Prairie Sun Bank-Appleton f/k/a Prairie State Bank, Appellant, vs. Vivian Boerboom, Respondent.

Prairie Sun Bank-Appleton f/k/a Prairie State Bank, Appellant, vs. Vivian Boerboom, Respondent. A05-786, Court of Appeals Unpublished, January 3, 2006.

This opinion will be unpublished and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

A05-786

 

Prairie Sun Bank-Appleton f/k/a Prairie State Bank,
Appellant,
 
vs.
 
Vivian Boerboom,
Respondent.

 

Filed January 3, 2006

Affirmed

Wright, Judge

 

Lyon County District Court

File No. C0-05-34

 

 

Douglas Kluver, P.O. Box 219, Montevideo, MN  56265 (for appellant)

 

Joseph Wentzell, 2855 Anthony Lane South, Suite 200, St. Anthony, MN  55418 (for respondent)

 

            Considered and decided by Klaphake, Presiding Judge; Stoneburner, Judge; and Wright, Judge.

 

U N P U B L I S H E D  O P I N I O N

 

WRIGHT, Judge

            Appellant bank challenges the district court's entry of summary judgment, arguing that material issues of fact remain as to whether respondent (1) converted appellant's security interest, (2) was negligent regarding appellant's security interest, and (3) was unjustly enriched.  We affirm.

FACTS

            The Boerbooms are family farmers in Lyon County, Minnesota.  To cover expenses for the 2001 growing season, Scott Boerboom obtained a $408,000 loan from appellant Prairie Sun Bank (Prairie Sun) using his 2001 crops as collateral.  Prairie Sun perfected its security interest in the crops by filing a Uniform Commercial Code (UCC-1) financing statement with the Minnesota Secretary of State in January 2001 and by recording a statutory lien notice in the county recorder's office in June 2001. 

For several years, including 2001, Scott Boerboom rented farmland from his mother, respondent Vivian Boerboom.  Vivian Boerboom also filed a UCC-1 financing statement on June 28, 2001, in an effort to perfect a landlord's lien to secure payment for the rental of the farmland to her son.  Because Vivian Boerboom's UCC-1 financing statement was filed more than 30 days after crops were planted, her security interest was inferior to that of Prairie Sun.  In addition to renting her land to her son, Vivian Boerboom also loaned him money for operating expenses for the 2001 season.  Vivian Boerboom was not aware of the bank's security interest in the 2001 crop.

            After the 2001 harvest, Scott Boerboom sold his crop to local grain elevators.  Scott Boerboom arranged for the grain to be transported to the grain elevators and asked them to make checks directly payable to various creditors, including Vivian Boerboom.  Vivian Boerboom was not involved with the transport or sale of the grain to the grain elevators.  Between October 2001 and January 2002, Vivian Boerboom received checks in the mail totaling $44,709 from three grain elevators.  She was advised by Scott Boerboom that he had instructed the grain elevators to pay her for the rental of the farmland when he sold his crop.

            In May 2002, Scott Boerboom filed for bankruptcy.  Four months later, Prairie Sun filed a complaint in United States Bankruptcy Court for the District of Minnesota, claiming fraud and conversion against Scott Boerboom.  In December 2003, Scott Boerboom and Prairie Sun entered into a settlement agreement that satisfied in full Scott Boerboom's debt to Prairie Sun for $20,000.

In February 2004, Prairie Sun wrote a letter to Vivian Boerboom requesting her to relinquish the funds from the 2001 sale of Scott Boerboom's grain.  When she declined to do so, Prairie Sun filed a complaint against her, claiming conversion, negligence, and unjust enrichment (money had and received).  Prairie Sun moved for summary judgment on all issues in December 2004.  Vivian Boerboom filed an answer and a cross-motion for summary judgment.  On February 22, 2005, the district court granted summary judgment for Vivian Boerboom.  This appeal by Prairie Sun followed.

