may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Hammel Green and Abrahamson, Inc.,
Cal Investments, et al.,
Filed February 25, 1997
File No. 94-18897
Ludwig B. Gartner, Jr., Heidi A. Schneider, Gartner & Schupp, P.A., One Financial Plaza, Suite 2200, 120 South Sixth Street, Minneapolis, MN 55402 (for Respondent)
Gavin P. Craig, Wickwire Gavin, P.A., 4700 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402 (for Appellant)
Considered and decided by Davies, Presiding Judge, Randall, Judge, and Short, Judge
Appellant Hammel Green and Abrahamson, Inc. (HGA) challenges a judgment in favor of respondents James Briggs, James Forsythe, and George Shank. The trial court found respondents Briggs, Forsythe, and Shank (BFS) not personally liable for certain debt. Appellants contend: (1) respondents are individually liable to HGA under the theory of partnership by estoppel; (2) respondents are individually liable to HGA because they acted for an undisclosed principal; and (3) the conduct of respondents created a general partnership in Minnesota, with respondents as the general partners. We affirm.
In October 1989, following an investigation to assure that Cal Investments had the necessary experience and expertise to develop their project, the Minneapolis Community Development Agency (MCDA) designated the partnership as exclusive developer for the redevelopment of a Sears building located at Chicago Avenue and Lake Street in Minneapolis. BFS agreed they did not disclose the corporate partners of Cal Investments to the MCDA. Sometime later in 1989, Cal Investments contracted with HGA, a Minnesota corporation, for architectural services necessary for the first study phase of the project.
Prior to contracting with Cal Investments, Kurt Rogness, then a vice-president of HGA, visited the partnership's offices in Vancouver, British Columbia, to investigate the partnership, discuss the project and satisfy himself regarding the partnership's reputation for paying bills and developing projects. He met a number of times with respondents BFS but never inquired as to the legal structure of Cal Investments. Nobody from Cal Investments disclosed the existence of the corporate partners.
George Riches, then president of HGA, also travelled to Vancouver prior to contracting with Cal Investments to assess the partnership's experience, background, track record, its involvement in similar projects of the same size, scope, and type, and its "financial muscle" to accomplish the project. BFS did not disclose the existence of the corporate partners. Riches assumed that they were principals, partners, and owners of Cal Investments. Relying on his assumption, Riches failed to inquire into the legal structure of Cal Investments. Riches did not require assurances that HGA would be paid.
Pursuant to its agreement with HGA, Cal Investments made timely payments of $150,000 for services through June 1990. The partnership then advised HGA it was unable to make timely payments for services and requested a deferral. After October 15, 1990, Cal Investments advised HGA it was unable to pay for further architectural services. HGA, without inquiring as to the legal status of Cal Investments, continued to perform services on the Sears project until mid-summer of 1991. HGA expected the fees for the design study to be reimbursed through financing for the final design and construction of the Sears project. The final phase of the Sears project has not gone forward.
Following a bench trial, the trial court found Cal Investments, Ltd. and Cal Developments, Ltd. jointly liable to HGA for the debts of Cal Investments in the amount of $114,071.81, together with interest thereon at the rate of 1 percent per month to the date of the order and accrued interest in the amount of $55,994.77. The trial court found BFS not individually liable for the judgment. The trial court denied appellant's motion to amend the findings of fact, conclusions of law, and order for judgment.
Appellant contends that BFS should be held personally liable for the debts of Cal Investments under the theory of partnership by estoppel. We disagree. Under the doctrine of partnership by estoppel:
When a person, by words spoken or written or by conduct, makes * * * a representation to any one that the person is a partner in an existing partnership * * * the person represented to be a partner is liable to one to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership * * * [and] such a person is liable to the one giving credit.
Minn. Stat. § 323.15, subd. 1 (1996). The person seeking to enforce liability must have acted in reliance on the other party's representation of partnership. Pump-It, Inc. v. Alexander, 230 Minn. 564, 569, 42 N.W.2d 337, 340 (1950).
