IN COURT OF APPEALS
Real Estate Equity Strategies, LLC,
Michael E. Jones, et al.,
Filed August 8, 2006
Washington County District Court
File No. C0-05-5749
Jack E. Pierce, Tracy Halliday, Pierce Law Firm, P.A., 6040 Earle Brown Drive, Suite 420, Minneapolis, Minnesota 55430 (for respondent);
Kristine K. Nogosek, Robert B. Bauer, Severson, Sheldon, Dougherty & Molenda, P.A., 7300 West 147th Street, Suite 600, Apple Valley, Minnesota 55124 (for appellants);
Leah K. Weaver,
Mid-Minnesota Legal Assistance,
David P. Graham, Michael L. Dolan, Oppenheimer Wolff & Donnelly LLP, 3300 Plaza VII Building, 45 South Seventh Street, Minneapolis, Minnesota 55402 (for amicus curiae Mid-Minnesota Legal Assistance);
Attorney General, Julie Yuki Ralston Aoki, Martin Carlson, Assistant Attorneys
Considered and decided by Hudson, Presiding Judge; Kalitowski, Judge; and Worke, Judge.
S Y L L A B U S
1. An eviction appeal is not moot when the landlord obtains possession of the premises based on a tenant’s involuntary vacation of the premises as a result of an eviction judgment.
2. In an eviction proceeding, a purported tenant’s assertion of a claim to title to the property under Minn. Stat. § 504B.121 (2004) does not deprive the district court of subject-matter jurisdiction to hear the eviction proceeding.
3. A district court hearing an eviction proceeding has discretion to decide whether to stay that proceeding pending resolution of a related action under Minn. Stat. §§ 325N.01–.18 (2004) and does not abuse its discretion by declining to stay the eviction proceeding when the parties seeking to stay the eviction proceeding have other options for seeking to protect any interests they may have in the property at issue.
4. An eviction court’s refusal to stay an eviction proceeding pending resolution of a related rescission action brought under Minn. Stat. §§ 325N.01–.18 (2004) does not necessarily violate chapter 325N.
O P I N I O N
When the mortgage on the home of Michael and Edith Jones (owners) went into foreclosure, they entered an agreement with Real Estate Equity Strategies (REES) and related entities under which owners purportedly sold their home to a REES-related entity and leased it back with an option to purchase. Owners later defaulted on the lease and REES filed an eviction action against owners. Owners filed a separate equity-stripping action against REES and the related entities under Minn. Stat. §§ 325N.01–.18 (2004) (hereinafter chapter 325N). Owners also filed an answer in the eviction proceeding noting the pendency of the chapter 325N action and moved for the district court to dismiss the eviction proceeding or to stay it pending resolution of the chapter 325N action. The district court denied that motion and awarded REES an eviction judgment. Owners appeal, arguing that the district court should have dismissed or stayed the eviction proceeding. REES argues that because owners are no longer in possession of the property, the appeal is moot. Because the appeal is not moot and because the district court properly applied the law and did not abuse its discretion in declining to stay the eviction proceeding, we affirm.
In spring 2005, the mortgage on owners’ home was in foreclosure. In May, owners entered an agreement with REES, under which owners purportedly sold their home to a REES-related entity and leased it back, with an option to repurchase the home after making a limited number of timely lease payments. Part of owners’ incentive to enter the arrangement was that some of the equity in their home could be used to pay debts while their payments on the lease were supposed to be approximately what the payments had been under the mortgage that was in foreclosure. The sale-lease-back transaction closed in early June.
After the closing, owners learned that their lease payment would be substantially greater than their mortgage payment had been. Owners defaulted on the REES lease, and REES filed an eviction action against owners. Owners responded by filing (a) an equity-stripping action under chapter 325N against REES and the related entities, alleging, among other things, equity stripping by REES and the related entities, that the parties’ arrangement was not an actual conveyance of the home but an equitable mortgage, and that any agreement between owners and the REES entities should be rescinded; (b) an answer in the eviction proceeding asserting the pendency of the chapter 325N action; and (c) a motion in the eviction proceeding asking the eviction court to dismiss the eviction proceeding or to stay that proceeding pending resolution of the chapter 325N action. The eviction court denied owners’ motion to dismiss or stay the proceeding, and, after a trial in which owners admitted that they defaulted on the REES lease, granted REES an eviction judgment.
appeal. REES argues that because owners
vacated the property, the appeal is now moot.
