Lighthouse Management Group, Inc. vs. Deutsche Bank Trust Company Americas

Filing 112

ORDER denying 57 Motion for Summary Judgment; denying 58 Motion for Summary Judgment. (Written Opinion) Signed by Senior Judge David S. Doty on 3/29/2019. (DLO)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 17-3473(DSD/SER)
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,
v.

ORDER

Deutsche Bank Trust Company
of Americas, MelTel II W3, LLC,
and MelTel II Valentine, LLC,
Defendants.
Arthur G. Boylan, Esq. and Anthony Ostlund Baer & Louwagie,
PA, 90 South 7th Street, Suite 3600, Minneapolis, MN 55402,
counsel for plaintiff.
Brian W. Varland, Esq. and Heley, Duncan & Melander, PLLP,
8500 Normandale Lake Blvd., Suite 2110, Minneapolis, MN 55437,
counsel for defendants.
This 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).1
file,

record,

and

proceedings

herein,

Based on a review of the
and

for

the

following

reasons, the courts denies the motions.

1

MelTel II W3 and MelTel II Valentine were previously named
WCP III and Valentine Capital respectively. The court will refer
to defendants collectively as MelTel unless a finer distinction is
required.

BACKGROUND
This property dispute arises out of the allegedly fraudulent
assignment of certain property rights to MelTel.
I.

The Parties
Plaintiff Lighthouse Management Group is an assignee for the

benefit of creditors of Apple Valley Commons (AVC)2 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.

AVC owns two large office buildings in Apple Valley, Minnesota
(Buildings).3

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.

2

AVC consists of three entities: AV Development Company
LLLP, Apple Valley Commons II LLLP, and AV Commons II LLLP.
3

The Buildings are located at 15025 Glazier Avenue and 7300
West 147th Street.
2

MelTel
securities.

and

Deutsche

Bank

are

involved

in

asset-backed

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.
Decl. ¶ 6.

Voon

In total, MelTel has acquired nearly 1,500 wireless

antennae lease rights.

Bauermeister Dep. at 29:14-16.

Before 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.
MelTel

investigates

department, see

all

asset

ownership

Hwang Decl. ¶ 3.

through

review.
II.

internal

id., and logs its due diligence efforts and

communications in a specially designed database.
41:19-22.

an

Wade Dep. at

Deutsche Bank relies entirely on MelTel’s due diligence

Id. at 56:4-24; Voon Dep. at 27:23-25.

The Lease Rights Assignment
MelTel 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.

3

Then in 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

the

that

AVC

was

selling

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.
In July 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 payment.

Id.

On July 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
Lease Rights.

MelTel an exclusive option to acquire the

Id. Ex. 30 at 1–3.

Based on those representations,

MelTel assumed that Chris Hanson was the controlling person for the
“landlord entity, Hillside.”
However,

during

that

Wade Dep. at 24:11-13.
same

time

period,

MelTel

received

information that Chris Hanson and Hillside were not the Buildings’

4

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,” AVC.4

Id.

Despite 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.
However, 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

4

“Noted” refers to notes recorded in MelTel’s due diligence
database.
5

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.
On 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).5
Id.; see also Varland Aff. Exs. C, E.
Assignment on AVC’s behalf.6

John Hanson signed the

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 $440,000.7

Id.

The Assignment

also expressly stated that MelTel would pay AVC a second $35,000

5

The two agreements comprising the Assignment included two
separate memorandum.
6

John Hanson “made it his practice” to sign his name John O.
Hanson because John Hanson is a common name. Varland Decl. Ex. A
at 3.
7

The agreements stated that “[u]pon the Effective Date,
[MelTel] shall pay to [AVC], in consideration for the rights and
interests granted by [AVC], a one-time lump-sum amount ....” Id.
The $440,000 payment was divided into two payments of $300,000 and
$140,000. Id.
6

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, 34.
Then, 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 Hillside bank account.
were not signed by John Hanson.8

Id.

The statements

Id.

Later that day, the wiring instructions changed again. MelTel
noted that “per John Hanson” it was required to wire the payment to
Berkey’s client trust account at PNC Bank on Hillside’s behalf.
Id. Ex. 28 at 1.

