Minnesota

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

John L. Kipp, et al. v. Thomas Sweno,
No. CX-03-140 (Minn.App. 08/05/2003)

CX-03-140

COURT OF APPEALS OF MINNESOTA

August 5, 2003, Filed

NOTICE: [*1] THIS OPINION WILL BE UNPUBLISHED AND MAY NOT BE CITED EXCEPT AS PROVIDED BY MINN. STAT. § 480A.08, SUBD. 3 (2002).

SUBSEQUENT HISTORY: Review granted by Kipp v. Sweno (Minn., Oct. 29, 2003)

PRIOR HISTORY: Washington County District Court. File No. C4992682. Hon. Thomas Armstrong. Kipp v. Sweno, 629 N.W.2d 468

DISPOSITION: Affirmed in part, reversed in part, and remanded.

COUNSEL: M.T. Fabyanske, Christopher P. Chilstrom, Fabyanske, Westra and Hart, P.A., Minneapolis, MN (for respondents).

Gerald G. Workinger, Jr., Edina, MN (for appellant).

JUDGES: Considered and decided by Shumaker, Presiding Judge, Wright, Judge, and Forsberg, Judge. *

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

OPINIONBY: FORSBERG

OPINION: UNPUBLISHED OPINION

FORSBERG, Judge

Appellant Thomas Sweno challenges the district court's order confirming the sheriff's execution sale of his homestead. Sweno argues that the sale was unconstitutional and invalid because respondents John and Christine Kipp made a credit bid and because the notice of sale did not include the homestead designation notice. Sweno also challenges the district court's award of attorney fees and its order enjoining him from committing waste. Because the execution sale was constitutional and not otherwise [*2] invalid, and because the district court properly exercised its discretion in ordering Sweno not to commit waste, we affirm on those issues. Because the district court failed to provide a basis for an award of attorney fees, we remand on that issue.

FACTS

In January 1987, four years after Sweno began construction of a home for the Kipps, they sued him, alleging that he defrauded them as to the actual cost of the construction of their home. A jury found Sweno guilty of fraud and liable for $ 165,000, and judgment was entered against Sweno in the amount of $ 168,633, which represented Sweno's liability plus all interest.

In January 2000, the district court issued a writ of execution on the judgment, which had increased with interest to $ 269,341.50. Sweno was served with the writ and notice of a sheriff's execution sale of his real property, which he owned in joint tenancy with his wife. In response, Sweno served and filed a certificate of ownership and designation of homestead claiming an "undivided one-half interest" in the property subject to the sheriff's execution sale. Sweno claimed that the $ 200,000 statutory exemption exceeded his one-half interest in the property, [*3] which 2000 property tax records valued at $ 309,900. The district court concluded that the property could not be severed because it was held in joint tenancy with right of survivorship to Sweno's wife under Minn. Stat. § 500.19, subd. 5 (2000).

On appeal, this court held that Minn. Stat. § 510.02 (2000) "plainly denotes a single, indivisible, homestead exception of $ 200,000." Kipp v. Sweno, 629 N.W.2d 468, 471 (Minn. App. 2001), review denied (Minn. Aug. 22, 2001) (Kipp I). This court therefore reversed the district court's determination that both Sweno and his wife were each entitled to individual $ 200,000 homestead exemptions. Id. at 473.

On remand, the Kipps moved to foreclose their judgment lien. The district court entered a judgment of foreclosure against Sweno in the amount of $ 264,186.05, plus $ 33,721.73 in interest, the costs of collection, and attorney fees. The judgment was declared a lien against the property, and the sheriff was authorized to sell the property if the amount due the Kipps exceeded the mortgages, plus the $ 200,000 statutory homestead exemption.

Notice of [*4] the sheriff's sale was personally served on Sweno and his wife, and notice was published for six successive weeks. The sheriff sold the property to the Kipps for $ 300,306.84. The Kipps moved for an order confirming the sheriff's sale, and the court confirmed the sale after making certain corrections regarding the inclusion of lot numbers in the property description. The district court further enjoined Sweno from committing waste to the subject property. Sweno appeals.

DECISION

I.

