Kenneth L. Evins, Relator, vs. Freedom Place, Inc., Respondent, Commissioner of Economic Security, Respondent.Annotate this Case
may not be cited except as provided by
Minn. Stat. sec. 480 A. 08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Christoffel, Elliott & Albrecht,
Consumers Realty and Development Co., Inc., et al.,
Filed May 5, 1998
Dakota County District Court
File No. C4-96-7556
Eric J. Magnuson, Richard J. Nygaard, Kathy S. Kimmel, Rider, Bennett, Egan & Arundel, L.L.P., 2000 Metropolitan Centre, 333 South Seventh Street, Minneapolis, MN 55402 (for appellants)
David F. Herr, Cynthia F. Gilbertson, Maslon Edelman Borman & Brand, L.L.P., 3300 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402 (for respondent)
Considered and decided by Short, Presiding Judge, Amundson, Judge, and Harten, Judge.
U N P U B L I S H E D O P I N I O N
Following a bench trial in district court, respondent law firm, Christoffel, Elliott, & Albrecht (CE&A), was declared the owner of 1,000 shares of appellant Consumers Realty and Development Co., Inc., (CRD) corporate stock. The district court also granted CE&A sanctions of approximately $80,000 for attorney fees and costs due to appellant Grohoski's fraud and lack of compliance with discovery. We affirm.
CRD is a Minnesota corporation founded by appellant Steven Grohoski. In the early 1990's, CRD began having financial problems. The circumstances of this case originated when CE&A represented CRD in bankruptcy proceedings. After the bankruptcy court approved CRD's reorganization, appellants fell behind in fee payments to CE&A and, in 1993, CE&A obtained a judgment against both Grohoski and CRD for $40,000 attorney fees and expenses. To satisfy the judgment, CE&A obtained a writ of execution and on February 14, 1994, CE&A purchased 1,000 shares of CRD stock at a properly noticed and conducted sheriff's sale. CE&A was the only bidder; it purchased the shares for $1,500. Appellants allege that there were more than 1,000 shares at the time of the sale and that CE&A's purchase of the 1,000 shares made it only a minority shareholder. Appellants also argue that the value of CRD at the time of sale was at least $57,000.
On December 10, 1993, well before the sheriff's sale, CE&A took Grohoski's deposition. Grohoski then testified that he was the sole shareholder in CRD and opined that he owned between 200 and 1,000 shares of stock. At trial, however, Grohoski's testimony differed substantially. For example, he testified that on December 10, 1989, he issued 2,600 additional shares of CRD stock to himself. The three purported 1989 stock certificates, however, show obvious evidence of tampering and alteration. The trial court determined that Grohoski fraudulently backdated the three certificates. Grohoski also testified at trial that on December 10, 1993 (after his deposition), he issued 8,000 shares of CRD stock to his wife, Sharron Grohoski. He testified that he did not inform his accountant or lawyers about the issuance of additional stock.
The district court declared (1) that the value of the corporation was zero at the time of the sheriff's sale, (2) that at all times material there were a total of 1,000 shares of CRD stock, and (3) that CE&A is the owner of Grohoski's 1,000 shares of CRD. These appeals followed, which we consolidated to accommodate the supreme court's February 19, 1998, order and to further the interests of economy and practicability.
D E C I S I O N
1. Trial Transcript. As a preliminary matter, the parties disagree as to whether the trial transcript may be considered by this court. Appellants did not file transcript certificates after filing this appeal, and they rely on the transcript that was in the trial court file at the time of appeal. Respondent CE&A argues that appellant's failure to comply with Minn. R. Civ. App. P. 110.02 precludes our review of the trial transcript and urges us to summarily affirm all findings of fact.
Rule 110.02 states, in relevant part, that
[w]ithin 10 days after filing the notice of appeal, the appellant shall: * * * order from the reporter a transcript of those parts of the proceedings not already part of the record * * *
or if no transcript is to be prepared, appellant must so notify the respondent in writing. Id. (emphasis added).
Rule 110.02 requires an appellant to order necessary transcripts that are not already part of the record. Because the trial transcript was already part of the district court record, there was no need for appellant to order the transcript. Accordingly, the transcript is part of the record on appeal.
2. Joinder of Additional Parties. Appellants argue that it was error for the district court to proceed without parties who allegedly had an ownership interest in CRD, namely, Sharron Grohoski and the Premack Trust. But appellants did not move to dismiss the case on this joinder basis, nor did they ask the district court to join either Sharron Grohoski or the Premack Trust.
This issue is controlled by State Auto. & Cas. Underwriters v. Lee, 257 N.W.2d 573 (Minn. 1977). In Lee, the supreme court held that a party will not be considered indispensable when a valid and binding judgment may be entered between the parties already present in the action. Id. at 576; see also Zions First Nat'l Bank v. World of Fitness, Inc., 280 N.W.2d 22, 26 (Minn. 1979) (failure to join indispensable party as defendant would not void default judgment). We conclude that the joinder issue does not affect the validity of the judgment between CRD and CE&A.
3. District Court Findings. A trial court's findings of fact will not be reversed unless they are clearly erroneous; due regard must be given to the trial court's witness credibility determinations. Minn. R. Civ. P. 52.01. "[T]his court will only reverse a trial court's findings of fact if, upon review of the entire evidence, we are `left with the definite and firm conviction that a mistake has been made.'" In re Guardianship of Dawson, 502 N.W.2d 65, 68 (Minn. App. 1993) (quoting Gjovik v. Strope, 401 N.W.2d 664, 667 (Minn. 1987)), review denied (Minn. Aug. 16, 1993).
