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Paulson v. Beliveau et al.: US District Court : CIVIL PROCEDURE - defendants took 5th, facts undisputed regarding equity stripping; pro bono counsel

1Hennigan and Ale are representing Paulson pro bono. The Court commends them on
their extraordinarily thorough and careful work.
2Shelley Beliveau is now known as Shelley Milless. Because Beliveau was her surname
during the time relevant to this action, the Court will refer to her using that name.
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
TELSCHE E. PAULSON,
Plaintiff,
v.
TIMOTHY BELIVEAU;
LAWRENCE MAAHS; WEST BAY
CAPITAL, INC.; U.S. HOUSING
SERVICES, LLC; AMERICAN ALLIANCE
MORTGAGE GROUP, INC.; SHELLEY
BELIVEAU; and AMERICAN ALLIANCE
TITLE, LLC,
Defendants.
Case No. 07-CV-3757 (PJS/JJK)
ORDER
Peter C. Hennigan and Eleasalo V. Ale, FAEGRE & BENSON LLP, for plaintiff.1
Jack E. Pierce, PIERCE LAW FIRM, P.A., for defendant Shelley Beliveau.
This matter is before the Court on two unopposed motions filed by plaintiff Telsche
Paulson: (1) a motion for partial summary judgment against defendants Timothy and Shelley
Beliveau2 and (2) a motion for dismissal without prejudice of her claims against defendant
Lawrence Maahs. For the reasons set forth below, the motions are granted.
-2-
I. BACKGROUND
The undisputed evidence described in Paulsons memorandum and supported by
appropriate citations to the affidavits, deposition transcripts, and other documents that make up
the record establishes Paulsons entitlement to the relief she seeks. The Court will summarize
that evidence only briefly here.
During the time relevant to this action, defendants Timothy and Shelley Beliveau, who
were until recently a married couple, controlled numerous business entities through which they
ran an equity-stripping scheme. These entities which include defendants West Bay Capital,
Inc. (West Bay), American Alliance Mortgage Group, Inc. (American), U.S. Housing
Services, LLC, and American Alliance Title, LLC were merely alter egos for the Beliveaus.
The Beliveaus had check-writing authority on all the corporate accounts, regularly commingled
funds, routinely used corporate funds for personal expenses, and did not observe corporate
formalities.
Paulson is an elderly woman who became caught up in the Beliveaus scheme after
Paulson found herself facing foreclosure proceedings in May 2004. For many years, Paulson
lived in and was the sole owner of a duplex located in South Minneapolis. After losing her
downstairs tenants, Paulson fell behind in her mortgage payments, and her lender began
foreclosure proceedings. At that time, the duplex was worth approximately 0,000, and
Paulson had over 0,000 of equity. One of the Beliveaus entities American contacted
Paulson, who eventually agreed to permit American to refinance her mortgage.
As it turned out, however, the Beliveaus and their agents arranged not for the refinancing
of Paulsons mortgage, but, unbeknownst to Paulson, arranged for the sale of Paulsons house to
-3-
defendant Lawrence Maahs, a business associate of the Beliveaus. The Beliveaus hid the true
nature of the transaction from Paulson, who at all times believed that she was merely refinancing
her mortgage. The Beliveaus tricked Paulson not only into selling her home, but into entering a
Contract for Deed with Maahs.
The sale generated 9,733.73 in net proceeds. Paulson never received a penny of this
amount, however. Among the papers that Paulson was tricked into signing was a letter
requesting that these proceeds be transferred to an escrow account belonging to another of the
Beliveaus entities, West Bay. The record shows that a large chunk of this money was used, in
circular fashion, to finance Maahss purchase of the duplex. The remainder of the money has
since been dissipated by the Beliveaus. Essentially, the Beliveaus stole the closing proceeds
from Paulson.
This, however, was apparently not enough for the Beliveaus. After the sale, the
Beliveaus instructed Paulson to make payments to West Bay on what Paulson thought was her
refinanced mortgage. Paulson complied with the instructions, dutifully making mortgage
payments to the Beliveaus company. In January 2006, without Paulsons knowledge, Shelley
Beliveau arranged for Maahs to sell the duplex to Shelley Beliveaus sister and brother-in-law.
