Graves v. First Minnesota Bank |Minnesota Supreme Court - TILA, Rescission, "Cancellation of Contract Notice.",


Graves v. First Minnesota Bank |Minnesota Supreme Court – TILA, Rescission, “Cancellation of Contract Notice.”,

Graves v. First Minnesota Bank |Minnesota Supreme Court – TILA, Rescission, “Cancellation of Contract Notice.”,

H/T Alina Virani


Court of Appeals

Stras, J.
Dissenting, Dietzen, J.,
Gildea, C.J., and Wright, J.

Amos Graves,


Michael Wayman et al.,

First Minnesota Bank,

Jeramie Steinert, Steinert, P.A., Minneapolis, Minnesota, for respondent Amos Graves.
Thomas G. Wallrich, Peter L. Crema, Jr., Cozen O’Connor, Minneapolis, Minnesota, for appellant First Minnesota Bank.


1. When a homeowner timely cancels a foreclosure reconveyance under Minn. Stat. § 325N.13 (2014), any deed executed by the homeowner before the cancellation is rendered void.

2. Because a deed that has been rendered void by a timely cancellation notice under Minn. Stat. § 325N.13 does not transfer title, a mortgagee does not take any interest based on such a deed, even if the mortgagee can establish that it was a bona fide purchaser.

3. It remains an open question, for consideration by the district court on remand, whether the appellant, the purported mortgagee, has an interest in the property based on equitable principles.
Affirmed in part, reversed in part, and remanded.


STRAS, Justice.

This case arises out of the distressed real estate market of the past decade. When respondent Amos Graves was on the verge of losing his home to foreclosure, Michael Wayman persuaded Graves to enter into a transaction that would purportedly save his home. The transaction required Graves to execute a quitclaim deed in favor of a corporate entity under Wayman’s control. The day after Graves executed the deed, he sent a timely cancellation notice, as was his statutory right, to Wayman, who refused to cancel the transaction. The eventual mortgagee of the property, appellant First Minnesota Bank, sought ownership of the home in foreclosure when Wayman ceased making mortgage payments. The district court awarded the property to First Minnesota based on the bank’s status as a bona fide purchaser, but the court of appeals reversed and awarded the property to Graves free of any interest of the bank. For the reasons that follow, we affirm in part, reverse in part, and remand to the district court for further proceedings consistent with this opinion.

Below are a few excerpts from the case:

“Cancellation is “effective upon mailing” and “occurs when the foreclosed homeowner delivers, by any means, written notice of cancellation.” Minn. Stat. § 325N.13(b).”


““Rescission” is “the unmaking or abrogation of a contract.” Abdallah, Inc. v. Martin, 242 Minn. 416, 420, 423, 65 N.W.2d 641, 644, 646 (1954) (“[T]o rescind a contract is not merely to terminate it but to abrogate it and undo it from the beginning.” (citing 1 Black, Rescission and Cancellation § 1 (2d ed.))). In the real estate context, we have said that “[r]escission annihilates the contract, and, after a binding election to rescind, each party is returned to his previously existing rights.” Brown v. Cal. & W. 15 Land Co., 145 Minn. 432, 436, 177 N.W. 774, 776 (1920) (emphasis added). Thus, “[t]he effect of the remedy of rescission is generally to extinguish a rescinded contract so effectively that in contemplation of law it has never had existence.” Chase Manhattan Bank, N.A. v. Clusiau Sales & Rental, Inc., 308 N.W.2d 490, 494 (Minn. 1981). Accordingly, Graves’s timely cancellation was the statutory equivalent of rescission, which rendered void all of the instruments—including the quitclaim deed that Wayman and his entities obtained from Graves in the foreclosure-reconveyance transaction—and returned each of the parties to their “previously existing rights.” See Brown, 145 Minn. at 436, 177 N.W. at 776; see also Cooper v. Finke, 38 Minn. 2, 7, 35 N.W. 469, 471 (1887) (explaining that a void instrument is an instrument that “never had any legal existence or binding force”).”


“But the dissent then proceeds to interpret a different statute than the one the Legislature actually enacted. Specifically, the dissent faults Graves for failing to record his cancellation notice—a requirement that is nowhere to be found in MHOEPA and is 18 contrary to the statute, which says that “cancellation” becomes “effective” and “occurs” when a homeowner mails notice of the cancellation to the foreclosure purchaser. Id. Instead of creating a novel recording requirement, we simply follow the plain language of the statute and conclude that Graves’s cancellation became “effective” and “occur[red],” even as to third parties, when Graves mailed his written cancellation notice to Wayman.”


Fn 5 “The dissent disagrees with our characterization of the cancelled foreclosure reconveyance as “void,” claiming that we actually mean that the transaction was “voidable.” Consistent with the cancellation provisions of MHOEPA, Minn. Stat. § 325N.13, we interpret “void” to mean “[o]f no legal effect; to null,” Black’s Law Dictionary 1805 (10th ed. 2014), which is consistent with MHOEPA’s direction that a homeowner who timely cancels incurs no “penalty or obligation,” Minn. Stat. § 325N.14(a). It is clear that, once Graves cancelled the transaction, the Wayman entities had absolutely no legal interest in the property and thus had nothing to convey, contrary to the position adopted by the dissent, which views the foreclosure reconveyance as merely “voidable”—that is, “capable of being affirmed or rejected,” Black’s Law Dictionary 1805.”


“We also disagree more broadly with the dissent’s interpretation of the statute, which effectively negates the statutory protections afforded to foreclosed homeowners under MHOEPA. The dissent criticizes us for our “inequitable treatment” of First Minnesota, without mentioning that Graves did everything he was required to do under MHOEPA, yet would still lose his home under the dissent’s approach. In effect, the dissent turns a statute protecting homeowners from the predatory practices of foreclosure purchasers into one protecting third-party lenders at the expense of homeowners.”


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