Also, Mid-Minnesota Legal Assistance and the State of
I. Is this appeal moot because REES has possession of the property?
II. Does the assertion of a claim to title by owners deprive the district court of subject-matter jurisdiction to hear the eviction proceeding?
III. Did the district court abuse its discretion by not staying the eviction proceeding because of the pendency of owners’ action brought under chapter 325N?
IV. Did refusing to stay or dismiss the eviction proceeding contravene chapter 325N?
argues that under Lanthier v. Michaelson,
394 N.W.2d 245, 246 (Minn. App. 1986), review
denied (Minn. Nov. 26, 1986), this appeal is moot because REES now has
possession of the property. In a prior
appeal in which Lanthier was cited for this proposition, this court
distinguished Lanthier by noting that
it involved a voluntary vacation of the premises and rejected the argument: “Where a landlord’s right to possession of
property rests only on an unlawful detainer judgment, execution of the
associated writ of restitution does not moot an appeal of the underlying
judgment.” Scroggins v. Solchaga, 552 N.W.2d 248, 252–53 (Minn. App. 1996)
(citing Pushor v. Dale, 242
Steele vs. Bond, 28 Minn. 267, 9 N.W.
772 (1881), states that unlawful-detainer proceedings are “summary and special
in their nature,” that the unlawful-detainer statutes are to be “construed . .
. to apply only to the conventional relation of landlord and tenant[,]” and
that “[t]he foundation[al] fact upon which the jurisdiction [of the court]
rests [in unlawful-detainer proceedings] is that the tenant is in possession of
the land in consequence and by virtue of [the landlord-tenant] relation, and
unlawfully withholds possession after a default in the performance of the terms
upon which he entered . . . .” 28
While Minn. Stat. § 504B.121 was not cited to the district court for any purpose, questions of subject-matter jurisdiction may be raised for the first time on appeal. Cochrane v. Tudor Oaks Condo. Project, 529 N.W.2d 429, 432 (Minn. App. 1995), review denied (Minn. May 31, 1995); see Minn. R. Civ. P. 12.08(c) (stating “[w]henever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action”).
jurisdiction is “a court’s power to hear and determine cases of the general
class or category to which the proceedings in question belong[,]” and whether
subject-matter jurisdiction exists is reviewed de novo. Bode v.
Minn. Dep’t of Natural Res., 594 N.W.2d 257, 259 (Minn. App. 1999) (quotation
omitted) (defining subject-matter jurisdiction), aff’d, 612 N.W.2d 862 (
Steele was decided in 1881 and involved
an unlawful-detainer appeal from a St. Paul Municipal Court. 28
[J]ustices’ courts are not appropriate tribunals for the administration of equity jurisprudence, and the course of proceedings therein is not adapted to administer equitable relief; nor can it be construed to confer power or jurisdiction to try disputed questions of title to real estate, because the constitution expressly withholds the exercise of such power from justices of the peace.
Steele, the legal landscape for
landlord-tenant disputes has changed.
Among other things, in 1898, the supreme court ruled in an ejectment
action that “a lessee cannot deny the title of his landlord, and this rule
applies whether the tenant was in possession before the lease was made or
not.” Sage v. Halverson, 72
1899 statute, with renumerations and minor amendments, is the current Minn.
