Opinion
No. C3-96-2453.
Filed May 27, 1997.
Appeal from the District Court, Hennepin County, File No. 9510022.
Wayne B. Holstad, Holstad and Larson, P.L.C., (for Appellants).
Randall J. Fuller, James M. Neilson, Stephen J. Nash, Babcock, Locher, Neilson Mannella, (for Respondent Rum River Lumber Co.).
Katherine M. Bergenthal, Coleman, Hull Van Vliet, P.L.L.P., (for Respondent Doors Windows, Inc.).
David J. Lenhardt, Gries Lenhardt, P.L.L.P., (for Respondent Bob Kilian Electric Co.).
Considered and decided by Schumacher, Presiding Judge, Parker, Judge, and Huspeni, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
The parties brought cross-motions for summary judgment to determine title to a piece of real property. Respondents, whose claims were based on mechanics' liens, were granted summary judgment. Because we conclude that the entity with whom appellants signed a purchase agreement for the property had no interest to convey to appellants, we affirm.
FACTS
In July 1993, appellants Scott Flynn and Lauren Heard entered into a purchase agreement with G. Simon Construction Co. (G. Simon) for a house to be constructed by G. Simon. On November 19, 1993, G. Simon first entered into a purchase agreement for the property for appellants' house with Lowry Hill (Lowry), the property owner. On the same day, G. Simon issued a mortgage on the property to Construction Mortgage Investors Co. (CMIC) for $162,000. G. Simon also entered into a second mortgage on the property with respondent Rum River Lumber Co. (Rum River).
The president of Lowry is the father of the president of G. Simon.
Apparently, G. Simon used a purchase agreement on which appellants' signatures had been forged stating that appellants agreed to subordinate their interests to those of CMIC to obtain the mortgage.
In March 1994, appellants and G. Simon entered into a new purchase agreement, providing for a different house plan at a cost of $307,900 and requiring a down payment of $24,142. At the direction of G. Simon, appellants also made other payments to builders and suppliers. The amount they put into the house was about $90,000.
G. Simon defaulted on the CMIC mortgage and also failed to pay subcontractors who provided labor and/or materials for the house. More than 30 mechanics' liens were filed in 1994 and 1995. Among them were those filed by respondents Rum River, Doors and Windows, Inc. (D W), and Bob Kilian Electric (Kilian).
CMIC purchased the property at a foreclosure sale. Rum River purchased it from CMIC, and when the six-month mortgagor redemption period expired, purchased the property from itself under its second mortgage during the first five-day creditor redemption period. During the second creditor redemption period, the three respondents redeemed the property from Rum River for $226,883.98. Appellants had moved into the property in January 1995, at about the time of CMIC's purchase; they gave no notice of intent to redeem and made no effort to redeem.
Respondents brought an unlawful detainer action against appellants. The action was resolved in favor of respondents. Appellants challenged the decision, and this court affirmed. Doors Windows, Inc. v. Scott P. Flynn , No CO-95-2268 (Minn.App. Sept. 3, 1996).
Both parties moved for summary judgment on the issue of title to the property. Appellants argued that the purchase agreement they entered into with G. Simon in July 1993 gave them an interest in the property that predated respondents' interest. Respondents argued that appellants did not acquire an interest in the property through their purchase agreement with G. Simon because G. Simon had no interest in the property at the time of that agreement, that the CMIC purchase money mortgage had priority over every other interest, and that appellants had lost any interest they might have had by failing to redeem from the mortgage foreclosure.
In support of their position, respondents submitted two affidavits. The president of G. Simon testified that G. Simon had no ownership interest in the property when it signed the purchase agreement with appellants, that it subsequently acquired a warranty deed to the property in exchange for $54,900, and that it obtained the $54,900 by a loan from CMIC, which G. Simon secured by granting a purchase money mortgage on the property to CMIC. The vice-president of Lowry Construction, the general partner of Lowry, stated that Lowry had sold the property to G. Simon for $54,900, that G. Simon paid this sum by obtaining a construction loan from CMIC, that there were no documents respecting the property executed by Lowry in favor of appellants or G. Simon prior to the November 19, 1993, purchase agreement, that Lowry had not received money or any other consideration for the property from G. Simon prior to the November 19, 1993, purchase agreement, and that neither G. Simon nor appellants had any ownership interest in the property prior to November 19, 1993.
