Daily Development for Monday, September 11, 2000

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

QUIET TITLE: MORTGAGEE'S INTERESTS: Adverse possession claimant fails to meet the continuous possession requirements for adverse possession where (1) mortgagee from whom claimant acquired the property had only a nonpossessory interest, and (2) the mortgagor, as predecessor in interest to the mortgagee, had its rights extinguished in prior quiet title action.

Ford Consumer Finance Company, Inc. v. Carlson and Breese, Inc., 611 N.W.2d 75 (Minn. Ct. App. 2000)

The parcel in question was a piece of land providing lake frontage to the mortgaged parcel obviously land of some consequence. Although there was some dispute, for purposes of analyzing the court's opinion we can assume that the mortgagor indeed did purport to include the disputed piece of land in the mortgage to Ford, which occurred in 1989. At that time, it appears that there probably was a running adverse possession claim on the land dating back to 1974.

We'll never know for sure about the validity of the adverse possession claim, however, because in 1993, Carlson, the "true owner" of the land brought a quiet title action and named the mortgagor's as defendants. Mortgagors were served, but did not appear, and a quiet title judgment was entered against them. They later attempted to vacate the default judgment, but were unsuccessful.

In 1995, the mortgagee foreclosed on the property. In 1998, it brought an action to reform its foreclosure title to include the disputed piece of land. Apparently it was alleging that Carlson or its predecessors did intend to convey the land into its chain of title in 1974, and its failure to do so completely was a "scrivener's error." Ultimately, it appears that this litigation devolved into an attempt to establish the mortgagee's adverse possession claim to the property.

The court ruled that the adverse possession claim was finally resolved by the 1993 quiet title action. Although the mortgagee was known at that time, and was not served, and had no knowledge of the action, the court held that the mortgagee was bound by the judgment entered against its mortgagor's title. A mortgagee has no possessory claim in Minnesota and has no right to participate in a quiet title action against the mortgagor in possession.

Comment 1: One assumes that the mortgagee's title insurer is going to be involved here someplace, assuming that it actually insured the title to the critical piece (the nature of the original claim as a suit for reformation suggests that there may be some coverage issues here).

Comment 2: What can a mortgagee do in these cases? Is it just an unavoidable "business risk" that an adverse quiet title action might be entered against one's mortgagor without notice to the mortgagee?

ADVERSE POSSESSION; MORTGAGEE'S INTERESTS: Adverse possession claimant fails to meet the continuous possession requirements for adverse possession where (1) mortgagee from whom claimant acquired the property had only a nonpossessory interest, and (2) the mortgagor, as predecessor in interest to the mortgagee, had its rights extinguished in prior quiet title action.

Ford Consumer Finance Company, Inc. v. Carlson and Breese, Inc., 611 N.W.2d 75 (Minn. Ct. App. 2000), discussed under the heading "Quiet Title; Mortgagee's Interests."

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