This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
IN COURT OF APPEALS
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
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,
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 “
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.
D E C I S I O N
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
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.”
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 (
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 (
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
Reversed and remanded.