Sweno argues that the Kipps are not entitled to an execution sale of his wife's joint tenancy interest in the homestead because she is not liable for his debts and because there was no lien on his wife's interest. See Minn. Stat. §§ 519.05(a) (stating that "spouse is not liable to a creditor for any debts of the other spouse."), 548.09, subd. 1 (stating that "from the time of docketing the judgment is a lien * * * upon all real property * * * owned by the judgment debtor") (2002). Sweno made similar arguments in Kipp I, which were rejected by this court. In that case, this court held that "there can be a forced sale to satisfy the judgment against Sweno under Minnesota [*5] law subject to [his] one homestead exemption." Kipp I, 629 N.W.2d at 472. This court further held that "the district court has the power and the jurisdiction to order a foreclosure sale" if the fair value of the property exceeds the amount of the homestead exemption and existing mortgages. Id. at 475. In so holding, this court rejected Sweno's claim that his wife's interest and joint-tenancy ownership could not be broken in favor of the Kipps' lien. Id. Consistent with our decision in Kipp I, we reaffirm that Sweno's property can be sold by execution, so long as his wife's interest is protected.

Sweno argues that if the law allows property held in joint tenancy to be sold, then Minn. Stat. § 550.175, subd. 4 (2002), is unconstitutional as applied to non-debtors because it fails to provide non-debtors with procedural protections such as notice. Here, however, no erroneous deprivation has occurred, because Sweno's wife had notice of these proceedings and was given an opportunity to be heard. See Cressy v. Grassman, 536 N.W.2d 39, 43 (Minn. App. 1995) (in determining what process is due, the court [*6] balances "the private interest at stake, the government interest in administrative efficiency and the risk of erroneous deprivation under current procedures"), review denied (Minn. Sept. 28, 1995). In connection with Kipp I, Sweno's wife was allowed to file a memorandum of law as an interested party and to challenge the Kipps' motion.

Sweno also argues that the statute violates equal protection because it authorizes the sale of a non-debtor's property to satisfy another person's debt. We disagree. The statute does not treat similarly situated persons differently, and Sweno has provided no evidence of invidious discrimination. See Scott v. Minneapolis Police Relief Ass'n, 615 N.W.2d 66, 74 (Minn. 2000) (explaining equal protection as mandating that "all similarly situated individuals shall be treated alike, but only 'invidious discrimination' is deemed constitutionally offensive"). We therefore reject Sweno's constitutional challenges to the sale.

II.

Sweno argues that homestead property is exempt from execution by the Kipps because their credit bid of $ 300,306.84 did not generate sufficient cash proceeds to cover his statutory $ 200,000 homestead [*7] exemption. Sweno argues that in order to protect a judgment debtor's homestead interest, a cash sale is necessary and is the only acceptable type of sale under the law.

Minn. Stat. § 550.175, subd. 4(d), states that if the court has ordered the sale of the entire property, including the homestead, out of the proceeds of the sale, the court shall pay the debtor the amount of the homestead exemption and apply the balance of the proceeds of the sale on the execution.

The statute further states that no bid may be accepted unless it exceeds the amount of the homestead exemption. If no bid exceeds the exemption, the homestead is exempt.

Minn. Stat. § 550.175, subd. 4(e).

The statute states "out of the proceeds of the sale." Minn. Stat. § 550.175, subd. 4(d). Nowhere does it mention "cash" proceeds, and nowhere does it raise the issue of timing. Only the buyer's rights to the property, or rather the right to sell the property, are subject to the timing of the debtor's right to redeem the property or buy it back within the statutory time period. Minn. Stat. § 550.175, subd. [*8] 5 (2002). n1 Because the statutory language is clear and unambiguous, we refuse to conclude that a cash sale is required or that the credit sale to the Kipps was invalid. See Phelps v. Commonwealth Land Title Ins. Co., 537 N.W.2d 271, 274 (Minn. 1995) (where statutory language is plain and unambiguous, the court must give it its plain meaning).

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n1 After the one-year redemption period expires, the Kipps may sell the property. Out of the proceeds of that sale, Sweno and his wife will receive a cash payment of $ 200,000 for their homestead exemption.

