Justia North Dakota Supreme Court Opinion Summaries

APM, a property management company, sought a builders risk insurance policy from TCI Insurance Agency, Inc. to cover an apartment building under construction in Fargo. Jay Alsop, APM's president, discussed insurance policies with TCI's agent Devin Gaard. One policy in particular, from Philadelphia Insurance Company, covered lost rent and other "soft costs," such as interest. Alsop also received a quote from a different insurance agency for another policy from Travelers Insurance Company, which was cheaper than the Philadelphia policy. The Travelers policy did not have coverage for lost rent and soft costs. Alsop informed Gaard about the Travelers policy and requested Gaard to procure the policy as it was quoted by the other agency, without change. A fire at the construction site delayed the opening of the apartment building for five months. APM filed a claim under the insurance policy for damages caused by the fire, including lost rent and interest charges. Travelers paid part of the claim, but denied the claim for lost rent and interest because the policy did not provide coverage for those costs. APM sued TCI, alleging TCI and Gaard were negligent for failing to offer APM a policy endorsement that provided additional coverage for lost rent and soft costs. TCI denied liability and moved for summary judgment, claiming that APM did not request the additional coverage for lost rent and soft costs and that TCI and Gaard were not required to offer the additional coverage to APM. The district court granted TCI's motion, concluding APM failed to raise a genuine issue of material fact as to whether Gaard breached his duty to APM. The court also concluded Gaard's duty was not enhanced because APM failed to establish a genuine issue of material fact indicating a special relationship existed between APM and TCI. On appeal, APM argued the district court erred in deciding there were no genuine issues of material fact as to whether: (1) Gaard breached his duty to APM; and (2) a special relationship existed between APM and TCI. Finding no reversible error, the Supreme Court affirmed the grant of summary judgment to TCI. View "APM, LLP v. TCI Insurance Agency, Inc." on Justia Law

In 2007, Thomas and Mari Grabanski and John and Dawn Keeley formed Keeley Grabanski Land Partnership for the purpose of purchasing land in Texas. In 2008 the Grabanskis and Keeleys formed G & K Farms for the purpose of farming the Texas land. G & K was insured under the Supplemental Revenue Assistance Payments Program ("SURE"), which was administered by the Farm Service Agency of the United States Department of Agriculture. In 2007 and 2008 Choice Financial Group made a series of loans totaling more than $6.75 million to the Grabanskis and the Keeleys on behalf of G & K. Choice entered into a number of security agreements with G & K and its principals to secure the debt. In 2008 PHI Financial Services, Inc. loaned $6.6 million to G & K, the Grabanskis and their various other business entities. PHI entered into security agreements with the debtors which included a provision granting it a security interest in certain "General Intangibles." The Grabanskis and their business entities eventually defaulted on their loans. Johnston Law Office, P.C. represented the Grabanskis in personal bankruptcy proceedings initiated in 2010, and represented them and their business entities during the following two years in numerous lawsuits stemming from the bankruptcy. In March 2011, PHI obtained a judgment against the Grabanskis and G & K in the United States District Court for the District of North Dakota. G & K received a SURE payment from the federal government for 2009 crop losses. The Grabanskis did not deposit the disaster payment in G & K's North Dakota bank account with Choice because Johnston advised them that Choice would offset the funds against G & K's debt to Choice. Instead, G & K deposited the SURE payment in a new Texas bank account. The Grabanskis then transferred a portion of the SURE payment from the Texas bank account to Johnston's law office trust account through two transactions: one to pay Johnston's attorney fees, and the other for Tom Grabanski's father, Merlyn Grabanski, to indemnify him for monies paid on behalf of G & K the previous year. PHI brought this action against Johnston seeking to recover additional monies based on theories of conversion and fraudulent transfer. PHI later added Choice as a defendant to determine priority of the competing security interests. The district court granted summary judgment ruling PHI's security interest had priority over the security interest held by Choice. Following a bench trial the court ruled the money transferred to Tom Grabanski's father was a fraudulent transfer and PHI was entitled to recover that amount from Johnston. The court also found that a $150,000 payment was fraudulent, but found G & K received reasonably equivalent value for the transfer. The court allowed Johnston to retain $35,000 of the remaining funds, which the court found equaled the value of legal services provided to G & K, but voided the remaining $115,000. A judgment with interest totaling $167,203.24 was entered in favor of PHI. Johnston argued on appeal that the district court erred in holding it liable for any part of the $170,400 the law firm received from G & K's Texas bank account. Upon review, the Supreme Court reversed the award of prejudgment interest and remanded for recalculation. The Court affirmed in all other respects. View "PHI Financial Services, Inc. v. Johnston Law Office, P.C." on Justia Law

