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Scheffler v. City of Coon Rapids

United States District Court, D. Minnesota

April 11, 2017

Troy K. Scheffler, Plaintiff,
v.
City of Coon Rapids, et al., Defendants.

          Peter J. Nickitas, Peter J. Nickitas Law Office, L.L.C., Minneapolis, Minnesota, for Plaintiff.

          Andrew T. Jackola, Jason J. Stover, Anoka County Attorney's Office, Anoka, Minnesota, for Defendant Anoka County.

          MEMORANDUM OPINION AND ORDER

          RICHARD H. KYLE United States District Judge

         INTRODUCTION

         This action arises out of an “energy improvement loan” obtained by Plaintiff Troy Scheffler in 2013. Scheffler alleges that the Defendants - the City of Coon Rapids (“Coon Rapids”), Anoka County (the “County”), and the Greater Metropolitan Housing Corporation (“GMHC”) - fraudulently recorded a lien on his property in connection with the loan. He commenced this action in 2016, asserting claims against all Defendants under the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., and the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq. He also alleged that Anoka County violated the Minnesota Government Data Practices Act (“MGDPA”), Minn. Stat. § 13.01 et seq., and that Assistant County Attorney Andrew Jackola, Esq., defamed him in certain pre-litigation correspondence.

         Scheffler has now settled and dismissed his claims against Coon Rapids and GMHC; all that remain for resolution are his claims against the County. Those claims are currently before the Court on competing cross-Motions: the County moves to dismiss all of Scheffler's claims, while Scheffler cross-moves for partial summary judgment on his state-law claims. For the reasons set forth below, the Court will grant the County's Motion in part and dismiss the federal claims, and it will decline to exercise supplemental jurisdiction over the remaining claims, rendering Scheffler's cross-Motion moot.

         BACKGROUND

         The Amended Complaint and the documents embraced by it[1] allege the following facts, taken as true for purposes of the County's Motion. Scheffler is a disabled adult who lives in Coon Rapids. (Am. Compl. ¶¶ 10, 14.)[2] In June 2013, he applied for an “energy improvement loan, ” to be funded by a “block grant” from the United States Department of Housing and Urban Development (“HUD”) for energy-efficient home improvements. (Id. ¶ 15; Nickitas Decl. Ex. L.) The loan was to be secured by a lien on Scheffler's property. (Nickitas Decl. Ex. L.) The Amended Complaint does not specify which Defendant was the recipient of the HUD funds or which Defendant was going to loan those funds to Scheffler. Nor does it indicate how Defendants relate to one another vis-à-vis the loan or the HUD funds. Instead, Scheffler simply alleges that he applied for a loan “with Coon Rapids and Anoka County through GMHC.” (Am. Compl. ¶ 15.) His loan application, however, is on a pre-printed form entitled “Coon Rapids Energy Loan Application” and, at the time he applied, Scheffler signed a “Subordination Policy” indicating that Coon Rapids would agree to subordinate its mortgage on his property under certain circumstances. (Nickitas Decl. Ex. L (emphasis added).) Furthermore, the loan was conditioned on a satisfactory “environmental assessment, ” and the form on which that assessment was completed listed the “grantee” of the HUD funds as “the City of Coon Rapids.” (Id. Ex. M.)[3]

         On August 7, 2013, GMHC wrote Scheffler to advise that he met the criteria to obtain the loan, but it had not yet been approved because he had not submitted all of the required information. (Id. Ex. A.) The letter also specified that the loan could not be approved “until the Housing Resource Center [part of GMHC] closes the loan and it has been approved by Anoka County.” (Id.) Scheffler then obtained bids from contractors for his proposed home improvements, the lowest three of which totaled $7, 580 (comprising $3, 800 for HVAC work, $2, 880 for insulation, and $900 for door/window repairs by an entity named Bear Claw Construction LLC (“Bear Claw”)). (Am. Compl. ¶¶ 16-17, 21.) After he submitted those bids, an Anoka County official certified that the proposed work met environmental guidelines (Nickitas Decl. Ex. M), and the loan was approved.