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Sweno argues that a reading of the statute different from the one he urges would render the homestead exemption meaningless because the judgment creditor may never pay the judgment debtor the amount of the exemption. But Sweno's concern that a future payment will not be made is not yet a justiciable issue. See Lee v. Delmont, 228 Minn. 101, 110, 36 N.W.2d 530, 537 (1949) (issues relating to future possibility are hypothetical and not [*9] justiciable). We therefore conclude that the Kipps' credit bid was valid and enforceable.

III.

Sweno argues that the sheriff's execution sale of the property was invalid because the notice of sale failed to include the homestead designation notice provided for in Minn. Stat. § 550.175 (2002).

If real property is to be sold on execution and the property contains a portion of the homestead of the debtor, the debtor must be notified by the executing creditor that the homestead may be sold and redeemed separately from the remaining property. The notice in subdivision 2 must be included in the notice of execution served on the debtor under section 550.19.

Id., subd. 1. Subdivision 2 provides the specific language and font to be included in the notice. Minn. Stat. § 550.18 (2002) sets forth the procedures for giving notice before an execution sale and also establishes the consequences for failure to provide proper notice. As a consequence for failing to properly give notice, the officer shall forfeit $ 100 to the party aggrieved, in addition to paying actual damages; * * * but the validity of the sale shall not be [*10] affected * * *, either as to third persons or parties in the action.

Minn. Stat. § 550.18.

Generally, "the validity of a sale authorized by statute depends upon strict compliance with statutory provisions relating to the notice of sale and posting thereof." Fidelity & Deposit Co. of Md. v. Riopelle, 298 Minn. 417, 423, 216 N.W.2d 674, 678 (1974). But defects in notice, or even the failure to give notice as prescribed by statute, will not necessarily invalidate the sale. Id. at 427, 216 N.W.2d at 680 (stating that plain language of Minn. Stat. § 550.18, is that "the sole remedy for lack of notice (and presumably for defects in notice) is recovery of actual damages plus $ 100 from the officer responsible for such notice"). We therefore conclude that the defect in the notice did not affect the validity of the sheriff's execution sale.

IV.

This court will not reverse a district court's award or denial of attorney fees absent an abuse of discretion. Becker v. Alloy Hardfacing & Eng'g Co., 401 N.W.2d 655, 661 (Minn. 1987). Sweno argues that the district court erred in [*11] its award of attorney fees to the Kipps because there is no statutory or contractual basis for such an award and because they failed to assert a basis for the recovery of attorney fees as required by Minn. Gen. R. Pract. 119.04. The Kipps agree that we should remand for additional findings regarding the basis for the award. See Barr/Nelson, Inc. v. Tonto's Inc., 336 N.W.2d 46, 53 (Minn. 1983) (attorney fees are not recoverable in litigation unless permitted by statute or contract). We therefore remand to the district court on this issue.

V.

Sweno argues that the district court abused its discretion by enjoining him from committing waste on the homestead property because the Kipps failed to introduce evidence of waste and the court failed to make findings to support its decision. The supreme court has held that "waste by a mortgagor in possession will not be enjoined unless it 'may so impair the value of the property as to render it insufficient, or of doubtful sufficiency, as security for the debt.'" Gardner v. W.M. Prindle & Co., 185 Minn. 147, 152, 240 N.W. 351, 353 (1932) (quotation omitted).

When real property is sold upon execution [*12] or under judgment or mortgage, until the expiration of the time allowed for redemption, the court may restrain the commission of waste on the property, by order granted, with or without notice, on application of the purchaser * * *; but it is not waste for the person in possession of the property at the time of the sale, or entitled to the possession afterwards, during the time allowed for redemption, to continue to use it in the same manner in which it was previously used * * * .

Minn. Stat. § 561.18 (2002). This permissive statute allows a restraint "on application of the purchaser" and leaves the decision to "restrain the commission of waste" to the district court. Id.

Here, the court's order specifies that Sweno may not commit waste, including without limitation, removal of fixtures to the home located on the subject property or in any other way damaging the home on the subject property or the surrounding property so as to, in any way, diminish the fair market value of the [property].

Because the district court's order is reasonably intended to prevent Sweno from impairing the fair market value of the property, we affirm that part of the [*13] order.

Affirmed in part, reversed in part, and remanded.

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