Daily Development for Wednesday, January 23, 2001

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

MORTGAGES; FORECLOSURE; REDEMPTION; EQUITABLE ESTOPPEL: Although "substantial compliance" with the Minnesota statutory redemption statute requires timely payment of the redemption funds to the statutorily designated person, under some circumstances, the doctrine of equitable estoppel may be used to benefit a redemptioner who has failed to comply.

Sieve v. Rosar, 613 N.W.2d 789 (Minn. Ct. App. 2000).

Under Minnesota's post foreclosure redemption statute, a junior lien creditor has a limited window of opportunity in which to redeem from the foreclosure. The redemptioner must first give notice of intention to redeem, and then, following delivery of the redemption payment, msut promptly file a notice of redemption, so that any other junior creditors with subordinate redemption rights will be able to assess those rights. The statute permits a redemptioner to make payment either to the sheriff or to the foreclosure purchaser.

In the instant case, after the sale, the junior creditor recorded and served on the purchaser a notice of intent to redeem the property. The junior creditor's attorney had conversations with the purchaser during which they discussed acceptable methods of payment. They agreed upon a certified check payment. Later, during the redemption period, the purchaser left for a vacation. The junior creditor's attorney made several attempts to contact the purchaser while he was on vacation and ultimately delivered a cashier's check to the purchaser's office, where a neighboring office tenant accepted delivery. The purchaser received the check upon return from his vacation, one day after the expiration of the redemption period. After delivering the funds, the junior creditor completed repairs on the property, the value of which was not determined.

A few days later, the purchaser returned the funds to the junior creditor, claiming that failure to meet the statutory redemption requirements had led to the forfeiture of the redemptioner's rights.

The trial court had concluded that there was substantial compliance with the redemption statute and permitted the redemption to proceed.

On appeal: Held: Reversed. The Court of Appeals held that the trial court erred by determining that the junior creditor had substantially complied with the statutory redemption requirements.

The Court acknowledged that some Minnesota case have held that substantial compliance with the redemption statute will effect redemption. But it noted that "substantial compliance" requires strict compliance with the essential elements, while it allows for failure to comply with formal requirements. For instance, cases have held that failure to file timely file the papers required following a redemption payment will not necessarily void a redemption if no subsequent redemption's period of redemption has been compromised. But the court, following precedent, found that "substantial compliance" requires strict compliance with the time of payment, since the party purchasing at foreclosure is entitled to have a time certain at which he knows he is the owner of the foreclosed property.

The court remanded for determination of the estoppel issue, which the trial court, in light of its reading of the case, had not reached. The appeals court noted that there were two grounds upon which an estoppel conceivably could be found. First, the purchasers may have led the redemptioners to believe that sending payment to the office of the purchaser would satisfy the requirement of payment. Second, the purchasers may have been estopped in any event by their delay in objecting to the one day late payment, during which time the redemptioner carried out improvements to the property in question.

Comment: The court draws a nice line here, and one with which the editor agrees. A statutory provision that sets specific and clear tolerances should be respected, and parties should not be permitted to "fudge" by arguing the legislature didn't mean what it said. But special circumstances affecting the inequitable conduct of a party relying upon the strict language of the statute need not be disregarded, particularly when, as here, the statutory language is for that party's protection exclusively.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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