Consistent with that instruction, MelTel wired

$421,734.17 to Berkey’s trust account.

8

Boylan Decl. Ex. 11.

The signature on the landlord settlement statements are
illegible.
Lighthouse alleges that Chris Hanson fraudulently
signed them on AVC’s behalf.
7

MelTel subsequently obtained two mortgages from Deutsche Bank
on

the

Lease

Rights.9

Shortly

thereafter,

MelTel

started

collecting the monthly rent proceeds under the Lease Rights.
Boylan Decl. Ex. 18.
John Hanson was not aware of the wire transfer to Berkey and
AVC did not receive any of the $421,734.17 payment.
Ex. A. at 7.

Varland Decl.

The record does not show whether MelTel tendered the

$35,000 payment.

MelTel testified that it is not aware of any

previous situation in which it paid the lease purchase price to an
entity other than the title or property owner or lease landlord.
Bauermeister Dep. at 94:25-96:11.

Hillside ultimately was unable

to secure financing and never purchased the Buildings.

Varland

Decl. Ex. A at 5.
III. Lighthouse Appointment and Investigation
In April 2013, AVC and Husker Management Company (Husker)
agreed that Husker would manage the Buildings and the collect
rents.

Id. at 2. In exchange, Husker received a percentage of the

rental income.

Id.

It appears, however, that Husker did not

always remit the rental proceeds as agreed and failed to keep an
accounting of the collected rents.

Id.

In mid-2015, AVC hired Lighthouse to conduct a third-party
audit given its suspicions that Husker was not properly reporting

9

Deutsche Bank also recorded its interests on December 4
with the Dakota County District Court. Varland Aff. Exs. A, B.
8

the rental income.

AVC later agreed to assign its interest in the

Buildings’ to Lighthouse for the benefit of creditors, and in
exchange, Lighthouse would conduct the audit and, if necessary,
pursue legal action on AVC’s behalf. Lighthouse agreed to reassign
the Buildings back to AVC at the conclusion of its investigation
and any related legal action.
During the course of the investigation, Lighthouse discovered
that Chris Hanson had orchestrated a number of fraudulent real
estate transactions involving assignments and other encumbrances on
the Buildings.

Boylan Decl. Ex. 1 at 5.

For example, unrelated to

this case, Lighthouse learned that Chris Hanson obtained several
large loans through Fidelity Investment Group, LLC, using the
Buildings as collateral and by representing himself as AVC’s
“Managing

Member.”

Id.;

see

also

id.

Ex.

4

at

2,

34-36.

Lighthouse commenced a number of actions on AVC’s behalf to clear
adverse property claims. In 2015 and 2016, Lighthouse sued Husker,
Chris Hanson, Fidelity, and others in Dakota County District Court.
Boylan Decl Ex. 1. at 1; Ex. 6 at 2.
resulted in default judgment.
IV.

These cases either settled or

Id. at 1; Id. at Ex. 6 at 2.

This Lawsuit
On July 3, 2017, Lighthouse filed suit against Deutsche Bank

in Hennepin County District Court and Deutsche Bank timely removed.
On January 24, 2018, Lighthouse filed a revised amended complaint
raising

quiet-title, declaratory judgment, and unjust enrichment

9

claims.

Defendants now move for judgment on the pleadings or, in

the alternative, summary judgment.

DISCUSSION
I.

Summary Judgment10
“The court shall grant summary judgment if the movant shows

that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”

Fed. R. Civ.

P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A fact is material only when its resolution affects the outcome of
the case.
(1986).

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

A dispute is genuine if the evidence is such that it could

cause a reasonable jury to return a verdict for either party.

See

id. at 252 (“The mere existence of a scintilla of evidence in
support of the plaintiff’s position will be insufficient ....”).
On a motion for summary judgment, the court views all evidence
and inferences in a light most favorable to the nonmoving party.
Id. at 255.

The nonmoving party, however, may not rest upon mere

denials or allegations in the pleadings, but must set forth
specific facts sufficient to raise a genuine issue for trial.
Celotex, 477 U.S. at 324. A party asserting that a genuine dispute

10

Because the court has considered both the initial and
supplemental affidavits, exhibits, and memoranda in resolving the
instant motions, it will apply the summary judgment standard.
10

exists - or cannot exist - about a material fact must cite
“particular parts of materials in the record.”
56(c)(1)(A).

