US Federal Credit Union v. Avidigm Capital Group, Inc., No. A07-1596 (Minn. App. 7/22/2008)
| Decision Date | 22 July 2008 |
| Docket Number | No. A07-2415,No. A07-1596.,A07-1596.,A07-2415 |
| Parties | US Federal Credit Union, Respondent, v. Avidigm Capital Group, Inc., Respondent, Steven J. Mattson, Respondent, Homecomings Financial Network, Inc., Appellant. |
| Court | Minnesota Court of Appeals |
Appeal from the District Court, Carver County, File No. 10-CV-06-1078.
T. Chris Stewart, Garth G. Gavenda, David C. Anastasi, Anastasi & Associates, P.A., Stillwater, MN (for respondent US Federal Credit Union).
Avidigm Capital Group, Inc., WI (respondent).
Benjamin S. Houge, Stillwater, MN (for respondent Steven J. Mattson).
Mark E. Greene, Sarah L. Krans, Bernick, Lifson, Greenstein, Greene & Liszt, P.A., The Colonnade, Minneapolis, MN (for appellant).
Considered and decided by Willis, Presiding Judge; Halbrooks, Judge; and Johnson, Judge.
UNPUBLISHED OPINION
Two companies—US Federal Credit Union (USFCU) and Homecomings Financial Network, Inc.—held interests in a parcel of real property in Carver County when the owners defaulted on both loans. On cross-motions for summary judgment, the district court held that USFCU's interest in the property is superior to that of Homecomings. On appeal, Homecomings argues that the district court erred because its decision is contrary to a default judgment of the same court concerning the same property and because Homecomings registered its interest with the county registrar before USFCU registered its interest. We conclude that the doctrine of res judicata does not apply and that Homecomings' interest lapsed when it failed to redeem its interest following a sheriff's sale of the property. Therefore, we affirm.
This case concerns mortgage liens on a parcel of real estate in Carver County that is described as Lot 6, Block 3, Kings Meadows, which was owned by Richard P. and Elizabeth L. Axtman from 1999 to 2004. The property is registered with the county under the Torrens land title registration system.
On July 5, 2002, the Axtmans borrowed $47,000 from Bremer Bank and, in consideration for the loan, granted a mortgage on their property to Bremer. On July 29 2002, Bremer filed documentation concerning the mortgage with the county registrar, and the documentation was registered.
On May 4, 2004, Bremer filed a notice of intent to foreclose on the Axtman loan. On June 29, 2004, a sheriff's sale was held, at which Avidigm Capital Group, Inc., purchased the sheriff's certificate and registered the purchase with the county registrar.
On December 29, 2004, six months after the foreclosure of the Bremer mortgage, the Axtmans' redemption period expired. During the redemption period, the Axtmans did not redeem their interest in the property, and Homecomings (which independently had acquired a mortgage interest in the property, as explained further below) did not file a notice of intent to redeem.
On January 5, 2005, seven days after the expiration of the Axtmans' redemption period, Homecomings' redemption period expired. During that period, Homecomings did not redeem.
On February 17, 2005, Avidigm conveyed its interest in the property to USFCU. On April 12, 2005, USFCU registered its interest with the county registrar.
On June 23, 2003, the Axtmans borrowed $220,000 from Wells Fargo Home Mortgage, Inc. and, in consideration for the loan, granted a mortgage on their property to Wells Fargo. Before making the loan to the Axtmans, Wells Fargo induced Bremer to subordinate its mortgage to the Wells Fargo mortgage.
On July 8, 2003, Wells Fargo delivered the mortgage to the county registrar for registration. The county registrar, however, refused to register the subordination agreement because the documentation submitted by Wells Fargo did not include the document number and other information relating to the Bremer mortgage.
On August 30, 2004, Wells Fargo conveyed its mortgage interest in the Axtman property to Wilshire Credit Corporation. On September 1, 2004, Wilshire transferred its interests to Homecomings.
Later in 2004, Homecomings foreclosed on the Axtman loan. On November 2, 2004, a sheriff's sale was held, at which Homecomings purchased the sheriff's certificate. On the same day, Homecomings registered its purchase with the county registrar.
