Gjovik v. Strope
| Decision Date | 06 March 1987 |
| Docket Number | No. C4-86-371,C4-86-371 |
| Citation | 401 N.W.2d 664 |
| Parties | Grant GJOVIK, Respondent, v. Lawrence STROPE, Petitioner, Appellant, Lawrence McKee, Respondent, Martin Gubb, et al., Defendants. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
The evidence sustained the trial court's finding that respondent Gjovik accepted appellant's withdrawal from partnership obligations.
Kurt J. Marben, Thief River Falls, for respondent Grant Gjovik.
Robert J. Schmitz, Mark E. O'Boyle, Crookston, for appellant Lawrence Strope.
Heard, considered and decided by the court en banc.
Respondent Grant Gjovik brought an action to collect on loans made to the partnership of Lawrence McKee and petitioner Lawrence Strope. The trial court found that McKee had assumed all the obligations of the partnership and that Strope had been discharged from partnership liabilities. The trial court entered judgment against McKee and dismissed the action against Strope. The court of appeals reversed the judgment for Strope, finding him still liable for partnership debts. Strope appeals this decision. We reverse and reinstate the trial court's decision.
In 1977, Grant Gjovik purchased 2,111 acres of land in Roseau County, Minnesota, known as the Diamond H Ranch. In October 1978, Gjovik leased a Steiger tractor, a Massey-Ferguson combine, and a grain handling system from IFG Leasing, Inc. Each of these leases required Gjovik to make lease payments every October. In July 1979, Gjovik borrowed $340,000 from Thorp Credit, Inc., so as to purchase 200 other acres of farmland and refinance the debt on his farm equipment. As collateral for the loan from Thorp, Gjovik gave them a mortgage in the 200 acres of land purchased and also granted a security in certain farm machinery. The Thorp loan was to be repaid in four annual installments of $91,162 due each May beginning in 1980.
In the fall of 1979, Gjovik talked with Lawrence Strope and Lawrence McKee, who had formed a partnership for the purpose of investing in land in northwestern Minnesota. Originally, Strope and McKee were interested only in purchasing Gjovik's 2,311 acres of land, but then inquired about purchasing Gjovik's farm equipment also. A contract was drawn up on March 1 to sell Gjovik's farm and farm machinery to Strope and McKee for $2,227,900 and the assumption of Gjovik's debts. The contract expressly provided for the execution of two subsequent agreements: a contract of deed for 2,111 acres of land and an assumption of liabilities agreement designed to transfer Gjovik's obligations as purchaser of the Diamond H Ranch, his debt with Thorp and his obligation under the lease contracts with IFG. The details of this second agreement were left unstated until Strope and McKee's accountant, Norm Hayes, could work out the details. The contract for deed was signed by all parties on March 17, 1980. However, only Gjovik and McKee signed the assumption of liabilities.
Immediately following the March 1 sale, Gjovik was hired to manage operations on the Diamond H Ranch. From March until May, Strope supervised operations on the farm for the partnership, visiting it approximately once a month. By May, the partnership needed money to meet its debts. Strope had little money of his own, his intended role being that of a source of farm management expertise. McKee, who was to have supplied required capital, had suffered financial losses in connection with McKee's brokerage business in Boston. Because of its financial needs, the partnership could no longer afford a non-contributing partner and, thus, Strope resigned. Strope's resignation, effective May 20, was contained in a May 19 letter to McKee. Later, McKee acquired two new partners, Martin and Queenie Gubb. Strope continued to supervise operations of the farm on monthly visits through August 1980, drawing a salary as a manager. Strope testified he informed Gjovik of his withdrawal in May. Gjovik only recalls hearing of Strope's withdrawal indirectly from McKee in August. After discussing the matter with Norm Hayes, Gjovik's accountant, Strope chose not to sign the assumption of liabilities agreement contained in the March contract. After August, McKee supervised operations at the farm instead of Strope.
The partnership lacked funds in May 1980 to make the payment due to Thorp. Gjovik agreed to lend the money required as well as $12,700 more needed for daily operations. The checks were made payable to Strope and McKee and deposited in a partnership account, one to which Strope retained rights of withdrawal. Gjovik discussed repayment of these loans with Strope in the early summer of 1980 and with McKee after August. Gjovik's understanding was that half of the loan would be paid in the fall and the other half in the spring. Gjovik received partial payment of the loans in the fall of 1980. On July 15, 1981, McKee signed a promissory note to Gjovik for $83,207, the balance remaining on Gjovik's loans. Strope was not contacted with regard to this note and knew nothing about it. McKee made several further payments on this note, but left a balance of $25,203.94 still owing.
In May of 1981, the second payment on the debt to Thorp came due. McKee advised Gjovik that the money was not available, and the two decided to auction off some farm machinery to raise money. The sale occurred on July 15, 1981, and the proceeds reduced the debt to Thorp to $219,000. Strope received no notice of the sale.
Most of the equipment sold at auction was security for the loan to Thorp. Thorp notified Gjovik in September 1981 that the loan was now under-secured. Thorp asked Gjovik for a mortgage in an 80-acre homestead Gjovik had acquired with the proceeds from the sale of the farm. Gjovik contacted McKee, who told him that if Gjovik agreed to give Thorp the additional security, McKee would be able to sell the farmland and pay the debt to Thorp.
On November 30, 1981, Gjovik gave Thorp the additional security requested. Thorp then loaned Gjovik and McKee $287,600, of which $219,000 was used to pay off the original debt to Thorp and the remaining to release the existing mortgage on Gjovik's homestead. McKee signed the new note as an individual. Gjovik, McKee and the Gubbs all signed the new mortgage covering Gjovik's land. Strope was not consulted or otherwise involved with the renegotiation of the loan.
The first payment on the new Thorp loan was due March 1982. Gjovik...
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...96, 102 (Minn.1999) (“An appellate court may not reverse a trial court due to mere disagreement with its findings.”); Gjovik v. Strope, 401 N.W.2d 664, 668 (Minn.1987) (stating an appellate court “should not substitute its findings for that of the trial court merely because it feels that th......
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