In the Matter of the Petition of U.S. Bank National Association for a New Certificate of Title after Mortgage Foreclosure Sale U.S. Bank National Association, petitioner, 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This opinion will be unpublished and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
A18-0008

In the Matter of the Petition of U.S. Bank National Association
for a New Certificate of Title after Mortgage Foreclosure Sale
U.S. Bank National Association, petitioner,
Appellant,

vs.

Traverse Pointe Association,
Respondent.

Filed August 6, 2018
Reversed and remanded
Johnson, Judge

Dakota County District Court
File No. 19HA-CV-16-3911

Gerald G. Workinger, Jr., David J. Usset, Usset, Weingarden & Liebo, PLLP, Minneapolis,
Minnesota (for appellant)

Gretchen S. Schellhas, Natalie R. Walz, Chestnut Cambronne, PA, Minneapolis,
Minnesota (for respondent)

Considered and decided by Johnson, Presiding Judge; Worke, Judge; and Reyes,
Judge.
U N P U B L I S H E D O P I N I O N
JOHNSON, Judge
The primary issue in this appeal is whether an association organized under the
Minnesota Common Interest Ownership Act has an assessment lien on a condominium unit
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that was acquired in a mortgage foreclosure sale. We conclude that the association’s
assessment lien does not comply with section 515B.3 -116(c) of the Minnesota Statutes
because it reflects assessments of expenses that were not included in the association’s then-
current annual budget. We also conclude that the district court erred by not ordering the
issuance of a new certificate of title. We further conclude that the district court erred by
granting the association ’s request for attorney fees and costs and by denying the unit
owner’s request for attorney fees and costs. Therefore, we reverse and remand for further
proceedings.
FACTS
In 2001, Anita R. Kennedy and James M. Kennedy purchased a condominium unit
in Inver Grove Heights. In 2004, the Kennedys granted a mortgage on the property to
Optimum Mortgage Services, Inc. The mortgage later was assigned to U.S. Bank, N.A.
On July 22, 2015, significant water and mold damage in the condominium unit was
discovered. The City of Inver Grove Heights ordered the Traverse Pointe Association, a
common-interest community , to repair the damaged unit . The association partially
demolished the residence and rebuilt it. The expenses of demolition and rebuilding were
paid by an insurance company, with some exceptions, including the association’s payment
of a $10,000 .00 deductible and $7,989.19 in expenses that were not insur ed. The
association asserts that it levied assessments on the unit to account for th ose two
expenditures.
U.S. Bank later foreclosed on its mortgage. On June 23, 2016, U.S. Bank purchased
the unit at a sheriff’s foreclosure sale. On June 27, 2016, U.S. Bank recorded the certificate
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of sale. In August 2016, U.S. Bank commenced an action to shorten the Kennedys’
redemption period , and a district court granted relief by declaring that the six -month
redemption period would be shortened to five weeks and would expire on October 5, 2016.
See Minn. Stat. § 582.032, subds. 1, 3 (2016). The Kennedys did not redeem.
In December 2016, U.S. Bank commenced this action by filing a petition to cancel
the existing certificate of title and to order the issuance of a new certificate of title “free
and clear of all interest of [the Kennedys] and all junior liens. ” On March 16, 2017, the
association recorded an assessment lien against the unit in the amount of $20,810.16. The
amount of the assessment lien includes the association’s payment of the $10,000.00
insurance deductible, the association’s payment of $7,989.19 in uninsured repair expenses,
$2,208.16 for association dues from Apr il 4, 2016 , to March 2017, late fees of $180.00
from October 2016 to March 2017, and attorney fees and costs of $1,533.00 , less a
$1,100.00 payment from U.S. Bank in February 2017.
In September 2017, the association moved for summary judgement on U.S. Bank’s
petition. The association argued that U.S. Bank’s title is subject to an assessment lien and
that the bank is not entitled to a new certificate of title free and clear of other interests.
U.S. Bank argued that the assessment lien should not include assessments for expenses that
were not included in the association’s then-current annual budget. The district court
granted the association’s motion for summary judgment. The district court determined that
the association’s assessment lien is proper and that U.S. Bank’s certificate of title shall be
subject to a lien in favor of the association in the amount of $20,405.35 (which is
approximately $400 less than the lien that the association recorded) . T he district court ,
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however, did not cancel the exist ing certificate of title and did not order the issuance of a
new certificate of title . The district court also awarded the association attorney fees and
costs in the amount of $12,000 .00 and denied U.S. Bank ’s request for attorney fees and
costs. U.S. Bank appeals.
D E C I S I O N
I. Request for New Certificate of Title
U.S. Bank argues that the district court erred by granting the association’s motion
for summary judgment. A district court must grant a motion for summary judgment “if the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that either
party is entitled to a judgment as a matter of law. ” Minn. R. Civ. P. 56.03 (2017). A
genuine issue of material fact exists if a rational trier of fact, considering the record as a
whole, could find for the non -moving party. Frieler v. Carlson Mktg. Grp., Inc. , 751
N.W.2d 558, 564 (Minn. 2008) (quotation omitted). This court applies a de novo standard
of review to a district court ’s legal conclusions on summary judgment and views the
evidence in the light most favorable to the non-moving party. RAM Mut. Ins. Co. v. Rohde,
820 N.W.2d 1, 6 (Minn. 2012) (quotations omitted); Day Masonry v. Independent Sch.
Dist. No. 347, 781 N.W.2d 321, 325 (Minn. 2010).
U.S. Bank argues that the district court erred by determining that the association’s
assessment lien complies with the applicable provision of the Minnesota Common Interest
Ownership Act (MCIOA). In general, a common-interest association “has a lien on a unit
for any assessment levied against that unit from the time the assessment becomes due.”
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Minn. Stat. § 515B.3 -116(a) (2016). But a common -interest association’s right to an
assessment lien is limited after a mortgage foreclosure:
If a first mortgage on a unit is foreclosed, . . . and no
owner or person who acquires the owner ’s interest in the unit
redeems . . . , the holder of the sheriff’s certificate of sale from
the foreclosure of the first mortgage or any person who
acquires title to the unit by redemption as a junior creditor shall
take title to the unit subject to a lien in favor of the association
for unpaid assessments for common expenses levied pursuant
to secti on 515B.3-115(a), (e)(1) to (3), (f), and (i) which
became due, without acceleration, during the six months
immediately preceding the end of the owner ’s period of
redemption. The common expenses shall be based upon the
association’s then current annual budget, notwithstanding the
use of an alternate common expense plan under
section 515B.3-115(a)(2).

