriff's office. Kneer did not respond to either of Deputy Villerius' April 4, 2006 telephone messages.
14. On April 6, 2006, which was the last day of their redemption period, Plaintiffs transferred and conveyed their equitable right of redemption to John and Stacey Elfelt via a quit claim drafted by their attorney Boeder. Plaintiffs also entered into a one-year lease agreement with the Elfelts, which contained an option to purchase the subject property for $158,251.00 until March 31, 2007.
15. Also on April 6, 2006, TCM's then-attorney Chad Lemmons sent a letter to the Sheriff's office, which stated the following:
16. On April 7, 2006, Mark Kneer, accompanied by then-attorney Chad Lemmons, drove from St. Paul to the Hennepin County Sheriff's office in Minneapolis to redeem the subject property as a lien creditor pursuant to Minnesota Statute section 580.25.
17. Deputy Villerius saw Kneer and attorney Lemmons enter the Sheriff's office and attempted to hand check No. 5717607 for $7,632.90, which would satisfy TCM's judgment, to Kneer and attorney Lemmons. Both Kneer and Lemmons refused to accept the check from Deputy Villerius.
18. After rejecting Deputy Villerius' attempt to hand him the $7,632.90 satisfaction check, Kneer handed two cashiers' checks totaling $200,000.00 to Deputy Villerius. Kneer also produced a copy of the docketed judgment in favor of Discover Bank and the assignment of the Discover Bank judgment to TCM as evidence of TCM's right to redeem the subject property.
19. Deputy Villerius accepted the cashiers' checks from Kneer and issued a receipt evidencing this acceptance. The Sheriff's office still holds check No. 5717607 for $7,632.90 that TCM refused to accept.
20. On April 13, 2006, TCM assigned its redemption rights to Defendant Kevin Lamson. The Sheriff told Lamson that he held funds sufficient to satisfy his judgment and had previously tendered to TCM. Lamson refused to accept the funds as satisfaction of his judgment and delivered a demand letter with proof of TCM's legal right to redeem to the Sheriff.
21. On April 14, 2006, Plaintiffs filed the above-entitled action and sought an Order temporarily restraining the Sheriff from issuing the Certificate of Redemption to TCM, which this Court granted.
CONCLUSIONS OF LAW:
1. Plaintiffs have shown that they possess the requisite interest in the subject property to establish standing. Roberts v. Meighen, 77 N.W. 139 (Minn. 1898) (). Although Plaintiffs' failure to redeem the subject property extinguished any ownership interest they previously possessed, Johnson v. Melges, 203 N.W. 983, 983 (Minn. 1925) (), Plaintiffs retained an interest in the subject property under their one-year lease agreement with option to purchase from the Elfelts. Under the agreement, the Elfelts granted Plaintiffs the right to purchase the subject property by March 31, 2007 for $158,251.00, significantly less than the subject property's market value.
2. The surplus funds generated from the Elfelts' bid at the October 6, 2005 Sheriff's sale belong to Plaintiffs. Perkins v. Stewart, 77 N.W. 434 (Minn. 1898) (). Here, as in Perkins, there were no lienholders at the time of the foreclosure sale. TCM's judgment was subsequently docketed against Plaintiffs and became a lien on Plaintiffs' equity of redemption, but did not disturb Plaintiff...
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