STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss CIVIL ACTION DOCKET NO. CV-09-38Q, / ' ~6 V-C[}/Y) - d.jl1!J..ctO COLLEEN and CHRIS OLSEN, • Plaintiffs ORDER ON THE K\;V DEFENDANTS' v. MOTION TO DISMISS
KAILE WARREN, K\;Y ENTERPRISES, INC, RENT-A-HUSBAND, LLC, (THE KW DEFENDANTS)
SHAWN P. LYDEN, and
COASTAL REALTY, LLC, Defendants
BEFORE THE COURT
Before the court is a Motion to Dismiss pursuant to M.R. Civ. P. 12(b)(6)
filed by Defendants Kaile Warren, KW Enterprises, [nc., and Rent-A-Husband,
LLC, collectively known as the "K\;Y Defendants."
BACKGROUND
This suit pertains to financing arrangements the Plaintiffs, husband and
wife Chris and Colleen Olsen (the Olsens), entered into with the KW Defend,1I1ts
and Defendants Shawn Lyden and Coastal Realty Capital, LLC. Defendant
Warren resides in Windham, Maine. \;Yarren is the CEO of Rent-A-Husband,
LLC, LInd is also ,111 officer and shareholder of K\V Enterprises, Inc. Rent-A-
Husband, LLC is a Delaware Corporation. Lyden is a member of Coastal Realty
Capital, a Maine limited liability company.
The Olsens live in Windham, Maine. Warren became acquainted with the
Olsens while serving on the Windham Town Council. \;Yarren approached the Olsens about investing in his company Rent-A-Husband. On March 28, 2008, the
Olsens agreed to tender two parcels of land (one of which included their
personal residence) and another $5,000 in cash to Rent-A-Husband in exchange
for a "Non-Negotiable, Convertible Prom.issory Note," which promised to pay
the Olsens $199,650 with interest of 10% per year by March 28, 2010. The Olsens
never deeded their property to Rent-A-Husband and it appears that this deal
was not executed. However, Warren signed the Convertible Note as the CEO of
Rent-A-Husband. The Olsens clairn that Warren represented that the
Convertible Note gave them an interest in Rent-A-Husband. The Olsens later
tendered two short-ternl10ans to Warren, one for $5,000 and one for $10,000.
The Olsens claim that these loans have not been paid back.
A year lilter, on or around March 4,2009, the Olscns al1mved Warren to
use their properties as collateral for a $45,000 loan he needed for Rcnt-A
Husband. The Olsens claim \;\Tarren engaged Shawn Lyden of Coastal Realty
Capital, LLC to help put the deal together. On March 4, 2009, the Olsens'
properties were mortgaged to Coastal Realty Capital to secure the loan for
$45,000 (the Coastal Loan) to KW Enterprises. The Olsens claim that Warren
represented that they were obligated by the Convertible Note to pledge their
house. The Convertible Note vvas signed by Rcnt-A-HusbClnd in 200R, and was
not signed by KW Enterprises. Accordingly, the Olsens claim that no document
exists showing that, prior to the Coastal Loan, the Olsens owed any duties to
either K\'V Enterprises, Inc. or Warren, because neither \Varren nor K\V
Enterprises was a party to the Convertible Note. The 01sen5 claim that Rent-A
Husband's authority to do business in Maine was revoked on or before
September 5, 2008. The 015en5 allege that Warren never advised them that
2 almost all of the Rent-A-I-Iusband subsidiaries in Maine had either been
dissolved or had their authority to do business in Maine revoked by the Maine
Secretary of State.
The Olsens claim that during all discussions about transferring their
properties or encumbering them, they made it clear to VVarren that they did not
want their residence at risk in any way. The Olsens claim that both Warren and
Lyden reassured them that their residence would not be at any risk of
foreclosure. According to the Olsens, on March 4th , 2009, Lyden advised them of
their rights as they pertained to pledging their real estate. The Olsens claim they
have not received any consideration in exchange for mortgaging their property
to secure the Coastal Loan.
