This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C2-99-1566

 

Office Systems, Inc., d/b/a

3M Business Products Center,

Respondent,

 

vs.

 

Vacationaire, Inc.,

Appellant.

 

Filed March 28, 2000

Affirmed in part, reversed in part and remanded

Harten, Judge

 

Hubbard County District Court

File No. C7-97-661

 

Steven H. Bolton, Bolton Law Office, Highway 34 West, P.O. Box 126, Park Rapids, MN 56470 (for appellant)

 

Mark J. Thomason, Thomason Law Office, Edgewater Office Plaza, Suite 1, 107 South Grove, P.O. Box 87, Park Rapids, MN 56470 (for respondent)

 

            Considered and decided by Davies, Presiding Judge, Lansing, Judge, and Harten, Judge.

U N P U B L I S H E D   O P I N I O N

HARTEN, Judge

            In this breach of contract action, appellant challenges the finding that a lease existed between the parties, the award of attorney fees and expenses, and the admission of hearsay evidence on damages.  We see no clear error in the district court’s finding that the parties entered into a valid lease agreement and affirm it; we reverse the award of attorney fees and expenses because we conclude it resulted from an abuse of discretion; and we reverse and remand for a new trial the issue of damages because we conclude that the district court abused its discretion in admitting incompetent evidence on that issue.   

FACTS

In 1953, Robert Woodmansee incorporated Woodmansee’s Inc., then doing business as 3M Business Products Center, to reflect its exclusive sale of 3M business products.  On August 12, 1976, he executed three lease agreements to rent a cabin from appellant Vacationaire, Inc.  He signed as “3M Business Products Center, R. Woodmansee, President” and agreed to pay appellant $7,500 to rent cabin #9 for the 24th, 25th, and 28th weeks of each year for 20 years.  The lease agreement provided the “option to renew for 20 additional years at original lodging rate.”[1]

On November 1, 1977, Woodmansee’s, Inc., changed its name to Office Systems, Inc., by amending its articles of incorporation.  On March 21, 1996, respondent Office Systems, Inc., doing business as 3M Business Products Center, notified appellant that it was exercising its option to renew for 20 additional years.  Appellant refused to renew the lease.  Respondent sued appellant for breach of contract. 

After the first judge recused himself, the court administrator assigned the case to a second judge and scheduled trial for October 9, 1998.  That judge, however, indicated his intent to recuse himself, so the district court administrator took the case off the trial calendar.  Two days before the scheduled trial date, appellant’s attorney confirmed in a letter to the district court administrator that the trial was no longer scheduled.  But no one notified respondent of either the impending recusal or the change of date, and respondent duly appeared for trial.  The second judge recused himself and continued the case, which was then assigned to a third judge.  Respondent moved for the attorney fees and expenses resulting from the rescheduling communication failure.  The district court awarded respondent $195 in mileage expenses, $500 in lost income, and $160 in attorney fees. 

After a bench trial, the district court found that the parties had a valid lease agreement and that appellant had breached that agreement.  The district court 

encourage[d] the attorneys for the parties to submit a letter brief to the Court within twenty (20) days from the date of this order detailing the amount of damages that would be proper in this matter.

 

Respondent submitted a letter from a certified public accountant stating that “the present value of $2,526.12, payable for 20 years with the first payment commencing on today’s date would be $31,477.58.”  Appellant submitted a letter stating that damages were not appropriate, but that in light of the court’s order, “we submit that the sum of $7,500 is the appropriate amount of damages.”  At a subsequent hearing, each party objected to the other’s damage calculations as hearsay.  The district court overruled the objections, holding that the letters were “merely assistance to the Court” in determining damages.

The district court then awarded respondent $31,477.58 in damages.  Appellant challenges the finding that a lease existed between the parties, the award of attorney fees and expenses, and the admission of hearsay evidence on damages.

D E C I S I O N

1.         Lease Agreements

            A district court’s findings of fact will not be reversed unless clearly erroneous.  Robinson v. State, 567 N.W.2d 491, 495 (Minn. 1997).  This court will not reverse unless, after a review of all of the evidence, it “is left with the definite and firm conviction that a mistake has been made.”  Id. (quoting Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987)). 