Fed. R. Civ. P.

If a plaintiff cannot support each essential element

of a claim, the court must grant summary judgment because a
complete

failure

of

proof

regarding

an

essential

necessarily renders all other facts immaterial.

element

Celotex, 477 U.S.

at 322-23.
A.

Quiet Title

Lighthouse
parties’

brings

adverse

a

quiet-title

property

interests

claim
in

to
the

determine
Lease

the

Rights.

Lighthouse, specifically, requests that the court declare that: (1)
the Assignment and mortgages are null and void,(2) MelTel and
Deutsche Bank do not have an interest in the Lease Rights and,(3)
any adverse interests are cleared from the Buildings’ title.

Rev.

Am. Compl. ¶ 33.
Minnesota’s quiet-title statute provides that “[a]ny person in
possession of real property ... may bring an action against another
who claims an estate or interest therein, or a lien thereon,
adverse to the person bringing the action, for the purpose of
determining such adverse claim and the rights of the parties,
respectively.”
1.

Minn. Stat. § 559.01.
Fraud

MelTel first asserts that Lighthouse’s quiet-title claim fails
as a matter of law because Lighthouse has not alleged that it

11

engaged in fraud.

However, MelTel cites no authority, and the

court can find none, stating that the only basis for a quiet-title
action is fraud. Indeed, § 559.01 simply requires that a plaintiff
have “possession of real property” and that the defendant be
“another who claims an ... interest ... adverse to the person
bringing the action” such that the court may determine the rights
of the parties.
2.

Minnesota law requires nothing more.
Surrender of Interest

MelTel next argues that Lighthouse’s quiet-title claim fails
as a matter of law because AVC surrendered its interest in the
Lease Rights through the conveyance of the Assignment on November
10.

Specifically, MelTel argues that once John Hanson signed the

Assignment on AVC’s behalf and MelTel took possession of the
Assignment, the Assignment was legally delivered, and consequently,
MelTel became the lawful and indefeasible owner of the Lease
Rights.

MelTel further argues that its failure to remit the

purchase payment to AVC does not invalidate its property interest
because AVC legally conveyed the Assignment when it was signed and
MelTel took possession.

According to MelTel, AVC’s recourse is

limited to recovering damages related to payment.

The court

disagrees.
Delivery of a real property interest “is effective if the
grantor

manifests

a

clear

intention

unconditionally with all control ....”

12

to

part

presently

and

Mollico v. Mollico, 628

N.W.2d

637,

omitted).

640-41

(Minn.

Ct.

App.

2001)(internal

Delivery is “complete only when the grantor has put it

beyond his power to revoke or reclaim.”
N.W.2d 235, 241 (Minn. 1964).
considered
occurred.

citations

in

determining

Fenrick v. Olson, 131

“The intent of the parties may be

when”

the

real

property

conveyance

Travelers Ins. Co. v. Horseshoe Lake Farms, Inc., 456

N.W.2d 453, 458 (Minn. Ct. App. 1990).

“With respect to the

execution of conveyances ... the grantor must understand the nature
and effect of what he is doing, and that equity may require
cancellation of an instrument for an entire lack of consideration
therefor.”

Fenrick, 131 N.W.2d at 240.

“Where the intent of the

parties is totally ascertainable from the [conveyance] writing,
construction is for the court.”

Mollico, 628 N.W.2d at 641

(internal citations omitted).
Here, the record establishes that the Assignment was not
delivered as a matter of law.

The Assignment plainly states that

MelTel’s interest in the Lease Rights is subject to certain
conditions. There is no dispute that a significant condition, that
MelTel tender a $440,000 purchase payment, did not occur.

In

addition, MelTel failed to pay the second $35,000 payment as was
also required under the Assignment. The court cannot conclude that
the sale contemplated by the Assignment was fully delivered on
November 10, given that MelTel did not pay AVC as required.

Under

these circumstances, the evidence does not show that AVC intended

13

to presently and unconditionally surrender its interest in the
Lease Rights on November 10, when the Assignment was signed.

As a

result, this argument fails as a matter of law.
3.