Stat. § 504B.121 upon which amici base their argument that a tenant’s
title challenge under Minn. Stat. § 504B.121 deprives the district court
of subject-matter jurisdiction to hear an eviction proceeding. The current version of the statute allows a
tenant to challenge a landlord’s title “in an action brought by the landlord to
recover possession of the property” if “prior to entering into the lease, [the
tenant] possessed the property under a claim of title that was adverse or
hostile to that of the landlord.”
changes in the legal landscape for landlord-tenant disputes occurred when the
This background for eviction proceedings shows that the limited scope of those proceedings is a result of the summary nature of the prior unlawful-detainer proceedings as well as the fact that, originally, the tribunals hearing unlawful-detainer proceedings lacked both jurisdiction to address title matters and jurisdiction to act in equity. The summary nature of the eviction proceeding remains. Minn. Stat. § 504B.001, subd. 4. The title-related and equity-related jurisdictional limitations of the tribunals hearing those matters, however, have been removed. Therefore, any current limitation on the scope of eviction proceedings is a function of the summary nature of the proceeding, not a limit on the ability of the court to “hear and determine” the action, per Bode’s definition of subject-matter jurisdiction. Alternatively stated: That unlawful-detainer proceedings did not, and eviction proceedings do not, address matters other than the immediate right to possession of the property was and is a general rule, not a universally applicable axiom. Cf. Lilyerd v. Carlson, 499 N.W.2d 803, 812 (Minn. 1993) (stating “[w]hile an unlawful detainer action is generally summary in nature, determines only present possessory rights, and usually does not bar subsequent actions involving title or equitable rights of the parties, the counterclaim here could have been tried to a jury” (emphasis added) (citations omitted)); AMRESCO Residential Mortgage Corp. v. Stange, 631 N.W.2d 444, 445 (Minn. App. 2001) (noting, in eviction proceeding, that “the Minnesota Supreme Court has suggested in dicta that, even though [unlawful-detainer] proceedings are usually summary in nature, a counterclaim involving title should have been heard in an eviction proceeding to avoid the problems that later arose in a separate title action” (citing Lilyerd)). Because the current limits on the scope of eviction proceedings are not based on an inability of the district court to adjudicate disputes other than the right to present possession of the premises, a tenant who challenges a landlord’s title pursuant to Minn. Stat. § 504B.121 does not deprive the district court of subject-matter jurisdiction to hear the eviction proceeding.
argue that the district court should have stayed or dismissed the eviction
proceeding to allow owners’ chapter 325N action to be resolved before the
eviction proceeding was resolved.
Generally, whether to stay a proceeding is discretionary with the
district court, its decision on the issue will not be altered on appeal absent
an abuse of that discretion, and the test for whether an abuse of discretion
occurs is “whether a denial of a continuance would prejudice the outcome of the
trial.” Lanzo v. F & D Motor Works, 396 N.W.2d 631, 635 (
A. Minn. Stat. § 504B.121
Owners argue that, based on the exception in Minn. Stat. § 504B.121 (2004) and “the evidence received at trial regarding the true legal relationship of the parties, the district court erred[ ] in its determination that a pure landlord-tenant relationship existed and that [REES] was entitled to possession.” While the question of a stay or dismissal was presented to the district court, the record shows that Minn. Stat. § 504B.121 was not mentioned, either as the basis for a stay or a dismissal, or for any other reason. Therefore, we conclude that the impact of Minn. Stat. § 504B.121 on the question of whether the eviction court should have stayed the eviction proceeding is not properly before this court, and we decline to address it. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that generally appellate courts consider only issues presented to and considered by the district court and that a party cannot “obtain review by raising the same general issue litigated below but under a different theory” on appeal). Our conclusion here is not meant to trivialize the extent or import of the problem of equity-stripping. Likewise, we take no position on whether, or to what extent, equity-stripping may have occurred here.
B. Loss of Premises
Citing language in the original bill that later became chapter 325N and language from a summary of the proposed chapter 325N provided to the legislature by the House Research Committee, owners challenge the eviction court’s refusal to stay or dismiss the eviction action, alleging that
[o]nce the foreclosed homeowner is dispossessed of their home, the foreclosure purchaser is in control of the property and may either re-let the property, or worse, sell the property to a good faith purchaser. The effect of a conveyance of the property from the foreclosure purchaser to a good faith purchaser, by statute prohibits the foreclosed homeowner from affecting the rights of the good faith purchaser in the property. Minn. Stat. § 325N.18, subd. 3.[]
The crux of this argument seems to be owners’ assumption that if REES prevails in the eviction proceeding and conveys the property before the resolution of owners’ action under chapter 325N, Minn. Stat. § 325N.18 (2004) could leave owners without an ability to recover the property in the event owners prevail in their chapter 325N action.