Appellant challenges the district court’s finding that respondent signed a lease agreement with appellant because the lease is not signed “Office Systems, Inc., d/b/a 3M Business Products Center,” but rather, “3M Business Products Center, R. Woodmansee, President.”  The record shows that Robert Woodmansee incorporated Woodmansee’s Inc., that Woodmansee’s, Inc., began doing business as 3M Business Products Center, and that Woodmansee’s, Inc., later changed its name to Office Systems, Inc., by amending its articles of incorporation.   

            An amendment to articles of incorporation to change a corporate name does not invalidate an existing lease.  See, e.g., State Bank of Young America v. Vidmar Iron Works, Inc., 292 N.W.2d 244, 251 (Minn. 1980) (debtor cannot destroy the perfected security interest of a secured party by merely changing its name).  Moreover, a party may contract under an assumed name or doing business as a given entity.  See Scanlon v. Grimmer (State Report title: Scanlon v. Grimmer), 71 Minn. 351, 356-57, 74 N.W.146, 147 (1898) (in business matters a contract or obligation may be entered into by a person under any name he may choose to assume).  We agree with the district court that the parties had a valid lease agreement and that appellant breached the agreement by failing to recognize respondent’s option to renew the lease.

2.         Attorney Fees and Expenses

            We review a district court’s decision to award attorney fees and costs under an abuse of discretion standard.  See Radloff v. First Am. Nat’l Bank, 470 N.W.2d 154, 156 (Minn. App. 1991), review denied (Minn. July 24, 1991).  The general rule is that attorney fees and costs are not recoverable absent specific statutory or contractual authorization.  In re Wang, 441 N.W.2d 488, 496 (Minn. 1989); Barr/Nelson, Inc. v. Tonto’s, Inc., 336 N.W.2d 46, 53 (Minn. 1983). 

Minn. Stat. § 549.211 (1998) provides a statutory basis for sanctions in civil actions.[2]  The goal of this statute is not to punish the offender or to shift fees, but to deter bad-faith litigation.  Uselman v. Uselman, 464 N.W.2d 130, 142 (Minn. 1990).  But the district court found “that there was no intent by [appellant’s attorney] to create this mess.”  The district court did not find that appellant’s attorney acted in bad faith.  Indeed, the district court advanced no specific legal basis for the award of attorney fees and expenses; nor is there any indication that the award is justified as an exercise of inherent judicial power (even assuming the application of that basis to the facts here).  Accordingly, we conclude that the district court abused its discretion in awarding attorney fees and expenses without an express justification in law.  Therefore, we reverse the award to respondent of attorney fees and expenses.

3.         Damages

When reviewing a damages award, we consider the evidence in the light most favorable to the verdict.  Rayford v. Metropolitan Transit Comm’n, 379 N.W.2d 161, 165 (Minn. App. 1985), review denied (Minn. Feb. 14, 1986).  The admission of evidence rests within the broad discretion of the district court and we will not reverse absent an abuse of discretion.  Uselman, 464 N.W.2d at 138 (citations omitted). 

Appellant argues that the district court improperly considered hearsay evidence in awarding respondent damages.  We agree.  The damage calculations submitted by the parties were unsworn out-of-court statements and were, as such, incompetent evidence.  Counsel for the parties did not agree to submit proof of damages by post-trial letter briefs; the damage calculations were unsworn, and neither party had an opportunity to cross-examine the other party’s damage formula and calculations.  See, e.g., Mattfeld v. Nester, 226 Minn. 106, 126, 32 N.W.2d 291, 305 (1948) (the object of all examination, both direct and cross, is to elicit facts to show the truth).  In short, absent agreement of the parties to do otherwise, the district court’s directive that the parties submit letters on damages resulted in an evidentiary failure.  Accordingly, we reverse and remand for a new trial on the issue of damages.   

            Affirmed in part, reversed in part and remanded.



[1]  The lease agreement does not provide for attorney fees or expenses.

 

[2]  The Minnesota Rules of Civil Procedure authorize attorney fees related to pleadings (i.e., Minn. R. Civ. Proc. 11), discovery (i.e., Minn. R. Civ. Proc. 26.07, 30.04, 37.01, 37.04), dismissal (i.e., Minn. R. Civ. Proc. 41.02), judgments (i.e., Minn. R. Civ. Proc. 54, 55, 56, 57, 58, 60) and injunctions (i.e., Minn. R. Civ. P. 65.02).  But none of these rules are relevant to the facts of this case.