This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Mortgage One, Inc.,
(Assignee of and Successor in Interest to Wells Fargo Home Mortgage, Inc.),
Michelle R. Newton, a/k/a Michelle R. Newton-Witkowski,
John Doe, et al.,
Filed November 8, 2005
Affirmed in part, reversed in part, and remanded
Anoka County District Court
File No. C9-00-10025
Gary B. Bodelson,
Christopher E. Brevik,
Michelle R. Newton,
Considered and decided by Dietzen, Presiding Judge; Klaphake, Judge; and Crippen, Judge.*
Appellant Mortgage One, Inc. challenges the district court’s order and judgment denying its motion for attorney fees, costs and disbursements, and late fees; and its order that appellant modify its notice of lis pendens and the record of the mortgage. Appellant argues that the previous decisions of this court in this case entitle it to attorney fees, costs and disbursements, and late fees; and that the district court abused its discretion in requiring it to modify its notice of lis pendens and the record of the mortgage. By notice of review, respondent Theodore Witkowski contends that the district court improperly calculated the principal amount of the mortgage, interest, and insurance premiums owed to appellant. Because the district court did not abuse its discretion in denying late fees, and in concluding that the mortgage lien should include accrued interest and insurance premiums paid by appellant, we affirm those determinations. Because the district court failed to follow our previous decision regarding attorney fees, costs and disbursements, and modification of the lis pendens and record of the mortgage, we reverse those determinations, and we remand for entry of judgment consistent with this opinion.
Appellant Mortgage One, Inc. is the assignee of a promissory note and home mortgage executed by respondent Michelle Newton-Witkowski. Respondent Newton-Witkowski is the former wife of respondent Theodore Witkowski. Ms. Newton-Witkowski entered into a contract for deed to purchase a home prior to their marriage. During the marriage, the couple lived together in the home. The couple later separated, and during that time, Newton-Witkowski borrowed $116,600 and executed a promissory note and a mortgage for the home to secure the note, all without the knowledge of her husband. Witkowski was later awarded the mortgaged home property in the divorce decree. The mortgage payments went into default, and the predecessor in interest to appellant, Wells Fargo Home Mortgage, Inc. (Wells Fargo), brought a foreclosure by action against respondents under Minn. Stat. §§ 581.01–.12. Appellant challenges the amount of a purchase-money mortgage and other add-on amounts.
The Loan Documents
The loan documents include the mortgage and, inter alia, a promissory note. The promissory note was in the principal amount of $116,600. It sets forth a monthly payment amount based on a 30-year amortization schedule. It reserves to the lender the right to change the monthly payment amount. It also contains various remedies in favor of the lender upon default by the borrower, including recovery of attorney fees, costs and disbursements, and late fees. In the event of default, the mortgage, among other things, secures the debt against the property, sets forth various remedies, and incorporates most of the terms and conditions of the promissory note.
This dispute has been the subject of several appeals to this court. Originally, Wells Fargo sought a declaration that the mortgage was a purchase-money mortgage, and that it had the right to its mortgage lien in the amount of $108,856.24. On November 13, 2000, Wells Fargo filed a notice of lis pendens, which set forth the names of the parties and a legal description of the property, and stated that (1) the object of the action was to foreclose a mortgage by action together with other proposed relief; and (2) a personal judgment was sought only against Michele R. Newton.
Theodore Witkowski contended that he had no obligation to Wells Fargo because
he did not sign the loan documents. The
district court agreed. On appeal, this court held that Wells
Fargo had a valid purchase-money mortgage, but that Wells Fargo could only
recover $55,034.74 under the mortgage, the portion of the funds secured by the
mortgage that were used to pay off the contract for deed, because Witkowski did
not sign the loan documents. Wells Fargo Home Mortgage, Inc. v. Newton, 646 N.W.2d 888, 899–900
(Minn. App. 2002), review denied (
On remand, appellant Mortgage One, Inc., the
successor in interest to Wells Fargo, sought recovery of the unpaid principal of
the purchase-money mortgage, plus interest, attorney fees, costs, and late fees. Respondent contended that only the unpaid
principal amount could be collected by foreclosure on the mortgage. The district court granted summary judgment
to appellant on the mortgage lien, but limited the amount of the lien to
$55,034.74. On appeal, this court concluded
that in addition to the principal due under the purchase-money mortgage,
appellant was entitled to recover interest, attorney fees, and “other amounts
compensable under the terms of the mortgage.” Mortgage
One, Inc. v.
