Cedar-Riverside Land Corporation mortgaged its Minneapolis property to First Trust Company in 1971. Crablex later acquired the mortgage and brought a foreclosure action in 1995. Following a 2005 foreclosure decree and sheriff’s sale, Crablex acquired the property, subject to the redemption period.
Crablex then petitioned under Minnesota’s Torrens Act for a new certificate of title that would omit encumbrances recorded after the 1971 mortgage. Several parties opposed the petition, claiming registered easements over the property. MCDA, Riverside Plaza, and Capmark asserted five easements benefiting the adjacent Riverside Plaza complex. The City of Minneapolis and Cedar Cultural Center asserted separate easements.
The district court denied Crablex’s summary-judgment motion and granted summary judgment to the easement holders. It concluded that the easements remained valid and should continue to appear on the certificate of title. While the appeal was pending, Fine Associates, a purchaser under an unclosed purchase agreement with Crablex, moved to be substituted for Crablex after Crablex’s counsel withdrew.
Issue #1
Whether Fine Associates should be substituted for Crablex or allowed to participate in the appeal.
Holding
Fine Associates could intervene to protect its interest, but it could not be substituted for Crablex because Crablex retained a substantial interest in the property and the litigation.
Reasoning
Substitution is proper only when the party to be removed has no remaining interest in the lawsuit. Crablex still had an interest in the foreclosed property and in the unresolved purchase-agreement dispute with Fine Associates, so substitution would improperly eliminate a party with a continuing stake.
Fine Associates satisfied the requirements that guide intervention of right. It acted promptly after learning that Crablex might abandon the appeal; its purchase agreement gave it an equitable interest in the property; the appeal could impair its ability to challenge the easements; and Crablex’s failure to appear for oral argument showed that its interests were not adequately represented.
Because Fine Associates and Crablex advanced the same arguments on appeal and sought to protect the same property interest, the court referred to them collectively as Crablex for purposes of deciding the merits.
Issue #2
Whether res judicata barred Riverside Plaza-related parties from asserting that their five easements survived the foreclosure.
Holding
No. The Riverside parties did not have a full and fair opportunity to litigate the easement issue in the foreclosure action.
Reasoning
Res judicata applies only when the party to be precluded had a full and fair opportunity to litigate the claim in an earlier proceeding. Riverside did not pursue the easement issue at the foreclosure trial because it understood that the parties had resolved it through a settlement agreement.
At the foreclosure trial, counsel represented that a settlement had been reached and specifically stated that the agreement recognized the continuing validity of recorded easements. Crablex’s counsel did not object at that time, and no dispute concerning the five easements was presented to the foreclosure court before it entered its decree years later.
Although Crablex later asserted in correspondence that it did not consider itself bound by the settlement, that disagreement was never raised and adjudicated in the foreclosure action. Riverside’s later Torrens claims were therefore not precluded.
Issue #3
Whether the five easements benefiting Riverside Plaza survived foreclosure despite having been registered after Crablex’s mortgage.
Holding
Yes. The enforceable 2000 settlement agreement subordinated Crablex’s mortgage to those easements, giving them priority and preserving them after foreclosure.
Reasoning
Ordinarily, a valid foreclosure terminates interests junior to the foreclosed mortgage when their holders are properly joined or notified. The court held that this general rule applies to later-recorded easements just as it applies to other junior property interests.
Priority may be altered by agreement. A mortgagee may subordinate its otherwise senior mortgage interest to a later-recorded easement, and the court found no legal reason to treat easements differently from other interests that may receive priority through subordination.
The settlement agreement stated that easements recorded for the benefit of Riverside Plaza would remain valid and enforceable after foreclosure. Although the agreement did not use formal subordination terminology, its plain language could only mean that Crablex agreed to give those easements priority over its mortgage for purposes of the foreclosure.
Crablex’s challenges to the settlement’s enforceability failed. CRLC’s authorized general partner signed the agreement, objectively manifesting assent even though CRLC’s attorney did not sign. Crablex also did not show that an alleged violation of the professional-conduct rule against communicating with a represented person supplied a basis to void the contract.
The district court therefore correctly refused to omit the Tank & Tower, McKnight Driveway, E-Building Parking & Utility, Exterior Maintenance, and Gas Line easements from the new certificate of title.
Issue #4
Whether the City of Minneapolis’s and Cedar Cultural Center’s easements were extinguished by the foreclosure even though neither holder was joined as a party to the foreclosure action.
Holding
No. Their easement interests were not extinguished because they were not made parties to the foreclosure action.
Reasoning
A foreclosure judgment does not bind a person who was not made a party to the action and who did not later succeed to the rights of a party. Consistent with this rule, foreclosure ordinarily terminates junior interests only when their holders are properly joined or notified.
The city and Cedar Cultural claimed interests derived from the mortgagor and therefore had statutory rights of redemption. Contrary to Crablex’s argument, their status as easement holders did not mean they lacked a right to redeem or that they were not entitled to be joined in the foreclosure.
The court did not decide the ultimate priority or redemption consequences of their unjoined junior easement interests. It held only that the foreclosure action did not extinguish them, so the district court properly declined to omit them from the Torrens certificate of title.