Bona-Fide Purchaser

MelTel lastly argues that Lighthouse’s quiet-title claim fails
because it is a bona-fide purchaser protected under the Minnesota
Recording Act. Minn. Stat. § 507.34; see also Bruggeman v. Jerry’s
Enter., Inc., 591 N.W.2d 705, 710 (Minn. 1999); Chergosky v.
Crosstown Bell, Inc., 463 N.W.2d 522, 524 (Minn. 1990).

A bona-

fide purchaser is “defined as one who gives consideration in good
faith

without

actual,

implied,

or

constructive

notice

of

inconsistent outstanding rights of others.”

Anderson v. Graham

Inv. Co., 263 N.W.2d 382, 384 (Minn. 1978).

Implied notice is

based on “actual knowledge of facts which would put one on further”
duty to inquire. Id.; see also Claflin v. Commercial State Bank of
Two Harbors, 487 N.W.2d 242, 248 (Minn. Ct. App. 1992).

Bona-fide

purchaser status is an affirmative defense, which MelTel has the
burden of proving.

Goette v. Howe, 44 N.W.2d 734, 738 (Minn.

1950); see also MidCountry Bank v. Krueger, 782 N.W.2d 238, 244
(Minn. 2010).
The court cannot conclude that the evidence establishes that
MelTel is a bona-fide purchaser as a matter of law.

Despite Chris

Hanson’s July 2014 representations that he was the Buildings’ owner
and/or landlord, MelTel was aware that he was neither by August

14

2014.

In addition, by September 2014, MelTel had actual notice

that Chris Hanson had not secured financing to purchase the
Buildings.

In mid-October 2014, MelTel was again on notice that

Chris Hanson and Hillside still had not secured financing.

In

early November 2014, MelTel agreed several times to make the
purchase payment to AVC, and not to Hillside.
Nevertheless, on November 12, MelTel made the purchase payment
to Hillside through Berkey.

Given these facts, a jury could find

that MelTel had at least implied notice of AVC’s right to the
purchase payment.

At a minimum, a jury could conclude that MelTel

had a duty to ask why the wiring instructions had changed and why
the previous payment agreements were no longer in place.

Indeed,

there is no indication in the record that MelTel ever questioned
why the wiring instructions changed at the last minute. This is
particularly curious given that there is no indication in the
record that John Hanson ever told MelTel that the previous payment
agreements had been rescinded or modified.

MelTel could have

simply contacted John Hanson before wiring the purchase payment to
Hillside to verify the conflicting instructions, but it failed to
do so. There are certainly facts that may explain why MelTel chose
not to inquire, but they are for the jury to weigh in deciding the
issue.

As a result, the court must deny MelTel’s motion for

15

summary judgment on the quiet-title claim.11
B.

Declaratory Judgment

Lighthouse seeks the same relief under the Minnesota Uniform
Declaratory Judgment Act as it does in its quiet-title claim.
Minn. Stat. §§ 555.01–555.16.

See

The Act provides that “[a]ny person

... whose rights, status, or other legal relations are affected by
a statute” may obtain a declaration as to those rights, status, or
legal relations and as to any question of construction or validity
of the statute. Minn. Stat. § 555.02. “A declaratory judgment may
be entered regardless of whether further relief is or could be
claimed, and it will lie when legal relations are affected by a
statute, municipal ordinance, contract, or franchise.”

All. for

Metro. Stability v. Metro. Council, 671 N.W.2d 905, 915 (Minn. Ct.
App. 2003).
The purpose of the Act is to settle uncertainty, and it is to
be liberally construed and administered.
“The

Act,

however,

jurisdiction.”

is

not

an

express

Minn. Stat. § 555.12.
independent

source

of

All. for Metro. Stability, 671 N.W.2d at 915.

“A

party seeking a declaratory judgment must have an independent,
underlying cause of action based on a common-law or statutory
right.”

Id.

11

A jury may also conclude that Deutsche Bank was under a
duty to further inquire, or, conduct its own review. As a result,
a jury must decide whether Deutsche Bank is a bona-fide purchaser.
16

Here, because a jury could conclude that MelTel was not a
bona-fide purchaser, MelTel has not shown that Lighthouse does not
have an independent quiet-title claim.

