Serv. Oil, Inc. v. Gjestvang

• Decision Date: 30 March 2015
• Docket Number: No. 20130366.,20130366.
• Citation: 861 N.W.2d 490
• Parties: SERVICE OIL, INC. and Steven Dirk Lenthe, Plaintiffs Service Oil, Inc., Appellant and Cross–Appellee v. Rory D. GJESTVANG, Brad A. Bjerke, LaRayne K. Haakenson, Don Stetson, Defendants and Appellees. and Rodney Demers and Les Laidlaw, Defendants. Rory D. Gjestvang, Brad A. Bjerke and LaRayne Haakenson, Defendants, Third–Party Plaintiffs, Appellees, and Cross–Appellants v. Steven Dirk Lenthe, Third–Party Defendant.
• Court: North Dakota Supreme Court

861 N.W.2d 490

SERVICE OIL, INC. and Steven Dirk Lenthe, PlaintiffsService Oil, Inc., Appellant and Cross–Appellee

v. Rory D. GJESTVANG, Brad A. Bjerke, LaRayne K. Haakenson, Don Stetson, Defendants and Appellees.andRodney Demers and Les Laidlaw, Defendants.

Rory D. Gjestvang, Brad A. Bjerke and LaRayne Haakenson, Defendants, Third–Party Plaintiffs, Appellees, and Cross–Appellants

v.Steven Dirk Lenthe, Third–Party Defendant.

No. 20130366.

Supreme Court of North Dakota.

March 30, 2015.

Joseph A. Turman, Fargo, N.D., for plaintiffs, appellant and cross-appellee.

Leslie B. Oliver (argued) and Amanda E. Peterson (appeared), Bismarck, N.D., for defendants and appellees Rory D. Gjestvang, Brad A. Bjerke and LaRayne K. Haakenson.

David A. Tschider, Bismarck, N.D. for defendant and appellee Don Stetson.

Opinion

CROTHERS, Justice.

[¶ 1] Service Oil, Inc., appeals and Rory Gjestvang, Brad Bjerke and LaRayne Haakenson cross-appeal from a judgment entered after a bench trial dismissing the parties' claims involving their business relationship. The district court's underlying findings of fact are not clearly erroneous and the court did not err in dismissing all the parties' claims. We affirm.

I

[¶ 2] Steven Dirk Lenthe was the sole owner of Service Oil, which operated convenience stores in North Dakota, and defendants Gjestvang, Bjerke, Haakenson and Don Stetson were employees of Service Oil. Gjestvang started working for Service Oil in 1985, serving as operations manager from 1992 until April 2010. Bjerke was supervisor of eastern North Dakota stores from 1997 until 2010. Haakenson was district supervisor and manager of the Bismarck travel center from 1993 until May 2010.

[¶ 3] This lawsuit stems from a transaction involving the purchase of repossessed wholesale inventory, initially located in a warehouse in Bismarck, and an agreement for the sale of that inventory through Service Oil. In March 2007, American Bank Center in Bismarck contacted Haakenson about purchasing a large volume of repossessed inventory. Gjestvang and Haakenson discussed the matter with Lenthe, and he agreed to provide $700,000 to purchase the inventory. In April 2007, Lenthe, Gjestvang, Haakenson and Bjerke executed a Warehouse Business Agreement to sell the inventory. The agreement described the parties' compensation:

“A Profit and Loss Statement will be carefully used to track all true expenses throughout the period of operation. Brad Bjerke, LaRayne Haakenson, and Rory Gjestvang will handle all operations of the warehouse in conjunction with current duties. Stamart and Northtown Grill will be top priority with the Warehouse being worked around that schedule.

“Compensation will be $30,000 each for Brad Bjerke, LaRayne Haakenson and Rory Gjestvang, with 1/2 paid at the end of August if the proper progress is made in deleting warehouse stock. The remaining 1/2 will be paid after year end.

“The previous compensation will be included in the P & L Statement. The final year end profit as defined in the P & L Statement will be divided accordingly:

50% to owner Dirk Lenthe

25% to Rory Gjestvang

12.5% to Brad Bjerke

12.5% to LaRayne Haakenson

“This arrangement will continue into the next year if necessary with the same agreement in place.”

[¶ 4] At about the same time of the agreement, Service Oil finalized the purchase agreement and lease with American Bank Center, resulting in Service Oil purchasing the inventory in Bismarck for its newly established “Merchandise Depot” division for $700,000. In May 2009 Service Oil moved the warehouse operation and remaining inventory to Fargo.

[¶ 5] In early 2009, Gjestvang created a separate entity called “Prairie Distributing” and, on May 1, 2009, rented a building for its warehouse business. In May 2009, defendants Les Laidlaw and Rodney Demers started an entity under the trade name “Laidlaw Sales.” Laidlaw and Demers also were sales representatives of Prairie Distributing. Gjestvang purchased merchandise for Prairie Distributing and used the services of Demers and Laidlaw to sell products to Service Oil, which was done without informing Service Oil.

[¶ 6] In 2010, Service Oil sued Gjestvang, Bjerke, Haakenson, Stetson, Demers and Laidlaw. Service Oil alleged the defendants conspired to deceive Service Oil and sought a refund of commission overpayments from Gjestvang, Bjerke and Haakenson. Service Oil also asserted a claim against Gjestvang for conversion of certain brand-name gloves, asserting the gloves were Service Oil's property and were retrieved from Prairie Distributing's garbage.

