Minnesota auto dealer Morrie Wagener was sued Monday after redeeming Denny Hecker's Medina mansion from a foreclosure sale last week for just $225,000.
The lawsuit, filed by bankruptcy trustee Randy Seaver, said Wagener bought a stake in Hecker's foreclosed mansion only in an effort to recoup a debt judgment he won against Hecker last year. Seaver argued that such a move gave Wagener preferential treatment over Hecker's other creditors and that must not be allowed.
The dispute is the latest in development in the complicated and contentious Hecker saga.
Hecker's home is worth more than $1.8 million, according to Hennepin County tax records. U.S. Bank held the first mortgage and foreclosed upon it months ago. It then bought the property at a sheriff's sale for $213,263.
On Thursday, Wagener used his lien status from the prior debt judgment against Hecker to redeem the mansion from U.S. Bank. Wagener "tendered less than $225,000 to the Hennepin County sheriff" to win an interest in the lakeside property, the trustee's lawsuit said.
Second and third mortgage holders had held a balance on the property of $900,000, but did not redeem their interest. By law, that allowed other parties to come in and make an offer to U.S. Bank.
Wagener's attorney Tom Zappia said his client made the move because his business, New Buffalo Auto Sales, had sued and won a judgment against Hecker for a $324,938 unpaid debt. Wagener won that judgment in May 2009, which by law gave him a lien on Hecker property. The judgment landed just one month before Hecker filed for bankruptcy protection.
Hecker listed Wagener's New Buffalo Auto Sales firm as one of his creditors on his June 4, 2009, bankruptcy petition.
The taking of a lien or other transfers that occur within 90 days of a bankruptcy filing should be considered part of the bankruptcy estate, said Matthew Burton, an attorney for the trustee.
That is where Wagener's ownership of the house is problematic. If the house is sold, Wagener's "preferential transfer" could enable him and New Buffalo Auto "to recover more than they would receive as creditors in this Chapter 7 case, had they not had the lien," Burton said.
Seaver is asking the judge either for permission to take over Wagener's lien position or for a judgment against Wagener for $324,938, the value of the lien.
The dispute is the latest involving Hecker's Northridge Drive home in Medina. The trustee won court permission to call in federal marshals to enter the house last spring.
Dee DePass • 612-673-7725