And the Minnwest v. Koenig Verdict IS...

Post and stock photo by the Hawthorne Hawkman.

The Minnwest v. Paul Koenig, Aaron & Mary Durkop, Komo Group LLC, and Kaizen Property Solutions LLC is over.  Judge Susan Burke granted the Minnwest Bank request for summary judgment, and Minnwest is now the owner of the six properties at issue in this case.  There was a court hearing scheduled for Monday March 21, 2011, but that apparently has been canceled.  I showed the final documents to a real estate attorney, who confirmed they contain the final ruling, unless of course Koenig or any other defendant wishes to appeal.

In the last post regarding this trial, I mentioned that I was missing some previous documents, such as Paul Koenig's affidavit and the Defendants' Memorandum in opposition to summary judgment.  The defendants do make some interesting, although ultimately fruitless, claims.  Such as...

...item #6 of Paul Koenig's affidavit states that he redeemed "the six subject properties and several other properties not relevant to this litigation" from foreclosure.  Obviously he did not end up fully redeeming the six subject properties, but does he still own other rental properties in Minneapolis?  If regular citizens had the ability to search property ownership with the owner name as a search criteria, maybe we'd be able to answer that question.

Koenig stuck to his argument that the loan originated on the St. Paul building and amended to include the six subject properties should hold precedent over other financing since it was originated first.  The real estate attorney who reviewed the final ruling for me validated something I had said before:  even if the St. Paul loan was the senior loan and the $2.5 million loan on the Bryant property were the junior loan, the six subject properties would still be encumbered by both foreclosure proceedings.  In other words, if the St. Paul loan listed $1.00 as the amount to redeem a property from foreclosure, and the Bryant loan listed the redemption amount for the property at $180,000, the amount needed to redeem would be $180,001.

Pages 3-5 of Koenig's affidavit do contain a chart breaking down the history of the mortgage transactions as he sees it, in an attempt to demonstrate that the MCK loan and the subsequent $6.42 paid to redeem made him the sole owner of the properties.  The remainder of his affidavit contains loan documents that may or may not be noteworthy.  There were plenty of other exhibits referenced in the three documents described in this post, but they all seemed to be items that have already been posted on this site.

The first thing the defendants tried to do in their memorandum against summary judgment was to get Aaron and Mary Durkop and Kaizen Property Solutions LLC removed from the complaint, on the grounds that no claim is being made against them.  Sorry, you don't get let off the hook that easily.   The Durkops and Kaizen Property Solutions will be associated with a failed attempt to gain ownership of foreclosed properties.

The defendants also tried to sneak in their claim "That Pamiko owns the six subject properties free and clear of any claims or encumbrances by Minnwest" under the header of "Undisputed Facts."  Not only were they wrong about that, but the dispute over who owned the properties was the whole point of this lawsuit.

To a mortgage geek such as myself, the one interesting point the defendants made was in regards to the modified St. Paul mortgage.  That sequence of events went like this:  St. Paul mortgage was originated, but did not contain the properties that were on the Bryant loan because the Bryant loan didn't exist yet.  The Bryant loan was originated, and later the St. Paul loan was modified to include several properties that were also on the Bryant loan.  The defendants argued that if the intent of Minnwest was to make sure the Bryant loan remained superior to the St. Paul loan, then Minnwest should have created a new loan instead of modifying a previous one.  I'm not sure what the drawbacks to that approach might have been for Minnwest, but it sure seems like a better way to protect the priority on title.

Through their council, the defendants also argue that (what they claim as) the junior loan had its encumbrance of the foreclosure removed when the senior loan was redeemed by Paul Koenig, and Koenig's redemption was not reimbursed by Minnwest.  If we put that into a more conventional example, it would be the equivalent of someone buying a house cheaply (let's say $20,000) and then later taking out a line of credit for $100,000 after it had appreciated in value.  Then it went into foreclosure, and the original loan was down to a minimal balance while the line of credit was maxed out.  If this were the Koenig/Komo/Kaizen/Durkop case, paying the balance of the first loan would have negated the $100,000 foreclosure if the junior mortgage did not take steps to redeem the senior mortgage.

The Honorable Judge Susan Burke ruled in favor of Minnwest bank, and that ruling can be found here.  The ruling is fourteen pages of incredibly complex mortgage terminology that is so wonderfully put together it makes me weak in the knees.  Burke also cites general contractual rulings, saying, "if the contract is ambiguous, the court must interpret it with a view toward ascertaining and giving effect to the parties' likely intent...Defendants fail to cite any language in the MCK amendment (referred to in this series of blog posts as "the St. Paul loan") which would establish that the parties intended it to relate back to the date of the MCK mortgage in order to make the MCK mortgage amendment prior and superior to Minnwest's mortgages on the Hennepin properties."

Burke ruled that the contracts itself were not ambiguous, but even if they were, the interpretation would favor Minnwest in this case.  Because of that ruling, the Defendants' claims regarding which mortgage was the junior and senior mortgage was denied.  Because of THAT, the defendants wound up redeeming only the foreclosed amount of the junior mortgage while Minnwest retained rights reserved for the senior mortgage.  And because of THAT, the "defendants have no estate or interest in the Hennepin properties as a matter of law."

Because there may be other properties Koenig redeemed, and since there is always the possibility of an appeal, the story may or may not be over.  For now though, the question of who owns the properties in this case has been answered.