LaPanta v. Heidelberger, CX-86-147

• Decision Date: 12 August 1986
• Docket Number: No. CX-86-147,CX-86-147
• Citation: 392 N.W.2d 254
• Parties: Milton LaPANTA, et al., Respondents, v. Cecil HEIDELBERGER and Patricia A. Heidelberger, Appellants.
• Court: Minnesota Court of Appeals

Page 254

392 N.W.2d 254

Milton LaPANTA, et al., Respondents, v. Cecil HEIDELBERGER and Patricia A. Heidelberger Appellants.

No. CX-86-147.

Court of Appeals of Minnesota.

Aug. 12, 1986.

Syllabus by the Court

1. Because the issue of fraud was not properly pled or litigated below, it cannot be raised for the first time on appeal.

It was not an abuse of discretion for the trial court to order specific performance of a contract for the sale of a business where the buyer twice demonstrated his ability to perform and where the contract was complete on its face.

2. Findings which are reasonably supported by the evidence as a whole must be upheld as not clearly erroneous; however, a finding which is unsupported by any evidence must be reversed.

3. A finding is clearly erroneous where the only ascertainable evidence supports a contrary conclusion.

Richard J. Sundberg, Minneapolis, for respondents.

Elam Baer, Harstad & Rainbow, Minneapolis, for appellants.

Heard, considered and decided by PARKER, P.J., and WOZNIAK and SEDGWICK, JJ.

OPINION

PARKER, Judge.

This dispute arises out of a contract for the sale of Minnesota Tire Recycling, Inc. (MTR), a corporation engaged in the business of stockpiling and shredding used rubber tires. Respondent Milton LaPanta brought this action on his own behalf and on behalf of MTR, seeking specific performance of an earnest money agreement he had entered into with the shareholders of MTR, Robert Sayers and appellants Cecil and Patricia Heidelberger. The Heidelbergers commenced a separate action seeking cancellation of the earnest money agreement, alleging LaPanta was insolvent and unable to close the transaction. The Heidelbergers' complaint was subsequently ruled to be a compulsory counterclaim, and the two actions were consolidated. A five-day trial was held in October 1985.

Based on the evidence submitted, the trial court ordered that the Heidelbergers execute a lease to LaPanta, sign a covenant not to compete, sell their stock in MTR to LaPanta, and sell their tires to LaPanta for $270,000. The Heidelbergers appeal from the judgment entered, contending specific performance was inappropriate because LaPanta is insolvent, because there is no valid contract, and because LaPanta made fraudulent misrepresentations to them. Respondents have also filed a notice of review challenging several of the trial court's findings. We affirm in part, reverse in part and remand for additional findings.

FACTS

In 1953 Cecil Heidelberger began accumulating used tires and other miscellaneous junk on land owned by him and his wife, Patricia Heidelberger, and located in the City of Andover in Anoka County.

In 1983 Schriptek Recovery Systems International, Inc., and its president, Ray J. Slaback, contracted to purchase and process Heidelbergers' tires. Schriptek installed a tire shredding machine on the property and sold the tire shreds for use as a fuel additive. In October 1984 another company owned by Slaback, North American Tire Tech, Inc. (NATT), turned the operation over to the Heidelbergers and granted them an option to purchase the machine for $400,000.

In December 1984 the Heidelbergers and Sayers, the general manager of the tire shredding operation, entered into a shareholders' agreement and incorporated as MTR. Sayers testified that he contacted a number of banks and other possible investors in an attempt to raise money so that MTR could exercise its option to purchase the shredder. LaPanta, a real estate broker, eventually expressed an interest in purchasing the corporation.

At this point, the facts become controverted. The Heidelbergers allege that LaPanta made several fraudulent misrepresentations to them during contract negotiations. They claim that LaPanta informed them he was buying for a group of wealthy investors. The Heidelbergers did not demand a financial statement because LaPanta told them these investors would be insulted and wished to remain secret; they did not require a security interest because LaPanta told them the investors demanded complete control of MTR. The Heidelbergers also contend LaPanta failed to disclose that a series of judgments were pending against him and that he had declared bankruptcy in 1978.

Sayers' testimony disagreed with that of the Heidelbergers; he testified at trial that he was fully aware LaPanta had no outside or secret investors. Sayers admitted that he and the Heidelbergers were "pretty desperate" to obtain financing because they would soon lose the entire operation. A letter from NATT's attorney confirmed this desperation: if the Heidelbergers had failed to come up with money to purchase the tire shredder by April 12, 1985, they would have had to "cease all waste tire processing operations."

