Baker v. Sunbelt Business Brokers, No. A07-0514 (Minn. App. 3/11/2008)
| Decision Date | 11 March 2008 |
| Docket Number | No. A07-0514.,A07-0514. |
| Parties | Keith Baker, Appellant, v. Sunbelt Business Brokers, Respondent, Dogs Howling, Inc., Respondent. |
| Court | Minnesota Court of Appeals |
Appeal from the District Court, Hennepin County, File No. 27-CV-06-15730.
Allen H. Gibas, 1422 West Lake Street, Suite 320, Minneapolis, MN 55408 (for appellant)
Christopher M. Daniels, Jesse H. Kobort, Daniels & Wymore, 3165 Fernbrook Lane North, Plymouth, MN 55447 (for respondent Sunbelt Business Brokers)
Edward P. Sheu, Best & Flanagan, 225 South Sixth Street, Suite 4000, Minneapolis, MN 55402 (for respondent Dogs Howling, Inc.)
Considered and decided by Minge, Presiding Judge; Halbrooks, Judge; and Wright, Judge.
UNPUBLISHED OPINION
In this action arising from the attempt to purchase a business, appellant challenges the dismissal of his lawsuit under Minn. R. Civ. P. 12.02(e) for failure to state a claim on which relief could be granted and moves to strike portions of respondents' appellate brief. All parties seek attorney fees related to the motion. We affirm in part, reverse in part, and remand. We also grant appellant's motion to strike portions of respondents' brief and deny each party's motion for attorney fees.
Appellant Keith Baker attempted to purchase a bar and restaurant business from respondent Dogs Howling, Inc. (Dogs Howling). Respondent Sunbelt Business Brokers (Sunbelt) was the real estate broker for the transaction.
Because of the procedural posture of the case, the facts alleged in Baker's complaint are assumed to be true.1 According to the complaint, in May 2004, Baker and Sunbelt signed a nondisclosure agreement, which identified two businesses for Baker's consideration. One of the businesses was owned by Dogs Howling. The nondisclosure agreement required Baker to keep all information about the businesses confidential. It also prohibited Baker from "circumvent[ing] Sunbelt in any transaction or contact with the seller(s)" or "contact[ing] the seller(s), or agents, customers, vendors or employees of the Business(es) directly or indirectly." Baker agreed to conduct "all negotiations, inquiries, investigations, offers to purchase, and/or letters of intent" through Sunbelt. In the nondisclosure agreement, Baker also "acknowledges" being
advised that Sunbelt is an agent for the seller(s) in this transaction. I agree that should I buy, lease or come into possession of the Business(es) during the listing term or within one year from the date below, I will not interfere with Sunbelt's right to fee under Sunbelt's agreement with the seller(s).
During negotiations to purchase the bar and restaurant business from Dogs Howling, Sunbelt's employee, Matt Schroder, represented to Baker that Sunbelt would represent Baker's interests in connection with the purchase of the bar and restaurant business. On June 4, 2004, Sunbelt and Baker signed a Broker Services Acknowledgement, which stated that Sunbelt does not perform due diligence and advised Baker to obtain legal and accounting advice. The Broker Services Acknowledgement also stated: "Upon the introduction of a Business or purchase of the Business, both parties agree that [Sunbelt, its agents, and employees have] fulfilled [their] Brokerage Services concerning the sale/purchase of the Business."
That same day, Baker and Dogs Howling signed a purchase agreement (June purchase agreement) in which Baker agreed to buy the business for $500,000. The June purchase agreement required a total down payment of $150,000 and the balance to be paid pursuant to a secured promissory note. Under the June purchase agreement, "[b]oth [Baker] and [Dogs Howling] agree that any information provided by [Sunbelt] has not been verified by [Sunbelt] and both parties shall rely solely on their own due diligence and hold [Sunbelt] harmless from all claims regarding this transaction." The June purchase agreement also advised: Baker and Dogs Howling agreed "to execute all documents necessary to consummate this transaction."
After signing the June purchase agreement, Baker deposited $10,000 in earnest money with Sunbelt. Under its terms, unless the June purchase agreement was amended in writing, if Baker failed or refused to complete the transaction within 14 days after the closing date of July 13, 2004, any funds on deposit with Sunbelt would "be forfeited without notice, and, at [Sunbelt's] option, shall be split 50% to [Dogs Howling], and 50% to [Sunbelt]."
