Bauer v. JK Property Investment, Inc., No. 27CV06-22100.

• Decision Date: 26 May 2008
• Docket Number: No. 27CV06-22100.
• Parties: Kathleen Bauer and Patrick Bauer, Plaintiffs, v. JK Property Investment, Inc., Candace Johnson, individually and Gary Knuth, individually, Defendants.
• Court: Minnesota District Court

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Kathleen Bauer and Patrick Bauer, Plaintiffs, v.JK Property Investment, Inc., Candace Johnson, individually and Gary Knuth, individually, Defendants.

No. 27CV06-22100.

District Court of Minnesota, Fourth Judicial District.

May 26, 2008.

Adam Heaton, Esq., appeared for and on behalf of Plaintiffs.

Barry O'Neil, Esq., appeared for and on behalf of Defendants.

ORDER GRANTING PLAINTIFFS' MOTION TO AMEND COMPLAINT

GARY LARSON, Judge.

The above-titled matter came before the Honorable Gary Larson, Judge of Hennepin County District Court, on August 27, 2007, on Plaintiff's Motion to Amend Complaint.

Based upon all files, records, and proceedings herein, together with the arguments of counsel,

IT IS HEREBY ORDERED

1.Plaintiff's Motion to Amend its Complaint is GRANTED.

2.That the attached memorandum shall be made a part hereof.

MEMORANDUM

I.PLAINTIFFS' MOTION TO AMEND THEIR COMPLAINT IS GRANTED.

A.Factual backdrop.

Plaintiffs Kathleen and Patrick Bauer("Bauers") are residents of Oregon.In 1987, the Bauers responded to Defendants' add in the Minneapolis Star and Tribune newspaper which stated:

          Sell your R.E. & Keep It Too
                          Equity Sharing! It Works
                          • Cash Flow, homestead taxes
                          • No management hassles
                            Buying-Selling-
                              Wealth building-We can help
                              J.K. Property Inv. 722-9141
                

The Bauers met with Johnson and in late 1987 or early 1988, they bought their first property.After the purchase, the Bauers entered into a management agreement with JKPI and Johnson for the management of their property.This purchase was the first of many.

Stemming from their ownership of multiple houses and the Defendants management of these houses, the Bauers alleged in their Complaint that the Defendants are liable under claims of 1) breach of fiduciary duty; 2) breach of duty of loyalty; 3) breach of contract; 4) unjust enrichment; 5) negligence; 6) violation of Minnesota Uniform Deceptive Trade Practices Act; 7) promissory estoppel; 8) negligent misrepresentation; 9) fraudulent/intentional misrepresentation; 10) conversion; 11) replevin; and 12) declaratory relief—disregard of the corporate entity.The Bauers filed their Summons and Complaint in Hennepin County District Court on December 4, 2006.They now seek leave of the Court to amend their Complaint, adding two additional counts; the first count alleges a violation of the Racketeer Influenced and Corrupt Organizations Act("RICO") and the second alleges a violation of the Real Estate Settlement Procedures Act ("RESPA").

B.Standard for amendment of pleadings.

The Bauers seek leave of this Court to amend their Complaint, pursuant to Rule 15.01 of the Minnesota Rules of Civil Procedure.Rule 15.01 states that "a party may amend his pleadings only by leave of Court or by written consent of the adverse party."Motions to amend should be granted when justice requires, but not to the prejudice of the adverse party.Fabio v. Bellomo,504 N.W.2d 758, 761(Minn.1993).Although Rule 15.01 is subject to a liberal construction, if the additional claims cannot survive summary judgment, they should be denied.Rosenberg v. Heritage Renovations, LLC,685 N.W.2d 320, 332(Minn.2004)(upholding the district court's denial of motion because the additional alleged claims could not be maintained.)The district court's decision to grant such a motion will not be overruled on appeal absent a clear abuse of discretion.Johns v. Harborage I, Ltd.,664 N.W.2d 291, 295(Minn.2003);see alsoAg Services of America, Inc. v. Schroeder,693 N.W.2d 227, 235(Minn. Ct. App.2005).Thus, it is under this legal framework that the Court shall consider the Bauers' motion to amend their Complaint to include RICOandRESPA claims.

C. RICOAct claims.

In the present case the Bauers seek to amend their Complaint, thereby claiming that the Defendants violated RICO,18 U.S.C. § 1961(2006).RICO states, in relevant part: "It shall be unlawful for any person employed by or associated with any enterprise ... to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debts."28 U.S.C. § 1961(c).The Bauers seek leave to claim that the Defendants have violated RICO's prohibitions against mail fraud, wire fraud and bank fraud.18. U.S.C. §§ 1341,1343and1344.

In reaching its conclusion, this Court finds two issues pertinent: 1, resolving whether the Defendants committed fraud raises genuine issues of material fact, which cannot be resolved by the Court(i.e. did the Defendants' statements and communications to the Bauers misrepresent material facts concerning charges owed by the Bauers to the Defendants); and 2), the Bauers claims under RICO provide distinct legal claims but derive from the same specifically plead factual theory of fraud that is currently alleged in the Bauers' complaint.Because this Court should liberally grant the amendment of pleadings as justice requires, and because there are questions of material fact raised by the new claims, the motion to amend the complaint, claiming violations of RICO, is granted.Rosenberg,685 N.W.2d at 332("[T]he amendment of pleadings should be liberally allowed unless the adverse party would be prejudiced.)

D. RESPA Claim.

The Bauers also seek leave to amend their Complaint so as to include a claim under RESPA.12 U.S.C. §§ 2601-2617(2006).The Bauers allege that the Defendants acted in violation of the provisions, prohibitions and requirements of RESPA.Defendants contend that RESPA is inapt and that the claim fails by virtue of the fact that the Defendants are not servicers of a federally related mortgage loan.See12 U.S.C. § 2605.However, the Bauers'...