Minn. Stat. § 515B.3-116(c) (emphasis added). “Common expenses” are defined within
the MCIOA to mean “expenditures made or liabilities incurred by or on behalf of the
association . . . together with any allocations to reserves. ” Minn. Stat. § 515B.1 -103(8)
(2016).
In the district court, the association argued that the insurance deductible and the
uninsured repair expenses were common expenses that were assessed during the six months
immediately preceding the expiration of the redemption period. U.S. Bank argued in
response that the association’s annual budget for 2016 did not include expenses for an
insurance deductible or for uninsured repair expenses for the Kennedys’ unit. In its reply
memorandum, the association argued that , although the association’s 2016 budget
originally did not include such expenses, the association amended its budget to include
those expenses before the expiration of the redemption period. In support of that argument,
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the association submitted documentary evidence consisting of some financial statements
and the minutes of an October 4, 2016 meeting of the association’s board of directors.
The district court determined as a matter of law that an amended budget would
satisfy the requirements of section 515B. 3-116(c) and further determined that the
association amended its budget on October 4 , 2016 (one day before the expiration of the
redemption period), to account for the $10,000.00 insurance deductible and the $7,989.19
in uninsured repair expenses. A ccordingly, the district court determined that the
association’s assessment lien was proper.
A.
On appeal, U.S. Bank first contends that the district court erred by considering an
argument that the association made for the first time in its reply memorandum and by
allowing the association to submit additional evidence with its reply memorandum.
A party making a disposi tive motion may include affidavits and exhibits with its
motion papers, which must be served at least 28 days before the hearing on the motion.
Minn. R. Gen. Pract. 115.03( a), (a)(3) . A party responding to the motion may serve
supplementary affidavits an d exhibits with its responsive memorandum. Minn. R. Gen.
Pract. 115.03(b)(2). The moving party’s reply memorandum must be “limited to new legal
or factual matters raised by an opposing party ’s response to a motion. ” Minn. R. Gen.
Pract. 115.03(c).
In this case, t he argument made in the association’s reply memorandum, and the
evidentiary materials associated with the argument, were pertinent to the matters raised by
U.S. Bank ’s responsive arguments. U.S. Bank challenged the association’s motion by
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arguing that the association’s annual budget for 2016 did not include expenses for a
$10,000.00 insurance deductible or $7,989.19 in uninsured repair expenses for the unit.
The association’s reply relates directly to U.S. Bank’ s responsive argument . Thus, the
district court did not err by considering the argument and the evidentiary materials served
with contained in the association’s reply memorandum.
B.
U.S. Bank next contends (as its main argument on appeal) that the association’s
evidence does not create a genuine issue of material fact with respect to the question
whether the association’s then-current annual budget for 2016 include d a $10,000 .00
insurance deductible or $7,989.19 in uninsured repair expenses for the unit.
In response, the association contends that the undisputed facts show that the
association “amended its annual budget to include the insurance deductible and repair costs
prior to the expiration of the owners’ redemption period.” In support of this argument, the
association relies on its August 31, 2016 balance sheet, which lists six liabilities, including
one item described as “repair escrows ” in the amount of $17,989.19 . In addition, t he
association relies on the minutes of the October 4, 2016 meeting of its board of directors .
The minutes include mention of a “financial report,” which is briefly summarized, with
dollar amounts for revenues, expenses, and net income, as well as dollar amounts for assets,
liabilities, and equity.
The association’s evidence does not satisfy the plain language of the statute. The
balance sheet that the association cites is not, by itself, a “budget” and does not reflect the
association’s annual budget. A “budget” is an “itemized summary of estimated or intended
8
expenditures for a given period along wi th proposals for financing them,” The American
Heritage Dictionary 249 (3d ed. 1996), or “an estimate, often itemized, of expected income
and expense for a given period in the future,” The Random House Dictionary of the English
Language 272 (2d ed. 1987). In contrast, a “balance sheet” is a “statement of the financial
condition of an individual or organization at a given date” with “a statement of assets,