It appears that, at some time between June 29, 2004, and April 11, 2005, Homecomings became aware of Avidigm's interest in the property. On April 11, 2005, Homecomings filed a claim with the county registrar, alleging that it had an interest in the Axtman property that was prior and superior to that of Avidigm. At this time, Homecomings apparently was unaware that Avidigm had conveyed its interest to USFCU. Homecomings' filing of its claim occurred one day before USFCU registered its interest.
In June 2005, Homecomings commenced a civil action against Avidigm seeking a declaration that its interest (which was based on the mortgage originally granted to Wells Fargo) was superior to Avidigm's interest (which was based on the mortgage originally granted to Bremer). Homecomings filed a notice of lis pendens with the county registrar. USFCU was not named as a party to the action. Avidigm did not respond to the summons and complaint. On February 22, 2007, the district court issued an order granting Homecomings' motion for default judgment. The order states that the mortgage originally granted to Wells Fargo (which is the basis of Homecomings' interest) is prior and superior to the mortgage originally granted to Bremer (which is the basis of USFCU's interest).
Meanwhile, on October 18, 2006, USFCU commenced a civil action against Homecomings, Avidigm, and Avidigm's CEO. USFCU sought to recover money damages from Avidigm and its CEO equal to the outstanding balance on the loan. USFCU also sought to obtain a declaration that USFCU's mortgage on the property was superior to all other interests, including that of Homecomings. In March 2007, USFCU and Homecomings filed cross-motions for summary judgment, each arguing that its respective mortgage was superior to that of the other. At a hearing on the motions, at which a different district court judge presided, Homecomings' counsel produced a copy of the order for default judgment in Homecomings' action. It appears that neither the judge in the second case nor USFCU's counsel previously was aware of the ruling of the judge in the first case. On May 25, 2007, the district court issued an order granting USFCU's motion and denying Homecomings' motion. The order states that USFCU interest "is senior and prior to any interest in the Properties claimed by Homecomings."
On August 20, 2007, Homecomings filed a notice of appeal from the judgment entered on the May 25, 2007, order. On September 18, 2007, a sheriff's sale was held to foreclose on the USFCU mortgage, at which USFCU purchased the property, thereby retaining its interest. On October 2, 2007, USFCU filed a motion in the district court to confirm the sheriff's sale. On October 26, 2007, the district court granted the motion but instructed USFCU to not dispose of the proceeds of the sale until the pending appeal was concluded. On December 21, 2007, Homecomings filed a notice of appeal from the judgment entered on the October 26, 2007, order. Homecomings' two appeals have been consolidated.
"On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the [district court] erred in [its] application of the law." State ex rel. Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). A motion for summary judgment shall be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law." Minn. R. Civ. P. 56.03; see also Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). If there are genuine issues of material fact, a reviewing court will reverse the grant of summary judgment and remand for trial. Rosenberg v. Heritage Renovations, LLC, 685 N.W.2d 320, 330 (Minn. 2004).
We first consider Homecomings' argument that USFCU is bound by the decision in Homecomings' action against Avidigm. The district court in USFCU's action concluded that the prior decision had "no legal effect" on USFCU's and Homecomings' cross-motions for summary judgment. Homecomings' argument requires us to apply the doctrine of res judicata, which may preclude a party from relitigating a cause of action in a second lawsuit if:
(1) the earlier claim involved the same set of factual circumstances; (2) the earlier claim involved the same parties or their privities; (3) there was a final judgment on the merits; (4) the estopped party had a full and fair opportunity to litigate the matter.
Brown-Wilbert, Inc. v. Copeland Buhl & Co., 732 N.W.2d 209, 220 (Minn. 2007) (quotation omitted). "Res judicata applies equally to claims actually litigated and to claims that could have been litigated in the earlier action." Id. The applicability of res judicata is a question of law, which is subject to de novo review. Hauschildt v. Beckingham, 686 N.W.2d 829, 840 (Minn. 2004).
In this case, the first element of res judicata is satisfied because the second action concerns "the same set of factual circumstances" as the first action. Id. Likewise, the third element is satisfied because the first action reached a final judgment, and a default judgment may satisfy the third element of res judicata. See Roberts v. Flanagan, 410 N.W.2d 884, 886-87 (Minn. App. 1987) (citing Herreid v. Deaver, 193 Minn. 618, 622, 259 N.W. 189, 191 (1935)).
Nonetheless, the doctrine of res judicata does not bar USFCU's action because Avidigm and USFCU are not in privity with each other. There is no single definition for...
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