Shelley Beliveau did not inform the buyers about Paulsons Contract for Deed, and the sale did
not include an assignment of the Contract for Deed. As compensation for arranging this
transaction between her business associate and her sister, Shelley Beliveau helped herself to a
commission of nearly 0,000, representing approximately 20% of the sale price. This
commission essentially wiped out the remaining equity in the home that is, the equity that had
been financed by the proceeds from the earlier sale that should have gone to Paulson. In
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addition, by neglecting to assign Paulsons Contract for Deed, Shelley Beliveau extinguished
what remained of Paulsons legal interest in the property.
After this second sale, the Beliveaus continued to collect mortgage payments from
Paulson. In fact, in October 2006, Timothy Beliveau instructed Paulson to write her mortgage
checks to Shelley Beliveau personally. The mortgage checks Paulson wrote to Shelley
Beliveau were deposited into an account from which Beliveau paid for personal expenses. In all,
Paulson made ,100 in mortgage payments to Shelley Beliveau from October 2006 through
May 2007, when government investigators informed Paulson of the Beliveaus fraudulent
activities.
II. ANALYSIS
A. Motion for Partial Summary Judgment
Paulson seeks summary judgment against the Beliveaus on her claims of unjust
enrichment, conversion, and fraud. As noted, the Beliveaus have not contested any of the
evidence that Paulson has submitted in support of her claims. Moreover, because the Beliveaus
invoked their Fifth Amendment right against self-incrimination in response to most of Paulsons
discovery requests, a jury would be entitled to draw adverse inferences against them. See
Wartnick v. Moss & Barnett, 490 N.W.2d 108, 111 n.1 (Minn. 1992). As outlined in Paulsons
memorandum, the Beliveaus invoked the privilege in response to questions that directly accused
them of taking the sale proceeds from the 2004 sale of Paulsons home, intentionally
orchestrating the 2006 sale to extinguish Paulsons remaining legal rights in her home, and
deceiving Paulson into believing that she was still obligated to make mortgage payments after
the 2006 sale.
-5-
Under her claims of unjust enrichment and conversion, Paulson seeks a judgment in the
amount of 9,733.73, representing the net proceeds from the 2004 sale. To prevail on a claim
of unjust enrichment, a plaintiff must show that the defendant knowingly received something of
value from the plaintiff under circumstances in which it would be inequitable for the defendant
to retain the benefit without paying for it. Dahl v. R.J. Reynolds Tobacco Co., 742 N.W.2d 186,
195-96 (Minn. Ct. App. 2007), review granted (Minn. Feb. 27, 2008). To prevail on a claim of
conversion, a plaintiff must show that the defendant willfully interfered with the plaintiffs
personal property without lawful justification, thus depriving the plaintiff of use or possession.
Williamson v. Prasciunas, 661 N.W.2d 645, 649 (Minn. Ct. App. 2003). There is no dispute that
the Beliveaus, either personally or through entities that were their alter egos, used deceptive
means to obtain 9,733.73 in sale proceeds that rightfully belonged to Paulson. Paulson is
entitled to summary judgment on her claims of unjust enrichment and conversion. See Fed. R.
Civ. P. 56(c), (e)(2).
In her fraud claim, Paulson seeks judgment in the amount of ,100, representing the
amount of fraudulent mortgage payments made directly to Shelley Beliveau from
October 2006 through May 2007, after the Beliveaus had succeeded in extinguishing Paulsons
legal interest in her home. To prevail on a claim of fraud, a plaintiff must show that a defendant
knowingly or recklessly made a materially false representation with the intent to induce the
plaintiff to act, and that the plaintiff in fact was induced to act by the representation and suffered
damages in reliance on the representation. Florenzano v. Olson, 387 N.W.2d 168, 174 n.4
(Minn. 1986). Intentional misrepresentation includes concealing or failing to disclose facts
under circumstances that render the facts that are disclosed misleading. M.H. v. Caritas Family
-6-
Servs., 488 N.W.2d 282, 289 (Minn. 1992). There is no dispute that the Beliveaus deceived
Paulson into making mortgage payments that she was not obligated to make and that they were
not entitled to receive. Paulson is entitled to summary judgment on her claim of fraud against
the Beliveaus. See Fed. R. Civ. P. 56(c), (e)(2).
