Alert April 30, 2013

Minnesota Supreme Court Holds Foreclosure Void

The Supreme Court of Minnesota invalidated a completed foreclosure sale because the mortgage assignment to the defendant, the foreclosing mortgagee, was not recorded until after that defendant commenced proceedings to foreclose by advertisement and sale—a non-judicial foreclosure. Plaintiff, the mortgagor, filed suit alleging, among other things, that defendant failed to strictly comply with the assignment recording requirement under Minnesota law. The trial court granted defendant’s motion to dismiss, finding that a "substantial compliance" standard applied to the statutory requirement for assignment recording prior to foreclosure. However, the appellate court reversed, ruling that a "strict compliance" standard governed all aspects of the foreclosure process, and therefore, the foreclosure was void. Defendant appealed.

In affirming the appellate court ruling, the Supreme Court of Minnesota held that the statute "unambiguously mandates strict compliance." Thus, the Court rejected defendant’s argument that recording the necessary assignments before the sale occurred—though after proceedings were underway—constituted substantial compliance with the statute. Ultimately, because defendant failed to strictly comply with the statutory requirement to record an assignment prior to initiation of foreclosure, the foreclosure was void. This case once again highlights the importance of complying with state-specific requirements for conducting foreclosures, which can vary widely from one jurisdiction to another.