On remand, appellant again sought recovery of the unpaid principal of the purchase-money mortgage, plus interest, attorney fees, costs, and late fees. Respondent countered that it did not owe anything beyond the principal amount. The district court adjusted the mortgage lien to $84,439.27, concluding appellant was entitled to recover the unpaid principal, accrued interest, unpaid property taxes, and insurance premiums paid by appellant. But the district court denied appellant’s claims for recovery of late fees, attorney fees, and costs and disbursements. The district court also ordered appellant to modify its notice of lis pendens and the record of the mortgage to limit the amount of the mortgage lien to the principal amount of $55,034.74. This appeal follows.
D E C I S I O N
Appellant raises two issues on appeal. First, appellant contends that the district court erred by excluding attorney fees, costs, and late fees from the mortgage lien. Respondent contends that he is not obligated to pay anything other than $55,034.74, which is the principal amount of the mortgage as previously determined by this court.
that the district court abused its discretion in denying it attorney fees
because the last decision of this court resolved the issue in its favor. “On review, this court will not reverse a
trial court’s award or denial of attorney fees absent an abuse of
discretion.” Becker v. Alloy Hardfacing & Eng’g Co., 401 N.W.2d 655, 661 (
The district court awarded no attorney fees to appellant, reasoning that (1) appellant “blunder[ed]” in failing to investigate representations made by respondent Newton-Witkowski during the mortgage application process and is thus responsible for the excessive litigation in this case; (2) an award of any attorney fees would be excessive and inequitable in relation to the amount of the mortgage lien; and (3) respondent “is the prevailing party in this matter since less than one-half of the mortgage amount originally claimed by [Wells Fargo] was determined to be valid.”
But this court
previously decided that the promissory note and the mortgage instrument do
provide for attorney fees with no prerequisite that Mortgage One demonstrate
that is the “prevailing party.” See
Mortgage One, Inc. v.
Here, the district
court failed to consider the factors necessary to determine the reasonableness
of attorney fees. These factors include
(1) time and labor required; (2) the nature and
difficulty of the responsibility assumed; (3) the amount involved and the
results obtained; (4) the fees customarily charged for similar legal services;
(5) the experience, reputation, and ability of counsel; and (6) whether the fee
arrangement existing between counsel and the client is fixed or
Although the district court did not award attorney fees, it did conclude that appellant had incurred $28,840.50 in attorney fees. Appellant’s attorney, who had practiced law for 24 years, billed appellant at a rate of $75 per hour. Because the amount of attorney fees has been the subject of a previous appeal, we see no useful purpose in remanding for the district court to apply the Carlson factors. Applying the Carlson factors to the record, we conclude that appellant is entitled to attorney fees in the amount of $28,840.50. See id. Therefore, on remand the district court shall award appellant $28,840.50 in attorney fees.
Appellant also seeks attorney
fees for the appeal. When district court fees are authorized, a party is also
entitled to appellate fees to avoid dilution of the district court award. Anderson
v. Hunter, Keith, Marshall & Co., Inc., 401 N.W.2d 75, 83 (Minn.
App. 1987), aff’d in part, rev’d in part
on other grounds, 417 N.W.2d 619 (
Costs and Disbursements
Appellant also argues that
it is entitled to its costs and disbursements for the foreclosure action. Decisions regarding the amount of
costs and disbursements are generally reviewed for abuse of discretion. Kellar
v. Von Holtum, 605 N.W.2d 696, 703 (
Like attorney fees, costs and disbursements are recoverable under the terms of the mortgage instrument. Paragraph 7(E) of the promissory note, which is incorporated into the mortgage instrument, provides that appellant shall be entitled to recover its costs and disbursements incurred in enforcing the note and the mortgage without regard to who is the prevailing party. Consequently, appellant is entitled to costs and disbursements. The district court found that appellant incurred $2,544.47 in costs and disbursements. This amount is not in dispute. On remand, the district court shall in its judgment award appellant $2,544.47 for costs and disbursements.
Appellant argues that it is
entitled to late fees. The issue of
whether to award late fees is governed by the unambiguous terms of the mortgage
and is, therefore, reviewed de novo by this court. See Trondson v. Janikula, 458 N.W.2d 679, 681 (
Appellant failed to recalculate a new monthly payment amount after this court determined that appellant had a reduced mortgage lien in the principal amount of $55,034.74. Respondent argued, and the district court agreed, that absent a recalculation of the monthly payment amount and a demand for payment, appellant is not entitled to recover late fees under the loan documents. We agree.
