Diane Pettit, as Trustee of the Alan W. Pettit Marital Trust A, Appellant,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-0825

Diane Pettit, as Trustee of the
Alan W. Pettit Marital Trust A,
Appellant,

vs.

Mary J. Spethmann,
Respondent.

Filed January 29, 2018
Reversed and remanded
Kirk, Judge

Otter Tail County District Court
File No. 46-CV-16-546

Paul B. Hunt, Karkela, Hunt & Cheshire, PLLP, Perham, Minnesota (for appellant)

Thomas H. Sellnow, Sellnow Law Office, P.A., Long Prairie, Minnesota; and

John D. Hagen, Jr., Minneapolis, Minnesota (for respondent)

Considered and decided by Kirk, Presiding Judge; Peterson, Judge; and Jesson,
Judge.
U N P U B L I S H E D O P I N I O N
KIRK, Judge
In this intrafamilial dispute over a family lake property, appellant-trustee challenges
the summary-judgment dismissal of her claim against respondent under Minn. Stat. § 507.34
(2016), part of the Minnesota Recording Act (MRA). Trustee argues that the district court
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erred as a matter of law in concluding that (1) trustee was a mere donee and not a good-faith
purchaser for value (GFP) under the MRA , and (2) in concluding that trustee’s first-
recorded, but later- in-time deed, conveying the subject property to the marital trust under
the terms of parents-settlors’ trust documents, did not take priority over respondent’s first-
in-time, but later-recorded deed, conveying the subject property to respondent and her now-
deceased husband, trustee’s brother. We reverse the district court’s grant of partial summary
judgment to respondent on trustee’s MRA claim, and remand to the district court for
consideration of all issues in accordance with this opinion.
FACTS
The material facts related to trustee’s MRA claim are undisputed for the purposes of
summary judgment. On December 5, 1996, settlors Alan W. Pettit and Jean D. Pettit created
the Alan W. Pettit Living Trust (Alan’s Living Trust) and the Jean D. Pettit Living Trust
(Jean’s Living Trust), and named themselves as trustees. That same day, they conveyed the
subject real property, a family lake cabin in Otter Tail County, to Alan’s Living Trust, and
recorded the deed of conveyance (Original Deed). The Original Deed recited that the subject
property was conveyed “for valuable consideration” of “$100 or less.” Alan’s and Jean’s
Living Trusts were restated on September 24, 2004, and both restated trusts named Alan and
Jean’s daughter, appellant-trustee Diane Pettit, as co-trustee. In relevant part, the restated
Alan’s Living Trust document granted Alan and Diane equal authority to act jointly or
severally as co-trustees for Alan’s Living Trust.
On December 27, 2005, Alan and Jean executed a trustee’s deed conveying the
subject property from Alan’s Living Trust to their son, Jeffrey A. Pettit, and his wife,
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respondent Mary J. Spethmann (Respondent’s Deed).1 The Respondent’s Deed recited that
the subject property was conveyed “for valuable consideration” of “less than $500.”
Spethmann represented to the district court that Alan approached her prior to December
2005 and asked her if she and her family wa nted the lake cabin after he was gone, and that
Alan later told her he wanted to convey the lake cabin to her and Jeffrey . According to
Spethmann, Alan then executed the Respondent’s Deed and instructed them not to record
the deed until after Jean and Alan died. Spethmann acknowledged that she and Jeffrey paid
no monetary consideration for the Respondent’s Deed, but said that she, Jeffrey, and their
nine children provided other services to Alan and Jean during their lifetimes, which
constituted valuable consideration for the conveyance of the subject property. The parties
dispute whether the Respondent’s Deed was fraudulent.
Jean resigned as co- trustee of Jean’s Living Trust on December 31, 2005, leaving
Diane as the sole trustee. Alan resigned as co-trustee of Alan’s Living Trust on December
31, 2006, leaving Diane as the sole trustee. Alan died on September 28, 2009. On December
31, 2010, according to the terms of Alan’s Living Trust, Diane conveyed the subject property
via trustee’s deed to the Alan W. Pettit Marital Trust A for the benefit of Jean (Marital Trust
A Deed). Diane was the named trustee of Marital Trust A. The Marital Trust A Deed was
recorded on February 3, 2011, and recited that the subject property was convey ed “for
valuable consideration” of “under $500.” It is undisputed that Diane was not aware of the
unrecorded Respondent’s Deed when she made and recorded the Marital Trust A Deed.

