The Bank of New York Mellon, f/k/a The Bank of New York, as Trustee for The Certificateholders of CWABS Inc., Asset-backed Certificates, Series 2007-6 v. Alan G. Keiran, Provincial Bank

• Court: Court of Appeals of Minnesota
• Decided: April 6, 2015
• Docket: A14-304,A14-620
• Status: Published

Opinion

STATE OF MINNESOTA IN COURT OF APPEALS A14-0304 A14-0620

The Bank of New York Mellon, f/k/a The Bank of New York, as Trustee for The Certificateholders of CWABS Inc., Asset-backed Certificates, Series 2007-6, Respondent,

vs.

Alan G. Keiran, et al., Appellants,

Provincial Bank, et al., Defendants.

Filed April 6, 2015 Reversed and remanded Schellhas, Judge

Dakota County District Court File No. 19HA-CV-11-6412

Christina M. Snow, David R. Mortensen, Wilford, Geske & Cook, P.A., Woodbury, Minnesota (for respondent)

Jeramie Richard Steinert, Steinert, P.A., Minneapolis, Minnesota (for appellants)

Considered and decided by Schellhas, Presiding Judge; Stauber, Judge; and

Hooten, Judge.

SYLLABUS

A district court may not grant summary judgment based on a party’s failure to

satisfy the conditions of a court-ordered bond required to stay foreclosure proceedings

unless the court first determines that no genuine issue of material fact exists. OPINION

SCHELLHAS, Judge

In this mortgage foreclosure case, appellants argue that summary judgment cannot

withstand de novo review. We reverse and remand for further proceedings consistent

with this opinion.

FACTS

Appellants Alan and Mary Jane Keiran own real property located at 7820 200th

Street West, Lakeville, Minnesota. On December 30, 2006, Keirans granted Home

Capital Inc. a mortgage against the property to secure payment of a $404,000 promissory

note signed by Alan Keiran. BAC Home Loan Servicing LP, a subsidiary of Bank of

America, was Home Capital’s servicing agent. Home Capital assigned the promissory

note to Countrywide Home Loans Inc., and the note was subsequently assigned to

respondent Bank of New York Mellon (BNY Mellon). BAC remained the servicing

agent. On August 4, 2011, Mortgage Electronic Registration Systems Inc., as Home

Capital’s nominee, assigned the mortgage to BNY Mellon.

Meanwhile, Keirans ceased making payments on the mortgage loan and, on

October 8, 2009, sent Home Capital and BAC letters, purporting to rescind the mortgage

loan on the bases that they were not provided “[s]ufficient correct copies of a Truth in

Lending Disclosure Statement . . . in a manner [they] could retain” and that “[they] did

not receive the correct Truth in Lending Disclosure Statements.” Keirans alleged that

“failure to provide effective notice of these mandatory disclosures effectively extend[ed

their] rescission rights.” On January 7, 2010, BAC sent Keirans a letter, enclosing copies

2 of various documents and informing Keirans that their “request to rescind the mortgage

loan transaction [wa]s denied.”

In October 2010, Keirans sued Home Capital, BAC, and BNY Mellon in federal

district court, alleging violations of the Truth in Lending Act and seeking a declaration

that their rescission is valid, termination of any security interest in the property, an

injunction against non-judicial foreclosure proceedings, and monetary damages. The

defendants moved for summary judgment, and on November 30, 2011, the federal district

court granted the defendants’ motion on the basis that Keirans failed to commence their

lawsuit prior to the end of the three-year period of repose under 15 U.S.C. § 1635(f).

Keirans appealed the summary judgment to the United States Court of Appeals for the

Eighth Circuit.

While Keirans’ appeal in the Eighth Circuit was pending, BNY Mellon

commenced a foreclosure by action against Keirans in state district court, seeking a

monetary judgment, a decree of foreclosure, and a deficiency judgment. Keirans

answered, moved for a stay of proceedings pending their appeal to the Eighth Circuit, and

asserted as affirmative defenses their rescission of the mortgage loan, res judicata, and

collateral estoppel. BNY Mellon moved for summary judgment, and Keirans responded

to the motion, arguing that they had successfully rescinded the mortgage loan. Keirans

requested that the state district court either deny BNY Mellon’s motion or stay the

proceedings and order Keirans “to post a reasonable bond consistent with the fair market

rental value of the property, or some other reasonable monthly mortgage-like payment in

an amount to be determined by the Court.” On December 13, 2012, the court denied BNY

3 Mellon’s motion for summary judgment, stayed the proceedings until the Eighth Circuit

issued an opinion, and ordered Keirans to “pay a monthly bond in the amount of

$4,020.80 while the stay is in effect.”