D E C I S I O N

On appeal from summary judgment, we ask whether there are any genuine issues of material fact and whether the district court erred in its application of the law.  Prior Lake Am. v. Mader, 642 N.W.2d 729, 735 (Minn. 2002); State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  A genuine issue of material fact does not exist when "the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party."  DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,475 U.S. 574, 587, 106 S. Ct. 1348, 1356 (1986)).  "[T]he party resisting summary judgment must do more than rest on mere averments."  Id.at 71.  A genuine issue for trial must be established by substantial evidence.  Id.at 69-70.  We view the evidence in the light most favorable to the party against whom summary judgment was granted.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  Summary judgment is appropriate when a party fails to establish the existence of an element essential to the party's case.  Bersch v. Rgnonti & Assocs., Inc., 584 N.W.2d 783, 786 (Minn. App. 1998), review denied (Minn. Dec. 15, 1998).

I.

            Prairie Sun argues that the district court erred when it granted summary judgment in favor of Vivian Boerboom on the conversion, negligence, and money-had-and-received claims.  Prairie Sun argues that Vivian Boerboom was aware of Prairie Sun's security interest in Scott Boerboom's grain, that she represented to the grain elevators that she was the owner and seller of the grain, and that she colluded with Scott Boerboom to defeat Prairie Sun's security interest.  Because these are factual arguments, we first consider whether the record presents any genuine issues of material fact.

            Vivian and Scott Boerboom submitted affidavits to the district court in which they denied all of Prairie Sun's allegations.  In his affidavit, Scott Boerboom described his regular practice of selling grain and directing the grain elevators to pay his creditors directly.  Prairie Sun submitted documentation of its lending arrangement and settlement agreement with Scott Boerboom, as well as checks from the grain elevators made payable to Vivian Boerboom.  Prairie Sun asserted that it intended to impeach Scott Boerboom with testimony regarding his familial relationship with Vivian Boerboom and the operating procedures of the grain elevators.  But Prairie Sun presented no evidence impeaching either Scott or Vivian Boerboom.  Indeed, Prairie Sun did not present any evidence that would lead a rational trier of fact to conclude that Vivian Boerboom made any representations to the grain elevators or in any way colluded with her son.  Because Prairie Sun's assertions are no more than mere averments, the district court correctly concluded that there are no genuine issues of material fact as to Vivian Boerboom's conduct.

II.

Prairie Sun also argues that the district court erred as a matter of law in granting summary judgment on its conversion, negligence, and money-had-and-received claims.  Although each of these claims has different elements, in light of the circumstances in this case, the analysis related to all three claims is largely the same.  Vivian Boerboom is entitled to summary judgment because Prairie Sun's claims against her derive from its claim against Scott Boerboom.  Prairie Sun has not presented any evidence of independent wrongdoing on Vivian Boerboom's part, thus it has no independent claim against her.  When Prairie Sun settled its claim against Scott Boerboom, it also extinguished its derivative claims against Vivian Boerboom.  We briefly address each of Prairie Sun's claims. 

A.

Conversion is "an act of willful interference with the personal property of another which is without justification or which is inconsistent with the rights of the person entitled to the use, possession or ownership of the property."  Dain Bosworth Inc. v. Goetze, 374 N.W.2d 467, 471 (Minn. App. 1985).  "The [i]nnocent misapplication or deprivation of funds owned by others is in the law no less a conversion because such was done innocently or in ignorance.  Good faith is not a defense to a claim of conversion."  Id. (quotations and citations omitted).

A settlement between a debtor and creditor that extinguishes a creditor's security interest in grain discharges vicarious liability for buyers and recipients of proceeds from the grain sale.  Austin Farm Ctr., Inc. v. Austin Grain Co., 418 N.W.2d 181, 186 (Minn. App. 1988); see Farmers State Bank of Delavan v. Easton Farmers Elevator, 457 N.W.2d 763, 766 (Minn. App. 1990) (affirming rule from Austin Farm Ctr. and noting that "[b]ank, having settled with and released [the debtor], has already received the proceeds and had its one satisfaction"), review denied (Minn. Sept. 20, 1990).

In Farmers State Bank, a grain elevator bought grain on which there was a security interest, paid half of the proceeds to the farmer, and accepted the other half in payment of a debt.  457 N.W.2d at 764.  Vivian Boerboom is in the same position as the grain elevator in Farmers State Bank in that she received proceeds from a conversion in satisfaction of a debt.  Vivian Boerboom is thus subject to the same rule of law as the grain elevator in Farmers State Bank.  Prairie Sun's settlement with Scott Boerboom extinguishes its conversion claim against Vivian Boerboom.  Prairie Sun admits that the Farmers State Bank rule applies and that the grain elevators in this case are immune from liability by virtue of its settlement with Scott Boerboom.  But Prairie Sun argues that Vivian Boerboom remains liable because of her fraud and collusion with her son.  As addressed above, however, the record offers no factual support for this contention.

