Schumacher v. KMLE, Inc.

• Decision Date: 06 January 2020
• Docket Number: A19-0972
• Parties: Francis J. Schumacher, Respondent, v. KMLE, INC., et al., Appellants.
• Court: Minnesota Court of Appeals

Francis J. Schumacher, Respondent, v. KMLE, INC., et al., Appellants.

A19-0972

STATE OF MINNESOTA IN COURT OF APPEALS

January 6, 2020

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2018).

Affirmed

Reilly, Judge

Nicollet County District Court

File No. 52-CV-16-553

Rick J. Halbur, Dean M. Zimmerli, Gislason & Hunter LLP, New Ulm, Minnesota (for respondent)

Kevin K. Shoeberg, Kevin K. Shoeberg, P.A., Woodbury, Minnesota (for appellants)

Considered and decided by Reilly, Presiding Judge; Bjorkman, Judge; and Cochran, Judge.

UNPUBLISHED OPINION

REILLY, Judge

In this dispute over the ownership of real property, appellants challenge the district court's grant of summary judgment in respondent's favor on respondent's claim for determination of adverse claims. We affirm.

FACTS

This appeal involves a dispute over a 55-acre parcel of real property located near Courtland. The following facts are undisputed and recited in the light most favorable to appellants. See Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (noting that appellate courts view the record evidence "in the light most favorable to the party against whom [summary] judgment was granted").

The property was owned by appellants David A. Machau and Lori Stevensen, who are in a long-term romantic relationship and have three children together, and their limited-liability company KMLE Inc. (KMLE). Respondent Francis J. Schumacher claims ownership in the property following redemption from mortgage foreclosure.

Machau purchased the property on a contract for deed in 1976. In 1998, Machau and Stevensen formed KMLE for the benefit of their children. Stevensen was the sole owner and officer of KMLE. Machau transferred the property to KMLE at that time. The property was KMLE's sole asset. In 2002, KMLE borrowed money from the bank and secured repayment of the loans with two mortgages on the property. When the loans went into default in 2005, the bank commenced foreclosure proceedings on the property. A sheriff's sale on April 27, 2005 foreclosed on the first mortgage on the property, and a second sheriff's sale on May 4, 2005 foreclosed on the second mortgage on the property.

In the fall of 2005, Stevensen obtained employment with a company that did business in Iraq. Around the same time, Machau began looking for someone to provide a loan to KMLE to redeem the property and provide security in the event anything happened to Stevensen while she was in Iraq. Machau spoke to Schumacher about the possibility oftransferring the redemption rights on the property from KMLE to Schumacher. Stevensen and Machau also prepared a power of attorney naming Schumacher as Stevensen's alternate attorney-in-fact.

On October 28, 2005, Stevensen, in her capacity as KMLE's president, assigned KMLE's redemption rights to the property to Schumacher. The Assignment of Redemption Rights Agreement provided that: "For one dollar ($1.00) and other good and valuable consideration, [KMLE] does hereby sell, transfer and convey to Francis J. Schumacher, the redemption right to real property in Nicollet County Minnesota." The agreement was notarized on the same day. On October 28 or 29, 2005, Stevensen and Machau gave Schumacher the notarized agreement and Stevensen's power-of-attorney form.

KMLE's right to redeem the property from the first sheriff's sale expired on April 27, 2006, and the right to redeem the property from the second sheriff's sale expired on May 4, 2006. On April 27, 2006, Schumacher presented a check in the total amount of $162,430.70 to the bank to redeem the property from foreclosure from both sheriff's sales, including $63,780.23 related to the April 27, 2005 sheriff's sale, and $98,650.47 related to the May 4, 2005 sheriff's sale. Schumacher gave the check to a bank representative, who handed Schumacher an abstract to the property. At that point, Schumacher considered himself to be the owner of the property. An attorney drafted two Certificates of Redemption: one in the amount of $63,780.23 for the April 27, 2005 sheriff's sale, and one in the amount of $98,650.47 for the May 4, 2005 sheriff's sale. Both certificates provided that:

[The bank] . . . does hereby certify that on the 27th day of April, 2006, it received from [KMLE], a Minnesota corporation [amount] in full redemption of the tract of land lying and being in the County of Nicollet, described as [legal description] and that said redemption was made upon the claim following, to wit: [KMLE], a Minnesota corporation as owner of the real estate at the time of foreclosure sale.

After redeeming the property, Schumacher instructed an attorney to record the certificates of redemption and assignment of redemption rights. A county recorder recorded the Assignment of Redemption Rights and Certificates of Redemption on May 5, 2006.

