SW Partners, LLC, Appellant,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-0773

SW Partners, LLC,
Appellant,

vs.

Trade Center Property, LLC, et al.,
Respondents.

Filed March 8, 2021
Affirmed
Johnson, Judge

Clay County District Court
File No. 14-CV-18-4723

Jason R. Asmus, Adam G. Chandler, Taft Stettinius & Hollister, L.L.P., Minneapolis,
Minnesota (for appellant)

Kip M. Kaler, Asa K. Burck, Kaler Doeli ng, P.L.L.P., Fargo, North Dakota (for
respondents)

Considered and decided by Bjorkman, Pres iding Judge; Johnson, Judge; and Larkin,
Judge.
NONPRECEDENTIAL OPINION
JOHNSON, Judge
Two affiliated companies jointly borrowed $1,800,000. The loan was secured by a
mortgage on two properties. After the borrowe rs defaulted, the two properties were sold
in separate foreclosure sales at which the le nder submitted winning bids of $600,000 and
$1,800,000, respectively, for a total of $2,400,000. The borrowers sought to establish and

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recover a surplus by subtracting the amount of their outstanding debt from the sum of the
lender’s two bids. The district court gr anted the borrowers’ motion and awarded the
surplus to one of the borrowers . We conclude that the di strict court did not err by
determining that a surplus exists. Therefore, we affirm.
FACTS
The lender in this case is SW Partners, L.L.C., a Florida company. The borrowers
are two affiliated companies, M.I.G. Propert ies Hospitality-1, L.L.C., and Trade Center
Property, L.L.C., both of which are Minnesota companies. The loan was guaranteed by
Kenneth A. Martin, the president of both Minnesota companies. For the sake of simplicity,
we will refer to the borrowers as respondents throughout this opinion.
In November 2017, respondents jointly borrowed $1,800,000 from SW. The parties
agreed that respondents would make monthly interest-only payments, at an interest rate of
13%, until December 31, 2018, at which time all outstanding principal and interest would
be due in full. Respondents secured the loan with a mortgage on two properties, which are
identified in the mortgage as the TCP property and the MIG property. The record indicates
that respondents made untimely payments in April, June, and July of 2018 and made no
payments in August, September, October, or November of 2018.
In November 2018, SW commenced an acti on in the district court (No. 14-CV-18-
4515) in which it sought a judgment in the amount of respondents’ outstanding debt. In
December 2018, SW commenced two additional actions (Nos. 14-CV-18-4718 & -4723)
in which it sought to foreclose on the two properties identified in the mortgage.

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In February 2019, the partie s’ attorneys signed three stipulations, one for each case.
In each stipulation, the parties agreed that respondents are in default, agreed on an amount
of outstanding debt, and agreed th at the district court may ente r an order with findings of
fact, conclusions of law, and an order for judg ment. In the stipulations in the second and
third cases, the parties also agre ed that the district court ma y order the foreclosure of the
mortgaged properties. In March 2019, the dist rict court filed three orders, each of which
consists of findings of fact, conclusions of law, and an order for judgment. Shortly
thereafter, the district court administrator fi led three judgments, each of which generally
conforms to one of the district court’s orders.
As a result, respondents are jointly and severally liable to SW in the first case in the
amount of $1,983,815.63 plus interest, attorney fees, and costs. In the second case, in
which SW sought foreclosure of the TCP prope rty, respondents are jointly and severally
liable to SW in the amount of $1,990,012.67 plus interest, attorney fees, and costs. And in
the third case, in which SW sought foreclosure of the MIG property, respondents are jointly
and severally liable to SW in the amount of $2,005,371.35 plus interest, attorney fees, and
costs. The amounts of the judgments are different because property taxes of $6,197.04 and
$21,555.72 were included in the judgments in the second and third cases, respectively.
In May 2019, SW submitted the highest bid of $600,000 at the foreclosure sale of
the TCP property. In September 2019, SW submitted the highest bid of $1,800,000 at the
foreclosure sale of the TCP property.
In November 2019, respondents filed a motion in the third case for turnover of
surplus. They asserted that SW’s winning bid of $600,000 in the first foreclosure sale

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reduced the outstanding debt to approximately $1,437,000 (after accounting for post-
judgment interest and costs as sociated with the TCP property ), so that SW’s winning bid
of $1,800,000 in the second foreclosure sale created a surplus of approximately $296,000
(after accounting for post-judgment interest and costs associated with the MIG property).
Respondents argued that the surplus should be turned over to them. SW opposed the
motion on the ground that there was no surplu s because its winning bid of $1,800,000 on
the MIG property in the second foreclosure sale was less than the amount of the judgment
in the third case.
In January 2020, the district court conducted a hearing on respondents’ motion. At
the outset of the hearing, the district c ourt asked SW’s attorney whether the money
judgment in the first case had been satis fied, and SW’s attorn ey answered in the
affirmative. After receiving oral arguments on respondents’ motion, the district court took
the matter under advisement.
In February 2020, the district court file d an order in which it granted respondents’
motion in part. The district court determined that a surplus exists but deferred a final ruling
on the motion. The district court requested supplemental memoranda from the parties on
two specific issues: first, the amount of the surplus and, second, th e party or parties to
whom the surplus shou ld be awarded. In their s ubsequent memoranda, the parties
submitted similar numbers with respect to the first issue. Respondents asserted that the
amount of the surplus is $296,673.31. SW asserted that, if a surplus exists (a premise that
it reserved its right to challe nge), the amount is $273,900.36. With respect to the second

