Nelson's Minnesota Farms, LLC, Respondent, vs. David S. Logan, Appellant, Michael R. Morgan, Defendant.

Nelson's Minnesota Farms, LLC, Respondent, vs. David S. Logan, Appellant, Michael R. Morgan, Defendant. A04-758, Court of Appeals Unpublished, February 15, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-758

 

Nelson's Minnesota Farms, LLC,

Respondent,

 

vs.

 

David S. Logan,

Appellant,

 

Michael R. Morgan,

Defendant.

 

Filed February 15, 2005

Affirmed

Toussaint, Chief Judge

 

Pipestone County District Court

File No. C4-01-381

 

Paul M. Malone, 2605 Broadway Avenue, P.O. Box 256, Slayton, MN 56172 (for respondent)

 

Lawrence A. G. Moloney, Gray Plant Mooty, 80 South Eighth Street, Suite 500, Minneapolis, MN 55402 (for appellant)

 

            Considered and decided by Schumacher, Presiding Judge; Toussaint, Chief Judge; and Stoneburner, Judge.

U N P U B L I S H E D  O P I N I O N

 

TOUSSAINT, Chief Judge

 

            In January 1996, a group of buyersincluding appellant David Logan and defendant Michael Morganreached an agreement to purchase the corporate shares of Ellison Meat Company.  The purchase contract was subsequently assigned to respondent, a newly formed limited liability company.  After the contract was assigned but before the creation of the limited liability company, Morgan presented a $1.5 million loan request to the First National Bank in Pipestone, which was approved for the purchase of Ellison Meat Company.  In May 1996, Morgan, who was also a governor of respondent, advanced $200,000 on the loan and wrote three checks on a separate corporate account owned by Logan, who was also a governor of respondent.  One of the checks, in the amount of $100,000, was deposited into Logan's personal bank account. 

            Respondent filed suit against Logan and Morgan in September 2001 for breach of contract and breach of fiduciary duty.  Morgan confessed to respondent's complaint and the district court entered judgment against him for $200,000.  During the pendency of the civil trial, federal criminal charges were brought against Logan and Morgan.  On March 6, 2002, Logan signed a plea agreement where he admitted entering into a "conspiracy and misapplication scheme" with Morgan. 

            In August 2003, the district court granted respondent's motion for summary judgment in the amount of $100,000, less any amounts already paid by Logan.  Upon a subsequent motion by respondent, the district court amended its order, awarding respondent $200,000, plus prejudgment interest, costs and disbursements, minus amounts previously paid by Logan and Morgan.  Because there was evidence in the record that Logan breached the contractual and fiduciary duties owed to respondent, and because there was no evidence of an oral settlement between the parties, we affirm.    

D E C I S I O N

I.

Timeliness of Logan's Appeal

            Respondent contends that this court does not have jurisdiction because Logan's notice of appeal was dated April 29, 2004, which was well outside the sixty-day time frame in which to appeal the district court's October 6, 2003, amended judgment.  See Minn. R. Civ. App. P. 104.01, subd. 1 (stating that "an appeal may be taken from a judgment within 60 days after its entry").  But after the district court originally entered summary judgment for respondent on August 29, 2003, respondent tolled the time for appeal by filing a motion for amended order for judgment or new trial on September 15, 2003.  See id., subd. 2(c), (d) (allowing a party to file posttrial motions to alter or amend the judgment or for new trial).  Under the rules, once a proper posttrial motion has been filed, "the time for appeal of the order or judgment that is the subject of such motion runs for all parties from the service by any party of notice of filing of the order disposing of the last such motion outstanding."  Id., subd. 2 (emphasis added).  The district court filed an amended summary judgment on October 6, 2003, and Logan served the notice of filing of the court's order on respondent on March 8, 2004.  Logan's appeal was filed on April 29, 2004, which was within the sixty-day appeal period.  Id., subd.1.  This court has jurisdiction over Logan's appeal.    

II.

