Franklin National Bank of Minneapolis v. Norse Building Systems
| Decision Date | 11 June 2008 |
| Docket Number | Court File. 27-CV-06-16787 |
| Parties | Franklin National Bank of Minneapolis, a national banking association, Plaintiff, v. Norse Building Systems, a Minnesota Corporation; Knute Peter Stalland; Knute Development, LLC, a Minnesota limited liability company. Defendants. |
| Court | Minnesota District Court |
The above-captioned matter came before the Honorable William R. Howard, Judge of District Court, on March 19, 2008, and a hearing was held upon Cross Motions of Plaintiff and Defendants Knute Peter Stalland and Knute Development, LLC for summary judgment pursuant to Minn. R. Civ. P. 56.02. At the hearing, Knute Peter Stalland and Knute Development, LLC were represented by Todd R. Haugan, Haugan Law Office, LTD. Upon review of the arguments presented and the submissions from the parties, the Court hereby makes the following:
FINDINGS OF FACT
1. From 2001 to 2004, Norse Building Systems, Inc. ("Norse"), a modular home manufacturer located in Ladysmith, WI, built over 20 homes for Dreamhome Development, LLC ("Dreamhome"). Dreamhome subsequently went bankrupt sometime in 2004. Peter Stalland was President of Norse Building Systems, Inc. (Norse) during the entire time period in which the following material events occurred.
2. Between 2003 and 2004, Dreamhome, along with DPK Properties, LLC ("DPK"), executed a series of notes and mortgages to secure financing provided by the Plaintiff, Franklin National Bank of Minneapolis ("Franklin"), which is a commercial lender. David J. Kohlenberger ("Kohlenberger"), representative of Dreamhome and DPK, executed the notes and mortgages and guaranteed payments.
3. On July 1, 2004, Dreamhome executed and delivered to Franklin a promissory note in the amount of $185,000, which secured a construction mortgage encumbering real property owned by DPK, described as 770 Capital Heights, St. Paul, Minnesota (770 Capital Property), and guaranteed by DPK and Kohlenberger. Dreamhome subsequently executed a Disbursement Requests and Authorization dated July 1, 2004 for the $185,000.
4. On or about July 15, 2004, DPK requested $105,640.80 and Franklin accordingly disbursed the funds on July 21, 2004. Of these funds, $ 84,339.47 was to be used for the construction of 770 Capital Property.
5. Subsequently, both Dreamhome and DPK defaulted on their payments to Franklin. Franklin thereafter litigated against Dreamhome and DPK for title to 770 Capital Property in January 2005. Dreamhome and DPK acquiesced all rights, title, and interest to the modular unit within 770 Capital Property (unit 2014), which is the subject of this matter. Franklin perfected its security interest by filing a UCC Financing Statement in the offices of the Minnesota Secretary of State on December 3, 2004, which evidenced its interest in the three units that were forfeited by DPK, Dreamhome, and Kohlenberger.
6. After securing title to the modular unit 2014, Franklin solicited Stalland and Norse for assistance in selling unit 2014 along with two other units in February 2005.
7. On February 18, 2005, both Franklin and Norse entered into a letter agreement (agreement), in which Norse agreed to sell the three modular units owned by Franklin for a collective sum of $213,140.80, which Norse previously received from construction payments from both DPK and Dreamhome. The Agreement provided Norse would remit payment to Franklin in the amount of $213, 140.80 by April 19, 2005.
8. By August 2005, Norse had sold two of the modular homes. Payment from those two units was remitted to Franklin. On August 24, 2005, the remaining balance owed to Franklin under the letter agreement was $73,027.51. Franklin declared this remaining balance due and stated it was to be paid by August 31, 2005.
9. On or about December 11, 2005, Unit No. 2014 was sold to Knute Development for the sum of $73,027.51. Knute purchased Unit 2014 with a $310,000 loan it obtained from Goldstar Mortgage for the purchase of this home and three other homes it bought from Norse. The $310,000 was wired from Goldstar's bank directly to Norse's collateral account.
10. On or about December 29, 2005, Acro Business Financial Corp., Norse's lender, swept the loan transaction money from Norse's collateral account pursuant to the terms of Norse's asset based lender's banking requirements which resulted in adjusting Norse's line of credit on a daily basis.
11. On September 11, 2006, the subject house was sold to John Tittle by Knute for $228,000. Knute received $215.25 at the time of closing for some minor payment. Neither Norse nor Mr. Stalland received any proceeds from this sale.
12. During 2005 and 2006 Norse recognized the balance owed to Franklin in the amount of $73,027.50 as a liability on its balance sheet, referring to it as the "Dreamhome debt." During both 2005 and 2006 Norse had losses at year end. 13. Sometime after April 2007, Norse went out of business and its assets were liquidated at a foreclosure sale after its loan was called by its lender. Norse never paid the balance it owed to Franklin.
14. On December 31, 2007, Franklin filed motion for summary judgment against Norse for fraud and conversion. Franklin alleged Knute and Stalland misrepresented their intentions to remit payments to Franklin because no payments were made to Franklin after the subject property was sold. Defendants Knute and Stalland deny these allegations.
1. The Court finds Defendants Knute and Stalland neither intentionally nor willfully made any misrepresentation to Franklin for the sake of inducing its assent to the agreement. Defendants Knute and Stalland were not parties to the letter agreement. The agreement was solely with Norse.
2. The Court finds that Norse neither willfully nor intentionally interfered with Franklin's property, specifically unit 2014, because Norse's funds due to Franklin for unit 2014 were swept by Norse's lender.
ORDER1.) Defendant Knute and Stalland's Motion for Summary Judgment is hereby GRANTED.
2.) Plaintiff's Motion for Summary Judgment is hereby DENIED.
3.) The following memorandum is hereby incorporated as part of this Order.
LET JUDGMENT BE ENTERED ACCORDINGLY.
1. Summary Judgment Standard
The Court will grant a motion for summary judgment when there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.03. A material...
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