LaPanta's testimony is consistent with that of Sayers. LaPanta denied ever representing that he was purchasing on behalf of secret investors. He testified he had disclosed to the Heidelbergers that he had tax liens and judgments pending against him. He admitted that at about the same time the purchase agreement was entered, he also entered into a contract with NATT to purchase the shredder.

After lengthy negotiations, several drafts prepared by both parties, consultation with attorneys, and numerous handwritten changes, an earnest money agreement was signed on April 26, 1985. Under its terms, LaPanta assumed management control of the operation immediately. Although they were to close within 30 days, the parties disagreed on a number of items, including the extent of the corporate liabilities. Sayers has since closed the sale of his minority shares with LaPanta and remains in MTR's employ.

ISSUES

1. Did the trial court abuse its discretion in ordering specific performance?

2. Did the trial court clearly err in awarding certain corporate assets to the Heidelbergers?

3. Did the trial court clearly err in finding that the corporate liabilities did not exceed $45,000?

DISCUSSION

I

Specific performance is an equitable remedy addressed to the sound discretion of the trial court. Accordingly, this court will not interfere on appeal unless the trial court clearly abused its discretion. Flynn v. Sawyer, 272 N.W.2d 904, 910 (1978) (citations omitted).

The Heidelbergers contend that specific performance was inappropriate and that the trial court should have cancelled the contract because of the fraudulent misrepresentations made by LaPanta during the contract negotiations. Fraud was not pled by the Heidelbergers as a defense or as a claim, and the trial court made no findings on any such issue. On appeal, this case must be considered in accordance with the theory on which it was pled and tried; a party cannot, for the first time on appeal, shift its position. Security Bank of Pine Island v. Holst, 298 Minn. 563, 215 N.W.2d 61 (1974).

The Heidelbergers insist that fraud was properly raised and litigated. They assert that during a pretrial hearing in July 1985 LaPanta was put on notice that the trial would focus on their allegations of fraud. At no time during this hearing, however, did the Heidelbergers ever expressly accuse LaPanta of fraud or state that fraud would be an issue at trial. The first time the Heidelbergers made express allegations of fraud was three days before trial in a letter and statement of the case addressed to the trial court.

Prior to commencement of trial, LaPanta moved to limit the evidence to the issues raised in the pleadings; he specifically requested that no evidence be admitted on the issue of fraud because it was not pled. The Heidelbergers made no objection to this motion, and it was granted. Indeed, the Heidelbergers did not move to amend the pleadings to include their claim of fraud until after LaPanta's cross-examination had begun. The trial court's denial of the motion was well within its discretion, since trial had already begun and the defendant might have been prejudiced. Minn.R.Civ.P. 15.01; Hughes v. Micka, 269 Minn. 268, 130 N.W.2d 505 (1964); LOL Finance Co. v. Romain Corp., 352 N.W.2d 841 (Minn.Ct.App.1984).

By sheer persistence on the part of the Heidelbergers' attorney, some testimony of fraud was admitted during trial. LaPanta continually objected to admission of this testimony and stated he would not litigate the issue of fraud by consent. See Minn.R.Civ.P. 15.02. Because fraud must be pled with particularity and because LaPanta clearly did not consent to litigate the issue, it cannot now be considered on appeal.

The Heidelbergers also contend specific performance was inappropriate because LaPanta is insolvent, as evidenced by the various judgments pending against him and by his declaration of bankruptcy in 1978. In order to obtain specific performance, a party must be able and willing to perform. See Rooney v. Dayton-Hudson Corp., 246 N.W.2d 170, 176 (1976) (specific performance should not be granted where offeree had no funds available and merely had loan commitment).

During this litigation, the issue of the buyer's purported insolvency was considered by two different trial judges. Although there was no showing of insolvency in a formal sense, each of these judges required that LaPanta demonstrate his ability to perform under the contract: at a hearing in July 1985 to determine whether the closing should continue, LaPanta was required to deposit an $18,116.86 cashier's check with the clerk of court as the downpayment due at closing; upon conclusion of trial, LaPanta was ordered to produce $43,458.18, the balance due under the contract. In both instances LaPanta met the conditions imposed. Under these circumstances, it was not an abuse of discretion to conclude that LaPanta had the ability to perform under the terms of the contract.

The Heidelbergers...