Hartke et al v. WIPT, Inc. et al

Filing 114

ORDER declaring that the relevant statutes of limitations preclude enforcement of the notes and mortgages at issue, and therefore denying 33 Motion for Judgment on the Pleadings; denying 36 Motion for Judgment on the Pleadings; granting 47 [4 9] Motion for Judgment on the Pleadings; granting 72 Motion for Judgment on the Pleadings; denying 81 Motion for Continuance; denying 90 Motion for Continuance; denying 98 Motion to Strike Pleading ; denying 107 Motion to Strike Pleading (Written Opinion). LET JUDGMENT BE ENTERED ACCORDINGLY. Signed by Judge Paul A. Magnuson on November 28, 2017. (ALT)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
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,

Civ. No. 17-1851 (PAM/BRT)

Plaintiffs,
v.

MEMORANDUM AND ORDER

WIPT, Inc., Roger Dean Waldner,
The One Stop, Inc., RDW-KILT, Inc.,
and Community Bank,
Defendants.

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
BACKGROUND
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
1

Plaintiffs moved for judgment on the pleadings or, in the alternative, for summary
judgment. Defendants Waldner, WIPT, The One Stop, and RDW-KILT responded by
moving for a continuance under Fed. R. Civ. P. 56(d). Because the Court concludes that
judgment on the pleadings is appropriate, the Motions for Continuance are denied.

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 8-242002 and 1 balloon payment of $887,894.68 on 7-24-2003.” (See Larson Aff. Ex. 2 at 1.)
2

The notes and mortgages attached to the Larson Affidavit are matters necessarily
embraced by the pleadings and thus may be considered on a motion for judgment on the
pleadings. Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999).
2

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 120month 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
3

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.
DISCUSSION
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.

3

There is no dispute that Community Bank no longer has any interest in the note and
mortgage it issued to Plaintiffs. Plaintiffs ask for certain factual findings before any
dismissal of Community Bank from this action, but those findings are not appropriate.
There is no case or controversy as to Community Bank, and its Motion will be granted.
4

(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; it is an Iowa corporation with an address in Dubuque. The Iowa statute
of limitations is also ten years. Iowa Code § 614.1(5).
Because Defendants did not make any demand for payment on the July 2002 note
until December 29, 2016, the statute of limitations bars them from seeking to enforce the
loan. Any demand on the November 2002 note would also be time-barred. 4
Defendants argue that an Illinois statute that preserves counterclaims against
statutes of limitations applies here to render the notes enforceable. See 735 Ill. Comp.
Stat. 5/13-207.

This statute saves counterclaims when the plaintiff’s initial cause of

action accrued before the counterclaim’s limitations period expired. See, e.g., Barragan
v. Casco Design Corp., 837 N.E.2d 16, 23-24 (Ill. 2005) (noting that § 13-207 applies
when a plaintiff “owns” the claim being countered before the counterclaim is timebarred). Thus, for example, if the statute of limitations for breach of contract is 10 years
but for a counterclaim asserting unjust enrichment is only five years, a party cannot

4

Although a lack of payment demand might mean that a request for a declaratory
judgment with regard to a future demand is not ripe, in the circumstances present here,
and especially given the representations in Defendants’ pleadings, it is likely that a
demand for payment on the November loan is sufficiently imminent to create a case or
controversy with respect to that loan. See Missourians for Fiscal Accountability v. Klahr,
830 F.3d 789, 795 (8th Cir. 2016) (noting that a declaratory judgment plaintiff need only
show “adverse legal interests, of sufficient immediacy and reality to warrant the issuance
of a declaratory judgment”) (quoting Golden v. Zwickler, 394 U.S. 103, 108 (1969)).
5

prevent its opponent from bringing an unjust-enrichment counterclaim by waiting until
the sixth year after the alleged breach to assert a claim for breach of contract.
Here, by contrast, Plaintiffs could not have brought a declaratory judgment claim
before December 29, 2016, the date Defendants made a demand under the July 2002
note. By that date, however, any counterclaim Defendants might have was untimely.
Thus, Plaintiffs did not “own” their declaratory-judgment claims before the limitations
period on Defendants’ counterclaims expired, and the Illinois counterclaim-saving statute
does not save Defendants’ counterclaims.
Finally, Defendants’ claim that judgment is premature because they need time to
conduct discovery is without merit. The issues here are purely legal: whether the statute
of limitations bars Defendants from seeking payment on these notes. The discovery
Defendants claim to require is discovery into whether Plaintiffs in fact received money
under either of the notes, and more information about the “conspiracy” that Waldner
alleges regarding the Hartkes and Galley Smith. But none of those facts has any bearing
on the legal issue here, and the resolution of that issue is clear. Defendants are timebarred from seeking payment on these loans, and Plaintiffs are entitled to a declaratory
judgment to that effect.
CONCLUSION
Accordingly, IT IS HEREBY ORDERED that:
1.

Defendant Waldner’s Motion for Judgment on the Pleadings (Docket No.
33) is DENIED;

6

2.

Defendants The One Stop, RDW-KILT, and WIPT’s Motion for Judgment
on the Pleadings (Docket No. 36) is DENIED;

3.

Plaintiffs’ Motion for Judgment on the Pleadings (Docket Nos. 47, 49) is
GRANTED;

4.

Defendant Community Bank’s Motion for Judgment on the Pleadings
(Docket No. 72) is GRANTED;

5.

Defendant Waldner’s Motion for Continuance (Docket No. 81) is
DENIED;

6.

Defendants The One Stop, RDW-KILT, and WIPT’s Motion for
Continuance (Docket No. 90) is DENIED;

7.

Plaintiffs’ Motions to Strike (Docket Nos. 98, 107) are DENIED; and

8.

The relevant statutes of limitations preclude enforcement of the notes and
mortgages at issue in this litigation.

LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: November 28, 2017

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

7