Kevin L. Yonak, et al., Appellants, vs. Larry S. Severson, et al., Respondents.

Kevin L. Yonak, et al., Appellants, vs. Larry S. Severson, et al., Respondents. A05-154, Court of Appeals Unpublished, December 6, 2005.

This opinion will be unpublished and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

A05-154

 

Kevin L. Yonak, et al.,

Appellants,

 

vs.

 

Larry S. Severson, et al.,

Respondents.

 

 

Filed December 6, 2005 Affirmed Huspeni, Judge*

 

 

Dakota County District Court

File No. C3-04-8809

 

 

Paul A. Sortland, Sortland Law Office, 120 South Sixth Street, Suite 1510, Minneapolis, MN  55402-1817 (for appellants)

 

Richard J. Thomas, Chad J. Hintz, Burke & Thomas, P.L.L.P., 3900 Northwoods Drive, Suite 200, St. Paul, MN  55112 (for respondents)

 

 

 

            Considered and decided by Willis, Presiding Judge, Toussaint, Chief Judge, and Huspeni, Judge.

U N P U B L I S H E D   O P I N I O N

HUSPENI, Judge

            In this appeal from summary judgment for respondents in a legal malpractice action in which negligent representation arising out of the sale of a landfill business was alleged, appellants challenge the determination of the district court that the statute of limitations had run.  Appellants argue that (a) whether they were reasonably diligent so as to invoke the doctrine of fraudulent concealment and toll the running of the statute of limitations is a fact question not appropriate for summary judgment; and (b) in a legal malpractice case, appellants are not required to produce proof of an affirmative act or statement by respondent attorneys that would conceal a potential cause of action.  We agree with appellants that proof of an affirmative act or statement by respondent was not required; however, because appellants did not exercise reasonable diligence in attempting to discover alleged fraudulent concealment, we affirm.

FACTS

            Appellants Kevin and Rodney Yonak, together with their brother Wayne Yonak,[1] were the co-owners of Forest City Road Landfill, Inc. (FCR).  In the summer of 1994, respondents Larry S. Severson and the law firm Severson, Sheldon, Dougherty & Molenda, P.A., represented the owners of FCR in the sale of the landfill company to Superior Services, Inc. (Superior).  Robert McGillivray, a non-shareholder employee and a manager at FCR, was also represented by respondents. 

            On July 18, 1994, Severson, McGillivray, and the Yonak brothers were in Wisconsin to complete the sale of FCR.  As part of the sale, McGillivray and the three Yonak brothers all signed agreements with Superior.  The Yonak brothers signed "consulting agreements" that provided that Superior would make royalty payments to the brothers if the landfill expanded to an adjacent area designated as "Expansion Area C."

            In contrast to the consulting agreements signed by the Yonak brothers, McGillivray signed an "Employment Noncompetition Agreement" that provided that he would continue to be an employee with Superior, and that he would actively seek the purchase of real property in an area designated as "Expansion Area B."  According to this agreement, if McGillivray was successful in convincing the neighboring landowners to sell this property to Superior for future use as a landfill, he was to receive a commission of $50,000 on each parcel sold.  Finally, the agreement stated that McGillivray was to receive a royalty payment for future use of these areas as a landfill.  Appellants claim to have been unaware of the contents of McGillivray's Employment Noncompetition Agreement because they left the closing when Severson allegedly told them that "this was Rod McGillivray's personal work agreement, and [they] had no reason to be present."

            On August 22, 1994, McGillivray and Wayne Yonak entered into a separate agreement (hereinafter the side agreement) whereby the two agreed to share equally any payments and commissions resulting from the sale of Expansion Area B of the landfill.  Severson represented both McGillivray and Wayne Yonak in the creation of the side agreement; appellants were not parties to that agreement, nor were they made aware of the agreement at the time it was entered. 

            In a letter dated September 29, 1994, appellants were informed of the need to correct a typographical error common to all four of the agreements signed at closing.  This letter stated:

            This will confirm the agreement of the parties to correct the clerical error in Paragraph 6(b) of the Employment and Noncompetition Agreement dated July 18, 1994 between [FCR] and Wayne A. Yonak, Paragraph 6(a) of the Employment and Noncompetition Agreement dated July 18, 1994 between FCR and Rod McGillivray and Paragraph 3(b) of the separate Consulting Agreements dated July 18, 1994 between FCR and Rodney A. Yonak and Kevin L. Yonak; respectively.  Specifically, the parties agree that the mistaken reference in the last sentence of such paragraph to "$0.266" shall be correct to read "$0.20."

