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Simons v. Shiltz: REAL PROPERTY - judicial order lien priority over later-recorded liens with notice

Ann Marie Simons, f/k/a Ann Marie Shiltz,
Bryan Lee Shiltz, et al.,
Sterling State Bank,
Filed December 4, 2007
Ross, Judge
Wright County District Court
File No. 86-C7-05-004343
Mark W. Vyvyan, Sten-Erik Hoidal, Fredrickson & Byron, P.A., 200 South Sixth Street,
Suite 4000, Minneapolis, MN 55402-1425 (for respondent)
Eric D. Cook, Christina M. Weber, Wilford & Geske, P.A., 7650 Currell Boulevard,
Suite 300, Woodbury, MN 55125 (for appellant)
Considered and decided by Ross, Presiding Judge; Kalitowski, Judge; and
Crippen, Judge.*
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, 10.
A judicial order that secures a monetary award with an interest in real property
creates a property lien with priority over security interests that are obtained and recorded
later by persons with notice of the order.
ROSS, Judge
Appellant Sterling State Bank and respondent Ann Marie Simons dispute the
respective priorities of Simonss asserted lien on real property that was allegedly
established by court order as considered against the banks later mortgage on the
property. The district court granted Simonss motion for summary judgment, applying
language in Oldewurtel v. Redding, 421 N.W.2d 722 (Minn. 1988), to hold that the order
that purported to secure a monetary award with a security interest in specified real
property created a valid lien. We affirm.
Ann Marie Simons and Bryan Lee Shiltzs marriage dissolved by decree in
January 2002. The dissolution decree on which the district court entered its final
judgment required Simons to convey her interest in the marital homestead to Shiltz in
exchange for cash. The decree declared that the homestead shall constitute security for
[Shiltzs] property settlement payment obligation. The decree also ordered Shiltz to
execute a second mortgage against the property in Simonss favor, which Shiltz never
did, and it allowed Simons to foreclose if Shiltz defaulted on his payment obligation.
In March 2002 Shiltz obtained a loan from Sterling State Bank, which secured the
loan with a mortgage against the property. Sterling recorded its mortgage on April 16,
2002. A month before Sterling recorded its mortgage, however, Simons had notified
Sterling in writing of her claimed security interest in the property, and she quitclaimed
her interest to Shiltz, reserving any lien she might have from the dissolution judgment.
On April 16, before Sterling later recorded its mortgage that same day, Simons recorded
the dissolution judgment and decree and the quitclaim deed. In May, Sterling took
another mortgage on the property and soon recorded it also. Shiltz defaulted on his debts
to Sterling and on his judgment obligation to Simons.
Simons brought this action asking the district court to declare her lien senior to
Sterlings second mortgage. The district court granted summary judgment in Simonss
favor, holding that the dissolution decree created a lien in favor of Simons and that her
lien has priority over Sterlings second mortgage because Sterling obtained and recorded
its mortgage after it had actual notice of Simonss lien. Sterling appeals, arguing that the
decree did not create a lien.
Does a district court order with language that expressly secures an award with an
interest in real property create a lien that has priority over security interests later recorded
by a creditor who had notice of the order?
This case turns on whether the district court properly granted summary judgment
when it ruled that the dissolution decree created a valid lien with priority over a
subsequently recorded mortgage. We will affirm summary judgment if there are no
issues of material fact and if the district court correctly applied the law. See Thommes v.
Milwaukee Ins. Co., 641 N.W.2d 877, 879 (Minn. 2002). A fact is material if it affects
the outcome of a case. Zappa v. Fahey, 310 Minn. 555, 556, 245 N.W.2d 258, 259-60
Here, there are no disputed material facts. Sterling argues that there might be a
disputed material fact as to whether Simons must subordinate her lien to the banks
second mortgage. The decree language requires Simons to subordinate her lien to a
mortgage only if she were paid to satisfy Shiltzs obligation to her from the proceeds of
that mortgage. Because Simons was not paid from the proceeds of Sterlings second
mortgage, the question of subordination will not affect the cases outcome.
