This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALS
Twin City Catering, Inc., as assignee of Corporate and Executive Catering, Inc.,
Filed April 9, 2002
Hennepin County District Court
File No. DJ001591
Wynn C. Curtiss, Miller, Steiner & Curtiss, P.A., 400 Wells Fargo Bank Building, 1011 First Street South, Hopkins, MN 55343 (for respondent)
Robert A. Hill, Robert Hill & Associates, Ltd., 431 South Seventh Street, Suite 2450, Minneapolis, MN 55415 (for appellant)
Considered and decided by Harten, Presiding Judge, Anderson, Judge, and Stoneburner, Judge.
G. BARRY ANDERSON, Judge.
Appellant appeals from a district court judgment awarding respondent $12,000, plus interest, arguing that the district court erred by failing to conclude that (1) a demand note signed by appellant was not supported by consideration; (2) appellant was fraudulently induced to sign the note; and (3) respondent was barred by equitable estoppel from enforcing the note. We affirm.
The demand note on which this action is based arose from a convoluted business history between appellant James Dolan and a James McMerty. Before 1993, appellant owned and operated Shamrock Marketing, Inc. (Shamrock), a catering business. Shamrock was plagued by financial difficulties. In August 1993, appellant was introduced to James McMerty, a business consultant who specialized in assisting financially-distressed businesses. Appellant and McMerty agreed, pursuant to a retainer agreement, that McMerty would observe Shamrock’s operations and advise appellant how to improve Shamrock’s financial situation. After observing and analyzing Shamrock’s business operations, McMerty concluded that nothing could be done to keep Shamrock in business. On October 15, 1993, McMerty resigned his consulting position with Shamrock.
McMerty and appellant subsequently discussed another business option. McMerty proposed that he and appellant structure a complex business relationship, shielding the parties from Shamrock’s (and appellant’s) significant financial liabilities, including overdue state taxes. McMerty proposed that (1) he would incorporate Corporate & Executive Catering, Inc. (CEC); (2) CEC would neither assume Shamrock’s assets or liabilities, nor would it allow appellant or Shamrock’s employees to participate in its ownership or management; (3) Fremont Corporation, later Sunshine Bay Corporation (Fremont), a “kitchen-management company,” would be incorporated and solely owned by appellant’s wife; (4) Fremont would hire appellant as an employee; (5) CEC would contract with Fremont to provide catering services for CEC.
CEC initially agreed to pay Fremont $6,000 per month for its kitchen-management services and McMerty, an officer of CEC, considered Fremont to be a “supplier” of CEC’s. Appellant and his wife, however, believing that they were the true owners of CEC and believing that they could act on behalf of CEC, acquired a lease for a kitchen and purchased kitchen-related assets from Boltz Catering Service, whose owners planned to retire. CEC promptly repaid appellant’s wife for this acquisition.
Sometime thereafter, the Minnesota Department of Revenue (state), attempting to collect on the now-defunct Shamrock’s overdue sales taxes, levied on CEC’s bank account, receiving approximately $17,000. Appellant and his wife, assisted by CEC’s attorney, prepared and signed a letter to the state that disavowed any ownership rights in CEC and stated that they were not CEC employees, but that they provided “management services” to CEC. The state did not return the $17,000.
CEC instituted a tax court action asking the court to order the state to return the $17,000. On November 9, 1994, after consulting with McMerty, appellant executed a demand note that promised to pay CEC $12,000 plus interest in exchange for CEC releasing its claim to the $17,000 seized by the state. CEC dismissed its tax court action on November 10, 1994.
In December 1995, Twin City Catering, Inc. (Twin City), the successor corporation to CEC, terminated its services contract with Sunshine Bay Corporation, the successor corporation to Fremont. Twin City, as the assignee of CEC, brought an action to enforce the demand note. The district court found in favor of Twin City and ordered that judgment be entered against appellant for $12,000, plus interest. This appeal followed.
Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.
Minn. R. Civ. P. 52.01.
When applying Minn. R. Civ. P. 52.01, this court views “the record in the light most favorable to the judgment of the district court.” Rogers v. Moore, 603 N.W.2d 650, 656 (Minn. 1999) (citation omitted). We will not reverse the district court’s judgment merely because we view the evidence differently. Id.; see also Vangsness v. Vangsness, 607 N.W.2d 468, 474 (Minn. App. 2000) (although “the record might support findings other than those made by the [district] court does not show that the * * * findings are defective”). Rather, the district court’s factual findings must be “manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole” to warrant reversal. Rogers, 603 N.W.2d at 656 (quotation omitted). “Findings of fact are clearly erroneous only if the reviewing court is left with the definite and firm conviction that a mistake has been made.” Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999) (quotation omitted).