 

            Please confirm this correction by signing and returning two (2) of the enclosed copies of this letter to me.

 

All three Yonak brothers and McGillivray signed the letter acknowledging the mistake. 

            In December 1994, Wayne Yonak provided appellants with a copy of the sale documents regarding the sale of FCR.  The documents, which had been requested by appellants after the execution of the stock purchase agreement on July 18, did not contain the McGillivray agreement.  Also, there was no reference to the August 22, 1994 side agreement.  Appellants claim that it was not until 2001, when they requested and received from respondents a copy of McGillivray's employment agreement, that they realized that McGillivray's agreement provided for expansion payments and commissions that were not provided for in the consulting agreements appellants had signed on July 18, 1994.  Appellants also claim that it was not until August 2001, through the efforts of their attorney Brian Southwell, that they discovered the August 1994 side agreement between Wayne Yonak and McGillivray.[2] 

            In July 2004, appellants commenced this malpractice suit against respondents for negligence, breach of fiduciary duty, and breach of contract based on respondents' failure to assure that appellants received their fair share of compensation for the sale of FCR in accordance with their ownership interests.  Specifically, appellants argued that the agreement regarding Expansion Area B should have been offered to them as owners, not to McGillivray, and that respondents fraudulently concealed the side agreement and McGillivray's Employment Noncompetition Agreement.  Respondents subsequently moved for a more definitive statement and for a protective order to stay discovery.  Shortly thereafter, respondents amended their motion to include an alternative motion for summary judgment.  

            The district court, in awarding summary judgment for respondents, determined that if appellants had a viable cause of action, it arose on or about July 18, 1994.  The court concluded in part:

To establish fraudulent concealment, Plaintiffs must prove that the concealment could not have been discovered by reasonable diligence. . . .  Plaintiffs are also obligated to produce proof of an affirmative act or statement [by Defendants] that concealed a potential cause of action. . . .  Based on the undisputed facts, the court finds that Plaintiffs failed to exercise reasonable diligence to determine the terms of the employment agreements signed at closing.  Plaintiffs knew of the existence of the employment agreements, but did nothing to ascertain the terms therein.  Even if Defendants were attempting to conceal the agreements, this could have been discovered by reasonable diligence, including requesting a copy of the same from their lawyer at the time of the closing. . . .  No evidence exists to suggest that any such request was made. . . .  There is no evidence to suggest that Defendants took any affirmative steps to conceal a potential cause of action. . . .[[3]]  With respect to the side agreement, Defendants owed no duty to disclose its terms to Plaintiffs, who were not parties to that agreement.

 

            This appeal followed.

D E C I S I O N

            Summary-judgment motions are granted when the pleadings, depositions, answers to interrogatories, and admissions, together with any affidavits, show that there is no genuine issue of material fact and a party is entitled to judgment as a matter of law.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  On a motion for summary judgment, "a court may not weigh the evidence or make factual determinations."  State ex rel. Hatch v. Allina Health Sys., 679 N.W.2d 400, 406 (Minn. App. 2004) (quoting Fairview Hosp. & Health Care Servs. v. St. Paul Fire & Marine Ins. Co., 535 N.W.2d 337, 341 (Minn. 1995)).  "The reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted."  Fabio, 504 N.W.2d at 761.  A reviewing court need not defer to a trial court's decision on a pure question of law.  Frost-Benco Elec. Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984).  "[S]ummary judgment cannot be defeated with unverified and conclusory allegations or by postulating evidence that might be developed at trial."  N. States Power Co. v. Minn. Metro. Council, 684 N.W.2d 485, 491 (Minn. 2004) (quotation omitted).

I.

            "The statute of limitations for a legal malpractice action is six years."  Herrmann v. McMenomy & Severson, 590 N.W.2d 641, 643 (Minn. 1999).  A cause of action accrues and the statute of limitations begins to run when the cause of action will survive a motion to dismiss for failure to state a claim on which relief can be granted.  Id.  A cause of action will survive a motion to dismiss so long as "some damage" has occurred as a result of the alleged malpractice.  Id.  But the statute is not tolled by ignorance of the cause of action unless fraudulent concealment is involved.  Id. 