liabilities, and net worth,” Webster’s New International Dictionary 206 (2d ed. 1946), or a
“statement of a business or an institution that lists the assets, debts, and owners’ investment
as of a specified date,” American Heritage, supra, at 139. The association’s August 31,
2016 balance sheet reflect ed a liability (or perhaps a contingent liability, given the word
“escrow”) of $17,989.19, which appears to correspond to the disputed components of the
association’s assessment lien. But that line item does not indicate whether such amount is
a budgeted expense.
The association’s evidence also includes a document that relates more directly to its
budget. But the association does not cite it in its appellate brief. The one-page document
is entitled “operating budget comparison as of 8/31/2016. ” The document lists (in rows)
ten categories of expenses and a total amount of operating expenses. For each category,
the document shows (in columns) the amount in the 2016 budget, the year-to-date amount
in the 2016 budget, the amount actually spent year -to-date, and the “operating variance”
between the budgeted amount and the amount actually spent year-to-date. The document
implies that the association’s original budget had not been revised, updated, or amended as
of August 31, 2016.
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Furthermore, the minutes of the association’s October 4, 2016 board meeting do not
indicate that the board amended the annual budget at that meeting. The minutes do not
reflect that the board took any action concerning the annual budget. The minutes simply
refer to a “financial report.” In the context of a meeting of a board of directors, a “report”
generally is for informational purposes only, and any recommendation associated with a
report likely would require formal action, such as a motion, a second, and a majority vote.
See Henry M. Robert III, Robert’s Rules of Order: Newly Revised § 48, at 476-77 (11th ed.
2011). No such action appears in the minutes of the association’s October 4, 2016 board
meeting.
Thus, we agree with U.S. Bank that the district court erred by determining that the
disputed components of the association’s assessment lien ( the $10,000.00 insurance
deductible and $7,989.19 in uninsured repair expenses for the unit) were included in the
association’s then-current annual budget.
C.
The association argues in the alternative that , as a matter of law, the disputed
components of the association’s assessment lien are proper even if they were not included
in the association’s then-current annual budget. Specifically, the association argues that
the term “common expenses ” in section 515B.3-116(c) should be interpreted to mean
“customary and necessary operating expenses, ” which would harmonize that section with
another section of the MCIOA. See Minn. Stat. § 515B.3-1151(a) (2016). The association
argues further that the disputed components of its assessment lien were not “customary and
necessary operating expenses ” that are appropriate for an annual budget because the
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association was not and is not responsible for the repair, replacemen t, and maintenance of
individual units. See Minn. Stat. § 515B.1-103(8); cf. Minn. Stat. § 515B.3-115(e)(2).
U.S. Bank argues in its reply brief that the association did not preserve this argument
by presenting it to the district court. At oral argument, the association conceded that it did
not make this argument to the district court. Our review of the association’s motion papers
confirms that the association relied solely on an argument that is inconsistent with its
alternative argument; the association accepted U.S. Bank’s premise that all assessments
reflected in its assessment lien must be “based upon the association’s then current annual
budget.” See Minn. Stat. § 515B.3 -116(c). We will not consider the association’s
alternative argument for the first time on appeal because it has been forfeited. See Thiele
v. Stich, 425 N.W.2d 580, 582 (Minn. 1988); Doe 175 v. Columbia Heights Sch. Dist., ISD
No. 13, 842 N.W.2d 38, 43 (Minn. App. 2014).
D.
U.S. Bank next contends that the district court erred by not canceling the existing
certificate of title and ordering the issuance of a new certificate of title. U.S. Bank’s action
is based on the following statute:
Any person who has . . . become the owner in fee of the
land, or any part thereof, may have the title registered. . . .
[T]he owner shall apply by duly verified petition to the court
for a new certificate of title to such land, and the court shall
thereupon, after due notice to all parties in interest and upon
such hearing as the court may direct, make an order for the
issuance of a new certificate of title to the person entitled
thereto, and the registrar shall thereupon enter a new certificate
of title to the land, or of the part thereof to which the petitioner
is entitled as in the case of a voluntary conveyance.