On June 10, Baker and Dogs Howling signed an addendum to the June purchase agreement (purchase-agreement addendum), which added several contingencies, including: Baker's review and approval of all financials and records, Baker's review and approval of lease terms and conditions, and an agreement between Baker and Dogs Howling as to a training and transition period. The contingencies were set to expire on June 30, 2004.
Sunbelt subsequently induced Baker to execute two contingency-removal forms during the month of July. The first contingency-removal form, which was executed in early July, provided that two of the contingencies listed in the purchase-agreement addendum had been satisfied and consequently removed them; it also extended the contingency expiration date to mid-July. The second contingency-removal form, which was executed after the expiration date of the first contingency-removal form, removed all contingencies and provided that Baker was "allowing [the] deposit of $10,000 currently held in the Sunbelt Business Brokers trust account to become nonrefundable."
Two days later, Baker and Dogs Howling signed an Agreement Regarding Preparation of Closing Documents (the closing-documents agreement), which delegated to Sunbelt the responsibility to "coordinate with an attorney to close the Transaction." This attorney was to draft closing documents that were "not drafted for the exclusive benefit of either party." The particular documents to be drafted would be those "which, in the attorney's sole opinion, are customary to close the Transaction." Among the enumerated documents, the closing-documents agreement designated "Security Agreement (if applicable)."
Baker alleges that the documents drafted by the attorney selected by Sunbelt favored Dogs Howling's legal interests and set forth terms and conditions that materially altered the essence of the transaction. Specifically, Baker and Dogs Howling differed on the provisions of the security agreement.
The transaction did not close on the rescheduled July date. In August, Sunbelt advised Baker that an additional deposit of $30,000 in earnest money would break the deadlock between Baker and Dogs Howling. In reliance on this representation, Baker deposited $30,000 in Sunbelt's trust account.
In December, Sunbelt, purportedly on behalf of Dogs Howling, met with Baker's counsel to negotiate the terms of a new purchase agreement (proposed December purchase agreement) that would include the security agreement, which had not been part of the June purchase agreement. Dogs Howling subsequently rejected the proposed December purchase agreement and security agreement, asserting that Sunbelt was not acting as its agent.
On May 16, 2005, Sunbelt notified Baker that if the transaction did not close by May 19, Sunbelt would deem the $40,000 in earnest money forfeited and distribute it to Dogs Howling and Sunbelt. The transaction did not close, and the funds were distributed.
Baker brought a lawsuit, alleging claims against Sunbelt for breach of fiduciary duty, negligence, and violation of the Minnesota Deceptive Trade Practices Act, Minn. Stat. § 325D.44, subd. 1(5), (7), (13) (2006). The complaint also alleged claims against Sunbelt and Dogs Howling for conversion and breach of contract. Baker attached as exhibits to the complaint the Broker Services Acknowledgement, the June purchase agreement, the purchase-agreement addendum, the closing-documents agreement, and the proposed December purchase agreement that was repudiated by Dogs Howling.
Sunbelt and Dogs Howling moved to dismiss each claim for failure to state a claim on which relief could be granted. Minn. R. Civ. P. 12.02(e). In support of their motion, they submitted the nondisclosure agreement and the two contingency-removal forms. Baker's response to the motion included two affidavits, along with emails from Sunbelt's employees purporting to support his allegations that Sunbelt promised to represent his interests.
In its January 9, 2007 order, the district court dismissed each claim alleged in the complaint. In the accompanying memorandum, the district court indicated that, in accordance with Minn. R. Civ. P. 12, its consideration was limited to the complaint and its referenced documents. Finding that the relationship between Sunbelt and Baker was reduced to writing, the district court concluded that oral representations about the nature of the relationship between the parties could not be considered. Therefore, Baker's claims under the Deceptive Trade Practices Act and his breach-of-fiduciary-duty claims failed. The district court also concluded that, because Baker did not close the transaction, relief could not be granted on his breach-of-contract and conversion claims. Concluding that Baker was improperly attempting to convert a breach-of-contract action to a tort action, the district court also dismissed the negligence claim.
This appeal followed. Baker also moved to strike portions of Sunbelt and Dogs Howling's joint brief and for an award of attorney fees incurred in bringing the motion to strike. Sunbelt and Dogs Howling opposed the motion and moved for attorney fees.
Baker argues that the district court improperly considered matters outside the pleadings...
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