This opinion will
be unpublished and
may not be cited
except as provided by
Minn. Stat. §
480A.08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF
APPEALS
A04-1217
Metropolitan Law
Center, Ltd.,
f/k/a/ London Anderson
Antolak & Hoeft,
Ltd.,
Appellant,
vs.
Dean E.
Terry,
Respondent.
Filed May 10, 2005
Affirmed
Crippen, Judge
Dakota
County District Court
File No. CX-02-10732
Jonathan R. Fay, Jonathan Fay, P.C., Suite 600, Dakota
Center Building, 51 Broadway, Fargo, ND 58102 (for appellant)
Stewart, C. Loper, Becky L. Erickson, Chestnut &
Cambronne, P.A., 3700 Campbell Mithun
Tower, 222 South Ninth Street, Minneapolis, MN 55402 (for respondent)
Considered
and decided by Willis,
Presiding Judge, Stoneburner,
Judge, and Crippen,
Judge.
U N P U B L I S H E D O P I N I O N
CRIPPEN,
Judge
Appellant
law firm represented respondent Dean
Terry and associated corporations,
of which he was the majority shareholder, in underlying actions and then sought
to recover legal fees personally from respondent after the corporations became
defunct. Following a bench trial, the
district court rejected the claims.
Appellant argues that (1) the court clearly erred in finding that
respondent was not made aware of his personal liability for legal fees; (2) the
court erred in ruling that, when respondent was securing legal representation
for the defunct corporations, he was acting as an officer of the corporations
and committing the corporations, without his joint liability, for attorney
fees; and (3) the court misapplied the law of unjust enrichment. Finding no merit in these contentions, we
affirm.
FACTS
Respondent
Dean Terry was the majority
shareholder of Terry Farms, Inc., which owned four subsidiary corporations
involved in growing mushrooms and developing associated technology. Appellant
Metropolitan Law
Center provided legal
services to Terry and the corporations
over a period of approximately 27 years.
In 1998
and 1999, the corporations began to suffer economic difficulties and defaulted
on loans to Diversified Business Credit, Inc. (DBCI). In response to pressure from DBCI, Terry
Farms began negotiating the sale of assets of the subsidiary corporations. Prior to the sale, another creditor, Compost
Supply, Inc., sued one of the subsidiary corporations, Princewood Farms, Inc.,
and filed notice of lis pendens on real estate belonging to Princewood,
affecting real estate Terry Farms had intended to sell. After the prospective buyer backed out because
of the pending litigation, DBCI and Terry Farms agreed to voluntarily foreclose
the assets of three of the four corporations, which were then sold by
DBCI. As of August 31, 1999, the
corporations no longer had assets.
DBCI
also foreclosed assets of the fourth corporation, Terry Farms Technology, Inc.,
and then conveyed them to AG-Tech Systems, LLC, a new entity formed by Terry. The
consideration for this transaction was an amount equal to the existing
indebtedness of Terry Farms. But Terry
Farms Technology was worth approximately $7,200,000, and the remaining
indebtedness to DBCI was $1,200,000.
Appellant represented all of the Terry
enterprises in the foreclosure proceedings with DBCI.
Compost
Supply ultimately learned that, by naming Princewood Farms as a defendant, it
had sued the wrong Terry Farms subsidiary, and it amended its complaint to implead
Terry Farms and Terry in November
1999. Compost Supply alleged that Terry
Farms was liable on the contract with its subsidiary corporation and alleged
personal liability of Terry based on
the theory that the corporate veil should be pierced.
Because DBCI had
sold the former Terry subsidiary
assets following foreclosure and subject to a lis pendens, DBCI executed an
agreement reserving the right to control the litigation of the Compost Supply
matter. The agreement provided that
“DBCI shall have the right to select and retain counsel to conduct the
Litigation on behalf of itself, Dean
Terry [and] Terry
[Farms].” DBCI selected another firm to
represent Terry Farms, but appellant represented Terry
in the Compost Supply action. In the
course of its representation, appellant changed its billing account designation
from Princewood Farms to Terry, but
did not open a new file. Terry ultimately settled with Compost Supply for
$25,000.
Appellant
also provided legal services to AG-Tech Systems, LLC, the successor to Terry groups corporations, which ceased doing
business in April 2001. In an August 21,
2001, letter to Terry, appellant
requested a credit agreement of $200,000 as “collateral for the fees that
AG-Tech Systems, LLC owes to the firm.” Terry and appellant executed a credit agreement,
promissory note, security agreement, and mortgage and security agreement in
December 2001. The district court found
that Terry reasonably believed that
the credit agreement “represented all fees due by AG-Tech and the Corporations
in so far as [Terry’s] calculation of
the total fees for AG-Tech and the other Corporations was $192,000.”