According to the Olsens, as a result of the Coastal Loan transaction, KW
Enterprises and/ or Warren received
properties were encumbered to Coastal, and the 01sens received no
consideration and no documentation. The Olsens do not know if Warren or KvV
Enterprises arc in dcfaul t on a note secured by the Coastal mortgage, and they do
not know if their properties will be foreclosed upon by Coastal.
The Olsens filed suit on June 25,2009 alleging the following claims: (1)
Count I alleges that Defendants Wi:wren, K"'V Enterprises, Lyden, and CO('lstal
Realty Capital violated the Unfair Trade Pr,lctices Act by making
misrepresentations about the status of Rent-A-Husb(lnd and the Convertible
Promissory Note in order to secure the Coastal Loan; (2) Count II claims that
Defendants \,yarren, KW Enterprises, Lyden, and Coastal Realty Capital made
false representations of material facts, which the Olsens relied on, in order to
induce them to make the short term loans and to allO'v a mortgage to be placed on their home; (3) Count lIT clairns that Lyden and Coastal Realty Capital
breached their fiduciary duty to the Olsens; (4) Count IV is a negligence claim,
which alleges that the Defendants breached their duty of good fai th and fair
dealing, and as a result the Olsens suffered economic and non-economic harm;
and (5) Count V alleges Defendants Warren, KW En terprises, Lyden, and Coastal
committed conversion by convincing the Olsens to mortgage their house to
Coastal. Counts VI, VH, and VIn allege Lyden and Coastal Realty Capital
violated the Federal Truth in Lending Act, the Maine Truth in Lending Act, and
the Maine Consumer Credit Code.
The KW Defendants filed a Motion to Dismiss on August 20, 2009.
Specifically, they challenge Counts I, If, IV, and V. The court addresses the
Motion to Dismiss below.
DISCUSSION
I. Standard of Review
A Motion to Dismiss pursuant to M.R. Civ. [~. 12(b)(6) "tests the legal
sufficiency of the complaint and, on such a chaJJenge, 'the rnaterial allegations of
the complaint rnust be taken as admitted.'" Shaw v. SOlltllent Aroostook COI/IlII.
Sell. Dist., 683 A.2d 502, 503 (Me. 1996) (quoting lv1cAfc(, v. Cole, 637 A.2d 463, 465
(Me.1994)). When reviewing a Motion to Dismiss, this Court examines "the
complaint in the light most favorable to the plaintiff to determine whether it sets
forth elements of a cause of action or alleges facts that would entitle the plaintiff
to relief pursuant to some legal theory." lrf. A dismissal under M.R. Civ. P.
12(b)(6) will be granted only '''.vhen it appears beyond a doubt that the plaintiff is
entitled to no relief under any set of facts that he might prove in support of his
4 claim." Td. (quoting Hall v. Bd. of Ellvt/. Pro!.! 498 A.2d 260! 266 (Me. 1985)). This
is a question of law. Bcnll v. Clllllll1ings! 2008 ME 18! 9I 7! 939 A.2d 676! 679.
II. Unfair Trade Practices Act Claim
The KW Defendants claim. that the Olsens have failed to allege the factual
elements needed to assert a private claim under the Maine Unfair Trade Practices
Act. 5 M.R.5. § 205-A cf sci].
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STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss CIVIL ACTION DOCKET NO. CV-09-38Q, / ' ~6 V-C[}/Y) - d.jl1!J..ctO COLLEEN and CHRIS OLSEN, • Plaintiffs ORDER ON THE K\;V DEFENDANTS' v. MOTION TO DISMISS
KAILE WARREN, K\;Y ENTERPRISES, INC, RENT-A-HUSBAND, LLC, (THE KW DEFENDANTS)
SHAWN P. LYDEN, and
COASTAL REALTY, LLC, Defendants
BEFORE THE COURT
Before the court is a Motion to Dismiss pursuant to M.R. Civ. P. 12(b)(6)
filed by Defendants Kaile Warren, KW Enterprises, [nc., and Rent-A-Husband,
LLC, collectively known as the "K\;Y Defendants."