The district court determined that Grohoski was the sole owner of CRD at the time that CE&A purchased stock at the sheriff's sale. Moreover, the district court found that Grohoski's evidence as to additional shares was inconsistent. The district court based its findings on specific evidence as follows: (1) Grohoski's inconsistent deposition and trial testimony; (2) Grohoski's unusual and suspicious business management and accounting practices; (3) the three purported stock certificates from 1989 that show obvious signs of alteration; (4) conflicted and contradictory testimony as to the other alleged stock transfers. The district court had a clear opportunity to examine the documents and Grohoski's credibility during the trial. It did not err in its findings that Grohoski backdated the 1989 certificates in an attempt to defraud CE&A and the court.
In addition, the district court found that Sharron Grohoski lacked any knowledge of the corporate business and could not remember dates, circumstances, or reasons for the alleged stock transfers from CRD to herself immediately after Grohoski's 1993 deposition. Deferring to the district court's determination of witness credibility, and after reviewing the record as a whole, we are not left with a firm conviction that a mistake was made. See id. We affirm the district court's finding that only 1,000 shares of stock existed on the date of the execution sale.
Appellants challenge the district court's determination of the value of CRD at the time of the execution sale. Appellants claim that the price paid at the sheriff's sale was grossly inadequate and shocks the conscience. To support this argument, appellants rely on In re Nelson, 495 N.W.2d 200 (Minn. 1993), and Northland Pine Co. v. Northern Insulating Co., 145 Minn. 395, 177 N.W. 635 (1920).
Nelson does not support appellants' position. It holds that "[i]nadequacy of price by itself is generally insufficient to set aside an execution sale." 495 N.W.2d at 202. Nelson suggests that equity may require a court to review a low sale price if the price is the product of irregularities that occurred during the sale. Id. Appellants have pointed to no irregularities in the sheriff's execution sale and we apply the general rule that inadequate price is an insufficient basis to set aside the sale.
Moreover, Northland Pine is of little assistance. In that case, the price paid at the judicial sale was truly inadequate because another purchaser would have purchased at a higher price. 145 Minn. at 399, 177 N.W. at 636. The absence of another purchaser at the sale or anytime afterwards "might properly lead the court to conclude that [the] final bid fairly represented the market value of the property." Id. Here, CE&A was the only bidder; neither Grohoski nor any other bidder attended the properly noticed and conducted sheriff's sale. Northland Pine does not support appellants' argument.
Appellants argue that the district court erred when it credited testimony that the value of CRD at the time of the sheriff's sale was zero. The testimony came from CRD's attorney at the time of the bankruptcy proceeding. Appellants solicited the attorney's opinion as to value. While there was documentary evidence that contradicted that opinion, the district court's reliance on it was not "manifestly and palpably contrary to the evidence as a whole." First Trust Co. of St. Paul v. McLean, 254 Minn. 75, 79, 93 N.W.2d 517, 520 (1958).
Considering the evidence received and weighed by the district court, the absence of supportive caselaw as to inadequate price as a basis for invalidating a sheriff's sale, and our standard of review, we affirm the district court findings as to the number of shares and the value of CRD's stock at the time of the sheriff's sale.
4. Sanctions Against Appellants. A district court has the discretion to award costs and fees to a party where the other party (a) acted in bad faith, (b) asserted a claim that was frivolous and costly, (c) asserted an unfounded position solely to delay the proceedings or to harass, or (d) committed a fraud upon the court. Minn. Stat. § 549.21 (1996). The district court awarded CE&A approximately $80,000 in costs and fees under Minn. Stat. § 549.21. It determined that appellants "unreasonably delayed the prosecution" of the case and that appellants "unreasonably failed to respond to [CE&A]'s request for admissions." The district court's findings, conclusions, and memorandum also demonstrate that the district court concluded that Grohoski had tampered with the dates of the stock certificates to prevent CE&A from gaining control and that his testimony at trial was not credible.
Appellants argue that the district court abused its discretion when it awarded respondent approximately $80,000 in costs and fees. The allowance of attorney fees, however, "rests almost entirely in the discretion of the trial court." Solon v. Solon, 255 N.W.2d 395, 397 (Minn. 1977). "[O]nly rarely will a trial court's decision regarding attorney fees be overturned on appeal." Burns v. Burns, 466 N.W.2d 421, 424 (Minn. App. 1991).
In light of our review of Grohoski's conduct and the district court's bases for its award under Minn. Stat. § 549.21, we conclude that there was no abuse of discretion.
 The declaratory judgment, however, was not conclusive as to ownership interests of Sharron Grohoski and Steven Grohoski's mother-in-law's trust, the Premack Trust. The practical result of the judgment, therefore, was prolonged disputes as to who was in control of CRD. After the declaratory judgment in this case, a separate action commenced in Hennepin County between CE&A, Sharron Grohoski, and the Premack Trust. CE&A prevailed on collateral estoppel grounds.
 The procedural history of this case is fully addressed by this court's April 7, 1998, order. As a result of the supreme court's February 20, 1998, order, we: (1) consolidate C0-97-1450 and C4-97-1614; (2) address the merits of C0-97-1450; and (3) address the sanctions and fee issues from C4-97-1614.
 Under Minn. R. Civ. App. P. 110.02, subd. 4, appellant must provide copies of the transcript for each party separately represented by counsel. But CE&A made no motion to require appellants to pay for additional copies of the transcript. Further, CE&A's claim that it was prejudiced by appellants' noncompliance with the rule is inconsistent with CE&A's numerous citations to the transcript in its brief.
 The certificates are printed on green paper and the year is obscured by white correction fluid on two of the three certificates. On the third certificate, it is obvious that more than one set of numbers was typed for the year. Despite the clear contrast of white correction fluid on green paper, Grohoski consistently denied that the documents were altered or that correction fluid was visible on the certificates.