Mayer v. Countrywide Home Loans

Filing 98

ORDER granting 71 Motion for Summary Judgment. (Written Opinion)Signed by Judge James M. Rosenbaum on 2/18/10. (dal)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA 08-CV-1071(JMR/RLE) Kathleen Barbara Mayer v. Countrywide Home Loans, a/k/a MERS Inc. (Mortgage Electronic Registration Systems) ) ) ) ) ) ) ) )

ORDER

This matter is before the Court on defendant's motion for summary judgment. I. Background The facts are largely undisputed; where disputed, they are taken in the light most favorable to plaintiff.1 In October, 2006, plaintiff approached Bremer Bank, N.A. ("the Bank") about refinancing her home located on approximately seven acres in Glenwood, Minnesota. The Bank arranged for an appraisal, The motion is granted.

and qualified her for a mortgage of $156,000. The closing was held on November 20, 2006, at which time plaintiff signed the mortgage and promissory note in favor of the Bank. Nine days later, the

Bank assigned the loan servicing rights to defendant, Countrywide Home Loans, Inc. ("Countrywide"). After payment of closing costs

and other debts, plaintiff realized a $141,034.91 net cash payment. Plaintiff made mortgage payments through April, 2007, after

The Court considers only the materials which were timely filed in response to defendant's motion ­ Docket Nos. 82, 83, 84, 85, and 86, filed August 28, 2009.

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which she stopped, thereby defaulting on the loan. commenced foreclosure proceedings in September,

Countrywide 2007, and on

October 16, 2007, repurchased the property at auction for the outstanding mortgage amount. Six months later, the day the She

redemption period ended, plaintiff commenced this action.

claims the foreclosure violated Minnesota's Farmer-Lender Mediation Act ("FLMA"), Minn. Stat. §§ 583.21-32 (2008). Plaintiff sought to enjoin the foreclosure, and further sought a default judgment. The Honorable Raymond L. Erickson, United

States Chief Magistrate Judge, recommended the motions be denied. [Docket No. 37.] Plaintiff objected. This Court reviewed the

record de novo, and adopted the Report and Recommendation on September 29, 2008. Mayer v. Countrywide Home Loans, 2008 WL

4527800 (D. Minn. Sept. 29, 2008) (unpublished). Defendant now moves for summary judgment. II. Analysis Summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, presents no genuine issue of material fact. Fed. R. Civ. P. 56; Celotex Corp.

v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 246 (1986). The party opposing summary

judgment may not rest upon the allegations set forth in its pleadings, but must produce significant probative evidence

demonstrating a genuine issue for trial. See Anderson, 477 U.S. at 2

248-49. Plaintiff has contrived a theory under which her former home and acreage is a farm subject to the FLMA. substance to her theory. In 1986, Minnesota's legislature passed a law designed to protect farmers "threatened with the loss of their farmland, equipment, crops, and livestock" through foreclosure. § 583.21 (2008). Minn. Stat. The Court discerns no

The statute established "an orderly process with Id. The

state assistance to adjust agricultural indebtedness."

statute stays foreclosure proceedings against qualified debtors to allow them an opportunity to mediate any dispute with their lenders. See Minn. Stat. § 583.26 subd. 5 (2008). it specifically excludes "a debtor

But the law is explicit:

who owns and leases less than 60 acres if the debtor has less than $20,000 in gross sales of agricultural products the preceding year." Minn. Stat. § 583.24 subd. 2(b) (2008). It also requires Minn.

the individual debtor be "actively engaging in farming." Stat. §§ 583.22, 583.24 subd. 2(a), 500.24 subd. 2 (2008).

Plaintiff claims she is "actively engaging in farming" because she lives on the property, raises three to five head of cattle annually, and produces $15,000 worth of grain or alfalfa every other year. She claims these facts place her within the ambit of

Minn. Stat. §§ 583.22, 583.24 subd. 2, and 500.24 subd. 2 (2008). (See Plaintiff's Response to Motion for Summary Judgment ("Pl. 3

Resp.") at 12-13). years.

She admits she leases the farm in alternate

Plaintiff is wrong. least two reasons. Leasing a farm to

She does not qualify for the FLMA for at

First, she is not actively engaged in farming. someone else is not considered "actively

farming," and rental income does not count toward the $20,000 threshold. See Resolution Trust Corp. v. Lipton, 983 F.2d 901, 904 (8th Cir. 1993); Bornhorst v. Budzik, 1990 WL 119348, *1 (Minn. Ct. App., August 21, 1990) (unpublished) (plaintiffs not "actively engaged in farming" where another person "bought the seeds and actually did the planting, cultivating and harvesting"). The

property subject to Countrywide's mortgage has not generated at least $20,000 in gross sales of agricultural products in any year relevant to this motion. The Court finds plaintiff is not