1 Neither party argues that Alan and Jean lacked the authority to act on behalf of Alan’s
Living Trust or to act without the consent of the named co-trustee Diane.
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Jeffrey died on February 7, 2012, and Jean died on November 3, 2012. On November
5, 2012, Diane, as trustee of Marital Trust A, conveyed the subject property to the Alan W.
Pettit Family Trust B (Family Trust B Deed), in accordance with the terms of Marital Trust
A. Diane was the named trustee of Family Trust B. The Family Trust B Deed recited that
the subject property was conveyed “for valuable consideration” of “under $500.” Diane was
not aware of the unrecorded Respondent’s Deed when she made this conveyance. Shortly
thereafter, on November 13, 2012, Spethmann recorded the Respondent’s Deed.
From 2006 to 201 4, it is undisputed that Alan’s Living Trust, Marital Trust A, and
Family Trust B, administered by Diane in accordance with their terms, expended money in
the payment of real-property taxes, insurance, utilities, and improvements to the subject
property. Diane learned of the Respondent’s Deed in 2013 when Family Trust B did not
receive a tax document for the subject property . Diane recorded the Family Trust B Deed
on April 21, 2014, by which time she had actual and constructive notice of the now-recorded
Respondent’s Deed. Diane does not argue that the Family Trust B Deed takes priority.
Diane served a complaint on Spethmann in January 2017, seeking to void the
Respondent’s Deed under Minn. Stat. § 507.34 or as a matter of equity. In her answer and
counterclaim, Spethmann asked the district court to award her the subject property. Both
parties moved for summary judgment on Diane’s MRA claim . In her summary-judgment
motion, Spethmann also raised trust-administration claims and asked the district court to
award her an additional piece of real property.
In its summary-judgment order, the district court held that Diane, in her role as trustee
for Marital Trust A, acted as a mere donee and that the protections of the MRA were
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inapplicable to her as a matter of law. The court dismissed Diane’s MRA claim with
prejudice and entered final-partial summary judgment on the MRA claim under Minn. R.
Civ. P. 54.02. The court also dismissed Spethmann’s counterclaim without prejudice, noting
that Spethmann could bring her counterclaim and plead her other trust-related claims in a
separate trust action. The district court did not address Diane’s equitable claims, which
remain pending. Diane appealed. We accepted jurisdiction over the MRA claim only under
Minn. R. Civ. App. P. 103.03(a).
D E C I S I O N
“We review a district court’s summary judgment decision de novo. In doing so, we
determine whether the district court properly applied the law and whether there are genuine
issues of material fact that preclude summary judgment.” Riverview Muir Doran, LLC v.
JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn. 2010) (citations omitted). We “must
view the evidence in the light most favorable to the party against whom judgment was
granted.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). We also
review de novo the application of a statute to undisputed facts. See In re Marriage of
Branch, 632 N.W.2d 261, 263 (Minn. App. 2001). “If the plain language of a statute is clear
and free from ambiguity , the court’s role is to enforce the language of the statute and not
explore the spirit or purpose of the law.” Nelson v. Nelson, 866 N.W.2d 901, 903 (Minn.
2015) (quotation omitted).
Minnesota is a race- notice state, meaning that under Minn. Stat. § 507.34 , a
subsequent GFP of real property who first records her interest, takes priority over a prior
purchaser of that real property who failed to record. Anderson v. Graham Inv. Co., 263
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N.W.2d 382, 384 (Minn. 1978). “ A ‘good-faith purchaser’ is a purchaser ‘who gives
consideration in good faith without actual, implied, or constructive notice of inconsistent
outstanding rights of others.’” Citizens State Bank v. Raven Trading Partners, Inc., 786
N.W.2d 274, 278 (Minn. 2010) (quoting Anderson, 263 N.W.2d at 384). Thus, for a
purchaser to qualify as a GFP under the MRA, she must establish: “(1) [p]ayment of a
valuable consideration; (2) good faith, without purpose to take an unfair advantage of third
persons; and (3) absence of notice, actual or constructive, of the outstanding rights of others.
If any of these elements is lacking [the purchaser’s] proof fails.” Goette v. Howe, 232 Minn.
168, 173, 44 N.W.2d 734, 738 (1950).
It is undisputed that Diane, acting as trustee, offered sufficient evidence to establish
the second and third requirements of GFP status—Diane acted in good faith in accordance
with the terms of Alan’s Living Trust and Marital Trust A when she executed and recorded
the Marital Trust A Deed, and she did so without actual or constructive notice of the
unrecorded Respondent’s Deed. However, the district court concluded that Diane failed to
offer sufficient evidence to establish the first requirement of GFP status —payment of
valuable consideration by Marital Trust A. The district court held that non-nominal valuable
consideration must be pleaded and proved with evidence other than a recital in a deed
document, and concluded that: “Because the consideration alleged by [ Marital Trust A] is
