I can't think of a better way to close out the year than to close out yet another chapter in Paul Koenig's ongoing legal failures. For those unfamiliar with Koenig at all, Ed Kohler of the Deets compiled a list of (at the time) all the northside blog posts about this guy. Koenig came on to the radar almost a decade ago, buying up tons of vacant land and putting down "Dream Homes," poorly-built houses with six bedrooms, no basement, no garage, and basically destined to be section 8 rentals. He and his investment partners lied about how much rent they pulled in, were sued, and lost.
Koenig managed to shift the blame onto his partner, picked up many of the Dream Homes post-foreclosure, and started a new wave of slumminess under various LLC's. Pamiko, Marklee Construction, and MCK Investments were the most prominent of the three. Despite siphoning off tons of money to fund a lavish lifestyle, (or perhaps because of that) he couldn't make the payments, let his properties deteriorate, and then lost them to foreclosure.
He has since been involved in a legal battle in which he claims that he redeemed several of his foreclosed properties for a dollar each. In reality, this fight was little more than a charade so that Koenig could continue to make life miserable for Minnwest Bank with the slim hope that he could temporarily collect additional revenue from these rental units.
Oh, and in the midst of his housing hand grenade exploding across NoMi, Koenig was largely believed to have been the primary contributor to the Jordan Hawkman blog. Good riddance.
Now, about that ruling...
...Let's break down the particulars first. In mortgage technical terms, Koenig took out multiple loans from Minnwest, covering dozens of properties. Those loans were cross-collateralized, meaning that some properties were collateral for more than one loan. Koenig took out a mortgage on the first group of properties, then took out a mortgage on the second group of properties, then modified one loan. Part of that modification was to include more properties as collateral. He then defaulted on both, and was foreclosed upon. The added properties were foreclosed upon in two separate proceedings. One had the full dollar amount owed broken down and the other had a nominal amount of $1 per property. The lesser was the junior lien and would have needed the senior lien to be satisfied in order to be fully redeemed from foreclosure. That did not happen.
For the sake of simplicity, we'll say that Koenig borrowed money from several people. We'll call them Hawthorne, Jordan, and McKinley. And then he went and borrowed money from Willard, Cleveland, and Jordan. After defaulting on the first batch of loans entirely, then changing the second's loan terms and paying a nominal amount towards the second group, could you say that Jordan doesn't get any of their money because a loan that included them was restructured?
In Paul Koenig's world, the answer is yes. Under Minnesota law, the answer is no.
This argument is unavailing. The Minnesota Recording Act states that a bona fide purchaser who first records an interest obtains rights to the property superior to subsequent purchasers and prior purchasers who failed to record.Furthermore, the court states:
We see no reason, and appellants cite to no authority, to conclude that respondent’s validly recorded interest in the Hennepin properties somehow lost its priority because the properties were included as additional security in an amendment to a previously recorded mortgage to different property. Accordingly, appellants’ interests in the Hennepin properties were not properly redeemed from the senior mortgage. The district court did not err in this respect.Then there's a question over how clear the language of the contracts actually was. If the language were ambiguous enough to allow for multiple interpretations, Koenig and Kaizen could argue that they were signing based on their interpretation, and that such an interpretation should be reasonable enough to rule in their favor. Again, they fail to persuade the court.
Appellants’ arguments are unpersuasive. As respondent asserts, the plain language of the MCK Mortgage Amendment simply provides that: “Grantor and Lender agree that the Mortgage and Assignment are hereby amended so that the Additional Property [in Hennepin County], together with the property [in Ramsey County] shall secure the [existing obligations].” The MCK Mortgage Amendment provided respondent solely with an additional lien on the Hennepin properties. The agreement did not indicate that respondent’s lien was to be superior to any other interest in the property, nor did the agreement alter the priority of MCK’s interests in the Ramsey property. Rather, the mortgages were provided as additional securities by Pamiko, and the property interests were intended to be subject to the traditional race-notice principles: first of record is first of right...
(Emphasis included in original.)
There is no clear and unambiguous language in the MCK Mortgage Amendment that would support appellants’ assertion that the parties intended to subvert longstanding Minnesota law, and the district court did not error in interpreting the contract.
Will this be the end of Koenig's attempts to meddle with properties in NoMi? Only time will tell. But seeing him fail over and over again in a court of law is one of a NoMi blogger's greatest pleasures. So Paul...