"actively engaged in farming." Second, the Court concludes plaintiff's property, being at most seven acres, is too small to qualify for protection under the FLMA. Minnesota courts have consistently held the statute does not apply to farms smaller than 60 acres with less than $20,000 in gross sales of agricultural products. See Northern State Bank of

Thief River Falls v. Efteland, 409 N.W.2d 541, 543 (Minn. Ct. App. 1987) (FLMA does not apply to 26 acre farm); Ward v. Ward, 1993 WL 480243, *1 (Minn. Ct. App. Nov. 23, 1993) (unpublished) (FLMA does not apply to 1.36 acre residential parcel). 4

Plaintiff asks the Court to include an adjoining 55-acre tract not subject to the mortgage. She claims this land is owned by a The Court cannot find any

trust for the benefit of her children.

legal or equitable reason why it should engraft other property to create a fictitious 60-plus acre farm. The adjoining parcel is allegedly owned, not by plaintiff directly, but by a trust. Even if the Court were to assume

plaintiff owned the adjoining 55 acres, there is no question of fact for a jury. The adjoining parcel is not subject to

Countrywide's mortgage, and there is absolutely no evidence it faces any threat of foreclosure arising from that mortgage. The

statute explicitly excludes from its protection farms of fewer than 60 acres with less than $20,000 in gross sales of agricultural products. Minn. Stat. § 583.24 subd. 2(b) (2008). Nothing in the

statute, or any Minnesota court interpretation thereof, suggests an intent to let property owners bootstrap smaller properties into the statute's protection by looking to neighboring parcels entirely beyond the subject foreclosure. The Court holds that the adjoining piece of property, neither owned by plaintiff nor subject to a mortgage facing foreclosure, may not, as a matter of law, be added to the too-small parcel of plaintiff's property to create a 60-acre farm eligible for

protection under the FLMA. Accordingly, Countrywide is entitled to summary judgment. 5

As part of her response to Countrywide's motion for summary judgment, plaintiff, for the first time, offers two new legal theories: first, that the mortgage was procured through fraud; and second, that she rescinded the loan within three business days of closing. are not These allegations appear nowhere in the Complaint, and properly before the Court. Nonetheless, the Court

considers them and rejects them. Simply put, plaintiff's new legal theories are completely at odds with her actions. "One who may avoid a contract for fraud

ratifies it by accepting and retaining the benefits thereof." Proulx v. Hirsch Bros., Inc., 155 N.W.2d 907, 912 (Minn. 1968). Even assuming - and the Court does not so assume - the Bank fraudulently importuned plaintiff, contriving to induce her to sign the mortgage in 2006 as she now claims, she completely ratified the loan by accepting, and enjoying the benefit of, the $141,034.91 in cash she received and has not repaid. Further - assuming plaintiff ever had a right to rescind the contract - she voluntarily waived her right to do so. the voluntary abandonment of a known right. Waiver is

Montgomery Ward & Co.

v. County of Hennepin, 450 N.W.2d 299, 304 (Minn. 1990). Here, the recently-alleged fraud took place in October and November 2006, more than three years ago. Whatever right plaintiff may have had

to avoid or rescind the mortgage at that time, she has since waived by keeping the loan proceeds, making payments through April 2007, 6

and raising no allegations of fraud until now.

For the same

reason, even if plaintiff did attempt to rescind the loan within three days, as contemplated by the Truth In Lending Act, see 15 U.S.C. § 1635(a) (2003), she nonetheless accepted the loan

proceeds, made payments to Countrywide, and is now estopped from undoing the deal. See Wilson v. Homeowners Loan Corp., 263 F.

Supp. 2d 1212, 1218-19 (E.D. Mo. 2003). Considered on their merits, plaintiff's new claims fail. She

now alleges fraud by parties other than Countrywide, as well as her attempted rescission, all of which took place before Countrywide acquired the loan. Countrywide has offered uncontroverted evidence of its good faith loan purchase for value; plaintiff's belated suggestions to the contrary are entitled to no weight. (Compare Affidavit of Nichole Orr ¶¶ 4-7 and Pl. Resp. at 3-4, 14.) "Rescission and restoration will not be granted to the prejudice of bona fide purchasers acquiring rights subsequent to the execution of the instrument sought to be canceled." See Proulx, 155 N.W.2d

at 912; see also Minn. Stat. § 336.3-305(b)(2008). For more than a year, Countrywide has relied on the

allegations in plaintiff's Complaint to defend this case; discovery is now closed. The Court finds Countrywide would be prejudiced if

plaintiff were permitted to raise completely new theories - as yet unpleaded, against defendants as yet unnamed - in response to its motion for summary judgment. 7

III. Conclusion For the foregoing reasons, IT IS ORDERED that defendant's motion for summary judgment [Docket No. 71] is granted. LET JUDGMENT BE ENTERED ACCORDINGLY. Dated: February 18, 2010

s/ James M. Rosenbaum JAMES M. ROSENBAUM United States District Judge

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