Mittelstaedt v. Henney, A20-0573
| Citation | 954 N.W.2d 852 |
| Decision Date | 04 January 2021 |
| Docket Number | A20-0573 |
| Parties | Steven Lee MITTELSTAEDT, et al., Appellants, v. William H. HENNEY, et al., Respondents. |
| Court | Court of Appeals of Minnesota |
Adam C. Hagedorn, Charles J. Lloyd, Livgard & Lloyd PLLP, Minneapolis, Minnesota (for appellants)
William H. Henney, Minnetonka, Minnesota (attorney pro se and for respondents)
Considered and decided by Jesson, Presiding Judge; Cochran, Judge; and Slieter, Judge.
The central issue before us is whether, by framing an attorney-misconduct claim as a breach-of-fiduciary-duty claim, a litigant must meet the expert-affidavit requirements of Minnesota Statutes section 544.42. Here, appellant Steven Mittelstaedt claimed that his alleged attorney, respondent William H. Henney, breached his fiduciary duties to Mittelstaedt by failing to disclose his participation in a lease agreement involving Mittelstaedt's home and place of business. The district court granted summary judgment to Henney on Mittelstaedt's breach-of-fiduciary-duty claim, but allowed Mittelstaedt's breach-of-fiduciary-duty and breach-of-contract claims against Mittelstaedt's business partner, respondent John Prosser, and one of Prosser's companies, as well as an eviction action against Mittelstaedt and one of Mittelstaedt's companies, to proceed to a bench trial. Mittelstaedt now appeals, arguing that the district court erred by granting summary judgment to Henney, making clearly erroneous factual findings, and otherwise not meeting the requisite specificity in its damages calculations. Because we conclude that Mittelstaedt was required to submit expert affidavits in support of his breach-of-fiduciary-duty claim against Henney under Minnesota Statutes section 544.42, and because Mittelstaedt fails to show that the district court's factual findings were clearly erroneous, or otherwise prejudicial, we affirm.
This case involves multiple businessmen, intertwined projects and financing, a joint venture to refurbish and sell trucks, and a trail of debts. According to the district court, it also features two principal parties (Mittelstaedt and Prosser) with unclean hands, as well as an attorney (Henney) who allegedly operated at times as Mittelstaedt's attorney and at times as Prosser's business partner. To describe the underlying facts, we first identify the major participants in this litigation. Next, we summarize the relevant business transactions. We end with a summary of the legal proceedings before the district court.
Mittelstaedt was the president of appellant Iron Range Repair & Storage LLC and Wide Open Services LLC, while respondent Prosser is the president of respondent Prosser Holdings LLC, a limited liability company engaged in vehicle financing and related activities.1 Prosser and Mittelstaedt met at a trade show around 2008 and developed a business relationship with Prosser helping to finance trucks for Mittelstaedt. A couple of years into their relationship, Prosser introduced Mittelstaedt to his attorney, Henney. Henney later provided legal advice to Mittelstaedt in matters regarding an insurance claim and (to at least some degree) Mittelstaedt's divorce. Subsequently, Henney and Prosser created respondent Maxim Management LLC (Maxim), which also played a prominent role in the underlying dispute here.
We turn now to the relevant business transactions. In 2012, in an effort to increase his iron ore hauling operations, Mittelstaedt relocated to a property in the town of Virginia. The Virginia property was partially residential and partially commercial. The residential portion of the property had a house and a garage. The commercial portion had a large garage where Mittelstaedt's company's trucks could be serviced and repaired. Beacon Bank, the owner of the Virginia property, drafted two leases for the property—a residential lease for the house and a commercial lease for the remainder of the property. Mittelstaedt paid Beacon Bank $60,000 to include an option-to-purchase clause in both leases. Mittelstaedt used the commercial portion of the property for Wide Open Services’ operations, which hauled iron ore from mine dumps to a processing plant owned by the sole client of Wide Open Services.
When that sole client went bankrupt, causing Mittelstaedt's business to stagnate, Mittelstaedt fell behind on lease payments to Beacon Bank. Hoping to remain on the property—and ultimately purchase it—Mittelstaedt asked Prosser if he would buy the property from Beacon Bank and, in turn, lease it to Mittelstaedt with an option to purchase. In March 2015, Prosser agreed to Mittelstaedt's proposal and signed a purchase agreement with Beacon Bank for the two parcels leased by Mittelstaedt. Prosser and Henney then created Maxim to own and manage the property. Shortly before Mittelstaedt signed the lease agreement, Mittelstaedt and his former wife conveyed an adjacent parcel of property through a quitclaim deed to Maxim.
In April 2015, Maxim and Wide Open Services entered into the first lease agreement (first lease) with an option to purchase. Henney drafted all of the documents related to the property between Mittelstaedt, Wide Open Services, Prosser, and Maxim.2 Henney signed on behalf of Maxim and Mittelstaedt signed on behalf of Wide Open Services. Mittelstaedt personally guaranteed the lease. Part of the agreement was that Mittelstaedt would pay for insurance and taxes on the property.