The district court found that appellants presented no credible evidence demonstrating that they relied on respondents' representations when deciding whether to contract with Cal Investments. Because appellant failed to make a motion for a new trial, the only questions for our review are whether the evidence sustains the findings of fact and whether such findings sustain the conclusions of law and the judgment. See Gruenhagen, 310 Minn. at 458, 246 N.W.2d at 569 (stating the scope of review when parties fail to move for a new trial).
The district court acted properly in rejecting the following evidence of reliance as not credible: (1) Rogness testified that had Briggs identified the existence of corporate partners, the matter would "perhaps" have been reviewed by HGA's counsel and the board and (2) Riches testified that he would have undertaken more investigations and would have requested assurances if he had known of other ownership of Cal Investments. It is for trial courts initially to determine the credibility of a witness's testimony. In re Welfare of C.K. and K.K., 426 N.W.2d 842, 849 (Minn. 1988) (citing Georgopolis v. George, 237 Minn. 176, 182, 54 N.W.2d 137, 141 (1952)). It is not the function of reviewing courts to reconcile conflicting testimony, but rather to determine whether the trial court's findings are supported by the evidence. Action Time Carpets, Inc. v. Midwest Carpet Brokers, Inc., 271 N.W.2d 36, 40 (Minn. 1978).
Findings supporting the district court's conclusion of no reliance include: (1) appellants admit they relied on outside sources to determine whether Cal Investments had the financial muscle to accomplish the project; (2) appellant was motivated to extend credit in the hope of procuring the position as designer for the project that involved three and a half to six million dollars in architectural fees; and (3) Cal Investments believed appellant would conduct its own credit checks in conformance with what is known as "due diligence" in the real estate industry.
The evidence further demonstrates that HGA expected the fees for the design study to be reimbursed through financing for the final design and construction of the Sears project.
The district court did not err in concluding that BFS should not be held personally liable for the debts of Cal Investments under the theory of partnership by estoppel: (1) the trial court correctly determined that liability does not arise in the absence of reliance; (2) the trial court did not err in finding no credible evidence of reliance; and (3) the evidence in the record and the trial court's findings support a conclusion of no reliance. II.
Appellant contends that respondents should be held personally liable for the debts of Cal Investments because of their failure to disclose the identities of the corporate partners of Cal Investments. They claim that the corporate partners of Cal Investments are undisclosed principals. We disagree. Respondents acted as agents for Cal Investments, the principal. The corporate partners of Cal Investments are not principals at all, disclosed or undisclosed.
In general, officers of a corporation are not liable to creditors for corporate debts. Paynesville Farmers Union Oil Co. v. Ever Ready Oil Co., 379 N.W.2d 186, 188 (Minn. App. 1985), review denied (Minn. Mar. 14, 1986) (citation omitted). When third parties attempt to hold officers or agents personally liable on corporate contracts with undisclosed corporate principals, principles of agency law apply. Id. The agents acting for the undisclosed principal corporation are parties to the agreement and individually liable on the contract. Id.
Under the following undisputed facts, the trial court did not err by refusing to hold respondents personally liable: (1) BFS acted as agents for Cal Investments, a partnership; (2) HGA had notice that BFS acted as agents for Cal Investments; and (3) HGA contracted with a partnership, not a corporation. HGA's attempt to hold respondents personally liable under an undisclosed principal theory fails because they did not contract with an undisclosed corporation; they contracted with a disclosed partnership.
Appellant contends that the district court erred by not determining that natural persons conducting business under a common name in Minnesota for commercial gain, without disclosing the existence of corporations as partners, created a general partnership in Minnesota under Minnesota law with such persons as the general partners. Appellant concedes the district court made no findings of fact or conclusions of law regarding the issue. We do not, therefore, address this issue. It was not raised by appellants in a motion for a new trial, and it was not addressed in their motion to amend. See Metropolitan Fed. Sav. & Loan Ass'n, 356 N.W.2d at 421 (stating that appellate courts cannot review the absence of findings where the absence was not brought to the district court's attention in a motion for a new trial or amended findings). The trial court is affirmed on all issues.