relevant part of Minn. Stat. § 325N.18, subd. 3, states that “[n]o action
under this section shall affect the rights in the foreclosed property held by a
good faith purchaser for value under [statutory provisions not at issue here],
or other applicable law.” While we
cannot definitively comment on a transaction that is not currently before us
for review, we note that, in addition to asking the eviction court to stay the
eviction proceeding, owners appear to have had other options for protecting
their alleged interests in the property, including the filing of a notice of
lis pendens regarding their chapter 325N action. Cf.
Minn. Stat. § 557.02 (2004) (explaining impact of notice of lis pendens); Miller v. Hennen, 438 N.W.2d 366, 369 (
Amici argue that allowing an eviction proceeding to finish before a chapter 325N action is resolved is inconsistent with chapter 325N because allowing the eviction proceeding to go forward allows the landlord, who may, in the chapter 325N action, be found to lack title to the property, to obtain possession of the property and possibly convey it. But amici’s argument does not address the tenant’s opportunities to (a) file a notice of lis pendens; (b) ask the chapter 325N district court to enjoin pursuit of the eviction proceeding; (c) recover compensatory damages in the chapter 325N action; (d) recover exemplary damages in the chapter 325N action, which, under Minn. Stat. § 325N.18, subd. 2 (2004), “shall not be less than 1-1/2 times the foreclosed homeowner’s actual damages”; or (e) seek any other remedy available to the tenant as allowed by Minn. Stat. § 325N.18, subd. 3 (2004). Moreover, to the extent that the district court hearing a chapter 325N action has the information relevant to that action, that district court would be ideally situated to decide whether, to what extent, and under what conditions, to enjoin a related eviction proceeding. Case-by-case determinations of whether to enjoin pursuit of eviction proceedings are both judicially more efficient (because the decision-maker may have more information and a broader spectrum of issues before it) and more consistent with honoring the summary nature of eviction proceedings. We decline to adopt a universal requirement that eviction proceedings be stayed whenever a claim is asserted under chapter 325N.
D E C I S I O N
Because owners vacated the property only to avoid imminent enforcement of the eviction judgment, this appeal is not moot. Also, the fact that owners raised a title question in this eviction proceeding, under Minn. Stat. § 504B.121, does not deprive the district court of subject-matter jurisdiction to address the eviction proceeding. Finally, because owners apparently had ways to protect their alleged interests in the property other than obtaining a stay of the eviction proceeding from the eviction court, owners have not shown that the eviction court abused its discretion by declining to stay that proceeding or otherwise acted in a manner contrary to chapter 325N.
 Because the questions are not squarely before us in this appeal, we decline to comment on the fact that it was not until chapter 504B became effective that what is Minn. Stat. § 504B.121 was put into the same chapter as what are the current eviction provisions and that neither Minn. Stat. § 504B.121 nor its predecessors have been previously cited in an eviction/unlawful-detainer proceeding.
 See, e.g., Gallagher v. Moffet, 233 Minn. 330, 333, 46 N.W.2d 792, 793 (1951) (stating that unlawful-detainer proceeding “merely determines the right to present possession and does not adjudicate the ultimate legal or equitable rights of ownership possessed by the parties”); Keller v. Henvit, 219 Minn. 580, 585, 18 N.W.2d 544, 547 (1945) (stating that unlawful-detainer provisions were “not designed to try title or to serve as a substitute for ejectment. Instead, these provisions were intended to prevent parties from taking the law into their own hands”).
 Because Steele is stale regarding jurisdiction,
we need not address owners’ Steele-based
argument that the lack of a conventional landlord-tenant relationship precluded
the district court from proceeding with the eviction action. Owners cite Beecher v. Spain, 140
 Owners admit that the language they cite from the prior version of the bill was not included in the bill that was ultimately enacted.