Lake State Federal Credit Union v. Tretsven

In 2004, Richard Tretsven (defendant) entered a purchase agreement for property in Minnesota and obtained a purchase-money mortgage for the property from Lake State Federal Credit Union (Lake State) (plaintiff). Lake State agreed to allow Agility Title, Inc. (Agility) to handle the closing. Agility’s president at the time was Amanda Mahn, who later married Tretsven. Tretsven signed the mortgage note and mortgage and provided Lake State with copies of the executed deed, settlement statement, promissory note, and mortgage. Although Agility promised to immediately record the mortgage and deed after the closing, Agility failed to do so. Each of the documents executed by Tretsven listed only Tretsven as the purchaser, borrower, and grantee. However, after the closing, the deed was altered to add Mahn’s name as an additional grantee. In February 2005, before Lake State’s mortgage had been recorded, Mahn used the altered deed and purportedly granted a mortgage on the property to Hunter Financial, LLC (Hunter) (defendant) for $57,000 in financing. Hunter’s sole member was Kenneth Woodard (defendant). Hunter was not registered with the Minnesota Secretary of State as a limited-liability company (LLC) at the time of the transaction with Mahn and did not become a registered LLC until September 2005. The mortgage granted by Mahn to Hunter did not mention Woodard’s name. When Tretsven subsequently failed to make several monthly mortgage payments to Lake State, Lake State discovered that Agility had never recorded the original deed, that the deed had been altered, and that the altered deed had been used to obtain mortgage financing from Hunter. Lake State commenced foreclosure proceedings on the property and joined Hunter as a defendant in the action. The trial court found that the mortgage Mahn had given to Hunter was void for fraud and ordered that the property be foreclosed. The court awarded the foreclosure sale proceeds to Lake State, with any excess proceeds paid to the court. Woodard appealed, arguing that the trial court had improperly denied him of his rights to the property. Lake State argued that Woodard did not have standing to appeal because Hunter was the party in the original action, and Woodard was only a member of Hunter.