A03-500

James L. Mandel, et al.,

Appellants,

vs.

Americana Community Bank,

Respondent.

Filed January 27, 2004

Reversed and Remanded

Kalitowski, Judge

Hennepin County District Court

File No. 02-19814

David L. Lillehaug, Crystal M. Ovsak, Fredrikson & Byron, P.A., 4000 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402 (for appellants)

Wade R. Wacholz, J. Vincent Stevens, Gislason & Hunter LLP, 9900 Bren Road East, Suite 215E, P.O. Box 5297, Minnetonka, MN 55343-2297 (for respondent)

Considered and decided by Halbrooks, Presiding Judge; Kalitowski, Judge; and Stoneburner, Judge.

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

KALITOWSKI, Judge

Appellants filed an amended complaint against respondent in district court in February 2003, alleging breach of contract, unjust enrichment, breach of fiduciary duty, and fraud and misrepresentation. Appellants also sought a declaratory judgment and a temporary injunction. In March 2003, the district court determined that appellants failed to state a claim upon which relief can be granted and dismissed all claims pursuant to Minn. R. Civ. P. 12.02(e). The court also denied appellants’ motion for a temporary injunction and dismissed the amended complaint with prejudice. Appellants contend the district court erred in dismissing each of their alleged causes of action. We reverse and remand for further proceedings.

D E C I S I O N

When reviewing a dismissal for failure to state a claim upon which relief can be granted, an appellate court must only determine whether the complaint sets forth a legally sufficient claim for relief. Barton v. Moore, 558 N.W.2d 746, 749 (Minn. 1997). This court accepts the facts in the complaint as true and makes all reasonable and favorable inferences in favor of the plaintiff. Pullar v. Indep. Sch. Dist. No. 701, 582 N.W.2d 273, 275-76 (Minn. App. 1998). Whether the plaintiff can prove the facts alleged is immaterial. Stead-Bowers v. Langley, 636 N.W.2d 334, 338 (Minn. App. 2001), review denied (Minn. Feb. 19, 2002). An appellate court will not uphold a dismissal for failure to state a claim “if it is possible on any evidence which might be produced, consistent with the pleader’s theory, to grant the relief demanded.” Martens v. Minnesota Mining & Mfg. Co., 616 N.W.2d 732, 739-40 (Minn. 2000) (citing N. States Power Co. v. Franklin, 265 Minn. 391, 395, 122 N.W.2d 26, 29 (1963)). Although a district court typically may not consider documents other than the complaint without converting the motion into one for summary judgment, the court can consider a document if the complaint refers to it and it is central to the claims alleged. In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d 494, 497 (Minn. 1995).

Appellants contend that the district court erred in concluding that appellants had failed to state a claim upon which relief could be granted for breach of contract. To state a claim for breach of contract, appellants must allege that a contract existed and that respondent breached one of the terms of the contract. A contract requires an offer, acceptance, and consideration. S O Designs USA, Inc. v. Rollerblade, Inc., 620 N.W.2d 48, 53 (Minn. App. 2002), review denied (Minn. Feb. 21, 2001).

Appellants alleged that they entered into two dairy cattle leases with American Financial Services, Inc. (AFS), and AFS assigned its interest in the leases to respondent. Appellants attached copies of the signed lease and assignment agreements as exhibits. They also alleged that under the agreements between AFS and respondent, respondent agreed it would not violate their right of quiet possession and use of the cattle. Appellants further alleged that because a third party had a security interest in the dairy cows superior to respondent’s rights, respondent breached the lease and assignment agreements and they were deprived of their rights under the agreements. By alleging that respondent assumed obligations under the agreements and that it breached those agreements, appellants’ complaint properly pleaded the elements of a breach of contract claim. Therefore, we conclude that the district court erred in determining the complaint failed to state a breach of contract claim.

II.

Although a bank does not typically owe a fiduciary duty when conducting business with a customer, appellants’ claim survives if they allege that special circumstances exist, such that respondent knew or had reason to know that appellants were placing their trust and confidence in respondent and were relying on respondent to counsel and inform them. Klein v. First Edina Nat’l Bank, 293 Minn. 418, 422, 196 N.W.2d 619, 623 (1972).

Here, appellants alleged that respondent “occupied a position of trust and confidence in its dealings with Plaintiffs” and represented that it would “structure the transaction to protect Plaintiffs.” Appellants further alleged that respondent

knew or had reason to know that Plaintiffs were placing their trust and confidence in Defendant and Defendant’s superior knowledge, and relying upon Defendant’s superior knowledge to structure the transaction so that the physical possession of the dairy cattle and the milk produced by the dairy cattle would be maintained by Plaintiffs, and Plaintiffs would be protected from the claims or interest of third parties in the dairy cattle and their milk as promised by Defendant.

Appellants alleged that respondent breached its fiduciary duty by failing to exercise reasonable care in structuring the deal and by failing to disclose all material facts concerning the risks of the transaction. Finally, appellants alleged that the breach caused them damages.