no more than a nominal consideration, [its trustee] occupies the position of a mere donee,
and cannot claim the protections which the recording act grants to purchasers for value.”
“Consideration is usually in the form of [ the] payment of money, but [it] can be in
the form of a promise to perform certain future acts . . . .” 6A Cheryl L. Grasmoen,
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Minnesota Practice § 43.31 (3 d ed. 2017) (citing Ketterer v. Indep. Sch. Dist. No. 1, 248
Minn. 212, 222-23, 79 N.W.2d 428, 436 (1956); Enkema v. McIntyre, 136 Minn. 293, 298,
161 N.W. 587, 589 (1917)). In many instances, as occurred here, a trust is not able to provide
monetary consideration at the time of a conveyance of real property because the trust has no
assets until the real property or funds are transferred to it. See Minn. Stat. § 501C.0401(a)(1)
(2016) (providing that a trust may be created by a “transfer of property to another person as
trustee during the settlor’s lifetime or by will or other disposition taking effect upon the
settlor’s death”). Instead, “[a] valuable consideration, in the sense of the law, may consist
either of some right, interest, profit, or benefit accruing to the one party, or some forbearance,
detriment, loss, or responsibility given, suffered, or undertaken by the other.” Ketterer, 248
Minn. at 222, 79 N.W.2d at 436 (quotation omitted); see, e.g., Enkema, 136 Minn. at 297-
98, 161 N.W. at 589 (holding that a purchaser’s assumption of the obligations related to the
real property and promise to pay the mortgage and taxes was valuable consideration, without
evidence of monetary consideration).
Further, deeds will often recite nominal consideration to acknowledge the receipt of
other valuable, non-monetary consideration, as also occurred here. See Brandes v. Hastings, 163 Minn. 15, 17, 203 N.W. 430, 431 (1925) (noting that the phrase “$1 and other valuable
considerations” recited in a deed conveying real property indicates that legally sufficient
consideration was given, regardless of evidence of a monetary payment); see a lso In re
Delva’s Estate, 195 Minn. 192, 193-94, 262 N.W. 209, 209 (1935) (noting that the recital of
monetary consideration in a deed for the transfer of real property merely acknowledges the
receipt of consideration and does not constitute a contractual amount of payment).
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Here, the record shows that Diane was acting in her capacity as trustee for Alan’s
Living Trust and as the named trustee for Marital Trust A when Alan’s Living Trust
conveyed the subject property to Marital Trust A. During discovery, Diane’s responses to
the interrogatories regarding Marital Trust A’s consideration for the conveyance indicated
that she merely followed the dictates of the trust documents in executing and recording the
Marital Trust A Deed, and that the stated valuable consideration of “under $500” was
formulaic and nominal, not actual. Indeed, the Original Deed, the Respondent’s Deed, and
the Family Trust B Deed all included similar recitals that the subject property was conveyed
“for valuable consideration,” and listed nominal consideration of $500 or less.
Viewing the evidence in the light most favorable to Diane in her role as trustee, the
settlors’ trusts administered by Diane paid real-estate taxes, insurance, utilities, and
improvements for the subject property between 2006 and 2014. Given this record, there is
sufficient, undisputed evidence to reach the legal conclusion that Marital Trust A gave
valuable consideration for the conveyance of the subject property—the trustee’s promise on
behalf of the trust to undertake the future duties and responsibilities of the subject property,
including payment of the taxes and related expenses—as acknowledged by the recital of
valuable consideration in the deed.
In addition, w e need not look at extrinsic evidence outside of the deed’s recital to
conclude that Marital Trust A gave valuable consideration as a matter of law. The Minnesota
and foreign-jurisdiction caselaw relied upon by the district court is inapplicable because
those cases involved allegations of fraud or misdoings, purchasers who did not act in good
faith, and/or challenges to the validity of a deed. That is not the case here, where the Marital
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Trust A Deed has not been challenged, and where the record provides undisputed evidence
that Diane, as trustee, acted in good faith, and without notice of the Respondent’s Deed.
Because there was sufficient evidence offered to establish that Marital Trust A gave
valuable consideration for the conveyance of the subject property as a matter of law, and
because the evidence establishing the other two required elements of GFP status is not
disputed, the record shows that Diane, in her role as trustee for Marital Trust A, was a GFP
entitled to the protections of the MRA. Therefore, under Minn. Stat. § 507.34, the
Respondent’s Deed to the subject property is void as against the Marital Trust A Deed,
because the Marital Trust A Deed was recorded first by a “subsequent purchaser in good
faith and for a valuable consideration.” The district court’s order contradicts long-standing
Minnesota law and would disrupt real estate, trust, and estate practice in Minnesota. The
district court erred in granting Spethmann partial summary judgment on Diane’s MRA
claim, and we reverse and remand for consideration of all issues in light of our holding.
Reversed and remanded.