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Minn. Stat. § 508.58, subd. 1 (2016).
In its petition, U.S. Bank asked the district court to cancel the existing certificate of
title and issue a new certificate of title for the unit in the name of U.S. Bank “as sole owner
of the property described, ” “free and clear of all interest of [the Ke nnedys] and all junior
liens.” The parties agreed that some assessments reflected in the assessment lien (which
total $2,416.16) are properly included. The district court determined that the association
is entitled to an assessment lien of $20,4 05.35, which is less than the amount of the lien
that the association recorded in March 2017. After resolving the parties’ arguments
concerning the association’s assessment lien, the district court determined that the disputed
components of the assessment lien (which total $17,989.19) were properly included in the
lien. But the district court entered judgment for the association without making any
provision for the issuance of a new certificate of title.
The association does not oppose U.S. Bank’s argument that the district court erred
by not ordering the issuance of a new certificate of title with an assessment lien in a lesser
amount. We agree with both parties that the district court should have ordered the issuance
of a new certificate of title. In light of our resolution of the parties’ arguments concerning
the disputed components of the association’s assessment lien, see supra part I.B., the proper
amount of the lien should be $2,416.16.
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II. Association’s Attorney Fees and Costs
U.S. Bank also argues tha t the district court erred by granting the association’s
request for attorney fees and costs.
The association asked the district court for an award of attorney fees and costs in
the amount of $22,331. 00. The district court awarded the association $12,000.00 for
services performed and costs incurred between December 2016 and December 2017. The
district court stated that the legal basis of the award is section 515B.3-115(e)(4) of the
Minnesota Statutes . That statute provides that “reasonable attorn eys fees and costs
incurred by the association in connection with (i) the collection of assessments and, (ii) the
enforcement of this chapter, the articles, bylaws, declaration, or rules and regulations,
against a unit owner, may be assessed against the unit owner’s unit.” Minn. Stat. § 515B.3-
115(e)(4).
U.S. Bank contends that the district court erred because the statute allows an
association to levy an assessment against a unit owner for certain fees and costs but does
not permit a district court to enter a money judgment against the unit owner for those fees
and costs. In response, the association points to a statute providing that a unit owner “shall
be personally liable to the association for payment of the assessment levied against the
unit.” See Minn. Stat. § 515B.3-116(e).
In light of the plain language of the statute, we agree with U.S. Bank that the statute
cited by the district court is not a proper legal basis for a money judgment for fees and
costs. The statute merely allows the association to levy an assessment against the unit for
certain attorney fees and costs. See Minn. Stat. § 515B.3-115(e)(4). A different provision
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of the MCIOA expressly prohibits an association from asserting a lien on an assessment
for those attorney fees and costs. See Minn. Stat. § 515B.3-116(c) (authorizing lien for
assessments levied pursuant to subsections 515B.3-115(e)(1)-(3) but not subsection
515B.3-115(e)(4)). An association presumably may commence a civil action to obtain a
judgment if an assessment is not paid. But that did not happen in this case. This action
was commenced by U.S. Bank for the purpose of obtaining a new certificate of title. The
association has not identified any other legal basis justifying the district court ’s award of
fees and costs.
Thus, the district court erred by granting the association’s request for attorney fees
and costs.
III. U.S. Bank’s Attorney Fees and Costs
U.S. Bank last argues that the district court erred by denying its request for attorney
fees and costs. U.S. Bank’s request for fees and costs is based on a statute that provides
that “if . . . an association . . . violates any provision of this chapter, or any provision of the
declaration, bylaws, or rules a nd regulations[,] any person or class of persons adversely
affected by the failure to comply has a claim for appropriate relief.” Minn. Stat. § 515B.4-
116(a) (2016). In addition, “The court may award reasonable attorney ’s fees and costs of
litigation to the prevailing party.” Minn. Stat. § 515B.4-116(b). The district court denied
U.S. Bank’s request for fees and costs on the ground that it was not the prevailing party.
The district court ’s reasoning should be reconsidered in light of our resolution of the
14
parties’ arguments concerning the disputed components of the association’s assessment
lien. See supra part I.B.
In sum, we remand the matter to the district court for an order for the issuance of a
new certificate of title reflecting an assessment lien in the amount of $ 2,416.16 and for
reconsideration of U.S. Bank’s request for an award of attorney fees and costs.
Reversed and remanded.