At the same time, Mittelstaedt—in need of income to make lease payments to Maxim—entered into a joint venture with Prosser to acquire, repair, and sell used trucks and trailers. The arrangement was that Mittelstaedt would locate the trucks or trailers, Prosser would buy them, and Mittelstaedt would repair them. Prosser would pay Mittelstaedt for the work and other expenses in refurbishing the trucks and then sell the trucks through one of his companies. Prosser would keep the first $2,000 of net profit and the remaining profit was to go to Maxim to be applied toward Mittelstaedt's lease payments.
But Mittelstaedt still had difficulty making rent payments to Maxim. In late 2015, Mittelstaedt and Prosser agreed to enter into a new lease agreement (second lease) for the property with an effective date of January 1, 2016, that reduced monthly payments from $6,100 to $5,000. This new agreement was between Maxim and Iron Range Repair with one additional change: this new lease did not contain an option to purchase.3
Mittelstaedt, believing that his share of the profits from the joint venture were sufficient to satisfy his rent payments, stopped making payments under the lease. Yet he remained on the property. Prosser believed that Mittelstaedt was in default of their lease agreement.
In May 2017, Maxim brought an eviction action against Mittelstaedt and Iron Range Repair. In response, Mittelstaedt and Iron Range Repair sued Henney, Prosser, and Maxim, alleging, among other things, fraud, breach of fiduciary duties, and breach of contract. The claims against Henney centered on Mittelstaedt's allegation that (at the time of the transactions described here) Henney was acting as his attorney and that Henney did not disclose to Mittelstaedt that he was a part-owner of Maxim. Because Henney was purportedly Mittelstaedt's attorney, Mittelstaedt claimed he did not closely scrutinize the documents that Henney drafted, which left Mittelstaedt at a disadvantage. The claims against Prosser and Maxim focused on the alleged failure to credit Mittelstaedt with his fair share of the proceeds of the joint venture, as well as their fiduciary failure to disclose Henney's involvement with Maxim. Maxim responded with a counterclaim against Mittelstaedt alleging that he was in breach of the lease by failing to make rent payments.
Mittelstaedt's lawsuit was consolidated with the eviction action. Mittelstaedt remained on the property and the district court ordered him to pay to the court $5,000 per month while the action proceeded, totaling $140,000 by the time of trial.
Henney moved for summary judgment on the breach-of-fiduciary-duty claim against him, and summary judgment or dismissal of the fraud claims for failure to plead fraud with particularity, and for judgment on the pleadings.4 The district court granted Henney's motion, dismissing Mittelstaedt's breach-of-fiduciary-duty and fraud claims against Henney.
This left the claims for a breach of fiduciary duty and contract against Prosser and Maxim and the eviction and breach-of-lease actions against Mittelstaedt. Following a bench trial, the district court determined that Prosser and Maxim breached their contract and fiduciary duties to Mittelstaedt. The district court concluded that Mittelstaedt was only entitled to contract damages for their joint venture. Those damages, including the $140,000 paid by Mittelstaedt to the court during the litigation, totaled $275,328.28 owed to Mittelstaedt. The district court also concluded that while Mittelstaedt did not breach his lease, he still owed rent, insurance payments, and taxes to Prosser that amounted to $272,421. The court ordered that Mittelstaedt's damages were to be offset by the amounts owed under the lease, netting Mittelstaedt $2,907.28 in damages.5
This appeal follows.
I. Did the district court appropriately grant summary judgment to Henney on the claim that he breached fiduciary duties owed to Mittelstaedt?
II. Were the district court's findings of fact supported by the record, clearly erroneous, or otherwise prejudicial?
Mittelstaedt raises two primary arguments on appeal. First, Mittelstaedt argues that the district court erred in granting summary judgment on his breach-of-fiduciary-duty claim against Henney. Second, Mittelstaedt contends that several of the district court's findings of fact are clearly erroneous. We address each issue in turn.6
On...
To continue reading
Request your trial
-
Mittelstaedt v. Henney
...section 544.42 was an important issue on appeal, the court of appeals nevertheless took up the issue. See Mittelstaedt v. Henney , 954 N.W.2d 852, 859 (Minn. App. 2021). It concluded that because breach-of-fiduciary-duty claims have the same elements as legal malpractice, the statute's affi......
-
Hagle v. Erickson
...would have been successful in the prosecution or defense of the action." As support, the district court cited Mittelstaedt v. Henney, 954 N.W.2d 852, 860 (Minn.App. 2021), rev'd, 969 N.W.2d 634 (Minn. 2022). In Mittelstaedt, this court concluded that Minn. Stat. § 544.42 (2018), which sets ......
-
Soeffker v. Straughn
...convinced by either argument. First, Soeffker's initial argument is contrary to a recent holding from this court. Mittlestaedt v. Henney, 954 N.W.2d 852, 862 (Minn.App. 2021) (concluding that section 544.42 applies to claims alleging a breach of fiduciary duty against one's attorney), rev. ......
-
Mittelstaedt v. Henney
...attorney, regardless of whether the claim was framed as a breach of fiduciary duty or attorney malpractice. Mittelstaedt v. Henney, 954 N.W.2d 852, 863 (Minn.App. 2021) (Mittelstaedt I). Because Mittelstaedt raised an issue of attorney malpractice at the district court level but did not com......