Hansen v. U. S. Bank Nat'Lass'N

• Decision Date: 02 July 2018
• Docket Number: A17-1608
• Parties: Jill Hansen, et al., Appellants, v. U. S. Bank National Association, as Special Administrator and Personal Representative of the Estate of Robert J. Hansen, Respondent.
• Court: Minnesota Court of Appeals

Jill Hansen, et al., Appellants, v. U. S. Bank National Association, as Special Administrator and Personal Representativeof the Estate of Robert J. Hansen, Respondent.

A17-1608

STATE OF MINNESOTA IN COURT OF APPEALS

July 2, 2018

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2016).

Affirmed

Schellhas, Judge

Hennepin County District Court

File No. 27-CV-17-3332

Richard W. Huffman, James T. Smith, Huffman, Usem, Crawford & Greenberg, P.A., Minneapolis, Minnesota (for appellants)

Martin S. Fallon, Leora M. Maccabee, Maslon LLP, Minneapolis, Minnesota (for respondent)

Considered and decided by Schellhas, Presiding Judge; Reyes, Judge; and Randall, Judge.^*

UNPUBLISHED OPINION

SCHELLHAS, Judge

Appellants challenge the dismissal of their breach-of-fiduciary-duty and unjust-enrichment claims against respondent, arguing that the district court erred in concluding that their claims are barred by the applicable six-year statute of limitations. We affirm.

FACTS

In August 2009, Robert Hansen (Robert) and his brother, Bryan Hansen, agreed to sell certain real property (the property) located in the City of Vadnais Heights to Community Facilities Partnership of Vadnais Heights, LLC (CFP) for approximately $4.6 million. CFP intended to develop and construct a sports complex on the property and to finance its acquisition and construction of the sports complex project through the city's issuance of tax-exempt revenue bonds. The city would then be the "master lessee" of the sports complex.

Under the terms of the purchase agreement, CFP agreed to pay the sellers $2.5 million cash at closing and the balance of $2 million under a tax-exempt subordinate note or notes, (the note) issued by the city. The parties contemplated that CFP or its designated payor would make the note payments to the sellers, using the sports-center lease revenue. Although the purchase agreement stated that the city's lease payments would be "sufficient to pay the amounts due on the Bonds and the Note," the agreement also stated that "payments on the Note are to be subordinate . . . to operating expenses of the Project and debt service on the Bonds." The purchase agreement required CFP to provide the sellers with

a five-year compiled financial forecast prepared by an independent firm of certified public accountants or other independent financial consultant which shows that projected netoperating income of the Project is more than the amount necessary to pay the debt service on the Buyer's financing for such improvements and the debt service on the Bonds and the Note.

Robert died on November 22, 2009, leaving as beneficiaries of his estate his daughter and grandson, appellants Jill Hansen and Leif Layman. To supervise the closing of the sale of the property, the probate court appointed respondent U.S. Bank (the bank) and Barbara Pagel as co-special administrators of Robert's estate.¹ In April 2010, the purchase agreement was amended, changing, among other things, the amount of cash due at closing, and requiring that:

[p]rior to closing, an independent certified public accounting firm or financial professional selected by Seller shall forecast more than enough net operating income is expected to pay the debt service on all improvements and on all Tax-Exempt and Taxable Bonds and Taxable Notes applicable to this Project, its operation, and the property retained by the Buyer herein.

But the bank and Pagel did not select an independent certified public accounting firm or financial professional to conduct the required forecast. The sale of the property nevertheless closed on April 27, 2010, and the probate court entered an "Order Allowing Account and Discharging Special Administrator," finding that the "Special Administrator has otherwise complied with all the orders of the court, with the provisions of applicable law, and fully discharged the duties of the Special Administrator." On April 30, 2010, the probate court appointed the bank and Pagel as co-personal representatives of Robert's estate.

The sports complex experienced revenue shortfalls, and in August 2012, the city by resolution ceased its support of the sports complex. Robert's estate consequently stopped receiving payments under the note. In January 2017, appellants commenced this action in district court against the bank, alleging breach of fiduciary duty and unjust enrichment. Appellants claimed that the bank breached its fiduciary duties as co-special administrator of Robert's estate by (1) failing to require CFP to provide the sellers with financial forecasts of the sports complex as required by the purchase agreement; (2) failing to select an independent certified public accounting firm to forecast CFP's ability to service the debt on the sports complex as required by the amended purchase agreement; and (3) failing to require CFP to demonstrate that the lease with the city was sufficient to pay the sports complex's operating expenses and note payments as required by the amended purchase agreement. Appellants also claimed that the bank breached its fiduciary duty as personal representative of Robert's estate by failing to "hold itself liable for the damages caused by the breaches identified." Appellants further alleged that the bank was unjustly enriched "for all payments it received from [Robert's] Estate in association with and arising out of its breach of its fiduciary duties to the Estate and the closing of the sale of the property in April 2010."