[¶ 7] The defendants denied Service Oil's claims and asserted a counterclaim, as well as a third-party complaint against Lenthe. The defendants alleged Service Oil breached its duty of loyalty under a claimed partnership or joint venture between themselves and Service Oil. Defendants Gjestvang, Bjerke and Haakenson asserted they were entitled to additional payments under the Warehouse Business Agreement and sought to pierce Service Oil's corporate veil to hold Lenthe personally liable for claimed damages. Gjestvang also sued Service Oil and Lenthe for interference with business relationship or expectancy.

[¶ 8] After a bench trial the district court dismissed all the parties' claims. The court held that the sole purpose of the Warehouse Business Agreement was to “delet[e] the Merchandise Depot original stock” and that the Agreement did not create either a joint venture or a partnership between Service Oil, Lenthe, Gjestvang, Haakenson or Bjerke. The court further found it was impossible to determine whether Service Oil incurred any damages from alleged overpayment of commissions because no accurate inventories were taken of the Merchandise Depot inventory when it was first acquired, no accurate inventories exist for when Merchandise Depot was moved from Bismarck to Fargo and no accurate records in the interim differentiate between the original inventory and new inventory.

[¶ 9] The district court found Gjestvang, Haakenson and Bjerke had no fiduciary duty to disclose that Prairie Distributing was selling merchandise to Service Oil through Laidlaw Sales because Prairie Distributing was not in competition with Service Oil. The court determined Service Oil's claims for fraud or deceit and for conspiracy to defraud also failed because the Prairie Distributing merchandise sold to Service Oil through Laidlaw Sales resulted in greater profits to Service Oil than the products Service Oil sold from Merchandise Depot or other third-party vendors. The district court also rejected Service Oil's claim for conversion against Gjestvang, finding he had not converted any property belonging to Service Oil.

[¶ 10] The district court dismissed Gjestvang's claim for interference of business relations, determining Gjestvang failed to prove he incurred damages from Service Oil's alleged interference with his business relations.

II

[¶ 11] Service Oil contends the district court clearly erred in making certain factual findings. Service Oil argues the court clearly erred in determining that the lack of an inventory prevented calculation of commissions due under the Warehouse Business Agreement, the court clearly erred in determining the only gloves recovered from the garbage were purchased by Gjestvang and the court clearly erred in determining Service Oil did not suffer damages by reason of the operation of a competing business by the defendants while they were employees of Service Oil.

[¶ 12] This Court's standard of review on appeal from a bench trial is well-established:

“In an appeal from a bench trial, the trial court's findings of fact are reviewed under the clearly erroneous standard of N.D.R.Civ.P. 52(a) and its conclusions of law are fully reviewable. Fargo Foods, Inc., v. Bernabucci, 1999 ND 120, ¶ 10, 596 N.W.2d 38. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing all the evidence, we are left with a definite and firm conviction a mistake has been made. Moen v. Thomas, 2001 ND 95, ¶ 19, 627 N.W.2d 146. ‘In a bench trial, the trial court is “the determiner of credibility issues and we do not second-guess the trial court on its credibility determinations.” ’ Id. at ¶ 20.”

Brash v. Gulleson, 2013 ND 156, ¶ 7, 835 N.W.2d 798 (quoting Fladeland v. Gudbranson, 2004 ND 118, ¶ 7, 681 N.W.2d 431). A trial court's findings are “presumptively correct.” Tweeten v. Miller, 477 N.W.2d 822, 824 (N.D.1991).

[¶ 13] In applying the clearly erroneous standard of review, we will not substitute our judgment for the trial court's judgment. Erickson v. Olsen, 2014 ND 66, ¶ 19, 844 N.W.2d 585. “A trial court's choice between two permissible views of the weight of the evidence is not clearly erroneous, and simply because we may have viewed the evidence differently does not entitle us to reverse the trial court.” Id. (quoting RRMC Constr., Inc. v. Barth, 2010 ND 60, ¶ 7, 780 N.W.2d 656). A trial court's findings are adequate if the record enables us to understand the court's factual determinations and the basis for its conclusions of law and judgment. See Almont Lumber & Equip., Co. v. Dirk, 1998 ND 187, ¶ 13, 585 N.W.2d 798; First Am. Bank W. v. Berdahl, 556 N.W.2d 63, 65 (N.D.1996).

A

[¶ 14] Service Oil argues the district court clearly erred in finding the lack of inventories prevented calculation of commissions due under the Warehouse Business Agreement.

[¶ 15] Generally, while contract interpretation presents a question of law on appeal, whether a party breached a contract is a finding of fact under N.D.R.Civ.P. 52(a). WFND, LLC v. Fargo Marc, LLC, 2007 ND 67, ¶ 13, 730 N.W.2d 841. A breach of contract is “the nonperformance of a contractual duty when it is due.” WFND, at ¶ 13 (citing Restatement (Second) of Contracts § 235(2) (1981) ). “The elements of a prima facie case for breach of contract are: (1) the existence of a contract; (2) breach of the contract; and (3) damages which flow from the...