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8th Cir. Holds Civil Procedure Rules Could Not Extend Minnesota Foreclosure Deadlines

Answering a certified question from the U.S. Court of Appeals for the Eighth Circuit, the Minnesota Supreme Court recently held that a rule of civil procedure cannot be used to modify deadlines in the state’s foreclosure statute. In so ruling, the Minnesota Supreme Court concluded that to allow a rule of procedure to extend a deadline contained in the Minnesota foreclosure statute would alter the substantive rights of the litigants.

At issue in the case was the borrowers’ argument that the loan servicer violated the statutory requirements for handling foreclosures under Minn. Stat. § 582.043. The statute at issue required the borrowers to file a lis pendens within the statutory redemption period, but the borrowers failed to do so.

The loan servicer challenged the claim based on the borrowers’ failure to timely file the lis pendens, and the borrowers asserted that Minnesota Rule of Civil Procedure 6.02 allowed the court to extend the deadline for filing the lis pendens.

The trial court granted the servicer’s motion for summary judgment, and the Eighth Circuit certified the following question to the Minnesota Supreme Court:  “May the lis pendens deadline contained in Minn. Stat. § 582.043, subpart 7(b) be extended upon a showing of excusable neglect pursuant to Minn. R. Civ. P. 6.02?”

The Minnesota Supreme Court answered the question in the negative, and the Eighth Circuit accepted the answer and affirmed the district court’s conclusion.

A copy of the opinion in Litterer v. Rushmore Loan Management Services, LLC is available at:  Link to Opinion.

The borrowers’ home was sold to the mortgagee at a sheriff’s sale in November 2014.  The period in which the borrowers could pay off their debt and redeem their home expired on March 1, 2015.  On March 2, 2015, the borrowers sued the loan servicer for breach of contract, unjust enrichment, and injunctive relief.  On May 6, 2015, the borrowers filed a lis pendens on the property.

The loan servicer removed the matter to federal court, where the borrowers amended their complaint to add a claim that the servicer violated Minn. Stat. § 582.043.  The borrowers also added the mortgagee as a party.  In federal court, the borrowers pursued only their claim under § 582.043 and abandoned the others.

As you may recall, Minn. Stat. § 582.043, subpart 7(a), gives mortgagors a cause of action to set aside a foreclosure sale if the loan servicer violated the section’s substantive provisions. Section 582.043, subpart 7(b), however, requires a mortgagor bringing an action under subpart 7(a) to file a lis pendens within the mortgagor’s redemption period.  “The failure to record the lis pendens creates a conclusive presumption that the servicer has complied with this section.”  See Minn. Stat. § 582.043, subpart 7(b).

Here, the borrowers filed the lis pendens two months after their redemption period expired.  Therefore, the normal operation of § 582.043, subpart 7(b), would create the conclusive presumption that the servicer complied with the statute and the borrowers did not have any relief.

Minn. R. Civ. P. 6.02, however, authorizes courts in their discretion to extend a deadline in certain circumstances. As relevant here, Rule 6.02 provides: “When by statute . . . an act is required or allowed to be done at or within a specified time, the court for cause shown may … upon motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect . …”

The borrowers argued that if Rule 6.02 was used to extend the deadline in § 582.043, subpart 7(b), then the failure to file the lis pendens within the redemption period would not automatically trigger the provision’s conclusive presumption, and the borrowers would still have a viable claim for relief.

The loan servicer and mortgagee moved for summary judgment on the ground that the borrowers failed to timely file their lis pendens. The borrowers admitted they were late in filing the lis pendens, but urged the trial court to extend the deadline for “excusable neglect” under Rule 6.02. The trial court concluded that Rule 6.02 could not be used to extend the lis pendens deadline, and granted summary judgment in favor of the servicer and the mortgagee.

The borrowers appealed to the U.S. Court of Appeals for the Eighth Circuit. Because the issue on appeal addressed the application of Rule 6.02, the Eighth Circuit certified the following question to the Minnesota Supreme Court: “May the lis pendens deadline contained in Minn. Stat. Sec. 582.043, subpart 7(b) be extended upon a showing of excusable neglect pursuant to Minn. R. Civ. P. 6.02?”

The Minnesota Supreme Court accepted the certified question and issued an opinion answering the question in the negative.

The Supreme Court explained that Minnesota’s Rules of Civil Procedure cannot modify substantive law, and determined that “extending the deadline in Section 582.043, subpart 7(b), would alter the substantive rights of the litigants.”  Thus, the Minnesota Supreme Court concluded that “Rule 6.02 may not be used to extend this deadline.”

The Eighth Circuit accepted the Minnesota Supreme Court’s opinion.  Because Rule 6.02 could not be used to extend the deadline to file the lis pendens, and because it was undisputed that the borrowers had not timely filed their lis pendens, the Eighth Circuit held that the trial court correctly concluded the borrowers were not entitled to relief under Section 582.043.  Accordingly, the Eighth Circuit affirmed the trial court’s judgment.

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Mickey Lee practices in Maurice Wutscher’s Commercial Litigation, Consumer Credit Litigation and Employment Litigation groups. He has substantial experience representing clients in class action litigation, Fair Credit Reporting Act litigation, labor and employment law, and various types of commercial litigation. He has co-chaired several bench and jury trials in state and federal court and has authored numerous appellate briefs and argued numerous cases before the Indiana Court of Appeals and the United States Court of Appeals for the Seventh Circuit. He is Vice President of the Indianapolis Chapter of the Federal Bar Association, and a Board member of the Johnson County Indiana University Alumni Association. Mickey and his wife, Melissa, are active members of the Riley Society with the Riley Children’s Foundation and the Mended Little Hearts of Indianapolis. Mickey received his Juris Doctor from the Indiana University Robert H. McKinney School of Law, and obtained his Bachelor of Science degree from Indiana University – Bloomington.

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