Holmes v. Torguson
| Decision Date | 07 December 1994 |
| Docket Number | Nos. 93-3529,93-3532,s. 93-3529 |
| Citation | 41 F.3d 1251 |
| Parties | 25 UCC Rep.Serv.2d 517 Gary S. HOLMES, Plaintiff-Appellant, v. Marlin F. TORGUSON, Mardi Gras Casino Corp., Delta Casino Corp., Defendants-Appellees. DELTA CASINO CORP., Counterclaim Plaintiff-Cross-Appellant, v. Gary S. HOLMES, Commercial State Bank of Minnesota, Counterclaim Defendants-Cross-Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Robert J. Tansey, Jr., Minneapolis, MN, argued (David E. Oslund and Thomas J. Undlin, on the brief), for Gary S. Holmes.
Gregory Lee Wilmes, Minneapolis, MN, argued (Mark J. Briol, on the brief), for Mardi Gras Corp. and Delta Casino Corp.
Jerome S. Rice, Minneapolis, MN, argued (Mark V. Steffenson, on the brief), for Marlin F. Torguson.
Before BOWMAN, Circuit Judge, WEIS, * Senior Circuit Judge, and LOKEN, Circuit Judge.
In this diversity action, Gary Holmes seeks damages equal to one-half of Marlin Torguson's equity interest in a lucrative gaming enterprise. Holmes's claim is based on the alleged wrongful termination of an oral joint venture agreement. The district court 1 granted summary judgment dismissing Holmes's claims, primarily on the ground that the alleged agreement is unenforceable under the statute of frauds in Article 8 of the Minnesota Uniform Commercial Code, Minn.Stat. Sec. 336.8-319. Holmes appeals. Having considered any disputed facts most favorably to Holmes, and the grant of summary judgment de novo, we affirm.
On May 21, 1991, Holmes and Torguson held a long meeting in Holmes's office. At the time, Torguson was a multi-state developer and manager of casinos and gaming operations whose partner was looking to retire. Holmes was a developer and investor looking for opportunities. Over the next several months, Holmes and Torguson engaged in a number of cooperative activities. Holmes lent $309,000 to Atlantic-Pacific Corporation ("A-P"), a Torguson-owned company then operating a casino in Deadwood, South Dakota; Holmes received promissory notes from A-P and Torguson's written personal guaranty. Holmes lent another $250,000 to Delta Casino Corporation ("Delta"), a Torguson-owned company formed to develop riverboat casinos in Mississippi. This loan was for a deposit on two barges to be converted into casinos. Holmes again received a promissory note from Delta and Torguson's written guaranty. Holmes also arranged for Commercial State Bank of Minnesota to lend Delta $5,250,000 to complete purchase of the barges. 2 Holmes and his in-house architect and financial advisor also spent considerable time, effort, and money attempting to develop casino sites in Mississippi for Delta and for Mardi Gras Casino Corporation ("Mardi Gras"), another Torguson-owned company. Concurrent with these development activities, Torguson pressed pending applications to the Mississippi Gaming Commission for Delta and Mardi Gras gaming licenses and helped Holmes apply for approval as a suitable person to acquire an ownership interest in these prospective licensees.
By mid-November, Holmes was frustrated with the lack of progress. To get Torguson's attention, Holmes demanded payment of the loans to A-P and Delta and commenced a collection action in Minnesota state court against those corporations and Torguson as personal guarantor. However, for the next three months, Holmes and Torguson continued to cooperate, though to little real effect. Holmes's in-house staff kept working on the potential Mississippi casino sites. The attorneys for Holmes and Torguson exchanged proposals to reduce their complex relationship to a written agreement. And the parties submitted additional applications to the Mississippi Gaming Commission stating that Torguson had granted Holmes an option to buy fifty percent of the stock of Delta and Mardi Gras upon issuance of gaming licenses approving Torguson and Holmes as owners.
Holmes and Torguson never signed a written agreement reflecting their relationship. In March 1992, Torguson found another source of financing, repaid Holmes's loans to A-P and Delta, advised the Mississippi Gaming Commission to withdraw Holmes's suitability applications, and declared an end to the relationship. Holmes immediately commenced this action, seeking to compel Torguson to perform an alleged joint venture and to obtain other relief. On April 29, 1992, the Gaming Commission issued Torguson a license, and Mardi Gras opened a casino that summer. Torguson subsequently transferred his stock in A-P, Delta, and Mardi Gras to a new holding company, Casino Magic Corporation, and made a successful public offering of Casino Magic stock. The value of Torguson's shares in that company grew to more than $150,000,000.
