140 F. Supp. 3d 819
D. Minnesota2015Background
- In 2007 the Finnegans, in foreclosure, conveyed their Eden Prairie home to foreclosure purchaser Danny Solie in a sale/lease-back repurchase arrangement; Solie recorded a warranty deed and later gave a mortgage to SunTrust, which foreclosed in 2010 and whose sheriff’s certificate was later assigned to Fannie Mae.
- The Finnegans sued Solie in state court alleging violations of Minnesota Chapter 325N (MHOEPA); the state court found Solie violated the statute, cancelled the transaction, restored the Finnegans’ ownership, awarded fees against Solie, but expressly declined to adjudicate or affect SunTrust’s or Fannie Mae’s mortgage rights.
- The Finnegans then sued SunTrust and Fannie Mae in federal court, alleging (1) defendants violated Chapter 325N, (2) quiet title, and (3) declaratory relief; defendants moved to dismiss under Rule 12(b)(6).
- Plaintiffs alleged on information-and-belief that defendants had actual, constructive, or implied notice of Solie’s MHOEPA-violative conduct and thus were not bona fide purchasers, so their mortgage interests should be void.
- The magistrate judge recommended dismissing Count I (no standalone statutory cause against lenders) and Count III (redundant declaratory relief), but allowing repleading of a quiet title claim under Graves v. Wayman principles; the district court adopted the recommendation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Minn. Chap. 325N provides an independent statutory cause of action against lenders | Chap. 325N remedies should be read to permit relief against lenders when they are not bona fide purchasers | Statute regulates foreclosure purchasers and explicitly excludes banks; courts should not imply a private cause of action against lenders | Dismissed: no standalone cause under §325N against SunTrust/Fannie Mae; court refused to read such a remedy into the statute |
| Whether plaintiffs can pursue quiet title to defeat SunTrust/Fannie Mae’s claimed mortgage under Graves v. Wayman | Graves means the warranty deed was void and thus defendants took no legal interest; quiet title can resolve the parties’ rights | Defendants: plaintiffs have an adequate remedy at law and are barred by unclean hands; Graves is distinguishable because cancellation was untimely | Allowed in part: quiet title claim may proceed (plaintiffs may replead); Graves supports that the deed was void so defendants took no legal interest, but defendants may assert equitable interests that quiet title can adjudicate |
| Whether plaintiffs’ allegations about defendants’ knowledge (pled on information-and-belief) are sufficient to defeat bona fide purchaser protections | Allegations and discovery will show defendants had notice (title commitment, loan files), so protections should not apply | Allegations are speculative, conclusory, and insufficient under Rule 8/Iqbal/Twombly | Court: knowledge allegations are irrelevant to whether deed was void under Graves but are not precluded from discovery; plaintiffs should remove ¶29 allegations when repleading |
| Whether declaratory judgment claim should stand and whether pleading differentiates defendants | Declaratory relief seeks determination of mortgage status distinct from quiet title | Declaratory relief is redundant and plaintiff’s complaint lumps defendants together, failing Rule 8 notice | Dismissed: declaratory count redundant; complaint must distinguish SunTrust from Fannie Mae and cure shotgun-pleading defects in any amended complaint |
Key Cases Cited
- Graves v. Wayman, 859 N.W.2d 791 (Minn. 2015) (timely cancellation under MHOEPA renders underlying deed void and prevents a bona fide purchaser from acquiring title based on that deed)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleadings must contain factual matter sufficient to state a plausible claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plaintiff must allege enough facts to raise a plausible claim beyond mere labels and conclusions)
- Transamerica Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11 (1979) (courts should not read remedies into statutes beyond those provided by legislature)
- Graphic Communications Local 1B Health & Welfare Fund v. CVS Caremark, 850 N.W.2d 682 (Minn. 2014) (court will not read a cause of action into a statute when the legislature omitted it)
- MidCountry Bank v. Krueger, 782 N.W.2d 238 (Minn. 2010) (party claiming bona fide purchaser status bears burden of proof)