• August 20, 2012

On August 7, the Minnesota Supreme Court granted review in Marine Credit Union v. Detlefson-Delano.  Although the family-law aspect was not addressed by the Minnesota Court of Appeals, the case presents in intriguing juxtaposition of statutes relating to both real estate and family law.  In this instance, the Minnesota Supreme Court should reverse the decision of the Court of Appeals.Anne Detlefson-Delano was divorced in 2003 or 2004 and awarded all interest in the parties’ homestead property in Harmony.  She then married Jack Delano in 2005 and they occupied the property as their homestead.  In 2007, Anne considered selling the homestead.  She obtained a quitclaim deed from her ex-husband and, because Jack was an over-the-road trucker who was frequently gone, also obtained a quitclaim deed from him conveying all of Jack’s interest in the homestead to Anne.  She recorded both quitclaim deeds on July 25, 2007.

For undisclosed reasons, the homestead was not sold.  On January 18, 2008, Anne obtained an $84,000 loan from Marine Credit Union, secured by a mortgage on the homestead.  Only Anne signed the mortgage.  Marine Credit knew that she was married, but did not require Jack’s signature based on Anne’s representation that he had conveyed his interest to her.

Anne defaulted on the loan in October 2009 and Marine Credit initiated a foreclosure action.  Anne counterclaimed, arguing that the mortgage was void for lack of Jack’s signature.  The trial court concluded that the mortgage was void for lack of the husband’s signature and that the quitclaim was valid only for the limited purpose of sale of the homestead.  Marine Credit appealed.

The Minnesota Court of Appeals began by noting the the trial court had erroneously found that the quitclaim from Jack was executed after the mortgage was granted.  The Court then turned to a statutory analysis.  Section 507.02 of the Minnesota Statutes provides that, absent the signatures of both spouses, a conveyance of a homestead, including a mortgage is void.  However, this section also contains an exception, ignored by the district court, for “a conveyance between spouses pursuant to section 500.19, subdivision 4.”  Section 500.19 provides, in part, that a spouse may transfer his or her interest in a homestead to the other spouse by a conveyance signed only by the grantor spouse.  The court then found the quitclaim deed to be a complete transfer of Jack’s interest in the homestead and, reading the statutory sections in conjunction, determined that his signature was not required on the mortgage.  Thus, the Court of Appeals reversed the district court.

The attorneys, the trial court, and the Court of Appeals all overlooked the family-law aspect of the case.  Section 518.003 of the Minnesota Statutes defines “Marital Property” as property acquired by either or both parties during the existence of a marital relationship between them.  The statute further states that such property is presumed to be marital regardless of whether it is titled in one or both names and that “[i]f a title interest in real property is held individually by only one spouse, the interest in the real property of the nontitled spouse is not subject to claims of creditors or judgment or tax liens until the time of entry of the decree awarding an interest to the nontitled spouse.”

In this case, Anne owned the property before marrying Jack and so has a nonmarital interest therein.  However, improvements to the homestead or appreciation thereof during the marriage would create a marital interest in the property.  Such marital interest would continue to accrue until the parties divorce or one dies.  The amount of the marital interest Jack has not been specified, but it still exists.

The quitclaim deed from Jack to Anne did not extinguish his marital interest.  Section 518.003 states, in part, that “‘Nonmarital property’ means property real or personal, acquired by either spouse before, during, or after the existence of their marriage, which (a) is acquired as a gift, bequest, devise or inheritance made by a third party to one but not to the other spouse[.]”  A spouse is not a third party, thus a quitclaim deed by one spouse to another does not serve to render the property nonmarital.

The Minnesota Court of Appeals itself noted as much three years ago in the unpublished case of McQuay v. McQuay, stating “[b]ecause respondent was a party to the marriage, the interest deeded to appellant [via quitclaim deed] remained marital property. That deed did not in itself establish that respondent abandoned any marital interest for marriage dissolution purposes.”

Based on the above, it seems apparent that Jack retained an undetermined marital interest in the homestead that is “not subject to claims of creditors.”  This presents a potential statutory conflict that must be addressed by the Supreme Court, however the basics of family law suggest that the decision of the Court of Appeals must be reversed.

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