Vermillion State Bank v. Tennis Sanitation, LLC

• Decision Date: 29 June 2020
• Docket Number: A19-1421
• Parties: VERMILLION STATE BANK, Respondent, v. TENNIS SANITATION, LLC, Appellant.
• Court: Minnesota Court of Appeals

947 N.W.2d 456

VERMILLION STATE BANK, Respondent,

v.TENNIS SANITATION, LLC, Appellant.

A19-1421

Court of Appeals of Minnesota.

Filed June 29, 2020

Review Granted September 15, 2020

Mark R. Bradford, Lewis A. Remele, Jr., Steven M. Sitek, Bassford Remele, P.A., Minneapolis, Minnesota (for respondent)

Kay N. Hunt, Bryan R. Feldhaus, Lommen Abdo, P.A., Minneapolis, Minnesota; and Steven R. Coon, Law Offices of Steven Coon, Minneapolis, Minnesota (for appellant)

Considered and decided by Connolly, Presiding Judge; Larkin, Judge; and Cochran, Judge.

CONNOLLY, Judge

In this appeal from a jury verdict following a breach-of-contract trial, appellant challenges the district court's denial of its motions for judgment as a matter of law (JMOL) and a new trial. It also raises a constitutional challenge to Minnesota's postjudgment-interest statute. Because we see no error in the district court's denial of these motions and because Minn. Stat. § 549.09 (2018) does not violate equal protection, we affirm.

FACTS

This case involves the existence of an oral contract between appellant Tennis Sanitation, LLC, managed by brothers G.T. and W.T., and respondent Vermillion State Bank, whose president was J.P. In September 2017, respondent sued appellant for breach of contract, breach of the duty of good faith and fair dealing, and promissory estoppel, which stemmed from an alleged agreement between the parties for respondent to buy another company's assets for appellant. The case proceeded to a jury trial, where these facts were established.

In 2010, respondent loaned money to Troje's Trash Pick-Up Inc. (Troje), and secured an interest in Troje's tangible and intangible assets. By early 2015, J.P. learned that Troje was experiencing financial difficulties. Troje's financial problems led to it filing for chapter 11 bankruptcy in January 2016.

The bankruptcy court appointed R.G. as a financial consultant to oversee Troje's daily operations. Over the following months, respondent continued to finance Troje through debtor-in-possession financing. Once R.G. realized that Troje lacked financial sustainability, he identified other trash-collection companies as potential buyers. Appellant, one of the potential buyers, received a sale book listing Troje's assets from R.G. after contacting him in March and July 2016.

During the bankruptcy process, several companies offered to buy some or all of Troje's assets. This prompted respondent to use a "stalking-horse" bid, which entailed establishing a dummy company, Minnesota Sanitation Company LLC, to increase other bid offers. R.G. ultimately decided to sell Troje's assets at auction. Only Minnesota Sanitation Company and Republic Waste Services (Republic) submitted qualifying bids for the auction.

Before the auction, J.P. had several conversations with G.T. and W.T., who jointly manage and operate appellant's business. First, J.P. called G.T. on Saturday, August 6 and explained Troje's financial difficulties. The next day, J.P. and his son, M.P., met with G.T. and W.T. and discussed the upcoming auction. These individuals formulated numbers that represented a rough valuation of Troje's assets and placed them on a whiteboard. The total valuation of Troje's assets was $9.1 million; a value of $5.3 million was assigned to Troje's residential and commercial customer routes. G.T. and W.T. expressed interest in purchasing Troje and asked J.P. to send financial information to their accountant, T.B.

The auction was scheduled for 1:00 p.m. on Monday, August 8. That morning, J.P. and M.P. had a phone call with T.B., who opined that it was a good deal and stated that appellant had the financial capacity to complete it. Later, at 11:18 a.m., J.P. and M.P. spoke with G.T., W.T., and T.B., who expressed a willingness to buy Troje's assets, including its trucks, customer routes, and other equipment, for $6.1 million. But respondent refused appellant's request that their agreement include six natural-gas trucks (the natural-gas trucks).

These same individuals had another phone call at 12:01 p.m. and reached an oral agreement. T.B. stated that appellant would take the deal without the natural-gas trucks for $6.1 million, if respondent would bid on its behalf at the upcoming auction. Finally, J.P. asked that G.T. and W.T. confirm their agreement through email.

When the auction for Troje's assets started at 1:00 p.m., Republic had the highest bid. At 1:03 p.m., one of appellant's employees emailed M.P. a letter of intent signed by G.T. and W.T. Six minutes later, M.P. responded with an email stating "Got it. Thanks." Unlike the parties’ 12:01 p.m. phone conversation, which contemplated respondent bidding for appellant without completion of due diligence, the letter of intent included a later closing date after completion of due diligence. After receiving the signed letter of intent from M.P., J.P. called G.T. twice during the auction to confirm their agreement, stating that there was no time for due diligence. G.T. reaffirmed that appellant wanted respondent to bid on its behalf at the auction for Troje's assets.