Although the mortgage does provide for late fees, paragraph 7(C) of the promissory note, which is incorporated into the mortgage, provides that respondent must give notice of changes in monthly payment amounts to appellant. Here, the district court found that after the first remand, appellant failed to notify respondent of the new monthly payment amount and failed to demand payment of late fees. Appellant does not challenge these findings.
Although the record before us is sparse, we conclude that the district court did not abuse its discretion. The loan documents placed the obligation on appellant to provide the new monthly payment amount. Without a new monthly payment amount, it is impossible to calculate late fees. And appellant’s failure to give notice of late fees precludes it from recovering such fees.
contends it is owed late fees because the mortgage lien is on the property and,
therefore, it was not required to give notice of the revised payment schedule
or of late fees. But appellant sought to
enforce the terms of the mortgage by a foreclosure action in the previous
litigation, and this court held there was a valid purchase-money mortgage based
on the terms of the loan documents.
The second issue raised
by appellant relates to the district court’s order that appellant modify the
notice of lis pendens and the record of the mortgage. The procedures governing a notice of lis
pendens are set forth in Minn. Stat. § 557.02 (2004). Interpretation of the meaning of a statute is
a question of law which this court reviews de novo. See
The district court order stated that “[t]he Notice of Lis Pendens shall be modified to reflect that there exists a mortgage lien against the subject property in the amount of $89,439.27.” This amount includes $55,034.74 for principal, plus interest and insurance premiums that the district court concluded were recoverable under the mortgage. The district court order also instructed appellant to “modify the record of the mortgage” to reflect the new mortgage lien amount. The district court did not explain the basis for its modification orders.
Appellant contends that the district court’s order to modify the notice of lis pendens was inconsistent with this court’s February 2004 decision and otherwise lacked legal basis. Respondent states that while there is no statutory requirement that the amount at issue be indicated on the notice of lis pendens, this court remanded the issue to the district court to make a determination as to how the record should be corrected.
The purpose of a notice of
lis pendens is to protect the
litigating party (here, Mortgage One, Inc.) from having a third party take an
interest in the property without necessarily being subject to the result of the
litigation. Chaney v.
When any pleading is amended in such action, so as to alter the description of, or to extend the claim against, the premises affected, a new notice may be filed, . . . and may be discharged by an entry to that effect in the margin of the record by the party filing the [lis pendens].
Minn. Stat. § 557.02 (emphasis
added); see also Minn. Stat.
§ 645.44, subd. 15 (defining “may” as permissive) (2004). The statute provides that the filer may file
a new notice of lis pendens for certain reasons and discharge the notice for
other reasons. But it contains no
provision to amend the notice. See
The district court ordered that the notice of lis pendens be amended to reflect the new principal amount of the mortgage lien. Implicit in the district court order is its conclusion that the present lis pendens was in need of correction or clarification. But the lis pendens is not in need of correction. The lis pendens simply states the parties’ names, a legal description of the property, and that its object is foreclosure by action. Each of those statements is accurate. The lis pendens, as written, does not include the original amount of the mortgage. Consequently, it is not necessary to amend the lis pendens, and the district court abused its discretion in ordering that appellant modify the notice of lis pendens.
Record of the Mortgage
also argues that the district court erred in ordering it to “modify the record
of the mortgage” to reflect the revised lien amount of $89,439.27. Further, appellant contends that it does not
know what the district court means by “modify the record of the mortgage.” Respondent counters that the order was
necessary to allow respondent to refinance the mortgage and to specify the
revised amount for the purposes of a foreclosure decree. In the last appeal, this court directed the
district court on remand to “clarify the manner in which it contemplated that
the record be corrected and, if appropriate, designate the appropriate party to
make the correction.”
The record reflects that the original mortgage was recorded against the property, and that there were no subsequent recordings against the property that are relevant to this issue. Although the district court ordered appellant to modify the mortgage, its reasons for requiring appellant to do so are not apparent from the record. If the purpose of doing so is to amend the mortgage to reflect a reduced lien amount, that same purpose can be accomplished by recording a certified copy of the final judgment with the reduced lien amount. But the district court failed to articulate a legal basis for its order to modify the mortgage record. Consequently, the order lacks any legal basis and constitutes an abuse of discretion.
