Minnesota Appeals Court Slams Hammer On Foreclosure Redemption Scheme Involving Use Of Sham Note & Mortgage By Property Owner To Squeeze Co-Owner
The Minnesota Court of Appeals recently refused to allow a 'foreclosure redemption' scheme whereby one co-owner of real estate attempted to screw his co-owner out of the equity in the subject property that had gone through foreclosure proceedings through the use of:
The point here is that, had the cunning co-owner redeemed the property directly, he would have (under the law) also been treated as having redeemed on behalf of his unwitting co-owner as his co-tenant. The adroit-thinking co-owner thought he could avoid his obligation to his co-owner by instead surreptiously redeeming through a third/straw party (the 'creditor' holding the sham mortgage).
The 'creditor's attempt to assert that there was no improper side agreement with the bad actor, claiming she was an innocent unwitting party, an "unwilling accomplice," fell on deaf ears as the Minnesota appeals court pointed out that "even if a creditor is an "innocent" third party, relief may be available as long as that creditor is participating in a sham scheme with a devious cotenant and an improper result is obtained."(1)
The case makes for interesting reading, but probably only if you are in the business of undoing real estate equity ripoffs in Minnesota, and possibly in other states where the owner of a partial interest in real estate tries to screw his/her co-owners out of their interests through the use of a redemption scam used after a foreclosure sale due to an unpaid mortgage loan, municipal real estate taxes, or mechanics' and judgment liens.(2)
For the ruling, see Blat v. Takita, No. A10-2217 (Minn. App. July 5, 2011) (unpublished).
(1) In support of this proposition, the appeals court cites Hall v. Hall, 173 Minn. 128, 131, 216 N.W. 798, 799 (1927), a case where the Minnesota Supreme Court concluded that a foreclosure redemption scheme among remaindermen was improper because it eliminated the ownership interest of the life tenant, not because of the state of mind of the redemptioner who was given the sham note and mortgage in order to redeem the property. (Editor's Note: The fact that the Hall case dates back to 1927 is a clear indicator that this particular type of racket is nothing new - it's been around a pretty long time. It just doesn't seem to get litgated all that much - maybe because the victims of this scam don't know what hit them, or how to undo them.)
(2) See generally, Nelson, Grant S., The Foreclosure Purchase by the Equity of Redemption Holder or Other Junior Interests: When Should Principles of Fairness and Morality Trump Normal Priority Rules?, 72 Mo. L. Rev. 1259 (2007) (contains heavily-cited discussion on foreclosure redemption schemes involving junior lien 'squeeze-outs' by the owner of the property in foreclosure).
- a sham mortgage, and
- an "improper side agreement" with the 'creditor' holding the sham mortgage to redeem the subject foreclosed real estate
The point here is that, had the cunning co-owner redeemed the property directly, he would have (under the law) also been treated as having redeemed on behalf of his unwitting co-owner as his co-tenant. The adroit-thinking co-owner thought he could avoid his obligation to his co-owner by instead surreptiously redeeming through a third/straw party (the 'creditor' holding the sham mortgage).
The 'creditor's attempt to assert that there was no improper side agreement with the bad actor, claiming she was an innocent unwitting party, an "unwilling accomplice," fell on deaf ears as the Minnesota appeals court pointed out that "even if a creditor is an "innocent" third party, relief may be available as long as that creditor is participating in a sham scheme with a devious cotenant and an improper result is obtained."(1)
The case makes for interesting reading, but probably only if you are in the business of undoing real estate equity ripoffs in Minnesota, and possibly in other states where the owner of a partial interest in real estate tries to screw his/her co-owners out of their interests through the use of a redemption scam used after a foreclosure sale due to an unpaid mortgage loan, municipal real estate taxes, or mechanics' and judgment liens.(2)
For the ruling, see Blat v. Takita, No. A10-2217 (Minn. App. July 5, 2011) (unpublished).
(1) In support of this proposition, the appeals court cites Hall v. Hall, 173 Minn. 128, 131, 216 N.W. 798, 799 (1927), a case where the Minnesota Supreme Court concluded that a foreclosure redemption scheme among remaindermen was improper because it eliminated the ownership interest of the life tenant, not because of the state of mind of the redemptioner who was given the sham note and mortgage in order to redeem the property. (Editor's Note: The fact that the Hall case dates back to 1927 is a clear indicator that this particular type of racket is nothing new - it's been around a pretty long time. It just doesn't seem to get litgated all that much - maybe because the victims of this scam don't know what hit them, or how to undo them.)
(2) See generally, Nelson, Grant S., The Foreclosure Purchase by the Equity of Redemption Holder or Other Junior Interests: When Should Principles of Fairness and Morality Trump Normal Priority Rules?, 72 Mo. L. Rev. 1259 (2007) (contains heavily-cited discussion on foreclosure redemption schemes involving junior lien 'squeeze-outs' by the owner of the property in foreclosure).
posted by Home Equity Theft Reporter at 4:04 AM
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