On July 12, 2013, the Eighth Circuit affirmed the federal district court’s grant of

summary judgment; subsequently, BNY Mellon again moved for summary judgment in

state district court. At a hearing on October 14, Keirans requested a continuance, advising

the court that they intended to petition for certiorari review by the United States Supreme

Court and had obtained an extension to file their petition. The court granted a

continuance and scheduled a status hearing for January 3, 2014. The court also addressed

Keirans’ failure to pay the monthly bond amount, stating that “if the bond is not posted,

we’re done.” And in an order filed October 14, the court stated that Keirans must “pay

the outstanding bond balance of monthly bond in the amount of $40,208 by

November 15, 2013” and that “[f]ailure to make payment by November 15, 2013 will

result in the lifting of the stay ordered on December 7, 2012.” Also at the October 14,

2013 hearing, the court granted leave to BNY Mellon to amend its complaint to include a

homestead-designation notice, required under Minn. Stat. § 582.041, subd. 2 (2014),

which was omitted from the original complaint.1 Keirans stipulated to the amended

complaint.

1 We cite the most recent version of this statute because it has not been amended in relevant part. See Interstate Power Co. v. Nobles Cnty. Bd. Of Comm’rs, 617 N.W.2d 566, 575 (Minn. 2000) (stating that, generally, “appellate courts apply the law as it exists at the time they rule on a case”).

4 Keirans failed to pay the outstanding bond amount, and on December 20, 2013,

the district court lifted the stay of the foreclosure proceedings and granted BNY Mellon

summary judgment. By letter, dated February 10, 2014, BNY Mellon moved for a

corrected order under Minn. R. Civ. P. 60.01 and submitted a proposed amended order,

judgment, and decree to the court. On February 10, the court adopted BNY Mellon’s

proposed amended order, judgment, and decree verbatim, along with paragraph

numbering errors and factual findings supported by affidavits attached to BNY Mellon’s

motion. BNY Mellon mailed its motion to Keirans, who claim that they did not receive

notice of the motion until after the court had signed the amended order, judgment, and

decree. Keirans separately appealed the December 20, 2013 judgment and the

February 10, 2014 amended judgment. This court has consolidated the appeals.

On January 20, 2015, the United States Supreme Court granted certiorari review of

the Eighth Circuit’s opinion affirming summary judgment, vacated judgment, and

remanded to “the Eighth Circuit for further consideration in light of Jesinoski v.

Countrywide Home Loans, 574 U.S. ___, 135 S. Ct. 790, 190 L.E.2d 650 (2015).” Keiran

v. Home Capital, Inc., 135 S. Ct. 1152, 1152 (Jan. 20, 2015). In Jesinoski, the Supreme

Court determined “that rescission is effected when the borrower notifies the creditor of

his intention to rescind. It follows that, so long as the borrower notifies within three years

after the transaction is consummated, his rescission is timely. The statute does not also

require him to sue within three years.” 135 S. Ct. 790, 792.

ISSUES

I. Did the district court properly exercise jurisdiction in this case?

5 II. Did the district court err by entering summary judgment against Keirans upon their failure to satisfy the conditions of the court-ordered bond without first determining that no genuine issue of material fact exists?

ANALYSIS

“Summary judgment is appropriate when the evidence, viewed in the light most

favorable to the nonmoving party, establishes that no genuine issue of material fact exists

and that the moving party is entitled to judgment as a matter of law.” Citizens State Bank

Norwood Young Am. v. Brown, 849 N.W.2d 55, 61 (Minn. 2014); see also Minn. R. Civ.

P. 56.03. “[Appellate courts] review de novo a district court’s grant of summary

judgment,” Dukowitz v. Hannon Sec. Servs., 841 N.W.2d 147, 150 (Minn. 2014),

“determin[ing] whether any genuine issues of material fact exist and whether the district

court erred in its application of the law,” Bearder v. State, 806 N.W.2d 766, 770 (Minn.

2011) (quotation omitted).

I.

Keirans argue that both the federal lawsuit and state lawsuit are, at least in part, in

rem proceedings and that under the doctrine of prior exclusive jurisdiction, the state

district court had no jurisdiction over the property because the federal lawsuit

commenced first. “Jurisdiction is a question of law, which [appellate courts] review de

novo.” Schatz v. Interfaith Care Ctr., 811 N.W.2d 643, 653 (Minn. 2012).