The bank moved to dismiss the complaint under Minn. R. Civ. P. 12.02(e) or, alternatively, for summary judgment under Minn. R. Civ. P. 56.02. The bank argued that appellants' claims are barred by the applicable statute of limitations and the doctrines of res judicata and collateral estoppel. The district court concluded that appellants' breach-of-fiduciary-duty claims against the bank, both as both special administrator and personal representative, are "based solely on the actions, or inactions, of [the bank] which occurredprior to the sale of the property in April 2010." The court also concluded that appellants "suffered 'some' damage when [the bank] closed on the sale of the property without, allegedly, performing the required due diligence." Because appellants suffered "some" damage at the time the sale closed in April 2010, but did not commence their action until January 2017, the court concluded that more than six years had passed, and that appellants' breach-of-fiduciary-duty claim therefore is barred by the six-year statute of limitations.

The district court also concluded that appellants' unjust-enrichment claim is barred by the six-year statute of limitations because appellants "have not filed anything, and there is nothing in the record," to contradict the conclusion in the 2012 scheduling order that the bank's special-administrator fees were addressed in the probate court's April 30, 2010 discharging order. The court therefore granted the bank's motion to dismiss under rule 12.02(e), concluding that appellants' claims are barred by the statute of limitations. In reaching its conclusion, the court did not address the bank's arguments based on collateral estoppel and res judicata.

This appeal follows.

DECISION

Appellants challenge the district court's rule 12.02(e) dismissal of their breach-of-fiduciary-duty and unjust-enrichment claims. "When a case is dismissed pursuant to Minn. R. Civ. P. 12.02(e) for failure to state a claim for which relief can be granted, [appellate courts] review the legal sufficiency of the claim de novo to determine whether the complaint sets forth a legally sufficient claim for relief." Graphic Commc'ns Local 1B Health & Welfare Fund "A" v. CVS Caremark Corp., 850 N.W.2d 682, 692 (Minn. 2014).In so doing, appellate courts "accept the facts alleged in the complaint as true and construe all reasonable inferences in favor of the nonmoving party." Frederick v. Wallerich, 907 N.W.2d 167, 172 (Minn. 2018) (quotation omitted). "[Appellate courts] therefore rely principally on the allegations of the complaint for the factual record." Id. at 170. We also consider statements or documents incorporated in or attached to a complaint as exhibits. Minn. R. Civ. P. 10.03 ("A copy of any written instrument which is an exhibit to a pleading is part of the statement of claim or defense set forth in the pleading."). "A district court may only dismiss a complaint under Rule 12.02(e) if it appears to a certainty that no facts, which could be introduced consistent with the pleading, exist which would support granting the relief demanded." Finn v. Alliance Bank, 860 N.W.2d 638, 653 (Minn. 2015) (quotation omitted). But "[appellate courts] are not bound by legal conclusions stated in a complaint when determining whether the complaint survives a motion to dismiss for failure to state a claim." Id. at 653-54 (quotation omitted).

The parties agree that appellants' claims are subject to the six-year statute of limitations period set forth in Minn. Stat. § 541.05, subd. 1 (2016). "The statute of limitations begins to run on a claim when 'the cause of action accrues.'" Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 832 (Minn. 2011) (quoting Minn. Stat. § 541.01 (2010)). "Accrual is the point at which a plaintiff can allege sufficient facts to survive a motion to dismiss for failure to state a claim on which relief can be granted." Frederick, 907 N.W.2d at 173 (quotation omitted). This court reviews "de novo the construction and application of a statute of limitations, including the law governing the accrual of a cause of action." Sipe v. STS Mfg., Inc., 834 N.W.2d 683, 686 (Minn. 2013) (quotation omitted).

Minnesota follows the damage-accrual rule. Antone v. Mirviss, 720 N.W.2d 331, 336 (Minn. 2006). Under this rule, the statute of limitations begins to run once any compensable damages occur. Id. Also known as the "some damage rule," the damage-accrual rule is broadly defined "to include any...