Our sole inquiry, therefore, is whether the district courts conclusions of law are
sound. Both parties argue that Oldewurtel v. Redding is dispositive. 421 N.W.2d 722
(Minn. 1988). We agree.
Oldewurtel is particularly persuasive because its facts closely mirror those of this
case, and its legal analysis addresses the issue we face. Like the present case, Oldewurtel
involved a priority dispute that focused on language in a dissolution decree. Oldewurtel,
421 N.W.2d at 724-26. A dissolution decree ordered Redding, Oldewurtels husband, to
pay Oldewurtel approximately 0,000. Id. The decree did not include language that
purported to secure Oldewurtels award with any interest in Reddings real property. Id.
at 725. Redding later granted a mortgage on the property to a bank, and the bank
recorded it promptly. Id. A priority dispute between Oldewurtel and the bank ensued,
and the supreme court ruled in favor of the bank. Id. at 725, 728. It explained that the
order contained no provision to secure Oldewurtels award with Reddings property. But,
critical here, it emphasized that [h]ad such a provision been made . . . Oldewurtels lien
would have arisen against [the bank] on that date. Id. at 727 n.4 (emphasis added).
Though the supreme courts caveat in Oldewurtel is speculation and was not
essential to the courts holding, the supreme courts dicta are given considerable
weight. In re Estate of Bush, 302 Minn. 188, 207, 224 N.W.2d 489, 501 (1974). The
Oldewurtel court clearly opined that a dissolution decree securing an award with an
interest in real property gives rise to a lien on the date of the decree as against a secured
creditor who obtained its interest after notice of the decree. A district courts power to
create this kind of lien is consistent with the law of other jurisdictions. See, e.g., Coon v.
Coon, 85 So. 2d 430, 432 (Ala. 1955) ([A] decree without a provision that it shall be a
lien . . . does not ipso facto create a lien.), rehg denied (Ala. Feb. 2, 1956); First Cmty.
Bank of Blanchard v. Hodges, 907 P.2d 1047, 1051 (Okla. 1995) ([T]his Court has long
held that a trial court may impose a decree-ordered lien against property to secure
payment of alimony[, this] lien [is] created by force of judicial decree.); Bryan v.
Nelson, 884 P.2d 252, 253-54 (Ariz. Ct. App. 1994) ([A] decree of dissolution can
create a lien against real property.); Dunn v. Thompson, 529 N.E.2d 297, 300 (Ill. App.
Ct. 1988), modified on denial of rehg, ([A district court] order does not become a lien
unless . . . the decree itself recites that it shall become a lien.), appeal denied, 535
N.E.2d 913 (Ill. 1989); Penix v. Hicks, 618 N.E.2d 1346, 1347 (Ind. Ct. App. 1993) ([A
court may] create security interests to protect the effects of its decrees.); Kinne v. Kinne,
617 P.2d 442, 445 (Wash. Ct. App. 1980) (It was early decided in this state that a decree
for alimony creates no lien . . . unless the decree fastens itself upon some particular
property.), review denied (Wash. Jan. 19, 1981). Following the dicta of Oldewurtel, we
conclude that the district court rightly determined the priority of security interests in the
real property. A court order that expressly secures a monetary award with an interest in
real property establishes a lien on the property that is superior to security interests later
obtained and recorded by creditors who have notice of the judicial order that created the
security interest. The dissolution decree secured Simonss interest before Sterling took
its second mortgage. Simons gave the bank actual notice of her lien. She also provided
record notice of her lien before the bank recorded its mortgages. See Minn. Stat.
507.34 (2002) (establishing that the first party to record a lien has first priority).
Simonss lien takes priority over the banks second mortgage.
Because the decree created a lien in favor of Simons, and the bank had notice of
the lien prior to obtaining its second mortgage, the district court properly ordered
summary judgment in Simonss favor.


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