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Hartke v. WIPT, Inc.

United States District Court, D. Minnesota

November 28, 2017

Bradley R. Hartke, Douglas P. Hartke, Joan Hartke, individually and as Trustees of the Joan L. Hartke QTIP Marital Trust dated 7/12/1996 and as Trustees of the Robert Eugene Hartke Family Trust dated 7/12/1996; the Joan L. Hartke QTIP Marital Trust dated 7/12/1996; and the Robert Eugene Hartke Family Trust dated 7/12/1996, Plaintiffs,
WIPT, Inc., Roger Dean Waldner, The One Stop, Inc., RDW-KILT, Inc., and Community Bank, Defendants.


          Paul A. Magnuson United States District Court Judge

         This matter is before the Court on the parties’ Motions for Judgment on the Pleadings. For the following reasons, Plaintiffs’ Motion for Judgment on the Pleadings is granted, Defendant Community Bank’s Motion for Judgment on the Pleadings is granted, and the remaining Defendants’ various Motions are denied.[1]


         The personal and corporate relationships underlying this case are complex and opaque. For purposes of the dispositive Motions, however, a complete understanding of the parties’ interactions is not necessary. The Court will thus briefly describe the events giving rise to the litigation.

         In July 2002, Plaintiffs Bradley Hartke, Douglas Hartke, Joan Hartke, and the two Hartke family trusts entered into a $900,000 note for the purchase of a trucking business, Solace Transfer, from Defendant The One Stop, Inc. (Larson Aff. (Docket No. 68) Ex. 2.)[2] Defendant Community Bank, then known as State Bank of Winslow-Warren, is an Illinois bank that provided the financing to the Hartkes for the purchase of Solace. (Compl. ¶¶ 17, 19-20.) Plaintiffs allege that Defendant Roger Waldner, appearing in this matter pro se, was the owner of The One Stop, which in turn owned Solace. (Id. ¶ 12.) The note was secured in part with a mortgage on farmland and other property the Hartkes owned in southwest Minnesota. (Larson Aff. Ex. 3.)

         Waldner had filed for bankruptcy protection for Solace’s predecessor company, H&W Motor Express Company, one month before the Hartkes’ purchase. (Compl. ¶ 16.) Waldner had purchased H&W and transferred all of its assets to Solace, but Solace was in debt for more than $2 million, all secured with Community Bank-issued mortgages either personally guaranteed by Waldner or secured with various property Waldner and his associates owned. (Id. ¶¶14, 17, 20.) The Hartkes contend that the $900,000 purchase price for Solace represented the difference between Solace’s indebtedness and the money Waldner had siphoned out of H&W.

         The terms of the note required “11 monthly payments of $7,800 beginning 8-24-2002 and 1 balloon payment of $887,894.68 on 7-24-2003.” (See Larson Aff. Ex. 2 at 1.) The Hartkes made two monthly payments on the note, but they allege that Solace was in serious financial trouble even before they agreed to purchase it and that it was never a viable business. They thus made their last payment in October 2002. (Compl. ¶ 21.) Over the next several years, Waldner-controlled entities such as The One Stop and Defendant WIPT (which stands for Women’s Investment Property Trust) also made payments on the note, but after October 2002, the note was not ever current.

         In November 2002, the Hartkes signed another note, in the amount of $500,000, in favor of The One Stop. (Larson Aff. Ex. 4.) The note was secured with a mortgage on Plaintiff Joan L. Hartke Marital Trust’s property. (Id. Exs. 4, 5.) According to this note, the proceeds were to be used for “business investment,” and were to be distributed in multiple advances; the note leaves blank the amount of any immediate advance. (Id. Ex. 4 at 1.) The Hartkes assert that they did not receive any money from this note. (Compl. ¶ 48.) They also contend that Waldner used the Hartkes’ personal residences as collateral for this note without their consent. (Id. ¶ 47.) Waldner insists that the Hartkes knew about the mortgaging of their residences. The November note was eventually assigned to Defendant RDW-KILT, another Waldner-controlled company. (Id. ¶ 49.)

         The IRS began investigating Waldner in 2005, and in 2006 he was charged in federal court in Iowa with multiple counts of making false statements in H&W’s bankruptcy proceedings. He pled guilty to two counts in May 2007, and received a 120-month sentence. United States v. Waldner, 564 F. Supp. 2d 911 (N.D. Iowa 2008). Waldner was released from prison in late March 2017.

         In 2007, after Waldner pled guilty but before he was sentenced, RDW-KILT attempted to accelerate the November note and mortgage. (Compl. ¶ 51.) The Hartkes allege that they discovered at that time that their homesteads were collateral for the mortgage, and they disputed the acceleration because neither of their spouses had signed the mortgage. (Id. ¶ 52.) A Minnesota state court ordered that the mortgages on the homesteads were invalid, and there was apparently no further action on the November note and mortgage. (Id.)

         In late December 2016, WIPT notified the Hartkes that it had acquired the July note and mortgage from Community Bank, and demanded payment from the Hartkes for $1.5 million that WIPT had ostensibly paid on the note. (Id. ¶ 53.) The Hartkes then brought this lawsuit, seeking declarations that the July and November notes and mortgages are unenforceable and that WIPT and the other Defendants[3] are barred by the statute of limitations from attempting to collect on them.


         The only real issue here is whether the relevant statutes of limitations bar Defendants from taking any action to enforce the notes. The notes went into default, at the latest, in late 2002. There was no attempt to enforce the July note until the end of 2016. The Complaint contains no allegation regarding demands for payment on the November note.

         The July 2002 note provides that Illinois law governs the note and mortgage. (Larson Aff. Ex. 2 at 2; Ex. 3 ¶ 24.) The Illinois statute of limitations on promissory notes is ten years “after the cause of action accrued.” 735 Ill. Comp. Stat. 5/13-206. The November 2002 mortgage provides that it is “governed by the laws of the jurisdiction in which Lender is located.” (Larson Aff. Ex. 5 ¶ 24.) The One Stop was the lender on the November note; ...

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