At 3:55 p.m., respondent submitted a winning $5.4 million bid for Troje's assets. When the auction ended, J.P. called G.T. to inform him that appellant had acquired Troje's assets because respondent had submitted the high bid. That night at 6:00 p.m., J.P. and M.P. met with G.T. and W.T. During this meeting, J.P. observed that G.T. seemed nervous about the purchase while W.T. expressed excitement about operating Troje.

On Tuesday evening, the same four individuals met again along with R.G. To begin the meeting, J.P. restated the parties’ agreement, after which both G.T. and W.T. nodded and said, "yes, that's what [we] agreed to." The parties then discussed financing. While G.T. acknowledged at this meeting that he had agreed to respondent bidding on appellant's behalf, he stated that he did not want to undertake running Troje's business. Shortly after the Tuesday meeting, W.T. called J.P. to inform him that G.T. did not want to close the deal and that appellant would not be purchasing Troje's assets from respondent.

After learning that appellant would not purchase Troje's assets, respondent signed an agreement to sell Troje's assets to Republic for $4 million. To execute the deal with Republic, respondent paid $1.175 million to remove the liens on the natural gas trucks.

Respondent sought over $4 million in damages. The jury found that an oral contract existed, that its predominant purpose was for the sale of Troje's customer routes, and that appellant breached the contract, which damaged respondent. The jury awarded respondent $1.92 million in damages. Appellant filed posttrial motions for JMOL and a new trial; appellant also objected to respondent's application for costs and interest. In a written order, the district court denied appellant's posttrial motions.

ISSUES

I. What standard of proof governs a breach-of-contract claim involving the alleged existence of an oral contract to purchase the assets of a business?

II. Did the district court err in denying appellant's motion for JMOL?

III. Did the district court err in denying appellant's motion for a new trial?

IV. Does Minnesota's postjudgment-interest statute violate equal protection?

ANALYSIS

Appellant challenges the denial of its motions for JMOL and a new trial. It also argues that Minnesota's postjudgment-interest statute violates its right to equal protection. We first determine the applicable standard of proof here.

I. The preponderance-of-the-evidence standard applies.

To start, appellant faults the district court's conclusion that the preponderance-of-the-evidence standard governed respondent's breach-of-contract claim, asserting that the clear-and-convincing-evidence standard applies. Determining the applicable standard of proof presents a legal question subject to de novo review. Christie v. Estate of Christie , 911 N.W.2d 833, 838 (Minn. 2018).

"The standard of proof varies depending on the type of case and serves several purposes." Id. First, it informs the fact-finder of our society's expected level of confidence in the correctness of the fact-finder's conclusions. Carrillo v. Fabian , 701 N.W.2d 763, 773-74 (Minn. 2005). Second, it assigns the risk of error between litigants to reflect the relative importance accompanying the result. Id. at 774. Civil cases use both the preponderance-of-the-evidence and clear-and-convincing-evidence standards, and the case circumstances dictate which standard applies. Christie , 911 N.W.2d at 838-39.

To satisfy the preponderance-of-the-evidence standard, it must be more probable than not that a fact exists. City of Lake Elmo v. Metro. Council , 685 N.W.2d 1, 4 (Minn. 2004). In contrast, clear and convincing evidence exists when "the truth of the facts asserted is ‘highly probable.’ " Weber v. Anderson , 269 N.W.2d 892, 895 (Minn. 1978). Most civil cases use the preponderance-of-the-evidence standard as proportional to society's concern with resolving private suits. Carrillo , 701 N.W.2d at 774. But some civil matters "involving allegations of fraud or other quasi-criminal wrongdoing" use the clear-and-convincing-evidence standard because the defendant has a heightened interest at stake. Id.

In general, the preponderance-of-the-evidence standard applies when interpreting contracts or analyzing the elements of a contract claim. Bolander v. Bolander , 703 N.W.2d 529, 541 (Minn. App. 2005), review dismissed (Minn. Nov. 15, 2005). Christie reaffirmed that the clear-and-convincing-evidence standard applies to claims seeking damages for breach of an oral contract for the sale of land. 911 N.W.2d at 840. Other situations when the clear-and-convincing-evidence standard applies include oral modifications of a written contract, specific performance of an oral contract for a will, and reformation of a written contract based on mutual mistake. Id.

Appellant argues that Christie controls here, but respondent's breach-of-contract claim does not...