By notice of
review, respondent argues that the district court improperly calculated the
principal amount of the mortgage lien, accrued interest, and insurance premiums
to be included in the mortgage lien.
This court will review the district court’s interpretation of the terms
of the mortgage de novo. See Trondson, 458
N.W.2d at 681. The findings of fact underlying the calculation of amounts owed
will be upheld unless clearly erroneous.
first argues that the district court incorrectly failed to subtract the proper
portion of payments totaling $6,709.46 toward the original debt of $116,600.
These payments were made from December 1999 through April 2000, before this
court’s July 2002 decision holding that there was an enforceable purchase-money
mortgage in the amount of $55,034.74. See
Respondent argues that the full amount of payments attributable to principal should be applied to reduce the principal of the $55,034.74 mortgage, rather than a proportional share of those payments. The district court observed, “a mortgage only acts as security for the debt evidenced in a promissory note” and the payments apply first toward “the promissory note with a corresponding reduction in the amount secured by the mortgage.” See, e.g., First Nat’l Bank of Shakopee v. Halo Inv., 394 N.W.2d 158, 160–61 (Minn. App. 1986) (distinguishing a promissory note from a mortgage because the latter is a security interest and evidence of the former).
The payments by
respondent Newton-Witkowski were made under the original note (toward the
$116,600), and respondent offers no authority for treating them as though they
were made after this court determined that the mortgage is enforceable only up
to $55,034.74. See Ganguli v.
Respondent asserts that the district court erred by calculating interest for May 2000 because the trial court indicated that the mortgage payments were current through May 2000. Respondent would have this court further reduce accrued interest, so that it begins in October 2002, shortly after this court held that a valid purchase-money mortgage existed in the amount of $55,034.74, rather than in June 2000, when respondent Newton-Witkowski went into default.
court’s finding of when respondent was last current on her mortgage payments
will only be disturbed if clearly erroneous.
The issue of what interest is owed is governed by the terms of the mortgage and is therefore reviewed de novo by this court. See Trondson, 458 N.W.2d at 681. Paragraph 7(C) of the promissory note, incorporated into the mortgage, provides that in the event of default, the noteholder may require the borrower to pay “the full amount of principal which has not been paid and all the interest that [the borrower owes] on that amount.” Therefore, the district court did not err in determining that respondent owes interest from May 2000, when respondent Newton-Witkowski went into default.
Respondent argues that the district court erred by allowing appellant to recover for insurance premiums it paid after respondent failed to provide proof of insurance. This court will review the district court’s interpretation of the mortgage de novo. See Trondson, 458 N.W.2d at 681. The district court determined that the mortgage provides that if the borrower fails to provide proof of insurance coverage, appellant was permitted to obtain insurance coverage and charge the cost to the borrower. The district court found that respondent Witkowski failed to inform appellant that respondent had obtained insurance coverage for the second half of 2002. Accordingly, the district court held that respondent defaulted under the mortgage, and that appellant was entitled to recover $2,626 in insurance premiums it paid to insure the property.
Paragraphs 5 and 7 of the mortgage provide that appellant has the right to obtain insurance coverage absent demonstrable proof that the home was insured. Therefore, the district court did not err as a matter of law in concluding that the mortgage entitled appellant to pass on the cost of insurance after respondent failed to provide proof of insurance. The district court therefore properly held that the revised mortgage includes $2,626 in insurance premiums paid by Mortgage One, Inc.
Based on the foregoing reasons, we affirm in part, reverse in part, and remand. On remand, the district court shall (a) award appellant attorney fees in the amount of $28,840.50 to be added to the mortgage lien; (b) award appellant costs and disbursements in the amount of $2,544.47 to be added to the mortgage lien; and (c) rescind its order that appellant modify the notice of lis pendens and the record of the mortgage.
Affirmed in part, reversed in part, and remanded.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
 Mortgage One originally sought to enforce a
mortgage lien in the amount of $108,856.24.
This court limited the amount of the lien to $55,034.74.
 A lis pendens is “[a] notice, recorded in the chain of title to real property . . . to warn all persons that certain property is the subject matter of litigation, and that any interests acquired during the pendency of the suit are subject to its outcome.” Black’s Law Dictionary 950 (8th ed. 2004).