BACKGROUND
This suit pertains to financing arrangements the Plaintiffs, husband and
wife Chris and Colleen Olsen (the Olsens), entered into with the KW Defend,1I1ts
and Defendants Shawn Lyden and Coastal Realty Capital, LLC. Defendant
Warren resides in Windham, Maine. \;Yarren is the CEO of Rent-A-Husband,
LLC, LInd is also ,111 officer and shareholder of K\V Enterprises, Inc. Rent-A-
Husband, LLC is a Delaware Corporation. Lyden is a member of Coastal Realty
Capital, a Maine limited liability company.
The Olsens live in Windham, Maine. Warren became acquainted with the
Olsens while serving on the Windham Town Council. \;Yarren approached the Olsens about investing in his company Rent-A-Husband. On March 28, 2008, the
Olsens agreed to tender two parcels of land (one of which included their
personal residence) and another $5,000 in cash to Rent-A-Husband in exchange
for a "Non-Negotiable, Convertible Prom.issory Note," which promised to pay
the Olsens $199,650 with interest of 10% per year by March 28, 2010. The Olsens
never deeded their property to Rent-A-Husband and it appears that this deal
was not executed. However, Warren signed the Convertible Note as the CEO of
Rent-A-Husband. The Olsens clairn that Warren represented that the
Convertible Note gave them an interest in Rent-A-Husband. The Olsens later
tendered two short-ternl10ans to Warren, one for $5,000 and one for $10,000.
The Olsens claim that these loans have not been paid back.
A year lilter, on or around March 4,2009, the Olscns al1mved Warren to
use their properties as collateral for a $45,000 loan he needed for Rcnt-A
Husband. The Olsens claim \;\Tarren engaged Shawn Lyden of Coastal Realty
Capital, LLC to help put the deal together. On March 4, 2009, the Olsens'
properties were mortgaged to Coastal Realty Capital to secure the loan for
$45,000 (the Coastal Loan) to KW Enterprises. The Olsens claim that Warren
represented that they were obligated by the Convertible Note to pledge their
house. The Convertible Note vvas signed by Rcnt-A-HusbClnd in 200R, and was
not signed by KW Enterprises. Accordingly, the Olsens claim that no document
exists showing that, prior to the Coastal Loan, the Olsens owed any duties to
either K\'V Enterprises, Inc. or Warren, because neither \Varren nor K\V
Enterprises was a party to the Convertible Note. The 01sen5 claim that Rent-A
Husband's authority to do business in Maine was revoked on or before
September 5, 2008. The 015en5 allege that Warren never advised them that
2 almost all of the Rent-A-I-Iusband subsidiaries in Maine had either been
dissolved or had their authority to do business in Maine revoked by the Maine
Secretary of State.
The Olsens claim that during all discussions about transferring their
properties or encumbering them, they made it clear to VVarren that they did not
want their residence at risk in any way. The Olsens claim that both Warren and
Lyden reassured them that their residence would not be at any risk of
foreclosure. According to the Olsens, on March 4th , 2009, Lyden advised them of
their rights as they pertained to pledging their real estate. The Olsens claim they
have not received any consideration in exchange for mortgaging their property
to secure the Coastal Loan.
According to the Olsens, as a result of the Coastal Loan transaction, KW
Enterprises and/ or Warren received
properties were encumbered to Coastal, and the 01sens received no
consideration and no documentation. The Olsens do not know if Warren or KvV
Enterprises arc in dcfaul t on a note secured by the Coastal mortgage, and they do
not know if their properties will be foreclosed upon by Coastal.
The Olsens filed suit on June 25,2009 alleging the following claims: (1)
Count I alleges that Defendants Wi:wren, K"'V Enterprises, Lyden, and CO('lstal
Realty Capital violated the Unfair Trade Pr,lctices Act by making
misrepresentations about the status of Rent-A-Husb(lnd and the Convertible
Promissory Note in order to secure the Coastal Loan; (2) Count II claims that
Defendants \,yarren, KW Enterprises, Lyden, and Coastal Realty Capital made
false representations of material facts, which the Olsens relied on, in order to
induce them to make the short term loans and to allO'v a mortgage to be placed on their home; (3) Count lIT clairns that Lyden and Coastal Realty Capital
breached their fiduciary duty to the Olsens; (4) Count IV is a negligence claim,
which alleges that the Defendants breached their duty of good fai th and fair
dealing, and as a result the Olsens suffered economic and non-economic harm;
and (5) Count V alleges Defendants Warren, KW En terprises, Lyden, and Coastal
committed conversion by convincing the Olsens to mortgage their house to
Coastal. Counts VI, VH, and VIn allege Lyden and Coastal Realty Capital
violated the Federal Truth in Lending Act, the Maine Truth in Lending Act, and
the Maine Consumer Credit Code.