Breach of Contract

            All of Logan's arguments contend the district court erred in awarding summary judgment to respondent.  "On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the lower court[] erred in [its] application of the law."  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  This court must review the factual evidence in the light most favorable to the nonmoving party.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  No genuine issue of material fact exists "when the nonmoving party presents evidence which merely creates a metaphysical doubt as to a factual issue and which is not sufficiently probative with respect to an essential element of the nonmoving party's case[.]"  DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997).  "[T]he party resisting summary judgment must do more than rest on mere averments."  Id. 

            Logan first argues that the $200,000 loan disbursement did not breach the purchase contract.  But section 14 of the contract provides that: "Buyers, on the one hand, and the Company and Sellers on the other hand, represent to the other that no broker or finder has been connected with the transaction contemplated by this Agreement."  Logan asserts that this contract provision does not preclude compensation to a party-broker to the contract itself, such as a buyer.  But the contract language provides that no broker or finder has been connected with the transaction. Logan's brief describes him as instrumental in setting up the transaction and as the chief negotiator for the sale, thereby establishing him as broker to the transaction.  See Black's Law Dictionary 187 (7th pocket ed. 1999) (defining "broker" as "[a]n agent who acts as an intermediary or negotiator, [especially] between prospective buyers and sellers").  By compensating himself as an undisclosed broker, Logan breached section 14 of the contract. 

            Even if Logan breached the contract, he argues that respondent cannot enforce section 14 because respondent is not a party to the contract.  But section 4.2 of the contract makes respondent a party entitled to enforce the contract's rights and duties: "Buyers for themselves and for the limited liability company to be formed by them, represent that they have and when formed, it will have, full power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement."  (Emphasis added.)  Logan and Morgan conducted the misappropriation in May 1996, well after respondent was formed as a limited liability company.  Once Logan breached section 14 of the agreement by taking a brokerage fee, respondent was entitled to enforce the agreement. 

III.

Breach of Fiduciary Duty           

            Logan argues that he did not breach a fiduciary duty to respondent, or that any breach was later ratified through respondent's board of governors.  First, Logan contends that any loan proceeds disbursed belonged to the buyers, and not to respondent, because respondent did not exist as a legal entity at the time the purchase contract was assigned.  This argument ignores the fact that respondent was a party entitled to enforce the purchase contract and that respondent was in existence at the time of the misappropriation.  Further, Article IX of respondent's operating agreement holds governors liable for "an act or omission that involves intentional misconduct or a known violation of the law[.]"  Logan's intentional misconduct, which he admitted to in the federal criminal plea agreement, constitutes grounds for liability for breach of fiduciary duty.

            Logan argues that respondent's officers ratified any breach of fiduciary duty by acquiescing to his actions and by appointing Logan to positions of authority in other holding corporations after the misappropriation was revealed.  But the record lacks evidence showing that respondent's board affirmatively approved of the misappropriation, and co-governors Gerald Kennedy and Gordon Spronk testified that while Logan and Morgan may have earned the $200,000, they did not ask for the board's permission before taking the money.  The record is unclear as to when respondent's other governors learned of the misappropriation; Kennedy testified that although he and Spronk were notified in 1998, some governors were informed after an audit was conducted, which occurred in 2000.  The record indicates that corporate meetings were infrequently held.  There is no recorded evidence as to why respondent's entire board did not ask for the money back nearly three years after a few board members were notified of Logan's conduct.  The lack of such evidence does not lead us to conclude that respondent itself ratified Logan's breach of fiduciary duty and forfeited any right to seek reimbursement of the loan misappropriation.

IV.

Oral Settlement Agreement

            Logan's argues that the parties orally settled respondent's lawsuit.  During his deposition, Kennedy testified that he never participated in settlement negotiations unless he was in the presence of the entire board of governors.  Further, respondent's attorney objected every time Logan's attorney attempted to question Kennedy as to the substance of the settlement and its negotiations.  Respondent also submitted an affidavit from Hal Schmidt, a member of respondent's board in fall 2001, who stated that he does not recall that Kennedy ever had authorization to negotiate a settlement, and that respondent's corporate minutes do not support such a claim. 

