This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1994).

STATE OF MINNESOTA

IN COURT OF APPEALS

C7-96-916

Roger Wangen as successor in interest

to Apple Valley Food Services, Inc.,

Respondent,

vs.

State Bank of Blomkest,

Appellant.

Filed November 19, 1996

Reversed

Forsberg, Judge

[*]

Hennepin County District Court

File No. CT-95-744

John L. Greer, Robin & Thompson, P.A., 1000 Superior Boulevard, #300, Wayzata, MN 55391 (for respondent)

Kenneth H. Bayliss, Quinlivan, Sherwood, Spellacy & Tarvestad, P.A., 600 Norwest Center, P.O. Box 1008, St. Cloud, MN 56302; Nancy J. Carlson, Anderson & Burgett, 416 S.W. Sixth Street, Willmar, MN 56201 (for appellant)

Hubert H. Humphrey, III, Attorney General, Francis C. Ling, Assistant Attorney General, 525 Park Sreet., Suite 200, St. Paul, MN 55103-2106 (for amicus curiae State of Minnesota)

Considered and decided by Norton, Presiding Judge, Schumacher, Judge, and Forsberg, Judge.

U N P U B L I S H E D O P I N I O N

FORSBERG, Judge

Appellant State Bank of Blomkest (Bank) challenges judgment for respondent Roger Wangen, as successor in interest to Apple Valley Food Services, Inc. (AVFS), holding Bank liable for conversion of a promissory note. Because Wangen suffered no damages, we reverse.

FACTS

To secure a business loan, Bank acquired a security interest in the assets of Cheetah Pizza, Inc. (Cheetah), including a promissory note (Note). The Note had a face value of $113,000 and provided for monthly payments of approximately $2,400 by O. Zone Marketing, Inc. (O. Zone) extending over a five-year period. Bank obtained possession of the Note to perfect its security interest.

Cheetah's business assets were subject to the claims of several other competing creditors. On June 4, 1992, the State of Minnesota filed notice of its tax lien for $81,000 of unpaid taxes pursuant to Minn. Stat. § 270.69 (1992). On January 12, 1993, AVFS obtained a default judgment against Cheetah for $40,204.27 based on Cheetah's unpaid account with AVFS for food products. On April 13, 1993, the Internal Revenue Service filed notice of its federal tax lien against Cheetah for $23,600. On May 3, 1993, AVFS obtained a writ of execution in Hennepin County to collect on its default judgment, and the Sheriff of Kandiyohi County subsequently levied on the Note.

On August 19, 1993, AVFS purchased Cheetah's remaining interest in the Note subject to the superior interests of Bank and the state and federal tax liens. On March 23, 1994, O. Zone's monthly payment on the Note satisfied in full Cheetah's debt to Bank, extinguishing Bank's interest in the Note. On May 6, 1994, Bank entered an agreement with Cheetah and the state purporting to assign the state's tax lien to Bank. The agreement provided for satisfaction in full of Cheetah's tax liability (approximately $81,000) for a lump sum payment of $55,000. In exchange, Bank received the state's interest in the Note (i.e., a tax lien with notice of filing effective June 4, 1992). On June 13, 1994, AVFS demanded possession of the Note from Bank; Bank refused to relinquish possession of the Note.

AVFS brought a conversion action against Bank, claiming Bank wrongfully refused to turn over the Note after its interest had been satisfied. The district court ordered judgment against Bank in the amount of $74,407 plus prejudgment interest, costs and disbursements.

D E C I S I O N

Where a case is decided on stipulated facts, the only issue on appeal is whether the district court erred in its application of the law. Fingerhut Corp. v. Suburban Nat'l Bank, 460 N.W.2d 63, 65 (Minn. App. 1990). When the material facts are not in dispute, we need not defer to the district court's application of the law. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).

Bank argues the district court erred by concluding Bank had converted the Note and awarding Wangen damages. Bank contends it cannot be liable for conversion because Wangen suffered no damages, a necessary element to his action. Bank asserts Wangen was not entitled to O. Zone's monthly payments on the Note given the superior interests of the state and federal tax liens, which exceeded the remaining value of the Note. Thus, Bank contends Wangen's interest in the Note was essentially worthless due to the superior tax liens. We agree.

For a party to be liable for conversion there must be a repudiation of the owner's right, an exercise of dominion inconsistent with such right, or some act which has the effect of destroying or changing the quality of the chattel. Merz v. Croxen, 102 Minn. 69, 72, 112 N.W. 890, 891 (1907). In a conversion action, damages are generally measured as the market value of the property at the time of conversion, plus interest from that time. Dairy Farm Leasing Co. v. Haas Livestock Selling Agency, Inc., 458 N.W.2d 417, 419 (Minn. App. 1990). In a conversion action for a promissory note, the measure of damages is the remaining amount due on the note with interest. Hersey v. Walsh, 38 Minn. 521, 522, 38 N.W. 613, 613 (1888). Damages are an "essential element" in a conversion action. Sneve v. First Nat'l Bank & Trust Co. of Minneapolis, 195 Minn. 77, 78, 261 N.W. 700, 700 (1935).

The supreme court in Sneve held that the holder of trust certificates had no cause of action against defendant trustee for its alleged wrongful action in bidding in trust property without her knowledge or consent and thereby releasing the guarantors, because "[b]y the time her right to hold the guarantors had matured, they had become insolvent." Id., 261 N.W.2d at 700. The reasoning in Sneve applies to the instant case.

Where there is no damage, pecuniary or otherwise, there is no cause of action. Consequently, whether plaintiff sues in conversion, negligence, or otherwise, she is not entitled to recover anything from the trustee on this count because she has suffered no loss. This present action, founded in conversion, meets the same objection as did her former action, which sounded in negligence. She has sustained no damage by defendant's allegedly wrongful act in bidding in the property without her knowledge or consent because she has been deprived only of a right which was of no value to her.

Id., 261 N.W. at 700. Here, even though Wangen may have been deprived of a right (i.e., Cheetah's remainder interest in the Note or his status as a judgment creditor), this right held no value because the Note was subject to superior state and federal tax liens that exceeded the remaining value of the Note.

Wangen maintains the Note was of substantial value because O. Zone continued to make monthly payments of $2,400. Wangen, however, was not entitled to these payments since the state and IRS held superior tax liens. Wangen's interest was of no value to him. Thus, given the superior tax liens, Wangen cannot prove an essential element of his conversion claim--damages--because his interest in the Note was without meaningful value to him. Therefore, we conclude Bank cannot be liable for conversion of the Note.

Reversed.

[ ]* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.