may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
STATE OF MINNESOTA
IN COURT OF APPEALS
Myron Striker, et al.,
Lois Velasco, et al.,
Filed April 20, 1999
Toussaint, Chief Judge
Hennepin County District Court
File No. 988024
Rollin Cargill III, Skolnick & Harris, P.A., 510 Marquette Avenue South, Suite 200, Minneapolis, MN 55402 (for respondents)
James W. Rude, 580 International Centre, 900 Second Avenue South, Minneapolis, MN 55402 (for appellants)
Considered and decided by Toussaint, Chief Judge, Lansing, Judge, and Foley, Judge.[*]
TOUSSAINT, Chief Judge
In this consolidated appeal, appellants challenge the district court's preliminary injunction against them in the underlying partnership dissolution action. Because respondents cannot show irreparable harm or an inadequate remedy at law, and are unlikely to succeed on the merits, we reverse.
VIP Properties (VIP) is a Minnesota partnership engaged in property management. VIP has three partners: (1) Mysand Companies, Inc., owned by Myron Striker, (2) Properties by Velasco, Ltd., owned by Lois Velasco, and (3) Bisanz Property Management Company, Inc., owned by Joe Bisanz. VIP provides its management services to properties owned by other partnerships in which Striker, Velasco, or Bisanz have an interest.
VIP's "First Amended and Restated Partnership Agreement" (partnership agreement) provides each partner a monthly "Guaranteed Payment" of $5,000 for its services. The partnership agreement also imposes several obligations on the partners. Section 4.6(a) provides that
[i]n the event that any opportunity is made available to any Partner for the * * * sale * * * or other investment in any real property, or the earning of any commission in connection therewith, then such Partner * * * shall disclose, at least in summary, the terms of such opportunity to the other Partners.
The parties concur that the agreement's terms require VIP partners to contribute all commissions earned on the sale of properties owned by entities in which they have an interest (i.e., other partnerships) to the partnership.
This dispute arose from the sale of Countryside Estates, a property owned by Osseo Associates, a Minnesota partnership of which Velasco is a co-partner. Prior to the sale, VIP provided property management services to Countryside Estates. In the fall of 1997, Velasco informed Striker and Bisanz that Osseo was considering several offers for the purchase of Countryside Estates. With Striker and Bisanz's approval, Osseo accepted a purchase offer that included an agreement to retain VIP under a seven-year property management contract after the sale.
Before the closing, Striker, Velasco, and Bisanz had several discussions regarding Velasco's portion of the commission from the sale. In the fall of 1997, Striker and Velasco agreed that they should find out from Bob Ryan, Velasco's Osseo co-partner, whether Velasco would be receiving a commission. Striker called Ryan, who expressed concern about actually receiving a five percent commission but stated that they (Velasco and Ryan) were "anticipating" splitting about $70,000. On the basis of this conversation, Striker believed that VIP would receive Velasco's portion of a five percent commission.
When the sale closed on March 26, 1998, Osseo provided secondary financing in the form of a $129,000 mortgage. At an April 1, 1998, VIP partners meeting, Striker accused Velasco of "withholding commission money rightfully due VIP." On April 6, 1998, Striker sent Velasco a fax announcing that he would be transferring management of properties in which he had an ownership interest to "his new company." Striker then transferred management responsibilities of his properties to First Select Equities, a partnership whose principals include Striker's son and two former VIP employees. Instead of directly remitting the management fees to VIP, Striker arranged for First Select to place 29.17% of the revenues it received from the properties into a VIP escrow account.
On April 24, 1998, Striker sent Velasco and Bisanz a letter that purported to expel Velasco, Ltd. and Bisanz, Inc. from the partnership for "cause" under section 5.2 of the partnership agreement. In May 1998, respondents Striker, Mysand, and VIP commenced this action against appellants Velasco, Bisanz, and their respective companies, seeking VIP's dissolution and an accounting. Appellants counterclaimed, seeking monies owed to the partnership by Mysand, damages for Mysand's breach of the partnership agreement and defamation, and injunctive relief and an accounting relating to the management of the five properties taken by Mysand.
Claiming that Velasco and Bisanz were denying Mysand access to VIP property, withholding its monthly $5,000 guaranteed payment, and interfering with its right to participate in VIP's property management business, respondents moved in July 1998 to temporarily enjoin Velasco and Bisanz from obstructing Mysand's partnership rights. In opposing the motion, appellants submitted deposition testimony of Velasco's Osseo co-partner, Ryan, and affidavits of Velasco, Bisanz, legal representatives, and five VIP employees, who attested to Striker's disruptive and abusive behavior at the VIP offices since commencement of the lawsuit.
After a motion hearing, the district court granted the preliminary injunction. In its amended order for injunction, filed September 1, 1998, the district court ordered appellants to submit to a certified audit of VIP, maintain all business records in accordance with usual business practices, refrain from interfering with respondents' exercise of all partnership rights in VIP affairs, and continue to pay monthly $5,000 payments to Mysand.
In appeal C1-98-1628, appellants challenge the district court's first order, filed August 4, 1998, for lack of findings on the propriety of injunctive relief. When a district court does not make findings in an injunction order, this court, charged with determining whether the district court abused its discretion, remands for the appropriate factual findings and legal conclusions necessary for appellate review. State by Ulland v. International Ass'n of Entrepreneurs of America, 527 N.W.2d 133, 135 (Minn. App. 1995); Oxford Dev., Inc. v. County of Ramsey, 417 N.W.2d 319, 321 (Minn. App. 1988). Because the district court's amended order for injunction contains findings and addresses the relevant factors for a grant of injunctive relief, we need not remand. Appeal C8-98-1786 challenges the substance of the factual findings and legal conclusions in the amended order.