Patterson Enterprises, Inc., appealed and Titan Machinery, Inc., cross-appealed a judgment and an order denying their post-judgment motions after the district court ordered Patterson to pay Titan $88,707.75 due under several oral equipment leases. Patterson argued the district court erred in admitting into evidence an exhibit summarizing amounts Patterson owed Titan under the oral leases, the court erred in awarding Titan $5,617.63 for finance charges and the court erred in finding the equipment did not breach an implied warranty of merchantability. In its cross-appeal, Titan argued the court clearly erred in calculating the amount Patterson owed Titan for three items of leased equipment. After review, the Supreme Court concluded the trial court did not abuse its discretion in admitting the debt summary into evidence. The Supreme Court was unable to understand the basis for the court's decision regarding late payment charges as a component of Patterson's obligations to Titan, and reversed and remanded for findings addressing this issue. The Court reversed and remanded for findings about the implied warranty of merchantability. The Court was not convinced the trial court erred in calculating Patterson's lease payments for certain items of equipment. As such, the Supreme Court affirmed in part, reversed in part, and remanded for further proceedings. View "Titan Machinery, Inc. v. Patterson Enterprises, Inc." on Justia Law

Prairie Supply, Inc. ("Prairie") sued Raymond Winter, doing business as Prairie Wood Products, in small claims court alleging Winter sold Prairie wood stakes that did not conform to samples provided to Prairie. Winter answered, alleging Prairie's claim affidavit was defective, and he was not a party to the contracts with Prairie. Winter asserted the agreements for the wood stakes were between Prairie and his employer Pro Pallet, Inc., a North Dakota corporation doing business as Prairie Wood Products. After an unrecorded hearing, the small claims court entered a $15,000 judgment against Winter. Winter petitioned the district court for a writ of certiorari, arguing the small claims court exceeded its jurisdiction. The district court denied Winter's petition, concluding the small claims court had jurisdiction over the action, and Winter was improperly seeking to use a writ of certiorari to appeal from the small claims court judgment. Finding that the small claims court did not exceed its jurisdiction, the Supreme Court affirmed and declined supervisory jurisdiction. View "Winter v. Solheim" on Justia Law

Red River Trucking, LLC, appealed an amended judgment determining Peterbilt of Fargo, Inc., had a valid repairman's lien for completed repairs to a truck owned by Red River Trucking, Peterbilt breached a contract with Red River Trucking to repair the truck, and Red River Trucking was entitled to $390.66 in damages for Peterbilt's breach of the repair contract. After review of the parties' arguments on appeal, the Supreme Court concluded Red River Trucking's appeal from the amended judgment was timely and issues about damages for breach of the repair contract were not moot because of the subsequent sheriff's sale of the truck. The Court also concluded the district court did not clearly err in finding Red River Trucking failed to mitigate its damages and in awarding Red River Trucking $390.66 in damages for Peterbilt's breach of the repair contract. View "Peterbilt of Fargo, Inc. v. Red River Trucking, LLC" on Justia Law

Aggregate Construction, Inc., appealed the grant of summary judgment which declared certain leases of shop and office property to Aggregate were terminated on December 31, 2011, and dismissing Aggregate's counterclaims against Robin and Kathleen Funke. The Supreme Court concluded after review that the district court did not err in construing the leases to effectuate a termination on December 31, 2011, and in dismissing Aggregate's counterclaims. View "Funke v. Aggregate Construction, Inc." on Justia Law