As a result, MelTel’s

motion as to the declaratory judgment claim must be denied.
C.

Unjust Enrichment

The parties agree that Lighthouse’s unjust enrichment claim is
inextricably intertwined with its quiet-title claim – if MelTel is
a bona-fide purchaser of the Lease Rights, it cannot be unjustly
enriched by its interest in those Lease Rights.

Lighthouse argues

that MelTel has been unjustly enriched because it did not pay AVC
for the Lease Rights and is collecting the proceeds under the Lease
Rights.

Lighthouse also argues that MelTel’s retention of the

Lease Rights under these circumstances is morally wrong.

MelTel

responds that it is entitled to summary judgment on the unjust
enrichment claim because Lighthouse has not shown that it acted
illegally or unlawfully.
In Minnesota, the elements of an unjust enrichment claim are:
“(1) a benefit conferred; (2) the defendant’s appreciation and
knowing

acceptance

of

the

benefit;

and

(3)

the

defendant’s

acceptance and retention of the benefit under such circumstances
that it would be inequitable for him to retain it without paying
for it.”

Dahl v. R.J. Reynolds Tobacco Co., 742 N.W.2d 186, 196

(Minn. Ct. App. 2007). A plaintiff must show “that [the defendant]
was unjustly enriched in the sense that the term unjustly could
17

mean illegally or unlawfully.”

First Nat’l Bank of St. Paul v.

Ramier, 311 N.W.2d 502, 504 (Minn. 1981).

This court has held,

however, that unjust enrichment claims may be asserted even if the
defendant did not participate in an illegal or unlawful activity,
so long as it would be morally wrong for the defendant to retain
the benefit generated by the failure of consideration, fraud, or
mistake.

See Hartford Fire Ins. Co. v. Clark, 727 F. Supp. 2d 765,

777-78 (D. Minn. 2010); Kranz v. Koenig, 484 F. Supp. 2d 997, 1001
(D. Minn. 2007); see also Cady v. Bush, 166 N.W.2d 358, 361–62
(1969).
The Minnesota Court of Appeals appears to be split on the
issue.

Compare Schumacher v. Schumacher, 627 N.W.2d 725, 729

(Minn. Ct. App. 2001)(“[T]he cause of action for unjust enrichment
has been extended to also apply where, as here, the defendants’
conduct

in

retaining

the

benefit

is

morally

wrong);

Honeywell/Alliant Techsystems Fed. Credit Union v. Buckhalton, No.
C2-99-1194, 2000 WL 53875 (Minn. Ct. App. Jan. 25, 2000)(“[Despite
the absence of proof of fraud or illegal conduct on the part of
appellants, because of equity, they are not entitled to the
money.”),

with

Diversified

Water

Diversion,

Inc.

v.

Hogenson

Props., Ltd., No. A14-1519, 2015 WL 2185201, at *3-4 (Minn. Ct.
App. May 11, 2015)(holding that plaintiff must show that defendant
engaged in wrongful conduct in either obtaining or retaining the
benefit to support an unjust enrichment claim).

18

The Minnesota

Supreme Court has consistently described unjust enrichment claims
in

terms

of

the

inequitable

resulting

circumstances

necessarily on the defendant’s wrongful actions.

and

not

Hartford, 727 F.

Supp. 2d at 778; see, e.g., Klass v. Twin City Fed. Sav. & Loan
Ass’n, 190 N.W.2d 493, 494-95 (Minn. 1971)(holding that “[a] cause
of action for unjust enrichment may be based on situations where it
would be morally wrong for one party to enrich himself at the
expense of another.”)(internal quotation marks omitted).
The court agrees with the previous cases in this district
concluding that the Minnesota Supreme Court would hold that unjust
enrichment claims may be based on a moral wrong, even if not a
wrongful act.
Whether MelTel’s retention of the Lease Rights is a moral
wrong rests on the jury’s determination as to whether MelTel was a
bona-fide purchaser of those rights.

As a result, MelTel is not

entitled summary judgment on the unjust enrichment claim.

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
the motions for judgment on the pleadings, or, in the alternative,
summary judgment, [ECF Nos. 57 and 58] are denied.
Dated: March 29, 2019
s/David S. Doty
David S. Doty, Judge
United States District Court
19