The KW Defendants filed a Motion to Dismiss on August 20, 2009.
Specifically, they challenge Counts I, If, IV, and V. The court addresses the
Motion to Dismiss below.
DISCUSSION
I. Standard of Review
A Motion to Dismiss pursuant to M.R. Civ. [~. 12(b)(6) "tests the legal
sufficiency of the complaint and, on such a chaJJenge, 'the rnaterial allegations of
the complaint rnust be taken as admitted.'" Shaw v. SOlltllent Aroostook COI/IlII.
Sell. Dist., 683 A.2d 502, 503 (Me. 1996) (quoting lv1cAfc(, v. Cole, 637 A.2d 463, 465
(Me.1994)). When reviewing a Motion to Dismiss, this Court examines "the
complaint in the light most favorable to the plaintiff to determine whether it sets
forth elements of a cause of action or alleges facts that would entitle the plaintiff
to relief pursuant to some legal theory." lrf. A dismissal under M.R. Civ. P.
12(b)(6) will be granted only '''.vhen it appears beyond a doubt that the plaintiff is
entitled to no relief under any set of facts that he might prove in support of his
4 claim." Td. (quoting Hall v. Bd. of Ellvt/. Pro!.! 498 A.2d 260! 266 (Me. 1985)). This
is a question of law. Bcnll v. Clllllll1ings! 2008 ME 18! 9I 7! 939 A.2d 676! 679.
II. Unfair Trade Practices Act Claim
The KW Defendants claim. that the Olsens have failed to allege the factual
elements needed to assert a private claim under the Maine Unfair Trade Practices
Act. 5 M.R.5. § 205-A cf sci]. The Act provides that !![u]nfair methods of
competition and unfair or deceptive acts or practices in the conduct of any trade
or comm.erce arc declared unlawful." Td. at § 207. Section 213 states the
circulllstances in which a private action is available under the Act are as follows:
Any person who purchases or leases goods! services or property! real or personat primarily for personat family or household purposes and thereby suffers any loss of money or property! real or personat as a result of the usc or employment by another person of a method! act or practice declared unlawful by section 207 or by any rule or regulation issued under section 207! subsection 2 may bring an action either in the Superior Court or District Court for actual darn ages! resti tu tion and for such other equi table relief! including an injunction! as the court determines to be necessary and proper. There is a right to trial by jury in any action brought in Superior Court under this section.
5 M.R.5. § 213(1). The Olsens allege that their claim qualifies under the Act
because (1) the defendants guided them in pledging their property and horne in
Windham and (2) they have suffered a loss of money or property as a result of
the Defendants! unfair and deceptive trade practices.
These allegations are not sufficient to maintain a claim under the Act. The
Olsens have failed to demonstrate that they purc11ased or leased goods! services
or property for person at family or household purposes. While the Olsens may
have used their Windham property in the transaction! it appears to have been
used for a business deal or for investment purposes. For this reason! the Olsens!
claim under the Unfair Trade Practices Act must be dismissed.
5 III. The Fraud Claim
In order to make a claim for fraud, a plaintiff must assert that a defendant
(1) made a false representation (2) of rnaterial fact (3) with knowledge of its
falsity or in reckless disregard of whether it is true or false (4) for the purpose of
inducing another to act in reliance upon the false representation, and (5) the
plaintiff justifiably relied upon the representation as true and acted upon it to his
damage. Simmons, Zillman & Gregory, Maille Tort Law § 11.03 at 308-09 (1999
ed.), citing Letel/ier v. 5111171/,400 A.2d 371, 376 (Me. 1979). The Olsens allege that
the KW Defendants "made false representations of material facts in order to
convince them to (1) make short term loans [totaling $15,000] ... and (2) allow a
mortgage to be placed on their home."