            Appellants argue that the district court erred in granting summary judgment because the question of whether appellants were reasonably diligent so as to invoke the doctrine of fraudulent concealment is a question of fact for the jury.  Our review of the record convinces us that there is no question of fact for the jury to determine in this case.

            If fraudulent concealment is alleged by a claimant, the statute of limitations period is tolled until the concealment is or could have been discovered through reasonable diligence.  Wild v. Rarig, 302 Minn. 419, 450, 234 N.W.2d 775, 795 (1975).  "The party claiming fraudulent concealment . . . has the burden of proving that concealment could not have been discovered sooner by reasonable diligence and was not the result of his own negligence."  Cohen, 463 N.W.2d at 791.

            Although the malpractice alleged in this case occurred in 1994 when respondents represented appellants in the sale of FCR, appellants argue that the statute of limitations was tolled by respondents' fraudulent concealment of the fact that substantial amounts of equity were paid to McGillivray.  Appellants contend that they were completely unaware of the alleged fraudulent concealment until 2001, despite their reasonable efforts to obtain copies of the closing documents.

            Appellants are correct in that "[r]easonable diligence is generally a question of fact."  Appletree Square I Ltd. P'ship v. Investmark, Inc., 494 N.W.2d 889, 894 (Minn. App. 1993), review denied (Minn. Mar. 16, 1993).  But reasonableness becomes an issue of law when the record is devoid of any facts that would support a conclusion that an action or belief is reasonable.  Frerichs Constr. Co. v. Minn. Counties Ins. Trust, 666 N.W.2d 398, 402 (Minn. App. 2003), review dismissed (Minn. Oct. 21, 2003). 

            Here, the undisputed evidence shows that appellants attended the closing on July 18, 1994, and knew that McGillivray was entering into an employment agreement with Superior at that time.  The record also shows that the September 29, 1994 letter, which requested that appellants sign off on the corrections regarding a typographical error common to all four agreements, clearly referenced the McGillivray employment agreement.  The record further reflects that when appellants received copies of the requested closing documents in December 1994, the McGillivray employment agreement had been withheld.   

            Despite knowledge at least as early as September 29, 1994, that there were four agreements signed at closingone for each of the three Yonak brothers and one for McGillivray, appellants failed to request copies of those documents.  By December 1994, appellants knew that McGillivray had signed an employment agreement, but when they received the FCR closing documents, McGillivray's employment agreement had been withheld.[4] Again, they failed to inquire about the missing portions, or to request from respondents copies of all documents.  When they did request copies from respondents in 2001, copies were provided to them.  We have no reason to believe earlier requests would not have been honored.  Therefore, based on the undisputed evidence, we conclude that the record is devoid of any facts that would support a conclusion that appellants were reasonably diligent in discovering the alleged concealment.[5] 

            Affirmed.

*  Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10. 

[1] Wayne Yonak is not a party to this lawsuit.

[2]  The district court noted that subsequent to becoming aware of the side agreement "[d]issatisfied with the income they were receiving under their consulting agreements, [appellants] commenced a lawsuit against Wayne Yonak and Rod McGillivray.  That case settled."

[3]  Appellants challenge the conclusion that they must show an affirmative act or statement by defendants that concealed a potential cause of action.  We recognize, and respondents concede, that when a fiduciary relationship is involved (such as here) a party is not required to show affirmative acts of concealment as a prerequisite to tolling the statute of limitations.  See Cohen v. Appert, 463 N.W.2d 787, 790 (Minn. App. 1990), review denied (Minn. Jan. 24, 1991).  Therefore, no burden may be placed upon appellants to make a showing of affirmative acts or statements of concealment by respondents.  We shall consider only whether appellants exercised reasonable diligence in discovering the contents of McGillivray's employment agreement.

[4]  Notably, these documents were provided by appellants' brother, Wayne Yonak, not by respondents.

[5] In their brief, appellants argued that the district court erred in concluding that respondents had no duty to disclose the terms of the side agreement.  At oral argument, appellants appeared to abandon an argument that failure to disclose the existence of the side agreement was fraudulent concealment, and alleged only that the side agreement is evidence of the disproportionate share that McGillivray received in his employment agreement, thus further underscoring the depth of deception that was allegedly perpetrated at the time of the earlier contractual activities involving both appellants and respondents.  Therefore, because it appears that appellants no longer contend that the district court erred in determining that respondents were not required to disclose the terms of the side agreement to appellants, we do not discuss that issue further.