Owner Gets Two Mortgages, Court Needs to Sort Out the Resulting Mess

Minnesota case law summary by Attorney Richard Clem: mortgages, recordation.

Citizens State Bank v. Raven Trading Partners, Inc., . MN mortgate recordation.

On February 16, borrower entered into loan and mortgage with Mortgagee #1, proceeds of which were used to satisfy two prior mortgages. Mortgage was sent to county recorder on February 21, but was returned on March 14 due to improper mortgage registration tax amount. Mortgage #1 was re submitted on April 20, and was recorded on May 9.

In the meantime, on April 7, borrower executed mortgage with Mortgagee #2. Mortgage #2 referenced the two prior mortgages (which had been satisfied), but did not reference Mortgage #1. Mortgage #2 was recorded on April 29.

Mortgage #1 filed complaint in district court alleging that it was equitably subrogated to the positions of the two prior mortgages, since its loan was used to satisfy those mortgages.

The Supreme Court, in an opinion written by Justice G. Barry Anderson, held that Mortgagee #1 was not entitled to equitable subrogation. Therefore, Mortgagee #2 was entitled to priority under recording statute. Mortgagee #1's failure to act for 38 days after return by recorder's office was not a justifiable or excusable mistake of fact.

Justices Page and P.H. Anderson would have deferred to the discretion of the trial court, which had concluded that the delay was a justifiable or excusable mistake of fact, and would have allowed equitable subrogation.

No. A08-1560, 786 N.W.2d 274 (Minn. July 22, 2010).

Please see the original opinion for the court's exact language.


Richard P. Clem is an attorney and continuing legal education (CLE) provider in Minnesota. He has been in private practice in the Twin Cities for 25 years. He has a J.D., cum laude, from Hamline University School of Law in St. Paul and a B.A. in History from the University of Minnesota. His reported cases include: Asociacion Nacional de Pescadores a Pequena Escala o Artesanales de Colombia v. Dow Quimica de Colombia, 988 F.2d 559, rehearing denied, 5 F.3d 530 (5th Cir. 1993), cert. denied, 510 U.S. 1041 (1994); LaMott v. Apple Valley Health Care Center, 465 N.W.2d 585 (Minn. Ct. App. 1991); Abo el Ela v. State, 468 N.W.2d 580 (Minn. Ct. App. 1991).

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