Prairie Sun also argues that it never intended its settlement with Scott Boerboom to release third-party claims.  In the settlement agreement, Prairie Sun inserted language specifying that "BANK shall upon the conclusion of any third party claims which may be pursued by Bank supply to [Son], and each of them, a termination of any and all UCC filings which may be on file at this time against [Son] in favor of BANK . . . ."  Prairie Sun argues that this language preserved its third-party claims.  In Farmers State Bank, we addressed preservation of third-party claims akin to those at issue here, noting that regardless of whether a bank attempts to preserve third-party claims, a secured creditor has the right to only one recovery.  457 N.W.2d at 766.  Prairie Sun received its recovery from Scott Boerboom in the amount of $20,000.  Any secondary claim against Vivian Boerboom was extinguished by the settlement between Prairie Sun and Scott Boerboom.

B.

Prairie Sun's settlement with Scott Boerboom also extinguishes any negligence claim because Prairie Sun cannot show injury.  To withstand a defendant's motion for summary judgment, a plaintiff claiming negligence must establish a prima facie case.  See Patton v. Newmar Corp., 538 N.W.2d 116, 119-20 (Minn. 1995) (holding that district court properly granted summary judgment when plaintiff failed to establish prima facie case of liability).  In a negligence action, the defendant is entitled to summary judgment when the record reflects a complete lack of proof on any of the four essential elements of the claim: (1) the existence of a duty of care; (2) a breach of that duty; (3) an injury; and (4) the breach of the duty being the proximate cause of the injury.  Schafer v. JLC Food Sys., Inc., 695 N.W.2d 570, 573 (Minn. 2005).  Prairie Sun's injury is the nonpayment of the debt owed by Scott Boerboom.  Prairie Sun's settlement with Scott Boerboom cured that nonpayment.  See Austin Farm Ctr., 418 N.W.2d at 186 (citing Hoffmann v. Wiltscheck, 411 N.W.2d 923, 926 (Minn. App. 1987), review denied (Minn. Nov. 13, 1987)) (holding that grain buyers could not be liable on security interest for a discharged debt).  Vivian Boerboom is entitled to summary judgment on the negligence claim.

C.

Finally, Prairie Sun Bank argues that the district court erred in granting summary judgment on its claim for money had and received.  A claim alleging money had and received is analyzed as an unjust-enrichment claim.  See Heywood v. N. Assurance Co. of Detroit, 133 Minn. 360, 363, 158 N.W. 632, 633 (1916) (noting that the claim "is founded on the principle that no one ought unjustly to enrich himself at the expense of another").  A party cannot claim unjust enrichment "simply because one party benefits from the efforts or obligations of others, but instead it must be shown that a party was unjustly enriched in the sense that the term ‘unjustly' could mean illegally or unlawfully."  First Nat'l Bank of St. Paul v. Ramier, 311 N.W.2d 502, 504 (Minn. 1981); see also Cady v. Bush, 283 Minn. 105, 110, 166 N.W.2d 358, 362 (1969) (declaring that principle of unjust enrichment should not be invoked merely because a party has made a bad bargain and where there was no mistake or actionable fraud).  Redress cannot be predicated on the equitable doctrine of money had and received when the rights of the parties are governed by a valid contract.  Colangelo v. Norwest Mortgage, Inc., 598 N.W.2d 14, 19 (Minn. App. 1999), review denied (Minn. Oct. 21, 1999).  Prairie Sun's settlement with Scott Boerboom extinguishes its unjust enrichment claim because Vivian Boerboom's enrichment was not unjust.  Moreover, the record is devoid of any evidence that Vivian Boerboom's conduct was unlawful.  Vivian Boerboom accepted checks from the grain elevators in payment of a debt owed to her by her son.  Once Prairie Sun settled its claim with Scott Boerboom, its superior interest in the proceeds from the grain sales was extinguished.  Thus, summary judgment in favor of Vivian Boerboom on the claim of money had and received was properly granted.

Affirmed.