We conclude that the allegations in the complaint are sufficient to state a claim for breach of fiduciary duty. And nothing in the exhibits attached to the complaint establishes as a matter of law that respondent did not owe appellants a fiduciary duty.

In its memorandum of law, the district court stated that

there is no evidence that Plaintiffs had a relationship with the Bank or anyone associated with the Bank. Before entering into the Lease, Plaintiff James Mandel met with Bank officials on one occasion. There is no evidence that Defendant had actual knowledge that title to the cows was encumbered. In fact, Plaintiffs’ sole involvement with the Bank was to provide additional security in return for the Bank’s financing of the cattle leases.

By reading the district court’s memorandum of law, it appears that the district court improperly decided the motion to dismiss on the pleadings by looking at evidence outside the pleadings.

In some instances where the district court considers matters outside the pleadings, it may be appropriate to treat the motion to dismiss as one for summary judgment. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). But here, respondent did not move for summary judgment. Thus, appellants did not have the opportunity to respond to the motion to dismiss under the summary judgment standard. Moreover, because of the limited discovery done by the parties, we cannot conclude that there are no disputed issues of fact. Since it is not clear that no issues of fact are involved, and an inquiry into facts might clarify application of the law, we conclude that the district court erred in dismissing appellants’ breach of fiduciary duty claim on the pleadings.

III.

A fraudulent misrepresentation claim requires a plaintiff to demonstrate that a defendant:

(1) made a representation (2) that was false (3) having to do with a past or present fact (4) that is material (5) and susceptible of knowledge (6) that the representor knows to be false or is asserted without knowing whether the fact is true or false (7) with the intent to induce the other person to act (8) and the person in fact is induced to act (9) in reliance on the representation (10) that the plaintiff suffered damages (11) attributable to the misrepresentation.

M.H. v. Caritas Family Servs., 488 N.W.2d 282, 289 (Minn. 1992) (citation omitted).

Here, appellants alleged that respondent represented that it would structure the transaction to protect their interests, and respondent made this statement knowing it to be false and with the intent of inducing them to enter into the lease agreement. Appellants also alleged that respondent represented that the lease obligations were evidence by a promissory note, and respondent made this statement knowing it to be false and with the intent of inducing them to give respondent a security interest in stocks to protect itself from the risk of default on the lease. And appellants alleged that they suffered a loss because of these misrepresentations. We conclude that appellants pleaded the necessary elements required to establish a claim for false misrepresentation, and that the district court erred in dismissing this claim on the pleadings.

IV.

To establish a claim for unjust enrichment, the claimant must show that another party knowingly received something of value to which he was not entitled, and that the circumstances are such that it would be unjust for that person to retain the benefit. ServiceMaster of St. Cloud v. GAB Bus. Servs., Inc., 544 N.W.2d 302, 306 (Minn. 1996).

Here, appellants alleged that they made lease payments to respondent after they discovered that respondent did not have good title to the dairy cows. Appellants further alleged that respondent breached the lease agreement because it did not have title to the cows free and clear. And appellants alleged that respondent will be

unjustly enriched if it is allowed to retain the benefit of the $50,000.00 transaction fee paid by Plaintiffs and the Lease payments paid by Plaintiffs under the Cattle Leases after January of 2000, when all of the milk produced by the 450 dairy cattle were [sic] seized by third parties during January of 2000 and thereafter on account of such third parties’ superior claims and interest in such cattle and most, if not all, of the cattle were replevined by a third party in February of 2001.

We conclude that appellants properly pleaded a claim for unjust enrichment by alleging that a benefit was conferred upon respondent, that respondent appreciated and accepted the benefit, and that it would be unjust to let respondent keep the benefit.

In conclusion, because appellants’ complaint stated a claim for breach of contract, unjust enrichment, breach of fiduciary duty, fraud, and misrepresentation, upon which relief could be granted, we reverse the district court’s dismissal of appellants’ claims.

Any person with an interest in a written contract may have a court determine any question of construction or validity arising under the contract and may obtain a declaration of rights or status under the contract. Minn. Stat. § 555.02. Appellants argue that the district court erred in concluding that they did not state a claim for declaratory judgment upon which relief could be granted. We agree.

Here, appellants alleged that there is a dispute between them and respondent concerning their respective rights under the lease contracts. Appellants alleged that respondent breached the lease and, therefore, the lease is terminated.

Appellants also alleged that a dispute exists between the parties regarding whether respondent made an $810,000 loan to appellants and whether that loan is evidenced by a promissory note. And appellants alleged that a dispute exists between the parties regarding their respective rights under the mortgage deed, two promissory notes, and two security agreements.

We therefore conclude that because appellants alleged an assertion of rights by parties with adverse interests and a genuine conflict in interests of opposing litigants, which is capable of relief by a decree or judgment, the district court erred in dismissing appellants’ claim for a declaratory judgment on the pleadings.

Finally, because we conclude that the district court erred in granting respondent’s motion to dismiss, we do not reach appellants’ argument that the district court erred in not allowing them an opportunity to amend their complaint.

Reversed and remanded.