Susan White appealed a judgment on the pleadings in favor of Glen and Loretta White in an action by Glen and Loretta White against T.P. Motel, L.L.C., and an order denying her motion to intervene. Susan White was married to Ross White, and the daughter-in-law of Glen and Loretta. Susan and Ross were the co-owners and members of T.P. Motel. T.P. Motel entered into a contract for deed to purchase real property and a motel in Mandan from Glen and Loretta. The contract for deed required T.P. Motel to make monthly payments of $2,500 to Glen and Loretta beginning on March 15, 2012. T.P. Motel did not make payments in March, April, and May of 2012, but began making the monthly payments in June. Susan and Ross separated in January 2013, and Susan moved to California and initiated a divorce action against Ross in California. T.P. Motel failed to make monthly payments on the contract for deed in January and February 2013, but began making payments again in March 2013. In February 2013, Glen and Loretta served notice of default on the contract for deed on T.P. Motel and on Susan individually. When T.P. Motel failed to cure the default within 30 days as allowed by the contract for deed, Glen and Loretta sued T.P. Motel to cancel the contract for deed. In her answer, Susan included a counterclaim against Glen and Loretta and a crossclaim against Ross, alleging fraud, collusion, malicious intent, and breach of fiduciary obligations. The counterclaim alleged Ross, Glen, and Loretta acted in concert to operate the motel and prevented Susan from entering and operating the motel. Susan alleged Ross, Glen, and Loretta White perpetrated a fraud on her by acting in concert to manipulate T.P. Motel's financial information, by accepting and not reporting cash rentals of property, and by paying non-business bills and expenses out of T.P. Motel's accounts. A hearing was held on T.P. Motel's motion to dismiss Susan's crossclaim against Ross, and her motion to join Ross as a party to the action. The district court did not rule on the motions. Both parties acknowledged the district court indicated it did not believe Susan was a proper party to the action, and she should have moved to intervene if she wanted to be made a party. Susan moved to intervene, arguing as a fifty-percent owner of T.P. Motel, she had an equal right to answer the complaint on behalf of T.P. Motel. She argued Ross was not acting in the best interest of T.P. Motel by admitting the default and requesting cancellation of the contract for deed. After review, the Supreme Court concluded the district court erred in granting judgment on the pleadings and in denying the motion to intervene. The case was reversed and remanded for further proceedings. View "White v. T.P. Motel, L.L.C." on Justia Law

Service Oil, Inc., appealed and Rory Gjestvang, Brad Bjerke and LaRayne Haakenson cross-appealed a judgment entered after a bench trial dismissing the parties' claims involving their business relationship. Steven Lenthe was the sole owner of Service Oil, which operated convenience stores in North Dakota, and defendants Gjestvang, Bjerke, Haakenson and Don Stetson were employees of Service Oil. Gjestvang started working for Service Oil in 1985, serving as operations manager from 1992 until April 2010. Bjerke was supervisor of eastern North Dakota stores from 1997 until 2010. Haakenson was district supervisor and manager of the Bismarck travel center from 1993 until May 2010. This lawsuit stemmed from a transaction involving the purchase of repossessed wholesale inventory, initially located in a warehouse in Bismarck, and an agreement for the sale of that inventory through Service Oil. In March 2007, American Bank Center in Bismarck contacted Haakenson about purchasing a large volume of repossessed inventory. Gjestvang and Haakenson discussed the matter with Lenthe, and he agreed to provide $700,000 to purchase the inventory. In April 2007, Lenthe, Gjestvang, Haakenson and Bjerke executed a Warehouse Business Agreement to sell the inventory. At about the same time of the agreement, Service Oil finalized the purchase agreement and lease with American Bank Center, resulting in Service Oil purchasing the inventory in Bismarck for its newly established "Merchandise Depot" division for $700,000. In May 2009 Service Oil moved the warehouse operation and remaining inventory to Fargo. In early 2009, Gjestvang created a separate entity called "Prairie Distributing" and, on May 1, 2009, rented a building for its warehouse business. In May 2009, defendants Les Laidlaw and Rodney Demers started an entity under the trade name "Laidlaw Sales." Laidlaw and Demers also were sales representatives of Prairie Distributing. Gjestvang purchased merchandise for Prairie Distributing and used the services of Demers and Laidlaw to sell products to Service Oil, which was done without informing Service Oil. Service Oil sued Gjestvang, Bjerke, Haakenson, Stetson, Demers and Laidlaw. Service Oil alleged the defendants conspired to deceive Service Oil and sought a refund of commission overpayments from Gjestvang, Bjerke and Haakenson. Service Oil also asserted a claim against Gjestvang for conversion of certain brand-name gloves, asserting the gloves were Service Oil's property and were retrieved from Prairie Distributing's garbage. Upon review, the Supreme Court concluded that the district court's underlying findings of fact were not clearly erroneous and the court did not err in dismissing all the parties' claims. Accordingly, the Supreme Court affirmed. View "Service Oil, Inc. v. Gjestvang" on Justia Law