Appellant
initiated the present action in May 2002, alleging breach of contract, account
stated, and unjust enrichment and seeking a judgment for $92,975.66 plus
interest. The district court found that
appellant did not inform Terry of the
change in the billing account and that he did not know that the change had been
made until appellant informed him in the spring of 2002, after the end of the
Compost Supply action, that he was personally liable for fees and costs
incurred in his defense. The court
concluded that the legal fees charged by appellant for the Compost Supply and
other actions were the obligation of Princewood Farms and Terry Farms and not Terry personally, and that Terry
was entitled to dismissal of the claims with prejudice. The district court denied appellant’s motion
for amended findings and conclusions.
1.
“On appeal, a trial court’s findings
of fact are given great deference, and shall not be set aside unless clearly
erroneous. Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999). We will not disturb those findings if there
is reasonable evidence to support the district court’s findings of fact. Id.
MLC argues the following factual
findings of the district court are not supported by the record:
34. In December of
1999, [appellant] changed its billing account from Princewood Farms, Inc., to [Terry] personally.
[Appellant] had historically always billed the Corporations for similar
work.
35. [Appellant] did
not inform [Terry] of this change and
[Terry] did not know that the change
had been made.
. . . .
52. [Terry], based upon the dispute of the AG-Tech fees
reasonably believed that the Documents represented all fees due by AG-Tech and
the Corporations in so far as [Terry’s]
calculation of the total fees for AG-Tech and the other Corporations was
$192,000.00 and the promissory note was in the amount of $200,000.00.
Appellant contends that these
findings of fact are clearly erroneous for two reasons: (1) appellant
mailed “[b]ills totaling $84,800.90 and covering twenty months of
representation of Dean Terry individually” directly to Terry whereas bills for
Princewood were sent to a different address; and (2) the express meaning of the
documents constituting the credit agreement does not support Terry’s reasonable
belief that the agreement represented all legal fees due from both AG-Tech and
the former Terry Farms corporations.
In
support of its clear-error argument, appellant points to the testimony at trial
by Louis Ochocki, chief financial officer of Terry
Farms. Ochocki stated that he reviewed
all of the legal bills for the Terry Farms corporations, that “where they did [Terry’s] personal work, I didn’t even see those bills,”
and that “[i]t was a rarity that I would see a bill where [appellant was] doing
something for [him] personally.” Ochocki
also stated that “substantially all” of the corporate bills sent by appellant
came to him. Appellant contends that
this testimony refutes the district court’s finding that appellant “had
historically always billed the Corporations for similar work.”
This
evidence does not permit a finding of clear error on the part of the district
court. The court’s and Ochocki’s usage
of the word “personal” was not necessarily synonymous. The court’s finding of fact number 34 uses
“personal” in a nominal sense: the file which appellant had opened for
Princewood Farms in the Compost Supply litigation was renamed as the Terry file.
Ochocki’s testimony permits the inference that he is speaking about
legal services performed for Terry by
appellant that had no connection with his role as a principal of Terry
Farms. On its own, Ochocki’s testimony
does not prevent the conclusion that appellant, if it previously represented Terry in litigation that named him as a defendant,
did not send those bills directly to Terry.
Appellant
also takes issue with the finding that Terry
did not know that a change in the billing had been made. Appellant argues that, although Terry stated that he never looked at the bills, he
never denied receiving them and that it is “unreasonable to believe that a
business man with more than twenty years of experience . . . would fail to
review bills as they came in.” But Terry argues in response that the change of address
was necessary because Ochocki no longer worked for Terry Farms and that he
testified that, until the present action was contemplated, he never “thought or
understood . . . that [a]ppellant planned to hold him personally liable.” Appellant provides no legal authority
imputing knowledge of an obligation to Terry
based upon his receipt of the bills. The
record supports the district court’s conclusion that Terry
did not know about the change in billing.
Appellant
also contends that the district court erred in finding number 52 by stating
that Terry reasonably believed that
the credit agreement was intended to cover “all fees due by AG-Tech and the Corporations.” The court buttressed this finding by adding
that Terry’s calculation of all fees
owed to appellant was approximately the same as the value sought in the credit
agreement. Terry’s
belief does not seem consistent with the contents of the August 21 letter from
appellant, which opens with the sentence:
“I previously discussed with you the providing of collateral for the
fees that AG-Tech Systems, LLC owes to the firm,” and at no point discusses the
Compost Supply litigation or any other legal matter.
But
the district court considered other evidence relevant to this finding. Terry
testified at trial that Larry
Anderson, a partner of appellant,
told Terry, in response to the
question of how the legal bills would be paid, “maybe AG-Tech could pay.” And the district court specifically found
that the August 21 letter “was made simultaneously with” the completion of the
Compost Supply litigation. These facts
contribute to an understanding on the part of Terry
that may have been broader than the content of the letter or subsequent
documents would suggest. For that
reason, the district court’s finding regarding Terry’s
belief was not clearly erroneous.