First, the KW Defendants claim that there cannot be fr<1ud with regard to
the loan because there has been no violation of the loan terms. The Olsens
complaint regarding the ]o<1ns is concerned with Warren's representations about
his business Rent-A-Husband, when almost all of the Rent-A-Husband
subsidi<1fies/ <1ffili<1tes in Maine h<1d been either administratively dissolved or
had their authori ty to do business in Maine revoked by the Maine Secret<1fy of
State. The Olsens claim they relied on Warren's false representations about his
business <1nd those represent<1tions induced them make the loans. Thus, the
<111egations in the Complaint are sufficient to survive the Motion to Dismiss.
Second, the KVV Defendants claim that Exhibit B (<1tt<1ched to the
Complaint) refutes the Olsens' claim of fraud reg<1fding the rnortg<1ge on the
property. Exhibi t B appe<1fS to be part of the financing agreement between the
Olsens, KW Enterprises, and Coastal Realty. In that document the Olsens
acknowledge: "We further understand that we have been advised by Shawn
6 Lyden of our rights as it pertains to pledging the real estate
Windhanl, f'v'lE ...."
At the time the financing agreement was made, the 01sens claim they
were told by Warren, KW Enterprises, Lyden, and Coastal that the mortgage
would not place their home at risk of foreclosure, and that they were obligated
by the Convertible Note to grant the mortgage on their property. The Olsens
also claim they have not been provided closing documents for the transaction or
copies of the promissory note made to Coastal Realty, and they claim they have
received no consideration in rdum for encumbering their property. These
allegations are sufficient to survive the KW Defendants' Motion to Dismiss.
IV. The Negligence Claim
A plaintiff asserting negligence must show that a duty existed beh",een the
plainti ff and the defendant, a breach of that duty, and damages caused as a result
of that breach. Mnmvell v. R.f. Crallnill [1' SOliS, 2007 ME 1, (II 7,914 A.2d 709, 712.
The existence of a duty is a question of law. Cmllnell Nnt. Bnllk v. Crest COIISt., TIlC.,
2008 ME 113, <]I 10, 952 A.2d 213, 216. The Olsens claim that the KW Defendants
breached their duty of fair dealing and good faith. The K\f\T Defendants contend
that the negligence claim must be dismissed because there is "no general cause of
action for breach of the duty of good faith." The only circumstances in which
Maine law recognizes a general duty of good faith and fair dealing is in
transactions govcmed by the Uniform Commercial Code. Cmllnell Nnt. Bnllk, at err
18, 952 A.2d cIt 218 citillg 11 M.R.S. § 109(4)(k). The U.c.c. does not apply to the
creation of or transfer of an interest in real property. 11 M.R.5. § 109(4)(k).
Because the Olsens failed to demonstrate that the K\f\T Defendants owed them a
duty, the court dismisses their negligence claim.
7 V. The Conversion Claim
For a claim of conversion, a plaintiff must show "(1) a property interest in
the goods; (2) the right to their possession at the time of the alleged conversion;
and (3) when the holder has acquired possession rightfully, a demand by the
person entitled to possession and C1 refusC1] by the holder to surrender." DOlIgIJfy
v. SlIlIivr7l1, 661 A.2d 1112, 1122 (Me. 1995). The KW Defendants argue that the
conversion clC1im should be dismissed. The court agrees. The second element of
C1 conversion claim requires a right to possession C1t the time of the alleged
conversion. The Olsens voluntarily entered into a mortg
Coastal Realty and the KW Defendants in exchange for an interest bearing
promissory note. In doing so, the Olsens conditionally gave away their right to
possession. Such a trans
claim is dismissed.
Therefore, the entry is:
The KW Defendants' Motion to Dismiss Counts 11 of the Olsens' Complaint is DENIED.
The KW Defendants' Motion to Dismiss Counts 1, IV and V of the Olsens' Complaint is GRANTED.