Sterling Development Group Three, LLC, and Sterling Development Group Eight, LLC, appealed a judgment dismissing their action against James Carlson to collect on two personal guarantees, and an order awarding Carlson costs and disbursements. In 1983, Carlson founded PRACS Institute, Ltd., a medical research facility which began operating in East Grand Forks, Minnesota. In 1999, Sterling Development Group Three entered into a 15-year lease agreement with PRACS for a building located in East Grand Forks. Carlson signed the lease agreement as the president of PRACS. Carlson also signed a personal guaranty. When PRACS expanded in 2004, Sterling Development Group Eight built an expansion to the Sterling Three building, and PRACS entered into a lease agreement with Sterling Eight for a term running simultaneously with the Sterling Three lease. Carlson signed a similar personal guaranty for the Sterling Eight lease. In January 2006, Carlson sold PRACS to Contract Research Solutions, Inc., which the parties refer to as Cetero. The Sterling companies consented to this "change of control." Carlson's daily involvement in PRACS ceased at that point. Carlson received Cetero stock in the sale and became a member of Cetero's seven-member board of directors. In 2010, Cetero suspended its East Grand Forks operations, but continued to pay rent to the Sterling companies. In the spring of 2012, Cetero filed for bankruptcy. The bankruptcy trustee eventually rejected the East Grand Forks Cetero leases with the Sterling companies and stopped paying rent. The Sterling companies then brought this action against Carlson to collect more than $600,000 for unpaid rent under his personal guarantees. Following a bench trial, the district court dismissed the action. The court found Carlson was exonerated from liability under the personal guarantees because the original lease agreements had been altered in three respects by the Sterling companies and Cetero or PRACS without Carlson's knowledge or consent. The Sterling companies argued on appeal to the Supreme Court that the district court erred in finding the original lease agreements were contractually altered without Carlson's knowledge or consent, resulting in exoneration of his personal guaranty obligations. Because the district court's finding that the principal's contractual obligations were altered without Carlson's knowledge or consent was not clearly erroneous, and the court did not abuse its discretion in awarding costs and disbursements, the Supreme Court affirmed the judgment and order. View "Sterling Development Group Three, LLC v. Carlson" on Justia Law

Northstar Founders, LLC is a North Dakota company which was seeking financing to build a canola processing plant near Hallock, Minnesota. Northstar worked with several companies in an effort to raise funds for the project. In early April 2008, Northstar entered into a financial advisory agreement ("MDL Agreement") with MDL Consulting Group and Irish Financial Group, Inc. The agreement provided that MDL and Irish might act as a finder of potential sources of financing and required Northstar to pay various fees to MDL and Irish for their services, including success and equity fees if certain conditions were met. MDL and Irish introduced Northstar to Peter Williams. Williams was an investment banker in the New York office of Oppenheimer & Co., Inc., and was also a member of the board of directors of Hayden Capital Corp. MDL and Irish suggested Northstar enter into a financial advisory agreement with Hayden Capital USA (a subsidiary of Hayden Capital). Northstar signed a non-exclusive letter agreement with Hayden USA. Under the agreement, Northstar retained Hayden USA to act as a non-exclusive financial advisor and placement agent in connection with financing for the canola processing plant. Under the agreement, Hayden USA agreed to identify and introduce Northstar to potential purchasers or lenders and assist in structuring the financing and terms of the equity or debt financing. The agreement provided Northstar would pay Hayden USA a financing fee as compensation for its services if the conditions of the agreement were met. Stephen Hayden signed the agreement for Hayden USA. On April 28, 2008, Northstar entered into a confidentiality and non-disclosure agreement with Oppenheimer, which stated the purpose of the agreement was to facilitate business dealings between Northstar and Oppenheimer associated with the development of the processing plant. Williams signed the agreement for Oppenheimer. In July 2008, Williams introduced Northstar to PICO Holdings, Inc. In 2010, PICO Holdings and Northstar negotiated a transaction to build the canola processing plant. Hayden USA demanded a finder's fee from Northstar under the Hayden Agreement, claiming Williams was working on behalf of Hayden USA when he introduced Northstar to PICO Holdings. Irish and MDL also sought a finder's fee from Northstar, claiming they satisfied the terms of the MDL Agreement when they introduced Northstar to Williams. Hayden Capital US, Hayden Capital Corp., Peter Williams, and Stephen Hayden, and MDL Consulting Group, LLC and Andrew Zweig appealed, and Northstar Founders, LLC cross-appealed district court judgment declaring that Northstar did not owe Hayden or MDL finder's fees for securing financing for a canola processing plant. Finding no reversible error, the Supreme Court affirmed. View "Northstar Founders, LLC v. Hayden Capital USA, LLC" on Justia Law