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issue, the parties agreed that M.I.G. Prop erty Hospitality-1, L.L. C., is entitled to any
surplus identified by the district court.
In March 2020, the district court filed an order in the third case in which it adopted
SW’s proposal concerning the amount of the surplus and awarded the surplus to M.I.G.
Property Hospitality-1, L.L.C. SW appeals.
DECISION
I. Existence of Surplus
SW’s primary argument is that the distri ct court erred by finding that a surplus
exists.
Because the third case is a foreclosure by action, we apply the relevant provisions
of chapter 581 of the Minnesota Statutes. “J udgment shall be entered . . . adjudging the
amount due, with costs and disbursements, and the sale of the mortgaged premises, or some
part thereof, to satisfy such amount, and dire cting the sheriff to pr oceed to sell the same
according to the provisions of la w relating to the sale of real estate on execution, and to
make report to the court.” Minn. Stat. § 581. 03 (2020). If multiple properties secure a
debt, they generally should be sold separately, unless the distri ct court orders them to be
sold together. See Minn. Stat. § 581.04 (2020). Th e mortgagee may submit a good-faith
bid at a foreclosure sale, which “shall have th e same effect as a re ceipt for money paid
upon a sale for cash.” Minn. Stat. § 581.05 (2020). “[I]f, after sa tisfying the mortgage
debt, with costs and expenses, there is a surplus, it shall be brought into court for the benefit
of the mortgagor or the person entitled thereto, subject to the order of the court.” Minn.
Stat. § 581.06 (2020). “Upon confirmation of the report of sale, the court administrator

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shall enter satisfaction of the judgment to the extent of the sum bid for the premises, less
expenses and costs.” Minn. Stat. § 581.09 (2020). We apply a de novo standard of review
to a district court’s interpretati on and application of a statute. Premier Bank v. Becker
Dev., LLC, 785 N.W.2d 753, 758 (Minn. 2010).
In its February 2020 order, the district court recited the relevant historical and
procedural facts before stating that it “canno t simply ignore the two other related cases
given that those two cases involved the exact same claim as in the instant case.” The district
court reasoned that “[t]here was one promissory note” underlying “three separate actions,”
that “the three cases likely should have been consolidated,” that SW “can only collect what
it is owed,” that “the money judgment [in the first case] has been satisfied pursuant to the
agreement of the parties,” and that SW “is no t claiming it is owed any additional funds.”
The district court reasoned further that th e sum of SW’s two winning bids, $2,400,000,
“exceeds the money judgment [in the first case] and the two foreclosure judgments” in the
second and third cases, all of which “stem from the one promissory note.” For these
reasons, the district court concluded that “there is in fact some type of a surplus.”
SW contends that the district court erred for three reasons. We first consider SW’s
contention based on section 58 1.06, which is the statute authorizing a motion for the
turnover of a surplus. As st ated above, the statute provide s that “if, after satisfying the
mortgage debt, . . . there is a surplus, it shal l be brought into court for the benefit of the
mortgagor or the person entitled th ereto, subject to the order of the court.” Minn. Stat.
§ 581.06. SW contends that there is no su rplus under the statut e because respondents’
mortgage debt was not satisfied. This c ontention is counterintuitive because SW’s two

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bids totaling $2,400,000 obviously exceed both the outstanding debt, which was stipulated
to be $1,983,815.63, and the judgment in the third case, wh ich was stipulated to be
$2,005,371.35. In addition, SW’s attorney agreed at the January 2020 hearing that the
money judgment in the first case had been satisfied.
SW relies on this court’s opinion in First Minnesota Bank v. Overby Development,
Inc., 783 N.W.2d 405 (Minn. App. 2010), for the proposition that a stipulation between
parties may be used to calculate a surplus. The facts of Overby are meaningfully different
from the facts of this case. In Overby, the loan was secured by multiple residential lots.
Id. at 407. There was only one district c ourt action and only one foreclosure sale. Id. at
407-08. Because some of the lots securing the loans had been sold or were being sold, the
parties stipulated to a foreclosure order th at “excluded certain lots from the action and
subtracted from the judgment the mortgage principal and interest allocated to those
excluded lots.” Id. at 407. The parties’ stipulation was consistent with the statute that
authorizes a “sale of the mortgaged premises, or some part thereof .” See Minn. Stat.
§ 581.03 (emphasis added). In applying section 581.06, the district court in Overby
determined that the “mortgage debt” was the amount to which the parties had stipulated,
which was less than the amount of the outstanding debt because of the exclusion of the lots
that had been sold or were being sold. 783 N.W.2d at 408. On appeal, the lender argued
that the surplus calculation should be based on the outstanding mortgage debt, not the lesser
amount of the stipulated foreclosure judgment. Id. at 410-12. This court rejected the
lender’s argument and affirmed, reasoning that, in the circumstances of that case, “the
better interpretation of the phrase ‘mortgage debt’ in section 581.06 is that it refers to the