A district court’s conclusions of law, however, may be reviewed de novo, and we owe no deference to the district court in deciding questions of law. See Donovan v. Dixon, 261 Minn. 455, 460, 113 N.W.2d 432, 435 (1962).
Appellant argues the district court erred by finding that the demand note was supported by consideration because he was the only individual contributing revenue to CEC. According to appellant, because CEC had no other source of revenue, the $17,000 seized by the state was his alone, and not CEC’s. Therefore, appellant argues, “because CEC had no legal right to claim [appellant’s] funds back from the state,” there was no legal forbearance on behalf of respondent when it dismissed its lawsuit against the state, and, hence, the demand note was not supported by consideration. We disagree.
Generally, forbearance of a claim is sufficient to support consideration for a contract as long as the claim is asserted in good faith. See Thayer v. Knight, 210 Minn. 171, 175, 297 N.W. 625, 627 (1941). Moreover, even “forbearance of a doubtful claim is sufficient to support a contract”; however, forbearing “‘a wholly baseless or utterly unfounded claim [cannot be] consideration’” for a contract. Charles v. Hill, 260 N.W.2d 571, 575 (Minn. 1977) (quotation and citations omitted).
The district court found that McMerty, as an officer of CEC, and appellant agreed that appellant would pay $12,000 plus interest in exchange for CEC releasing its claim to the funds taken by the state by levy and applied to the debt owed by appellant to the state. The court also found that CEC dismissed its tax court action the day after the agreement was reached. The district court concluded, based on these findings, that appellant failed to show the absence of consideration for the demand note.
We conclude that although there was conflicting, and somewhat troubling, evidence at the trial regarding the parties’ business relationship, the district court’s findings are reasonably supported by the evidence as a whole and therefore are not clearly erroneous. Moreover, the district court did not err in its conclusion of law based on its findings of fact.
First, the state levied the $17,000 from CEC’s checking account after appellant’s wife represented to the state that CEC was Shamrock’s successor corporation. Appellant and his wife, however, subsequently signed a letter to the state that unequivocally stated that they never had any ownership rights in CEC and were not employees of CEC. The letter further represented that their relationship with CEC only consisted of a “management agreement,” which also permitted their corporation (Fremont) to provide management services to other retail-food establishments. Appellant admits in his reply brief that these representations were “technically true.”
Second, other documentary evidence in the record suggests CEC was an independent corporate entity with an independent ownership and management structure, except for (1) a letter that ambiguously refers to McMerty and appellant’s past creditors; (2) the contract between Boltz Catering and CEC, which was negotiated by appellant, according to McMerty, without McMerty’s consent; and (3) a March 1996 balance sheet and a later settlement letter sent to appellant and his wife that do not recognize the demand note as a receivable.
Third, the testimony of appellant and his wife constituted appellant’s main defense at trial. This testimony conflicted significantly with McMerty’s testimony. We, however, must give due regard to the opportunity for the district court to judge the credibility of witnesses at trial. See Minn. R. Civ. P. 52.01. Moreover, although a party offers a reasonable explanation of what occurred, that does not compel the trier of fact to accept this explanation. See State v. Larson, 393 N.W.2d 238, 241-42 (Minn. App. 1986).
Therefore, because the record reasonably supports the district court’s findings of fact, the findings are not clearly erroneous. Moreover, because the findings of fact suggest appellant did not have a legal ownership interest in CEC’s funds, the funds levied by the state could not have been appellant’s. Therefore, the district court’s legal conclusion that CEC’s forbearance of a lawsuit to reclaim those funds constituted consideration for the demand note was not error.
Appellant argues that respondent should not be allowed to enforce the demand note because McMerty fraudulently induced him to sign the note by representing that the note would only be used to mislead and deceive the state about the actual nature of the business relationship between the parties. We disagree.
To establish a fraud-in-the-inducement defense to contract formation, a defendant must establish (1) a false, material representation concerning a past or present fact that is susceptible of knowledge; (2) that the person making the representation knew that it was false or asserted it as his own knowledge without knowing whether it was true or false; (3) that the person making the representation intended to have the other person act in reliance on the representation; and (4) that the person relying and acting on the representation suffered damage and the damage was attributable to the misrepresentation. Vandeputte v. Soderholm, 216 N.W.2d 144, 146 (Minn. 1974).
“Ordinarily, the affirmative defense of fraud in the inducement is a fact question,” Stubblefield v. Gruenberg, 426 N.W.2d 912, 914 (Minn. App. 1988), and must be proved by clear and convincing evidence. Taylor v. Sheehan, 435 N.W.2d 575, 577 (Minn. App. 1989), review denied (Minn. Apr. 24, 1989).
The district court simply found that appellant “failed to establish that he signed the Note based on fraud.” Because we have already concluded that the district court’s findings are not clearly erroneous, its conclusion that appellant was not fraudulently induced to sign the note is also not error.