2.
A reviewing court is not bound by and
need not give deference to a district court’s decision on a purely legal
issue. Modrow v. JP Foodservice, Inc.,
656 N.W.2d 389, 393 (Minn. 2003) (citing Frost-Benco
Elec. Ass’n v. Minn. Pub. Utils. Comm’n,
358 N.W.2d 639, 642 (Minn.
1984)).
Appellant argues that the district
court “overstate[d] and/or misstate[d] the law of agency, and ignore[d] Terry’s contractual liability” in its memorandum in
response to appellant’s motion for amended findings and conclusions. Appellant indicates that the following
passage is the linchpin of the district court’s erroneous application of the
law:
[Appellant] vehemently argues
that, because the Corporations were defunct and because the legal services
served only [Terry’s] interests, [Terry] must have been the true contracting
party. [Appellant’s] argument . . . asks
the Court to turn a blind eye toward fundamental principles of agency. If [Terry]
was securing legal representation for the defunct Corporations then he was
acting as an officer of the defunct Corporations and he was binding the defunct
Corporations in contract.
But appellant does
not follow this assertion by providing a legal framework for this court to
assess the law of agency. He simply
states that “[t]he Finding contains a contradiction in terms: that as an officer of a defunct corporation, Terry secured legal representation for and bound the
corporation, while ignoring the separate and independent representation of Terry, himself.”
We cannot read the district court’s
memorandum to state that officers of defunct corporations, as a matter of law,
have the right to bind those corporations.
Nor did it “ignor[e] the separate and independent representation of Terry, himself.”
It is not evident that appellant’s argument concerns the law of
agency. Rather, the argument is an
attempt to continue appellant’s dispute of the facts in the guise of legal
argument. The district court noted that
appellant maintained a single file for the Compost Supply litigation, which
contained entries for both the corporations and Terry,
“suggesting the existence of only one contemplated payer.”
The district court partially
characterized appellant’s action as an attempt to require the court to decide
why appellant “would enter a contractual relationship with the defunct Corporations.” This characterization is true, and we cannot speculate
about this mystery, which would require the contemplation of facts not in
evidence. Ultimately, with respect to
the issue of legal error as stated in appellant’s brief, the district court
concluded that any legal services contract for the Compost Supply litigation
was between appellant and the corporations and that Terry’s
personal liability under the contract was never suggested until after the
litigation ended. Appellant’s assignment
of error to the district court’s legal analysis does not merit reversal.
3.
“In order
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.” Schumacher v. Schumacher,
627 N.W.2d 725, 729 (Minn.
App. 2001).
The district court rejected
appellant’s claim because it recognized an enforceable contract between appellant
and the corporations and concluded that “there is no reason to resort to the
equitable theory of unjust enrichment.” See
Southtown Plumbing, Inc. v. Har-Ned Lumber Co., 493 N.W.2d 137, 140 (Minn.
App. 1992) (stating that “one may not seek a remedy in equity when there is an
adequate remedy at law”). Appellant
correctly identifies various aspects of an unjust enrichment claim, including
the receipt of something of value based upon a failure of consideration, fraud,
or mistake, and asserts that appellant indisputably provided valuable services
to Terry. At no point does appellant attempt to refute
the district court’s threshold finding that appellant had a contract with the
corporations that governed the payment of legal services provided to Terry.
Regardless
of this infirmity, the law will only impose a contract when the failure to do
so would result in unjust enrichment to one of the parties. Stemmer v. Estate of Sarazin, 362
N.W.2d 406, 408 (Minn.
App. 1985). Simple benefit to the party
against whom a judgment is sought will not sustain a claim; “it must be shown
that a party was unjustly enriched in the sense that the term ‘unjustly’ could
mean illegally or unlawfully” or that retention of the benefit would be morally
wrong. Schumacher, 627 N.W.2d at 729 (quoting First Nat’l Bank of
St. Paul v. Ramier, 311 N.W.2d 502, 504 (Minn. 1981)).
We perceive no special justice
calling for a remedy for appellant, which had a long history of providing legal
services to Terry Farms and was fully aware of the liquidation of its
subsidiaries. Rather, as the district
court found, there was a contract implied in fact between appellant and Terry Farms that included the representation of Terry.
Furthermore, while the district court did not address this issue beyond
making a relevant factual finding, DBCI held the right to select and retain
counsel to conduct the Compost Supply litigation for both Terry Farms and Terry. This
right brings into doubt the very existence of a benefit to Terry from appellant’s representation. The district court did not err by denying
appellant’s claim of unjust enrichment.
Affirmed.