Following the hearing, appellants submitted supplementary affidavits from the vice-president of Lowry Construction contradicting her previous affidavit and stating that in July 1993, G. Simon had the right to purchase the property from Lowry pursuant to a lot hold agreement executed about that time, that the right was later secured by a lot reservation agreement executed in October 1993, and that no reservation fee had been received by Lowry in connection with either agreement because Lowry waived that requirement.
The district court awarded summary judgment to respondents, holding that appellants had no legal or equitable interest in the property prior to November 1993, that the CMIC purchase money mortgage was superior to the interests of appellants and respondents, and that appellants' interest in the property was extinguished by their failure to redeem.
DECISION
In reviewing a summary judgment, this court asks whether there is any genuine issue of material fact and whether the district court erred in its application of the law. State by Cooper v. French , 460 N.W.2d 2, 4 (Minn. 1990). Neither party contends that there are unresolved issues of fact precluding summary judgment. Where the material facts are not in dispute, a reviewing court need not defer to the district court's application of the law. Hubred v. Control Data Corp. , 442 N.W.2d 308, 310 (Minn. 1989).
1. Appellants' interest in the property
It is undisputed that when appellants signed their July 1993 purchase agreement with G. Simon, the property was owned by Lowry. "[It is an] axiom that one can only convey what one has * * *." Weber v. Eisentrager , 498 N.W.2d 460, 464 (Minn. 1993) (holding that a mother who had a life estate in property in which her daughters had remainder interests could not convey joint tenancy to her second husband). G. Simon could not and did not convey an interest in the property to appellants in July 1993 because G. Simon itself had no interest prior to its purchase agreement with Lowry in November 1993. Appellants' reliance on Romain v. Pebble Creek Partners , 310 N.W.2d 118 (Minn. 1981), for the proposition that a purchase agreement creates a right in the property for the purchasers, is misplaced. In that case, the seller owned the property at the time of the agreement and was therefore able to convey an interest in it. Id. 2. The CMIC mortgage
Appellants first raise this argument on appeal. It was not argued in appellants' memorandum in support of summary judgment. At the hearing, appellants' attorney said "For the purposes of this motion, I don't think it matters [whether this is a purchase money mortgage]." A party may not raise a new issue or shift position on appeal. Thiele v. Stich , 425 N.W.2d 580, 582 (Minn. 1988). However, in the interests of completeness, we address the issue here.
A purchase money mortgage takes precedence over any other claim or lien arising through the mortgagor. Stewart v. Smith, 36 Minn. 82, 30 N.W. 430 (1886). Appellants argue that the CMIC mortgage was not a purchase money mortgage but a construction mortgage because part of the CMIC mortgage was used to fund construction. They offer no support for their implied premise that a construction mortgage and a purchase money mortgage are mutually exclusive.
Respondents submitted specific evidence showing that the intention of G. Simon in mortgaging the property to CMIC was to obtain money to purchase it. The president of G. Simon stated in his affidavit:
That G. Simon acquired the $54,000 [with which it acquired a Warranty Deed on the property] by obtaining a loan from Construction Mortgage Investors Co. ("CMIC") and on November 19, 1993, G. Simon granted a Purchase Money Mortgage to CMIC on the Property to secure this loan.
The district court's finding that the loan was a purchase money mortgage, superior to all other claims or liens, is supported by this evidence.
3. Appellants' failure to redeem
If no such redemption be made by the mortgagor, * * * the senior creditor having a lien, legal or equitable, upon the mortgaged premises, or some part thereof, subsequent to the mortgage, may redeem within five days after the expiration of the redemption period * * * provided that no creditor shall be entitled to redeem unless within the period allowed for redemption the creditor file for record notice of intention to redeem with the county recorder or registrar of titles * * *.
Minn. Stat. § 580.24 (1994). Appellants gave no notice of intent to redeem and made no effort to redeem. They argue that they had no obligation to redeem because their interest was superior to and prior in time to CMIC's interest. Because this argument rests on the premise that appellants had an interest in the property at the time G. Simon obtained the CMIC mortgage, it must fail. Appellants' argument that CMIC had notice of their interest in the property is unpersuasive for the same reason.
The purchase agreement appellants signed with G. Simon conveyed no interest in the property because G. Simon had no interest to convey; the lien of the CMIC purchase money mortgage was superior to any interest of appellants, and appellants' failure to redeem extinguished whatever interest they had.