This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2006).






In the Matter of the Petition of

Option One Mortgage Corporation,

Regarding Certificate of Title No. 1110609

or the Current Certificate.


Filed March 20, 2007

Reversed and remanded

Shumaker, Judge


Hennepin County District Court

File No. TO-32050


Kevin J. Dunlevy, Michael E. Kreun, Beisel & Dunlevy, P.A., 282 U.S. Trust Building, 730 Second Avenue South, Minneapolis, MN 55402 (for appellant Option One Mortgage Corporation)


Douglas J. Dehn, Barna, Guzy & Steffen, Ltd., 400 Northtown Plaza, 200 Coon Rapids Blvd., Minneapolis, MN 55433 (for respondent Timeline, LLC)


            Considered and decided by Klaphake, Presiding Judge; Willis, Judge; and Shumaker, Judge.


U N P U B L I S H E D   O P I N I O N


            Appellant challenges the district court’s adoption and confirmation of the examiner of titles’ conclusion that a townhouse-association-assessment lien foreclosed by advertisement takes priority over a subsequently recorded purchase-money mortgage.  Because the townhouse declaration is ambiguous as to whether the townhouse association was limited to foreclosure by action, and because the ambiguity is to be resolved against the drafter, we reverse and remand.


            In this appeal, we are asked to determine whether the district court erred when it adopted the examiner of titles’ conclusion that a townhouse-association lien foreclosed by advertisement had priority over a purchase-money mortgage recorded after the lien-foreclosure sale.

            The real estate in question is registered, or “Torrens,” property and is improved with a townhouse subject to the covenants of the Town Oaks Association.  Town Oaks recorded its declaration of covenants in 1980.  Under the covenants, each townhouse unit was to be assessed a sum for the maintenance of the premises and any unpaid assessment would be a “continuing lien” against the unit to which the assessment applied.

            There is no dispute about the title history of this property or the propriety or validity of any encumbrance.  On August 30, 2002, the joint fee owners of the property conveyed their interest by warranty deed to Everette E. Sesler.  On that date, Sesler gave a purchase-money mortgage against the property to appellant Option One Mortgage Corporation.  Neither the warranty deed nor the mortgage was recorded at this time.

            Town Oaks recorded a lien against the property for an unpaid assessment on February 27, 2003, and filed a notice of lis pendens for the foreclosure of the lien by advertisement on May 12, 2003.  Sesler’s warranty deed and Option One’s mortgage were not of record as of this latter date.

            On July 31, 2003, at 11:00 a.m., AHR Properties, Inc. recorded a Sheriff’s Certificate of Sale showing AHR as the purchaser of the foreclosed property.  At 2:00 p.m. on that day, Option One recorded its mortgage.  Ultimately, respondent Timeline, LLC succeeded to AHR’s interest.

            Option One foreclosed its mortgage by advertisement on December 11, 2003, and became the successful bidder, receiving a Sheriff’s Certificate of Sale.

            The respective redemption periods for the foreclosed assessment lien and foreclosed mortgage expired without redemption.

            Option One brought a proceeding subsequent to the initial title registration, seeking a determination that its mortgage had priority over the assessment lien.  After an evidentiary hearing, the examiner of titles concluded that the assessment lien was entitled to be foreclosed by advertisement, that Option One’s mortgage was junior to the assessment lien and to AHR’s interest, and that Timeline, LLC was entitled to a new certificate of title showing it to be fee owner.  With a modification not material to this appeal, the district court adopted the examiner’s conclusions, confirmed them, and ordered the issuance of a certificate of title in Timeline’s name.  Option One appealed.


            Option One makes four arguments on appeal: (1) the assessment lien could not be validly foreclosed by advertisement and, thus, title derived from the lien is a nullity; (2) the townhouse declaration subordinates assessment liens to first mortgages and, thus, the Option One mortgage has priority over the lien; (3) a purchase-money mortgage takes precedence over liens of the type at issue; and (4) the doctrine of equitable subrogation makes Option One’s mortgage prior to the assessment lien.  Because the issue raised by Option One’s first argument is dispositive, we need not address the other arguments.

            Article IV, Section 8(b), of the townhouse-association declaration provides for the foreclosure of a lien levied for an unpaid assessment:

            If the assessment is not paid on or before the due date, the Association may impose interest . . . and/or bring an action at law against the Owner personally obligated to pay the same or foreclose the lien by suit in the manner provided for foreclosure of mortgage liens.  Each Owner, by acceptance of any conveyance of any interest in the Properties, grants to the Association a power of sale to accomplish the foreclosure and sale of such Owner’s Lot.  In such actions the Association shall be entitled to recover . . . attorneys’ fees and the costs of prosecuting such action . . . .


            Option One contends that this provision restricts the townhouse association to foreclosure of assessment liens by action.  The examiner of titles concluded that the use of the term “power of sale” in the declaration indicated an intent to allow foreclosure by advertisement because the declaration also provided that assessment liens were to be foreclosed in the manner that mortgage liens are foreclosed and Minn. Stat. § 507.15, subd. 5 (2004), defines that term to include foreclosure by advertisement.  Timeline argues summarily that the declaration contains a common-law power of sale and such power permits foreclosure by advertisement.