         On October 1, 2013, Scheffler signed several documents relating to the loan. First was a document styled “Coon Rapids Housing Rehabilitation Loan Program Participation Agreement” (the “Participation Agreement”), which set forth the terms of the loan he was receiving. (Nickitas Decl. Ex. B.) The Participation Agreement provided for a total loan amount of $7, 580 and, consistent with GMHC's August 2013 letter, specified that “[f]inal determination of eligibility” to receive the loan “rests with the County.” (Id.) Next Scheffler signed a Notice of Right to Rescission, a Truth-in-Lending Disclosure Statement, and a HUD-1A form (also known as a “Settlement Statement”), each of which provided additional information about the loan. (See id. Exs. O-Q.) These documents indicated that they were prepared by GMHC and that GMHC was the “lender” for Scheffler's loan. (Id. Ex. Q.) Finally, Scheffler also signed a document styled as a “Repayment Agreement, ” which lies at the heart of the present dispute. (See Skepper Decl. Ex. 2.) That document, which is in the nature of a promissory note, indicated that the “Lender” on Scheffler's loan was Coon Rapids, and that Scheffler was granting the City a lien on his home. (Id.) Although Scheffler's notarized signature on the last page of the Repayment Agreement bears the date October 1, 2013, many of the terms of the agreement were left blank - including the amount of the loan and the date upon which it was entered into by the parties. (Id.)

         In any event, the following day Anoka County issued a “Proceed to Work” Order, authorizing the three contractors to begin working on Scheffler's home. (Nickitas Decl. Ex. R.) GMHC subsequently paid for the insulation and HVAC work, but Scheffler discovered a problem with the door/window repairs by Bear Claw. In June 2014, he contacted GMHC and Coon Rapids, which allowed him to obtain new bids for the work. (Am. Compl. ¶¶ 21-23.) The lowest bid he received was for $1, 799. The $900 Bear Claw contract was then canceled, and the new contractor completed the work later that month, raising the total amount paid to $8, 461.90 (after accounting for a $17.10 payment Coon Rapids required Scheffler to make). (Id. ¶¶ 24-30.)[4] Scheffler, however, never signed or received new loan documents increasing his loan from the original principal amount ($7, 580) to the amount actually paid for the work ($8, 461.90).

         On September 12, 2014, Coon Rapids recorded the Repayment Agreement with the Anoka County Division of Property Records as a lien against Scheffler's property. (Id. ¶ 31; Nickitas Decl. Ex. C.) The recorded document, however, no longer contained blanks, as it did when Scheffler signed it on October 1, 2013. Rather, it indicated that the total amount loaned to Scheffler was $8, 461.90 and that the Repayment Agreement had been entered into on October 2, 2013; the notarized signature on the last page, however, continued to bear an October 1, 2013 date. (Nickitas Decl. Ex. C.) According to Scheffler, this was a “falsified” document: “If the loan amount of $8, 461.90 did not exist until June 4, 2014, ” when the replacement contractor completed the door/window work at his home, he “could not possibly have signed for it on October 1, 2013.” (Am. Compl. ¶ 36.)

         Scheffler's attorney, Peter Nickitas, Esq., later wrote to Coon Rapids City Attorney David Brodie with his concerns. Nickitas alleged that the Participation Agreement had been tampered with by attaching Scheffler's original notarized signature page to a different version of the Participation Agreement containing a different date and a higher loan amount. (Nickitas Decl. Ex. U.) He demanded that “the City of Coon Rapids' lien of $8, 461.90 upon Mr. Scheffler'[s] real property . . . be removed . . . immediately.” (Id.) On June 9, 2016, Nickitas received a letter from Jackola, advising that he was “in receipt of [the] letter [to] David Brodie.” (Id. Ex. W.)[5] Jackola denied that the recorded Participation Agreement was fraudulent or that it had been tampered with. He continued: “I suspect that fraud may be involved in the heart of this dispute, but it is not so on the part of the City of Coon Rapids or the [County].” (Id.) He also rejected Nickitas's demand to remove the lien from Scheffler's property. (Id.)

         On December 8, 2016, Scheffler commenced this action, later filing an Amended Complaint setting forth numerous claims against Coon Rapids, GMHC, and the County. By Stipulation filed March 3, 2017, Scheffler voluntarily dismissed his claims against Coon Rapids and GMHC (Doc. No. 39; see also Nickitas Decl. Ex. D), leaving only his claims against the County for resolution. Those claims assert (1) violations of TILA and REPSA (Counts I and II, respectively), (2) violations of the MGDPA (Counts III and V), and (3) defamation based on Jackola's June 9, 2016 letter (Count IV), for “impl[ying] that fraud” had been committed by Scheffler. The County now moves ...


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