United States District Court, D. Minnesota
Lighthouse Management Group, Inc. as assignee for the benefit of creditors of AV Development Company LLLP, Apple Valley Commons II and AV Commons II LLLP, Plaintiff,
Deutsche Bank Trust Company of Americas, MelTel II W3, LLC, and MelTel II Valentine, LLC, Defendants.
G. Boylan, Esq. and Anthony Ostlund Baer & Louwagie,
counsel for plaintiff.
W.Varland, Esq. and Heley, Duncan & Melander, PLLP,
counsel for defendants.
S. Doty, Judge
matter is before the court upon the motions for judgment on
the pleadings or, in the alternative, summary judgment by
defendants Deutsche Bank Trust Company Americas; MelTel II
W3, LLC; and MelTel II Valentine, LLC (MelTel). Based on a review
of the file, record, and proceedings herein, and for the
following reasons, the courts denies the motions.
property dispute arises out of the allegedly fraudulent
assignment of certain property rights to MelTel.
Lighthouse Management Group is an assignee for the benefit of
creditors of Apple Valley Commons (AVC) under Minn. Stat.
§ 577.14. Rev. Am. Compl. ¶ 6; Varland Decl. Ex. C
at 3-4. Lighthouse is charged with investigating AVC's
business management; using AVC's business assets for the
benefit of creditors; if necessary, taking possession of
AVC's property to further the creditors' interests;
and exercising the powers of a general receiver. See
also Minn Stat. § 577.18.
owns two large office buildings in Apple Valley, Minnesota
(Buildings). Varland Decl. Ex. A. at 3. Since 1994, AVC
has leased roof-top, antennae space at one of the Buildings
to wireless phone companies Verizon and T-Mobile in exchange
for monthly rent payments (Lease Rights). Id. at 7;
Rev. Am. Compl. ¶ 2. During 2014 and 2015, John Hanson
was AVC's general partner, chief manager, and a primary
investor. Varland Decl. Ex. A at 3; Boylan Supp. Decl., ECF
No. 102, Ex. 31 at 6.
and Deutsche Bank are involved in asset-backed securities.
Voon Decl. ¶ 5; Bauermeister Dep. at 25:13-27:5. MelTel
issues investor notes and, as collateral, acquires lease
rights to wireless phone antennas. Bauermeister Dep. at
28:12-17. MelTel then grants mortgages on those leases to
Deutsche Bank, which serves as the indenture trustee for the
note-holders. Voon Decl. ¶ 6. In total, MelTel has
acquired nearly 1, 500 wireless antennae lease rights.
Bauermeister Dep. at 29:14-16.
MelTel acquires a property interest, it conducts an asset due
diligence review to ensure that the entity or individual
negotiating the property transfer or assignment with MelTel
has the requisite ownership interest over the asset. Hwang
Decl. ¶ 3. MelTel investigates all asset ownership
through an internal department, see id., and logs
its due diligence efforts and communications in a specially
designed database. Wade Dep. at 41:19-22. Deutsche Bank
relies entirely on MelTel's due diligence review.
Id. at 56:4-24; Voon Dep. at 27:23-25.
The Lease Rights Assignment
first approached John Hanson in 2007 about acquiring the
Lease Rights, but he did not respond. Boylan Decl., ECF No.
65, Ex. 1 at 2-3; see also Boylan Supp. Decl. Ex. 28
at 7. MelTel contacted John Hanson approximately an
additional fifteen times over the next several years, but he
remained uninterested in assigning the Lease Rights. Boylan
Supp. Decl. Ex. 28 at 6-7.
June 2014, AVC agreed to sell the Buildings to Hillside, LLC,
owned by Chris Hanson (no relation to John Hanson). Varland
Decl. Ex. A at 4, 50. John Hanson subsequently informed
MelTel that AVC was selling the Buildings, and that he had
communicated MelTel's interest in the Lease Rights to
Hillside. Id. at 6; see also Boylan Decl.
Ex. 1 at 3.
2014, Chris Hanson represented himself to MelTel as the owner
and/or landlord of the Buildings and began negotiating
directly with MelTel regarding an assignment of the Lease
Rights. Boylan Supp. Decl. Ex. 28 at 5. Chris Hanson told
MelTel that he was John Hanson's brother, and that he
planned to acquire John's interests in the Lease Rights.