            Logan argues that the parties reached a binding oral settlement agreement that is fully enforceable under state law.  Enforceable oral settlements typically require a party, or a party's attorney, to approve or ratify the agreement.  Johnson v. Sitzmann, 413 N.W.2d 541, 544 (Minn. App. 1987), review denied (Minn. Dec. 22, 1987).  There is no evidence in the record to support Logan's contention that respondent ever agreed to the oral settlement.  Logan submitted an affidavit pursuant to Minn. R. Civ. P. 56.06, stating that if the existence of a settlement agreement cannot be established as a matter of law, additional discovery should be allowed to compel Kennedy to divulge his participation in settlement negotiations.  But Logan cannot seek to admit the substantive provisions of the alleged settlement agreement because Minn. R. Evid. 408 bars evidence of a party furnishing valuable consideration in compromising "a claim which was disputed as to either validity or amount," as well as "[e]vidence of conduct or statements made in compromise negotiations[.]"  Here, respondent questions the validity of the alleged settlement agreement, so it was proper to object to any questioning regarding Kennedy's conduct or statements during alleged settlement negotiations.  Because rule 408 bars any questioning on this issue, the limited factual evidence before the district court failed to establish the existence of a valid oral settlement. 

V.

Joint and Several Liability

            Finally, Logan argues that the district court's amended order for summary judgment impermissibly imposes joint and several liability because the district court awarded respondent the entire $200,000 loan disbursement, minus any amounts already repaid by Logan and Mogan.  Logan contends that joint and several liability is not appropriate because respondent's damages are clearly divisibleLogan and Morgan each received $100,000 from the misappropriated loan proceeds. 

            State law governing at the time of the transaction provided that "[w]hen two or more persons are jointly liable, contributions to awards shall be in proportion to the percentage of fault attributable to each, except that each is jointly and severally liable for the whole award."  Minn. Stat. § 604.02, subd. 1 (1996).  Therefore, under state law, if Logan is jointly liable for the transaction, he is liable for the entire $200,000. 

            Caselaw further provides that defendants bear the burden to prove apportionment of damages, and that "apportionment may only be asserted when damages are divisible."  Jenson v. Eveleth Taconite Co., 130 F.3d 1287, 1293-94 (8th Cir. 1997) (applying Minnesota law).  Prior to recent legislative amendments, Minnesota subscribed to the "single indivisible injury" rule, which determined that "joint and several liability is imposed when two or more persons acting independently cause harm to a third person through consecutive acts of negligence closely related in point of time and when the harm is incapable of division."  Canada by Landy v. McCarthy, 567 N.W.2d 496, 507 (Minn. 1997); see also Mathews v. Mills, 288 Minn. 16, 21-22, 178 N.W.2d 841, 844 (1970) ("It has always been the law of this state that parties whose negligence concurs to cause an injury are jointly and severally liable although not acting in concert."). 

            The "single indivisible injury" rule is applicable in this case because the rule applies to, at the very least, instances where two actors independently cause consecutive acts of negligence or misconduct.  The acts of misconduct were closely related in time, and Logan did not carry his burden to show that damages could be apportioned.  According to the criminal plea agreement, Logan and Morgan did more than act independentlythey entered into a "conspiracy and misapplication scheme."  When two or more persons make an agreement to commit an unlawful act, it follows that each person is responsible for the entire lawful act, which precludes the possibility that damages could be apportioned.  Additionally, the district court's $200,000 judgment against Morgan effectively conferred joint and several liability on him for his part in the conspiracy; Logan did not demonstrate how his involvement was at a lower level than Morgan's, which would necessitate an apportioned judgment.  Given that the facts were undisputed, it was appropriate for the district court to functionally impose joint and several liability by holding Logan responsible for the entire $200,000 misappropriation.                                                              

            Affirmed.