Rock v. Hennepin Broadcasting Associates, Inc., C7-84-1171

• Decision Date: 31 December 1984
• Docket Number: No. C7-84-1171,C7-84-1171
• Citation: 359 N.W.2d 735
• Parties: Robert J. ROCK, et al., Respondents, v. HENNEPIN BROADCASTING ASSOCIATES, INC., et al., Appellants.
• Court: Minnesota Court of Appeals

Page 735

359 N.W.2d 735

Robert J. ROCK, et al., Respondents, v. HENNEPIN BROADCASTING ASSOCIATES, INC., et al., Appellants.

No. C7-84-1171.

Court of Appeals of Minnesota.

Dec. 31, 1984.

Syllabus by the Court

1. An interlocutory order imposing a constructive trust is appealable under Minn.R.Civ.App.P. 103.03(g).

2. The trial court's imposition of a constructive trust was not appropriate because the evidence of unjust enrichment is not clear and convincing.

David P. Pearson, Winthrop, Weinstine & Sexton, St. Paul, for respondents.

Robert S. Brill, Doherty, Rumble & Butler, Minneapolis, for appellants.

Heard, considered and decided by LANSING, P.J., and HUSPENI and CRIPPEN, JJ.

OPINION

LANSING, Judge.

Appellants Hennepin Broadcasting Associates, Inc. (Hennepin Broadcasting), and Albert S. Tedesco appeal from the trial court's order imposing, during the pendency of a lawsuit, a constructive trust on the proceeds of sale of stock or assets of Hennepin Broadcasting. We reverse the order imposing the constructive trust.

FACTS

Hennepin Broadcasting is a closely held Minnesota corporation that until recently owned and operated KTCR, a local AM/FM radio station. Albert S. Tedesco is the president and majority shareholder of Hennepin Broadcasting. He recently sold its assets to John T. Parker and Kathleen Parker.

Respondent Robert J. Rock was employed by Hennepin Broadcasting from January 1965 until June 1983. He was vice president of Hennepin Broadcasting and a general manager of the radio station during that time, with considerable responsibility for the general business, marketing, programming, and financial aspects of the enterprise.

Rock apparently suffered from serious health problems during many of the years he was employed by Hennepin Broadcasting and in 1974 underwent back surgery and open-heart surgery. Rock contends that the stress and tension of his job, along with his health problems, led to his decision in 1974 to resign. He claims that Tedesco and Hennepin Broadcasting entered into a contract with him to induce him to stay and to reward him for past services, under which Rock was to receive a specified percentage of the proceeds of the sale of assets or stock of Hennepin Broadcasting or KTCR in the event the entities were sold. The payments were to be due at the closing of the sale. The contract was drafted by an attorney who at the time represented Tedesco and Hennepin Broadcasting and was signed by the parties.

In the spring of 1982 Tedesco began negotiations with John B. Parker and Kathleen Parker regarding the purchase of Hennepin Broadcasting. The negotiations apparently considered both the possibility of the Parkers purchasing the assets of Hennepin Broadcasting and of their becoming shareholders. By early 1984 the negotiations were completed, FCC approval had been obtained, and the transaction was finalized. The agreement provides that a corporation formed by the Parkers will pay about $3.4 million to Hennepin Broadcasting for its assets. In addition, Hennepin Broadcasting will receive $750,000 cash and a $2,650,000 promissory note, under which payments are due until 1990.

Rock and another Hennepin Broadcasting employee, Todd J. Garamella, worked for Hennepin Broadcasting until June 1983, when they claim they were involuntarily terminated. They sued Hennepin Broadcasting and Tedesco, seeking damages for breach of contract and numerous other causes of action. Rock claims he is entitled to a percentage of the sale proceeds under the 1974 contract. Tedesco contests the validity of the contract and denies that the contract was ever intended to induce Rock to continue working for the station. In addition, he accuses Rock of gross mismanagement and of misappropriating property from Hennepin Broadcasting.

Rock also asserts that he, Tedesco, and Hennepin Broadcasting agreed that the stock could not be sold or transferred to any other person or entity until Rock received the payments due him under the contract. Tedesco denies that any such agreement was ever made.

In May 1984 Rock made an interlocutory motion for imposition of a constructive trust or an equitable lien on Hennepin Broadcasting stock, assets, and the sale proceeds and asked that Hennepin Broadcasting be restrained during the pendency of the action from transferring or disposing of the sale proceeds. Without such a temporary measure, Rock claims, the proceeds may be transferred from Hennepin Broadcasting to Tedesco, and Rock would then be left without a meaningful remedy because "Tedesco has not been able to prudently manage his money, assets or financial affairs" and "has had a very serious problem with gambling." He would therefore "squander" the sale proceeds unless they are kept under court control.

The trial court denied Rock's motion for an equitable lien and for a temporary restraining order but ordered the imposition of a constructive trust. The order required Hennepin Broadcasting and Tedesco to deposit in a money market savings account the percentage of the sale claimed by Rock under the 1974 contract.

ISSUES

1. Is an interlocutory order imposing a constructive trust an appealable order?

2. Was the trial court's imposition of a constructive trust appropriate?

ANALYSIS

I

Respondents contend that an interlocutory order imposing a constructive trust during the pendency of an action is not appealable. This type of order is not specifically listed in Minn.R.Civ.App.P. 103.03. However, Rule 103.03(g) provides that an appeal may be taken from "a final order, decision or judgment affecting a substantial right made in an administrative or other special proceeding." A special proceeding has been defined as:

any civil remedy in a court of justice which is not of itself an ordinary action and which, if incidental to an ordinary action, independently of the progress and course of procedure in such action, terminates in an order which, to be appealable [within the meaning of the rule] must adjudicate a substantial right with decisive finality separate and apart from any final judgment entered or to be entered in such action upon the merits.

Chapman v. Dorsey, 230 Minn. 279, 283, 41 N.W.2d 438, 440-41 (1950) (emphasis added) (an order denying a motion for joinder of parties is not a special proceeding); see also Beatty v. Winona Housing and Redevelopment Authority, 277 Minn. 76, 79-80, 151 N.W.2d 584, 587 (1967) (declaratory judgment actions are not special proceedings). "Special proceeding" has been defined even more broadly as a "generic term" for civil remedies that are not ordinary actions. Anderson v. Langula, 180 Minn. 250, 251, 230 N.W. 645 (1930); see also Schuster v. Schuster, 84 Minn. 403, 407, 87 N.W. 1014, 1015 (1901) ("[w]here the law confers a right, and authorizes a special application to a court to enforce it, the proceeding is special, within the ordinary meaning of the term 'special proceeding.' ").

Imposition of a constructive trust is a proceeding commenced independently of a pending action in order to obtain special relief. In this case, imposition of the trust effectively adjudicates a substantial right--Hennepin Broadcasting's right to freely use and manage during litigation the proceeds from the sale of its stock and assets. Cf. Brown v. Muetzel, 358 N.W.2d 725 at 727 (Minn.Ct.App.1984) (order appointing a receiver pendente lite is a final order affecting a substantial right made in a special proceeding, appealable under Minn.R.Civ.App.P. 103.03(g)). Therefore the order imposing the trust is appealable under Rule 103.03(g).

II

Hennepin Broadcasting argues that the trial court's imposition of a constructive trust pendente lite is not appropriate in this situation. Rock responds with the fundamental principle that a court acting in equity has broad latitude within which to fashion remedies to suit...