Id. He also told MelTel that he would consider an
offer to assign the Lease Rights in exchange for a cash
22, Chris Hanson accepted MelTel's proposal to acquire
the Lease Rights for a 99-year term in exchange for a
lump-sum payment. Id. On July 23 and July 29, Chris
Hanson again represented to MelTel that he was the
Buildings' landlord, see Id. Ex. 29 at 2, and
granted MelTel an exclusive option to acquire the Lease
Rights. Id. Ex. 30 at 1-3. Based on those
representations, MelTel assumed that Chris Hanson was the
controlling person for the “landlord entity,
Hillside.” Wade Dep. at 24:11-13.
during that same time period, MelTel received information
that Chris Hanson and Hillside were not the Buildings'
owner or landlord. On August 8, Chris Hanson told MelTel that
he had not yet acquired the deed to the Buildings, but that
he hoped to do so in the next few days. Boylan Supp. Decl.
Ex. 28 at 4. On August 12, MelTel left Chris Hanson a
voicemail asking whether the deed transfer had occurred.
Id. at 3. On September 2, MelTel noted that Chris
Hanson was still negotiating the Buildings' sale and the
“idea [now] is to close [the Lease Rights'
assignment] with [the] current fee owner, ”
this information, MelTel still identified Chris Hanson as the
Buildings' landlord. On September 15, MelTel noted that
Chris Hanson, the Buildings' “landlord, ” had
retained counsel, John Berkey, to close the sale of the
Buildings. Id. On September 25, MelTel noted that
the landlord, Chris Hanson, “would now like to close
[the Lease Rights assignment] in the name of Hillside”
and that the “closing of the [Buildings] will happen in
about 7 days.” Id.
Chris Hanson did not have the financing to close the
Buildings' sale. In early October, Chris Hanson told John
Hanson that in order to obtain financing to close the
Buildings' sale, he needed to generate cash. Varland
Decl. Ex. A at 3. Chris Hanson and Berkey suggested that AVC
assign the Lease Rights to MelTel for a lump-sum cash
payment, which could be used to facilitate the sale of the
Building. Id. John Hanson appears to have agreed to
the proposal and to that end, on October 8, John Hanson told
MelTel that the Lease Rights assignment would be in AVC's
name, rather than Hillside's. Id. John Hanson
explained to MelTel that Chris Hanson had not yet been able
to obtain financing to purchase the Buildings and it was
uncertain when he would be able to do so. Boylan Supp. Decl.
Ex. 28 at 2.
November 10, AVC, as the Buildings' “Landlord,
” and MelTel entered two agreements, both entitled
“Purchase and Sale of Lease and Successor Lease
Agreement.” Id. Exs. 31, 32. The agreements
assigned the Lease Rights to MelTel for 99 years
(Assignment).Id.; see also Varland
Aff. Exs. C, E. John Hanson signed the Assignment on
AVC's behalf. Boylan Supp. Decl. Exs. 31, 32. The
Assignment expressly stated that MelTel “shall pay to
[AVC], in consideration for the rights and interests granted
by [AVC] to [MelTel]” the purchase price of $440,
Id. The Assignment also expressly stated that MelTel
would pay AVC a second $35, 000 payment thirty days after
MelTel obtained title insurance on the Lease Rights.
Id. The Assignment further provided that AVC had
assigned the Lease Rights to MelTel “on the terms and
subject to the conditions set forth” therein. Varland
Aff. Exs. C, E. MelTel, in turn, took possession of the
Assignment and subsequently recorded it with the Dakota
County District Court on December 4. Boylan Supp. Decl. Exs.
31, 32; see also Rev. Am. Compl. ¶ 17; Varland
Aff. ¶¶ 2-7; Varland Aff. Exs. A-F. Later on
November 10, MelTel entered a separate agreement whereby it
again agreed to “wire the [Lease Rights] purchase
proceeds ... to [AVC] ....” Boylan Supp. Decl. Exs. 33,
on the morning of November 12, MelTel received two landlord
settlement statements, purportedly from AVC, with wiring
instructions for the $440, 000 payment. Id. Exs. 39,
40. The statements identified AVC as the landlord, but
instructed MelTel to wire the payment to a ...