Di:lted at Portland, M
obert E. Crowley Justice, Superior Court
8 COLLEEN OLSEN - PLAINTIFF SUPERIOR COURT CUMBERLAND, 55. Attorney for: COLLEEN OLSEN Docket No PORSC-CV-2009-00380 MICHAEL WAXMAN - RETAINED 06/25/2009 LAW OFFICE MICHAEL J. WAXMAN 30 CITY CENTER DOCKET RECORD PO BOX 375 PORTLAND ME 04112-0375
CHRIS OLSEN - PLAINTIFF
Attorney for: CHRIS OLSEN MICHAEL WAXMAN - RETAINED 06/25/2009 LAW OFFICE MICHAEL J. WAXMAN 30 CITY CENTER PO BOX 375 PORTLAND ME 04112-0375
V5 KAILE WARREN - DEFENDANT
Attorney for: KAILE WARREN GEORGE MARCUS - RETAINED 08/20/2009 MARCUS CLEGG & MISTRETTA PA ONE CANAL PLAZA SUITE 600 PORTLAND ME 04101-4035
Attorney for: KAILE WARREN DAVID C JOHNSON - RETAINED 08/20/2009 MARCUS CLEGG & MISTRETTA PA ONE CANAL PLAZA SUITE 600 PORTLAND ME 04101-4035
KW ENTERPRISES INC - DEFENDANT
Attorney for: KW ENTERPRISES INC GEORGE MARCUS - RETAINED 08/20/2009 MARCUS CLEGG & MISTRETTA PA ONE CANAL PLAZA SUITE 600 PORTLAND ME 04101-4035
Attorney for: KW ENTERPRISES INC DAVID C JOHNSON - RETAINED 08/20/2009 MARCUS CLEGG & MISTRETTA PA ONE CANAL PLAZA SUITE 600 PORTLAND ME 04101-4035
RENT A HUSBAND LLC - DEFENDANT
Attorney for: RENT A HUSBAND LLC GEORGE MARCUS - RETAINED 08/20/2009 MARCUS CLEGG & MISTRETTA PA ONE CANAL PLAZA SUITE 600 PORTLAND ME 04101-4035
Page 1 of 4 Printed on: 02/12/2010 PORSC-CV-2009-00380 DOCKET RECORD Attorney for: RENT A HUSBAND LLC DAVID C JOHNSON - RETAINED 08/20/2009 MARCUS CLEGG & MISTRETTA PA ONE CANAL PLAZA SUITE 600 PORTLAND ME 04101-4035
SHAWN P LYDEN - DEFENDANT
Attorney for: SHAWN P LYDEN PETER CARY - RETAINED 07/31/2009 MITTEL ASEN LLC 85 EXHANGE ST, FLOOR 4 PO BOX 427 PORTLAND ME 04112-0427
COASTAL REALTY LLC - DEFENDANT
Attorney for: COASTAL REALTY LLC PETER CARY - RETAINED 07/31/2009 MITTEL ASEN LLC 85 EXHANGE ST, FLOOR 4 PO BOX 427 PORTLAND ME 04112-0427
Filing Document: COMPLAINT Minor Case Type: OTHER NON-PERSONAL INJURY TORT Filing Date: 06/25/2009
Docket Events: 06/25/2009 FILING DOCUMENT - COMPLAINT FILED ON 06/25/2009 WITH EXHIBITS A-C. (MH)
06/25/2009 Party(s): COLLEEN OLSEN ATTORNEY - RETAINED ENTERED ON 06/25/2009 Plaintiff's Attorney: MICHAEL WAXMAN
06/25/2009 Party(s): CHRIS OLSEN ATTORNEY - RETAINED ENTERED ON 06/25/2009 Plaintiff's Attorney: MICHAEL WAXMAN
06/25/2009 CERTIFY/NOTIFICATION - CASE FILE NOTICE SENT ON 06/25/2009
08/03/2009 Party(s): SHAWN P LYDEN,COASTAL REALTY LLC RESPONSIVE PLEADING - ANSWER & AFFIRMATIVE DEFENSE FILED ON 07/31/2009 OF SHAWN P. LYDEN AND COASTAL REALTY CAPITAL LLC (GM)
08/03/2009 Party(s): SHAWN P LYDEN ATTORNEY - RETAINED ENTERED ON 07/31/2009 Defendant's Attorney: PETER CARY
Party(s): COASTAL REALTY LLC ATTORNEY - RETAINED ENTERED ON 07/31/2009 Defendant's Attorney: PETER CARY
Page 2 of 4 Printed on: 02/12/2010