A reviewing court will not reverse a district court's decision to grant a temporary injunction absent a clear abuse of discretion. Carl Bolander & Sons Co. v. City of Minneapolis, 502 N.W.2d 203, 209 (Minn. 1993). Factual findings underlying the decision to grant injunctive relief will not be set aside unless clearly erroneous. LaValle v. Kulkay, 277 N.W.2d 400, 402 (Minn. 1979). This court considers the facts alleged in the pleadings and affidavits in the light most favorable to the prevailing party. Pacific Equip. & Irrigation Inc. v. Toro Co., 519 N.W.2d 911, 914 (Minn. App. 1994), review denied (Minn. Sept. 16, 1994).
A temporary injunction is an extraordinary equitable remedy designed to preserve the status quo until adjudication of the case on its merits. Miller v. Foley, 317 N.W.2d 710, 712 (Minn. 1982). In determining whether injunctive relief is justified, courts must consider the relationship between the parties, the likelihood of success on the merits, the relative harm to the parties if the temporary injunction is granted or denied, public policy considerations, and administrative burdens to supervise or enforce the injunction. Dahlberg Bros., Inc. v. Ford Motor Co., 272 Minn. 264, 274-75, 137 N.W.2d 314, 321-22 (1965). The district court addressed the Dahlberg factors in its findings and determined that maintenance of the status quo required Mysand's "equal exercise of partnership rights in VIP" and continued receipt of guaranteed payments. We first address respondents' likelihood of success on the merits.
In the underlying action, respondents seek VIP's dissolution and an accounting. Respondents also allege that appellants' partnership breaches resulted in "material adverse harm to the business of the partnership," which is cause for expulsion under section 5.2 of the partnership agreement. Respondents do not request money damages or specific performance, but rather a declaration that appellants were properly expelled from the partnership.
Respondents claim that Velasco breached the partnership agreement by failing to disclose the nature of the commission and financing opportunities associated with the Countryside Estates sale and failing to contribute her commission from the sale to VIP. The record indicates that although a commission was anticipated, Weber's purchase of Countryside Estates did not include enough cash for a commission at closing. Nevertheless, Velasco convinced her co-partner, Ryan, to give VIP $10,000 in cash on closing. Striker was aware of this anticipated $10,000 contribution in late October 1997 and again in November 1997. In his deposition, Ryan explained that the $10,000 represented a portion of a 6% sales commission that Ryan and Velasco would eventually receive. Ryan acknowledged that he had no obligation to VIP, but agreed to contribute half of the $10,000 in cash in order to complete the closing. Velasco and Ryan agreed to accept their full commission in payments under the second mortgage, which amounted to $450 per month payable to Velasco.
Velasco did not disclose this arrangement to her VIP co-partners until Striker confronted her at the April 1st partners meeting. After the meeting, Velasco sent a fax to Striker and Bisanz, which states that VIP would receive $10,000 from the partnership (Osseo) up front and a balance of $20,000 "once I have bought out the 2nd mortgage." She also states that "she will not be buying out the mortgage until after [a] meeting * * * on April 23." The record does not contain any further information about this "buy-out" of the second mortgage. Viewed in the light most favorable to respondents, the foregoing facts do not reveal that Velasco failed to contribute her commission from the sale (she had not yet received any commission), but they do indicate that Velasco failed to fully disclose her commission arrangement and mortgage "buy-out" opportunity.
Nevertheless, it is unlikely that respondents will be able to show that this breach or Bisanz's alleged excusal of Velasco's conduct resulted in the "material adverse harm to the business of the partnership" necessary to justify expulsion under the partnership agreement. The partnership did not suffer any monetary loss from Velasco's lack of disclosure; Velasco offered to contribute the full $30,000 commission envisioned by Striker. In addition, VIP acquired a lucrative management contract from the sale of the property. Any lost business opportunity with respect to the second mortgage only affects the partners individually, not the partnership business. The parties also agree that dissolution is the desired result. Given the circumstances, dissolution on equitable grounds, rather than the reasons advanced by respondents, is most likely.
Addressing the third Dahlberg factor, respondents claim they will suffer irreparable harm if a temporary injunction does not issue. Generally, to be considered irreparable, "[t]he injury must be of such a nature that money alone could not suffice." Morse v. City of Waterville, 458 N.W.2d 728, 729-30 (Minn. App. 1990), review denied (Minn. Sept. 28, 1990)(citation omitted). The availability of adequate compensatory or other corrective relief weighs heavily against a claim of irreparable harm. Miller v. Foley, 317 N.W.2d 710, 713 (Minn. 1982); cf. Cherne Indus., Inc. v. Grounds & Assocs., Inc., 278 N.W.2d 81, 92 (Minn. 1979) (party seeking the injunction must show that it has an inadequate remedy at law and would suffer irreparable harm).
Respondents contend, and the district court found, that the injunction was necessary to prevent the loss of partnership rights and harm caused by appellants' "siphoning away business, profits, and commissions payable to VIP." The record does not support a conclusion that business, profits, or commissions have been or are being siphoned off. In addition, Striker's own actions in withdrawing properties from VIP management implicate the loss of Velasco and Bisanz's partnership rights. In the absence of any evidence of partnership asset dissipation, we perceive no basis for the extraordinary remedy of injunction, particularly when monetary remedies are available on dissolution.
We decline to address the remaining factors, which do not weigh heavily for or against appellants or respondents. Our decision also obviates addressing the district court's decision to waive a bond for the temporary injunction or appellants' motion to strike.
[*] Retired judge of the Minnesota Court of Appeals, serving by apointment pursuant to Minn. Const. art. VI, § 10.