It is clear that the Beliveaus are jointly and severally liable for the full amount of
Paulsons damages on her unjust enrichment, conversion, and fraud claims. See Minn. Stat.
604.02, subd. 1(2) (mandating joint liability when two or more persons who are severally liable
have acted in a common scheme or plan that results in injury); Witzman v. Lehrman, Lehrman &
Flom, 601 N.W.2d 179, 185 (Minn. 1999) (all who actively participate in any manner in the
commission of a tort, or who procure, command, direct, advise, encourage, aid, or abet its
commission, or who ratify it after it is done are jointly and severally liable for the resulting
injury) (citation and quotations omitted). Paulson also asserts that West Bay, U.S. Housing
Services, LLC, American, and American Alliance Title, LLC all of whom are controlled by
the Beliveaus and all of whom are in default are also jointly and severally liable for the
amount of the proceeds from the 2004 sale of her house. For that reason, the Court will wait to
enter final judgment until such time as Paulson has renewed her motion for a default judgment
against the defaulting defendants. Cf. Pfanenstiel Architects, Inc. v. Chouteau Petroleum Co.,
978 F.2d 430, 433 (8th Cir. 1992) (noting the problems of dealing with inconsistent damage
determinations against jointly and severally liable defendants).
B. Motion to Dismiss
Paulson also moves to dismiss her claims against defendant Maahs without prejudice
because Maahs has filed for bankruptcy. Although Maahs has not responded to the motion, the
-7-
Court understands from Paulsons counsel that Maahs would prefer the dismissal to be with
prejudice. There is no conceivable reason why the dismissal should be with prejudice, however,
and the Court will therefore grant Paulsons motion.
Maahs has filed a pleading entitled Counterclaim and Crossclaims that contains four
claims, one of which is for indemnity and contribution. As the Court is dismissing Paulsons
claims against Maahs without prejudice, Maahss claim for indemnity and contribution is also
dismissed without prejudice as moot. With respect to Maahss three remaining claims for
deed reformation, note reformation, and mortgage reformation it is not clear against whom
Maahs is asserting these claims. Maahs also does not appear to be serious about pursuing his
claims, as he evidently engaged in no discovery prior to the expiration of the deadline for taking
discovery. The Court will therefore order Maahs to serve and file, within fifteen days after
service of this order upon him, a letter stating whether he intends to pursue his remaining claims.
If Maahs fails to serve and file the required letter, the Court will dismiss the claims without
prejudice. If Maahs does file the required letter and does express an interest in pursuing his
remaining claims then the Court will order that Maahs appear personally before the Court for
a status conference.
ORDER
Based on the foregoing, and on all of the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1. Plaintiffs motion for partial summary judgment [Docket No. 100] is GRANTED.
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2. Plaintiffs motion to dismiss her claims against defendant Lawrence Maahs
[Docket No. 84] is GRANTED. Plaintiffs claims against Maahs are
DISMISSED WITHOUT PREJUDICE.
3. Defendant Lawrence Maahss claim for indemnity and contribution against
defendants U.S. Housing Services, LLC and Timothy Beliveau is DISMISSED
WITHOUT PREJUDICE as moot.
4. Plaintiff is ORDERED to serve this order upon defendant Lawrence Maahs, using
one of the methods of service described in Fed. R. Civ. P. 5(b)(2).
5. Defendant Lawrence Maahs is ORDERED to serve and file a letter stating
whether he intends to pursue his remaining claims in this action. This letter must
be filed within fifteen days of the date on which this order was served upon him.
If defendant Maahs fails to comply with this paragraph, his remaining claims will
be dismissed without prejudice.
Dated: December 1 , 2008 s/Patrick J. Schiltz
Patrick J. Schiltz
United States District Judge
 

 
 
 

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