The record suggests, save for the few documents noted earlier, that CEC was an independent legal entity and that appellant was neither a legal owner of CEC nor participated in its management. It is clear that the district court believed McMerty’s testimony and the documentary evidence that supported that testimony. The district court did not accept appellant’s and his wife’s testimony that the business arrangement was a sham to shield appellant’s actual interest in CEC.
Because a fraud-in-the-inducement defense of involves a fact question and must be proved by clear and convincing evidence, we conclude that the district court did not err by finding that appellant failed to establish that he was fraudulently induced by McMerty to sign the note.
III. Equitable Estoppel
Appellant argues that respondent should be equitably estopped from enforcing the demand note because McMerty represented to appellant that the note would only be used to demonstrate to the state that CEC had a separate legal status apart from appellant as an individual. Appellant argues that he relied on this representation when he signed the note. Again, we conclude otherwise.
Equitable estoppel arises when “one by his acts or representations, or by his silence when he ought to speak, intentionally or through culpable negligence, induces another to believe certain facts to exist, and such other rightfully acts on the belief so induced in such manner that if the former is permitted to deny the existence of the facts it will prejudice the latter.”
Gresser v. Hotzler, 604 N.W.2d 379, 385 (Minn. App. 2000) (quoting Transamerica Ins. Group v. Paul, 267 N.W.2d 180, 183 (Minn. 1978)). Generally, whether a plaintiff should be equitably estopped is a question for the fact-finder, Brenner v. Nordby, 306 N.W.2d 126, 127 (Minn. 1981), and a party that claims estoppel has the burden of proving it. See Grant County State Bank v. Schultz, 178 Minn. 556, 560, 228 N.W. 150, 152 (1929).
The district court did not explicitly address appellant’s claim that respondent should be estopped from enforcing the demand note, although it was raised as a defense in appellant’s answer.
Because, as noted above, the district court’s findings are not clearly erroneous, and because its findings are sufficient to preclude appellant’s equitable-estoppel defense, appellant’s claim that respondent should be estopped from enforcing the demand note also fails.
Appellant asserts that he “established at trial” that the note would only be used to mislead the state about his true “ownership” interest in CEC. Appellant, however, never established this fact at trial and this issue was, and continues to be, disputed. Moreover, the district court found that McMerty and appellant discussed the tax court action and that appellant requested that CEC allow the state to retain the funds to reduce his overdue tax liability. In consideration for this forbearance, appellant agreed to sign the note, which incidentally obligated appellant to pay approximately $5,000 less than the amount seized by the state. The record reasonably supports these findings, and they are not clearly erroneous.
 A business associate of McMerty’s was the sole owner of CEC. Appellant was neither an owner nor an employee of CEC. CEC has changed its name twice since the events described herein occurred. After changing its name to Excelsior Management Corporation of Bloomington, the entity now does business as Twin City Catering, Inc.
 The transaction was apparently structured to avoid “successor liability” for Shamrock’s liabilities. Successor liability may be imposed by a court
[w]here one corporation sells or otherwise transfers all of its assets to another corporation, [and] * * * (1) where the purchaser expressly or impliedly agrees to assume such debts; (2) where the transaction amounts to a consolidation or merger of the corporation; (3) where the purchasing corporation is merely a continuation of the selling corporation; and (4) where the transaction is entered into fraudulently in order to escape liability for such debts.
Niccum v. Hydra Tool Corp., 438 N.W.2d 96, 98 (Minn. 1989) (quotation omitted).
 This documentary evidence includes (1) letters dated October 15 and 20, 1993, that proposed the business relationship described above; (2) CEC’s and Fremont’s certificates of incorporation; (3) the October 23, 1993 exclusive contract for services between CEC and Fremont; (4) the March 11, 1994 bill of sale transferring Shamrock’s customer lists to CEC; (5) the March 15, 1995 contract between Twin City Catering and Sunshine Bay Corporation which re-affirmed the parties’ earlier kitchen-management-services agreement; and (6) appellant’s bankruptcy petition that omitted any reference to his “ownership” in CEC or any of its successor corporations.
 Although the district court did not make any specific findings or conclusions concerning appellant’s equitable-estoppel defense,
[w]here it appears that the decisive issues have been decided by the trial court without a jury, the reviewing court is not required to reverse simply because the trial court might have gone into more detail in the explanation of its findings.
Peterson v. Johnston, 254 N.W.2d 360, 362 (Minn. 1977) (citation omitted).
 We also note that one who requests equity must also do equity. It is well-established that an obligor may be estopped from asserting a secret understanding that it is not liable for an obligation, if that obligation is originally prepared to appear as a valid obligation for purposes of public examination. See Grant County State Bank, 178 Minn. at 559, 228 N.W. at 152.