Following extensive discovery, the district court granted summary judgment dismissing all of Holmes's claims. After thorough analysis, the court concluded that in essence this is a suit to enforce an oral agreement by Torguson to sell fifty percent of the stock in his gaming corporations to Holmes; that the relevant documents are insufficient to satisfy the Sec. 8-319 statute of frauds; that the alleged joint venture is therefore unenforceable; and that the claim for unjust enrichment fails because Holmes seeks to recover primarily his costs of investigating an investment opportunity, and any incidental benefits to Torguson "are not so great as to rise to the level of unjust enrichment."
This appeal raises issues that turn on the precise nature of the alleged oral agreement. That agreement is described by Holmes as follows:
After a series of intense discussions spanning a number of months, on May 21, 1991 Holmes and Torguson agreed to pursue gaming operations in Mississippi, South Dakota and elsewhere throughout the United States as joint venturers and partners. Holmes and Torguson agreed that: (1) Holmes would own a one-half interest in the Mississippi gaming operations (Mardi Gras and Delta) and the South Dakota gaming operation (Atlantic Pacific); (2) Holmes and Torguson would be 50-50 partners in those operations and any others they developed; (3) Holmes would contribute equity of $3 million to the Joint Venture on a subordinated loan basis; (4) Holmes' $3 million would be paid back, if at all, out of cash flow from operations; and (5) Holmes would immediately loan Atlantic-Pacific money to help it pay its contracts in South Dakota.
(Brief of Appellant, p. 2.) In May 1991, when Holmes and Torguson allegedly entered into this agreement, Mardi Gras, Delta, and A-P were existing corporations with outstanding stock owned by Torguson. Thus, the district court correctly held that the initial term of the alleged joint venture--"Holmes would own a one-half interest in" those corporations--necessarily encompassed an oral agreement to transfer corporate stock. 3
Section 8-319 of the Minnesota Uniform Commercial Code, Minn.Stat. Sec. 336.8-319, provides:
A contract for the sale of securities is not enforceable by way of action or defense unless
(a) there is some writing signed by the party against whom enforcement is sought ... sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price;
(b) delivery of a certificated security or transfer instruction has been accepted ... or payment has been made ...;
(c) within a reasonable time a writing in confirmation of the sale or purchase and sufficient against the sender under paragraph (a) has been received by the party against whom enforcement is sought and the recipient has failed to send written objection to its contents within ten days after its receipt; or
(d) the party against whom enforcement is sought admits in pleading, testimony, or otherwise in court that a contract was made for sale of a stated quantity of described securities at a defined or stated price.
In this case, there is no writing signed by Torguson, no delivery of stock or acceptance of payment, and no written confirmation of sale that would satisfy Sec. 8-319(a), (b), or (c). Thus, Holmes must find a way to avoid application of this statute or the most essential term of the alleged oral agreement is unenforceable.
Holmes first asserts that he has alleged the elements of a joint venture, and an oral joint venture is enforceable under Minnesota law, even if it includes the transfer of property that normally falls within a statute of frauds. Holmes cites Anderson v. Property Developers, Inc., 555 F.2d 648 (8th Cir.1977), but Anderson merely stands for the well-settled principle that a statute of frauds does not apply to an oral joint venture to engage in future transactions subject to the statute, such as purchases and sales of real property or securities. As the district court noted, this case is different--Holmes alleges an oral agreement to transfer one-half of the stock of A-P, Delta, and Mardi Gras from Torguson to Holmes. That agreement falls squarely within Sec. 8-319. "[T]he label 'joint venture' will not remove the bar of the statute when, as here, the very essence of the asserted venture is a sale from one 'venturer' to the other." Backus Plywood Corp. v. Commercial Decal, Inc., 317 F.2d 339, 342 (2d Cir.), cert. denied, 375 U.S. 879, 84 S.Ct. 146, 11 L.Ed.2d 110 (1963); see Franklin Auto Body Co. v. Wicker, 414 N.W.2d 509, 512-13 (Minn.App.1987); Dobbs v. Vornado, Inc., 576 F.Supp. 1072, 1076-77 (E.D.N.Y.1983).
Holmes next asserts that various documents in the record, read together, satisfy the writing requirement of Sec. 8-319. For several writings to satisfy the statute of frauds collectively, they must refer to one another or be connected by internal evidence so clear that parol evidence is not needed to establish their relationship to the contract. Quinn-Shepardson Co. v. Triumph Farmers' Elevator Co., 149 Minn. 24, 182 N.W. 710, 711 (1921). To satisfy the statute of frauds, "one cannot bootstrap a skimpy writing into an ...
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