The Minnesota Court of Appeals recently held that a lender foreclosing by advertisement on two separate tracts of land secured by a single mortgage must strictly comply with Minn. Stat. § 580.08, which provides that the parcels must be sold separately. Under prior case law, a single foreclosure sale of multiple parcels secured by a single mortgage was not void, but only voidable, for good cause shown. But as a result of the Court of Appeals’ recent decision, a non-compliant foreclosure sale is void. The Court of Appeals applied a strict compliance standard and suggested that strict compliance should be the standard for all of Minn. Stat. Chapt. 580, which governs foreclosures by advertisement.
In Hunter v. Anchor Bank, __ N.W.2d __, A13-0515 (Minn. Ct. App. Dec. 23, 2013), a borrower sued to set aside a foreclosure sale of two separate homes that were sold together. The borrower argued the lender failed to strictly comply with Minn. Stat. § 580.08 when it sold the two homes at the same foreclosure sale. The Court of Appeals agreed with the borrower that the foreclosure sale was void and reversed the lower court’s decision.
The decision in Hunter was guided by the Minnesota Supreme Court’s recent decision in Ruiz v. 1st Fid. Loan Servicing, LLC, 829 N.W.2d 53 (Minn. 2013), which held that a foreclosing party must strictly comply with Minn. Stat. § 580.02. Hunter arguably goes further than Ruiz when it concludes that strict compliance is required for all sections within chapter 580, not just for section 580.02. This reasoning could be the subject of a petition for review to the Minnesota Supreme Court, if the court decides that further clarification on the application of the strict compliance standard to chapter 580 is warranted.
Foreclosures of residential mortgage loans are often conducted by advertisement in Minnesota. The process is generally less expensive and onerous than foreclosing through a court action. But in the wake ofHunter, there is some uncertainty as to the validity of a foreclosure by advertisement that does not strictly comply with all sections of Minn. Stat. Chapt. 580. Mortgage servicers and other foreclosing parties should continue to monitor Minnesota case law addressing foreclosures by advertisement.