Patriot Bank Minnesota v. Rehbein et al

Filing 65

Memorandum and Order: 1. Granting Plaintiff's Motion for Partial Summary Judgment 39 ; 2. Denying Defendants' Motion for Summary Judgment 41 ; and Denying as Moot Defendants' Motion in Limine 61 . (Written Opinion). Signed by The Hon. Paul A. Magnuson on 02/19/2013. (LLM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
First Resource Bank, as assignee
of the Federal Deposit Insurance
Corporation, as receiver of
Patriot Bank Minnesota,

Civil No. 12-206 (PAM/SER)

Plaintiff,
v.

MEMORANDUM AND ORDER

Marvin A. Rehbein, individually,
and Marvin Rehbein, Trustee of the
Marvin Rehbein Living Trust,
Defendants.

This matter is before the Court on Plaintiff’s Motion for Partial Summary Judgment
and Defendants’ Motion for Summary Judgment. For the reasons that follow, Plaintiff’s
Motion is granted and Defendants’ Motion is denied.
BACKGROUND
In July 2010, non-party Myrna Rehbein gave Defendant Marvin Rehbein, her dead
husband’s cousin, a $500,000 mortgage on her home in North Oaks, as security for loans
Marvin had made to Myrna in 2007 and 2009. The only problem with this mortgage was
that, at the time, Myrna was the personal guarantor on two loans from Patriot Bank that were
in default, to the tune of $9.4 million. In addition, she owed $9 million on a different loan
to a different bank.
Patriot Bank became insolvent in late 2011, and the FDIC took it over in January
2012. The FDIC then sold Patriot’s assets and liabilities to Plaintiff First Resource Bank.

Patriot/First Resource brought this lawsuit contending that the mortgage from Myrna to
Marvin (as well as Marvin’s subsequent transfer of the mortgage to his living trust) constitute
a fraudulent transfer and should be set aside.
DISCUSSION
The Minnesota Fraudulent Transfer Act prohibits transfers to an insider from an
insolvent debtor:
A transfer made by a debtor is fraudulent as to a creditor whose claim arose
before the transfer was made if the transfer was made to an insider for an
antecedent debt, the debtor was insolvent at that time, and the insider had
reasonable cause to believe that the debtor was insolvent.
Minn. Stat. § 513.45(b). First Resource bears the burden to prove each element of the statute
to prevail on its contention that the transfer must be set aside.
The parties do not dispute that Myrna made a transfer to Marvin, that Marvin is an
insider, or that the debt was antecedent. Plaintiff contends that there is no genuine issue of
fact as to whether its claim arose before the transfer to Marvin, or that Myrna was insolvent
at the time. Plaintiff admits, however, that whether Marvin had reasonable cause to believe
that Myrna was insolvent is a question of fact not amenable to summary judgment.
Defendants, on the other hand, contend that there is no genuine issue of fact remaining
to be decided because the evidence establishes that Plaintiff’s claim arose after the transfer
to Marvin, and thus that judgment is appropriate in Defendants’ favor. In addition, according
to Defendants, the evidence shows that Myrna was not insolvent on the date of the transfer
to Marvin.

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A.

When First Resource’s Claim Arose
Myrna guaranteed three loans to a company called East Lino Lakes, LLC, of which

Myrna was an officer. These loans were secured by real property in Anoka County as well
as by Myrna’s guaranty. One loan for $2.5 million matured in February 2010; another loan
for $6.9 million matured in April 2010. The final loan, for an additional $2.5 million,
matured in August 2010. None of the loans was paid at maturity, so all were in default
immediately after the maturity date.
On July 6, 2010, Patriot sent Myrna by certified mail a notice of default, telling her
that she was in default on all three loans (including the loan with the August 2010 maturity
date, because ELL had failed to make a required June 2010 payment on that loan) and giving
her until July 20, 2010, to cure the defaults. She failed to do so and Patriot brought a lawsuit
in state court, which ultimately ended in a final judgment in favor of Patriot for more than
$14 million. Myrna denies ever receiving the notice of default.
Also on July 6, 2010, Myrna gave Marvin the mortgage on her home that is the
subject of this lawsuit. This mortgage was to secure a December 31, 2007, loan of $300,000
and a May 7, 2009, loan of $250,000. Marvin filed the mortgage on July 13, 2010, and then
assigned the mortgage to himself as trustee of the Marvin Rehbein Living Trust. Myrna sold
the property in August 2011 for $955,000, with $519,000 of this amount going to Marvin in
his capacity as trustee. It is this $519,000 that First Resource seeks to recoup in this lawsuit.

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Defendants argue that, because Patriot sent the notice of default giving Myrna until
July 20 to cure the default, Patriot did not have any “claim” against Myrna on July 6 when
she made the mortgage to Marvin. The MFTA defines claim as “a right to payment, whether
or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” Minn. Stat.
§ 513.41(3).
Under the very broad definition of claim in the MFTA, Patriot had a claim against
Myrna the minute she signed the guaranty. Thus, it didn’t matter whether there was a notice
of default or a cure period; the claim arose the day she signed each guaranty. It might have
been a contingent, unmatured claim, but for purposes of the MFTA, contingent, unmatured
claims are claims nonetheless. First Resource is entitled to summary judgment on this
element of its MFTA claim.
B.

Insolvency
First Resource argues that Myrna was insolvent on the date of the mortgage to Marvin,

because her liabilities exceeded her assets by more than $14 million. Defendants take issue
with First Resources calculations of some of Myrna’s debts. But even taking all the numbers
as Defendants state them, Myrna’s liabilities exceeded her assets by more than $4 million.
She was insolvent as a matter of law.

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CONCLUSION
First Resource has established that there are no genuine issues of fact as to whether
First Resource had a “claim” under the MFTA on the date of the mortgage in question, or
that Myrna was insolvent on that date. Because there is a factual issue as to whether Marvin
knew Myrna was insolvent at the time of the mortgage, however, the case will proceed to
trial.
Accordingly, IT IS HEREBY ORDERED that:
1.

Plaintiff’s Motion for Partial Summary Judgment (Docket No. 39) is
GRANTED;

2.

Defendants’ Motion for Summary Judgment (Docket No. 41) is DENIED; and

3.

Defendants’ Motion in Limine (Docket No. 61) is DENIED as moot.

Dated: February 19, 2013

s/ Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge

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