In the Matter of the Petition of Crablex, Inc., Minn. App. Ct. , Court File No. A08-0458, decided 2/10/09.
We are in an age of foreclosures and the Minnesota Court of Appeals has issued a published decision making clear that a foreclosure action “never binds any one who has not been made a party, or who has not subsequently succeeded to the rights of one who was a party.” Whalley v. Eldridge, 24 Minn. 358, 359 (1877); see also Restatement (Third) of Property (Mortgages) ยง 7.1 cmt. b (stating that “[w]here the holder of a junior interest is not made a party in the [foreclosure action], that interest is neither terminated nor otherwise prejudiced by the foreclosure”).
This includes parties with easements. A junior lienholder’s interest in property survives foreclosure when it was not given proper notice of the foreclosure — including those with preexisting easements. The failure to give notice to those with easements and, thus, the easements’ surviving a foreclosure and subsequent sale, can have a huge impact on property value so the “ounce of prevention” adage applies here.
Crablex also touched on the issue of settlement agreements, with a party claiming a settlement agreement was void due to the failure of one of the attorneys’ signing the release. The claim was rejected. A representative of the party itself had signed; the failure of the lawyer to sign seems fairly weak justification for voiding a settlement agreement.