[I]f . . . two suits are in rem or quasi in rem, requiring that the court or its officer have possession or control of the property which is the subject of the suit in order to proceed with the cause and to grant the relief sought, the jurisdiction of one court must of necessity yield to that of the other. To avoid unseemly and disastrous conflicts in the administration of our dual judicial system, and to protect the judicial processes of

6 the court first assuming jurisdiction, the principle, applicable to both federal and state courts, is established that the court first assuming jurisdiction over the property may maintain and exercise that jurisdiction to the exclusion of the other.

Penn Gen. Cas. Co. v. Commonwealth of Pa. ex rel. Schnader, 294 U.S. 189, 195, 55 S.

Ct. 386, 389 (1935) (citations omitted).

Keirans’ argument fails because it rests on an incorrect premise. In Minnesota, “an

action to foreclose is not an action in rem.” Whalley v. Eldridge, 24 Minn. 358, 361

(1877). On the contrary, the supreme court has held that “an action to foreclose is one in

personam,” although “in a sense it is in the nature of a proceeding in rem, because it has

for its object the enforcement of the lien of the mortgage on specific property.” Winne v.

Lahart, 155 Minn. 307, 310, 193 N.W. 587, 589 (1923); see also JPMorgan Chase Bank,

N.A. v. Erlandson, 821 N.W.2d 600, 606 (Minn. App. 2012) (“A mortgage foreclosure by

action requires a judicial decree and approval of sale and is an in personam proceeding,

although it is in the nature of a proceeding in rem since its purpose is to enforce a lien on

the mortgaged property.” (quotation omitted)). Because BNY Mellon’s foreclosure action

in state district court is in personam under Minnesota law, the doctrine of prior exclusive

jurisdiction is inapplicable. The district court therefore did not err by exercising

jurisdiction.

II.

Keirans argue that the district court erred by granting summary judgment because

BNY Mellon failed to show an absence of genuine issues of material fact. The court

granted summary judgment to BNY Mellon upon Keirans’ failure to satisfy the

7 conditions of the court-ordered bond, without determining that no genuine issue of

material fact exists under Minn. R. Civ. P. 56. “The interpretation of the rules of civil

procedure . . . is a question of law that [appellate courts] review de novo.” TC/Am.

Monorail, Inc. v. Custom Conveyor Corp., 840 N.W.2d 414, 417–18 (Minn. 2013).

“Judgment shall be rendered forthwith if 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. As the supreme court has

explained, for a district court to enter summary judgment, “the court must determine on

the basis of all the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the filed affidavits, if any, that there is no genuine issue as to any

material fact.” Schmidt v. Smith, 299 Minn. 103, 106–07, 216 N.W.2d 669, 671 (1974)

(emphasis added).

In this case, neither the district court’s original order for summary judgment nor its

order of amended judgment contains any indication that the court determined that no

genuine issue of material fact exists. Rather, both judgments, along with the court’s

statement during the October 14, 2013 hearing—“if the bond is not posted, we’re

done”—suggest that the court’s singular basis for entering summary judgment against

Keirans was their failure to satisfy the court-ordered bond requirement. We conclude that

the district court erred. Our conclusion is informed by Barton v. Pfaff, 326 N.W.2d 12, 12

(Minn. 1982), in which the district court granted summary judgment to the plaintiff but,

before entry of judgment, determined that a fact issue existed. Barton, 326 N.W.2d at 12.

8 The court therefore “set the matter on for hearing, upon the condition that the defendant

post a bond in the amount of $35,000.” Id. (emphasis added). When the defendant failed

to post the bond, the court entered judgment for the plaintiff. Id. The supreme court

reversed and remanded, concluding that “[o]nce the trial judge determined that there was

a factual dispute, summary judgment could not be entered.” Id.

Failure to satisfy a bond condition required to stay foreclosure proceedings is not

alone a sufficient basis upon which to grant summary judgment on the merits. We

conclude that the district court erred by granting summary judgment upon Keirans’

failure to satisfy the conditions of the bond without first determining that no genuine

issue of material fact exists.

Keirans raise various other issues. Because we are reversing and remanding this

case to the district court on other grounds, we need not reach those issues.

DECISION

The district court properly exercised jurisdiction in this case but erred by granting

summary judgment in favor of BNY Mellon without first determining that no genuine

issue of material fact exists. We therefore reverse and remand for further proceedings

consistent with this opinion.

Reversed and remanded.