Machau asserts that he "provided most of the labor for the farming operation" from 2007 to 2015, and "provided the labor for equipment repairs and rebuilding equipment." Machau claims that the parties agreed that Machau could buy the property back from Schumacher, and that the value of Machau's labor would be deducted from the cost of the property. Stevensen and Machau lived on the property from 2006 until 2016, but the relationship between Stevensen, Machau and Schumacher deteriorated in 2015 or 2016. In 2016, Schumacher demanded that Stevensen and Machau vacate the property.

In September 2016, Schumacher initiated a seven-count civil complaint against Stevensen, Machau, and KMLE for an action to determine adverse claims, among other causes of action. Appellants filed an answer and asserted numerous counterclaims. In July 2018, the district court granted summary judgment in Schumacher's favor on his action to determine adverse claims and determined that Schumacher was the sole owner of the property. The district court later dismissed appellants' counterclaims against Schumacher and dismissed Schumacher's alternative claims as moot in light of the district court's July 2018 order. These cross-appeals follow.

DECISION

I. Summary Judgment Legal Standard

Summary judgment is appropriate if the record reflects "no genuine issue as to any material fact" and the moving party "is entitled to judgment as a matter of law." Minn. R. Civ. P. 56.01. On appeal, "[w]e review a district court's decision to grant summary judgment de novo to determine whether any genuine issue of material fact exists and whether the district court correctly applied the law." Citizens State Bank Norwood Young Am. v. Brown, 849 N.W.2d 55, 61 (Minn. 2014). The interpretation of a statute presents a question of law, which we review de novo. Eagle Lake of Becker Cty. Lake Ass'n v. Becker Cty. Bd. of Comm'rs, 738 N.W.2d 788, 792 (Minn. App. 2007). "[W]e may affirm a grant of summary judgment if it can be sustained on any grounds." Doe v. Archdiocese of St. Paul, 817 N.W.2d 150, 163 (Minn. 2012).

II. The District Court Did Not Err by Granting Summary Judgment in Schumacher's Favor on the Action to Determine Adverse Claims.

a. Assignment of Rights and Redemption

Schumacher asserted a cause of action to determine adverse claims to real property. An action to determine adverse claims to property is equitable in nature and district courts have broad discretion in fashioning a remedy. Gabler v. Fedoruk, 756 N.W.2d 725, 730 (Minn. App. 2008). An action to determine adverse claims is defined as follows:

Any person in possession of real property personally or through the person's tenant, or any other person having or claiming title to vacant or unoccupied real property, may bring an action against another who claims an estate or interest therein, or a lien thereon, adverse to the person bringing theaction, for the purpose of determining such adverse claim and the rights of the parties, respectively.

Minn. Stat. § 559.01 (2018).

The timeline of events is undisputed. Stevensen, as KMLE's president, assigned KMLE's redemption rights to the property to Schumacher on October 28, 2005. "An assignment is simply the transfer of rights or property." S O Designs USA, Inc. v. Rollerblade, Inc., 620 N.W.2d 48, 54 (Minn. App. 2000) (quotation omitted), review denied (Minn. Feb. 21, 2001). An assignment "operates to place the assignee in the shoes of the assignor, and provides the assignee with the same legal rights as the assignor had before assignment." Ill. Farmers Ins. Co. v. Glass Serv. Co., 683 N.W.2d 792, 803 (Minn. 2004).

The loans went into default in 2005 and the bank commenced foreclosure proceedings on the property. With respect to large agricultural lands, the foreclosure statute provides that:

[W]hen lands have been sold in conformity with [statutory requirements], the mortgagor, the mortgagor's personal representatives or assigns, within 12 months after such sale, may redeem such lands in accordance with the provisions of payment of subdivision 1 thereof[.]

Minn. Stat. § 580.23, subd. 2 (2018).

The right to redeem the property from the first sheriff's sale expired on April 27, 2006. Schumacher exercised his right of redemption by presenting a check to the bank onthe same day.¹ Following payment, an attorney mailed the Assignment of Redemption Rights and the Certificates of Redemption to the county recorder's office. These documents were recorded on May 5, 2006. The district court determined that the "assignment unambiguously conveyed all of KMLE's redemption rights in the property to [Schumacher]," and that the plain language of section 580.23, subdivision 2, allows for redemption of land by a mortgagor's assignee. The district court reasoned that Schumacher "acquired a valid and enforceable right to redeem the property," and redeemed the property by delivering payment of $162,430.70 to the bank on April 27, 2006.

We discern no error in the district court's order. There is no Minnesota caselaw addressing the enforceability of assignment rights in this context. Minnesota courts often review caselaw from...