            It should be noted that, as Option One states in its brief, “Option One has never argued that its mortgage took effect before it was registered, nor has it ever argued that a bidder at a Sheriff’s foreclosure sale takes subject to a specific mortgage not of record.”

            The townhouse-association declaration is a contract, and, absent ambiguity, we review the interpretation of contracts de novo.  Stiglich Constr., Inc. v. Larson, 621 N.W.2d 801, 802 (Minn. App. 2001), review denied (Minn. Mar. 27, 2001).  If a contract under review is clear and unambiguous, courts are to give it its full effect because the clear language reflects the intent and agreement of the parties.  See Telex Corp. v. Data Prods. Corp., 271 Minn. 288, 295, 135 N.W.2d 681, 686-87 (1965)(stating that courts will not construe unambiguous contracts beyond their wording); Polk v. Mut. Serv. Life Ins. Co., 344 N.W.2d 427, 430 (Minn. App. 1984) (refusing to construe the contract beyond its language and analyze the parties’ unexpressed intent).  In other words, no interpretation is necessary, or even appropriate.  On the other hand, if the contract is ambiguous in some particular, our obligation is to interpret it with a view toward ascertaining and giving effect to the parties’ likely intent.  See Metro. Sports Facilities Comm’n v. General Mills, Inc., 470 N.W.2d 118, 122-23 (Minn. 1991) (“The court’s role in interpreting a contract is to ascertain and give effect to the intention of the parties.”).  The determination of whether a contract is ambiguous is a question of law reviewed de novo.  State by Humphrey v. Delano Cmty. Dev. Corp., 571 N.W.2d 233, 236 (Minn. 1997).  The construction and effect of an unambiguous contract are legal questions.  Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979).  The construction of an ambiguous contract is a question of fact.  Id.  The district court’s findings of fact shall not be overturned on review unless they are clearly erroneous.  Minn. R. Civ. P. 52.01.

            Section 8(b) refers to an action at law against the owner personally.  That language is clear, namely, if the townhouse association wants to hold the townhouse owner personally liable for the assessment, the association has to sue the owner. 

            But then Section 8(b) provides for “foreclosure of the lien by suit in the manner provided for foreclosure of mortgage liens.” We begin to encounter ambiguity here because the phrase implies that there is one particular “manner” of foreclosing a mortgage lien.  In fact, a mortgage lien may be foreclosed by “action,” that is, through a lawsuit, or by “advertisement,” that is, through public notice and auction.  See Minn. Stat. § 541.03, subd. 1 (2006) (referring to the time limitation for mortgage foreclosure by “action or advertisement”); Minn. Stat. § 580.01 (2006) (providing that a mortgage may be foreclosed by advertisement if it contains a “power of sale”).  Section 8(b) then “grants to the Association a power of sale” to foreclose an assessment lien, but goes on to state that in “such actions” to foreclose the lien, the association is entitled to recover the attorney fees and costs of “prosecuting such action.”

            The examiner of titles concluded that the assessment lien could be properly foreclosed by advertisement because not only did the declaration provide a power of sale but also the power-of-sale language would be meaningless if the right of foreclosure by advertisement were not granted.  There is logic in the examiner’s analysis, but the converse is also logical:  If a “power of sale” in the technical sense were intended, why would the declaration provide that the lien was to be foreclosed “by suit”?  And why would the foreclosure be tied to “such actions”?  If it contained only the term “power of sale,” the declaration would not prohibit foreclosure by action, but rather would simply allow an alternate method of foreclosure.  But the declaration makes repeated reference to “suit” and “action,” and the examiner’s reading renders those references meaningless.

            When a contract is susceptible to more than one reasonable interpretation, the contract is ambiguous.  Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn. 2003) (stating that an ambiguous contract is one that, based solely on the plain language, is reasonably susceptible to more than one construction).  The language in Section 8(b) regarding the method to be used for foreclosing an assessment lien is contradictory and ambiguous.  To accept the examiner’s interpretation, we must assume that the drafter of the declaration intended the term “power of sale” to carry the technical meaning indicated by statute and that the apparent limitation of foreclosure to suit or action was superfluous or somehow subordinate to the power-of-sale clause.

            In interpreting a contract, we are to try to reconcile, harmonize, and give effect to all provisions if we can reasonably do so.  Telex Corp., 271 Minn. at 293, 135 N.W.2d at 685.  We cannot reasonably harmonize the contradictory requirement that foreclosure be “by suit” with the permissive term that the association is granted a “power of sale.”  Accepting either interpretation renders the language supporting the contrary conclusion meaningless.  The only guidance we are left with is the general principle that the ambiguity is to be resolved against the party that created the ambiguity, namely, the drafter of the declaration.  Current Tech. Concepts, Inc. v. Irie Enters., Inc., 530 N.W.2d 539, 543 (Minn. 1995); Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979).  The party against whom this principle must be applied is the townhouse association and because Timeline has derived its interest from the association’s lien foreclosure, the ambiguity is chargeable to Timeline.  We conclude that the district court erred in adopting the examiner of titles’ conclusions that Timeline’s interest has priority over Option One’s interest and that Timeline is entitled to a certificate of title showing it as fee owner of this property.  Thus, we remand this matter to the district court for further proceedings consistent with our holding.

            Reversed and remanded.