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portion of the mortgage de bt on which the lender actually forecloses,” i.e., “the debt
corresponding to and secured by the property th at is sold at the foreclosure sale.” Id. at
412. We also expressed concern that the lender’s method of calculating a surplus, if
adopted, would allow a lender, “by overbidding, [to] manipulate the foreclosure process,
obtain ownership of properties, retain a ‘surpl us,’ and frustrate a mortgagor’s . . . right of
redemption.” Id.
The Overby opinion has limited applicability to this case, in which the
circumstances are different in multiple ways. SW commenced three district court actions,
including two foreclosure actions. The parties sti pulated—for reasons that are not fully
explained—to three judgments, the sum of which exceeds the mortgage debt by a multiple
of approximately three. One similarity betw een the two cases is that SW’s position, like
that of the lender in Overby, would allow a lender to effec tively prevent both redemption
and a surplus. See id. at 412. In any event, the holding in Overby does not compel the
conclusion that, in the circum stances of this case, the stipulated judgment must be
substituted for the mortgage debt when determining a surplus under section 581.06.
Second, SW contends that the surplus calculation should be based solely on the
amount of the stipulated judgment in the th ird case because of section 581.03, which
provides, “Judgment shall be entered . . . adjudging the amount due, with costs and
disbursements, and the sale of the mortgaged premises, or some part thereof, to satisfy such
amount, and directing the sheriff to proceed to sell the same . . . .” Minn. Stat. § 581.03
(emphasis added). SW contends that the la nguage we have italicized means that “the
proceeds from the sale authorized by the foreclosure judgment will be applied only to such

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judgment.” SW cites no caselaw in support of this contention. When read in context, the
italicized language simply indicates that th e proceeds of a foreclosure sale should be
considered for purposes of entering a satisfaction of judgment pursuant to section 581.09.
In any event, section 581.03 ca nnot be interpreted in a ma nner that contradicts section
581.06, the statute that governs the issue of surplus.
Third, SW contends that the district c ourt’s reasoning is inconsistent with the
judgment that was entered in March 2019. SW relies on paragraph 14 of the judgment in
the third case, which states that “the Sher iff shall first apply the proceeds of the
[foreclosure] sale to the payment of costs an d disbursements, and second on the principal
of said judgment” and that “the Sheriff shall bring the surplus money, if any, arising from
the sale, after the payment desc ribed, into Court for the benefit of the mortgagor or the
person entitled thereto.” SW notes that the judgment in the second case, which concerned
the first foreclosure sale, contained identical language. We interpret the first part of
paragraph 14, which directs the sheriff to apply the proceeds of the sale to “said judgment,”
to be relevant to the entry of a satisfaction of judgment pursuant to section 581.09. The
second part of paragraph 14, which directs the sheriff to “bring the surplus money, if any”
into court obviously is relevant to the district court’s dete rmination of a surplus pursuant
to section 581.09. But the second part of paragraph 14 does not specify a method by which
the existence of a surplus should be determined. That issue is governed by section 581.06,
which provides that “there is a surplus” if, a nd only if, the “mortgage debt” is satisfied.
See Minn. Stat. § 581.06. In this case, the district court appropriately focused on whether
the mortgage debt was satisfied after the second foreclosure sale.

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Thus, the district court did not err by determining that a surplus exists.
II. Equitable Relief
SW also argues, in the alte rnative, that “this court should exercise its equitable
discretion to eliminate the unconscionable windfall that a surplus would grant to
respondents.” SW contends that equitable relief is appropriate because it did not intend to
create a surplus, because respondents stipulat ed to the entry of multiple judgments, and
because it is appropriate to restore the parties to the pre-existing status quo.
SW did not present this argument to the district court. When the district court asked
for supplemental memoranda on the amount of the surplus, SW filed a memorandum
stating that, if there is a surplus, it is $ 273,900.36. The district court adopted SW’s
argument on that issu e. Now, for the first time on appeal, SW argues that, for equitable
reasons, the amount of the surplu s should be zero. The district court did not have an
opportunity to consider SW’s argument for equitable relief. Accordingly, SW has forfeited
the argument. As a general rule, this cour t does not consider forfeited arguments. Thiele
v. Stich, 425 N.W.2d 580, 582 (Minn. 1988); Doe 175 v. Columbia Heights Sch. Dist., 842
N.W.2d 38, 42-43 (Minn. App. 2014). The ge neral rule is especially appropriate with
respect to issues of equity, for which the district court “is in the best position to analyze the
facts and balance the relevant factors.” Melrose Gates, LLC v. Moua , 875 N.W.2d 814,
819 (Minn. 2016). Thus, we decline to consider SW’s forfeited argument.
In sum, the district court did not e rr by determining that a surplus exists.
Accordingly, the district court did not err by determining that the amount of the surplus is

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$273,900.36 and that the surplus sh ould be awarded to M.I.G. Property Hospitality-1,
L.L.C.
Affirmed.