This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
IN COURT OF APPEALS
South Side Sales & Leasing of Faribault, Inc.,
Filed September 5, 2000
Rice County District Court
File No. C2981667
Adam J. Dowd, Schmitz, Ophaug and Dowd, 220 Division Street South, P.O. Box 237, Northfield, MN 55057-0237 (for respondent)
Eric J. Magnuson, John R. Neve, Rider, Bennett, Egan & Arundel, LLP, 333 South Seventh Street, Suite 2000, Minneapolis, MN 55402; and
William P. Simons, Lundblad & Simons, P.L.L.P., 200 Division Street, Suite 340, Northfield, MN 55057 (for appellant)
Considered and decided by Shumaker, Presiding Judge, Schumacher, Judge, and Harten, Judge.
Appellant contends that the trial court erred in determining that he breached a fiduciary duty to his corporation by usurping the corporation’s business opportunity, and that the court erred in its award of attorney fees. We affirm everything but the court’s holding on attorney fees and costs.
Respondent South Side Sales & Leasing of Faribault, Inc., purchases and re-sells salvaged and distressed motor vehicles. Federated Insurance is a common source of South Side’s inventory.
Appellant Steven Maas was a 50% shareholder and an officer and director of South Side until July 1, 1998. Between the fall of 1997 and the spring of 1998, Maas bought 11 vehicles from Federated and resold them at a profit of $39,152.95. He kept the profit. On July 1, 1998, the corporation redeemed all of Maas’s shares. At the closing of the redemption, Maas resigned as officer and director.
Maas opened his own business after he resigned from South Side. Because of his business relationship with Federated during his tenure at South Side, Maas learned of an opportunity to buy additional vehicles from Federated. On June 16, 1999, he purchased 21 vehicles and resold them for a profit of $75,472.44.
South Side sued Maas to recover the profits Maas realized from the sale of the 32 vehicles he acquired from Federated. Maas counterclaimed for unpaid wages and other damages. After a bench trial, the court found that Maas breached his duties of good faith, loyalty, and fair dealing toward South Side by usurping corporate business opportunities for his own personal gain. The court also found that South Side was liable to Maas for unpaid wages and attorney fees.
On appeal, Maas challenges the trial court’s conclusion that he breached a fiduciary duty and is therefore liable for the profits he realized. Maas also challenges the amount of attorney fees awarded to him.
D E C I S I O N
On appeal, a trial court’s findings of fact will not be set aside unless they are clearly erroneous. Frauenshuh v. Giese, 599 N.W.2d 153, 156 (Minn. 1999). We review the record in a light most favorable to the findings. Id. Discretionary rulings will not be reversed absent an abuse of discretion. Becker v. Alloy Hardfacing & Eng’g Co., 401 N.W.2d 655, 661 (Minn. 1987).
Under Minnesota law
an officer or director [of a corporation] occupies a fiduciary relationship to the corporation and may not exploit his position as an “insider” by appropriating to himself a business opportunity properly belonging to the corporation.
Miller v. Miller, 301 Minn. 207, 219, 222 N.W.2d 71, 78 (1974). Maas does not dispute that his acquisition of 32 motor vehicles from Federated was an opportunity in South Side’s line of business. Instead, he argues that he breached no duties of loyalty, good faith, or fair dealing in the acquisition, and he contends that the trial court failed to make essential findings on whether his conduct fell below the requisite fiduciary standard.
Maas argues that he breached no fiduciary duty because he and South Side’s other 50% shareholder had no agreement that they were to bring to the corporation purchases they made on their own time. Maas also claims that the other shareholder made a similar purchase previously and kept the profits for himself. The other shareholder denied Maas’s contentions. The trial court was in the best position to resolve credibility conflicts in testimony. See Larson v. Amundson, 414 N.W.2d 413, 418 (Minn. App. 1987) (“[I]t is the trial court’s province to resolve conflicts in testimony and evaluate the credibility of witnesses.”).
Citing Miller, Maas contends that the trial court failed to make requisite findings of fact on the components of fiduciary fairness, namely
the nature of the officer’s relationship to the management and control of the corporation; whether the opportunity was presented to him in his official or individual capacity; his prior disclosure of the opportunity to the board of directors or shareholders and their response; whether or not he used or exploited corporate facilities, assets, or personnel in acquiring the opportunity; whether his acquisition harmed or benefitted the corporation; and all other facts and circumstances bearing on the officer’s good faith and whether he exercised the diligence, devotion, care, and fairness toward the corporation which ordinarily prudent men would exercise under similar circumstances in like positions.
Miller, 301 Minn.at 226, 222 N.W.2d at 81-82.
The trial court found that Maas was an officer and director of the corporation over which he exercised 50% control. The corporation had an interest in and expectancy of acquiring the vehicles that Maas purchased. Maas learned of the availability of the vehicles because of the business connections he had developed with Federated while he was a director and officer of South Side. Maas failed to disclose the existence of the vehicles to South Side’s board, and he used corporate facilities and personnel to complete purchases that were in direct competition with South Side. These findings adequately demonstrate that Maas’s conduct fell below the fiduciary standard he owed to South Side.
Maas next claims that the trial court erred by requiring him to pay all the profits back to South Side. Miller held that profits acquired in breach of an officer’s or director’s fiduciary duty belong to the corporation:
If such a business opportunity is usurped for personal gain, it is equally well recognized that the opportunity and any property or profit acquired becomes subject to a constructive trust for the benefit of the corporation.
Id. at219-20, 222 N.W.2d at 78; see also Diedrick v. Helm, 217 Minn. 483, 494, 14 N.W.2d 913, 919 (1944) (if “an officer or director diverts the opportunity and embraces it as his own, he is chargeable as a constructive trustee for the benefit of the corporation with all the profits and benefits received therefrom by him”). Maas cites apposite authority that would entitle him to share in profits he usurped from the corporation.
Finally, Maas contends that the trial court should have awarded more than $500 in attorney fees to him and should have allowed him to provide an accounting of his fees and costs. We will not reverse a trial court’s award or denial of attorney fees absent an abuse of discretion. Becker, 401 N.W.2d at 661.
Maas did not offer evidence of his attorney fees and costs at trial. His rationale for not doing so was that he did not know he would be the prevailing party until after the trial court decided his wage claim.
The trial court found that South Side violated Minn. Stat. § 181.14 (1998) by failing to pay Maas all the wages due him. That finding entitled Maas to recover reasonable attorney fees and costs. Minn. Stat. § 181.171, subd. 3 (1998). The trial court determined that Maas was entitled to attorney fees but awarded him only $500, stating that the “amount represents the Court’s arbitrary assignment of reasonable costs and attorney fees * * * .”
When a party to a civil action seeks more than $1,000 in attorney fees, the application for fees is to be made by motion. Minn. R. Gen. Pract. 119.01. It appears that Maas was not given an opportunity to make an application for attorney fees. Furthermore, the court made no factual finding to support the fee award. The fee award must be reversed and the matter remanded for the sole purpose of determining the amounts of Maas’s reasonable attorney fees and costs.
Affirmed in part, reversed in part, and remanded.