Automotive 36, Inc., d/b/a Automotive 36 of Stillwater, Appellant, vs. IMYGE Motorcars of America, a Nevada corporation, Respondent, Glen L. Mead, et al., Respondents, Michael T. Hughes, Respondent, Mark Fronk, et al., Defendants.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C0-03-292

 

Automotive 36, Inc.,

d/b/a Automotive 36 of Stillwater,

Appellant,

 

vs.

 

IMYGE Motorcars of America,

a Nevada corporation,

Respondent,

 

Glen L. Mead, et al.,

Respondents,

 

Michael T. Hughes,

Respondent,

 

Mark Fronk, et al.,

Defendants.

 

Filed November 4, 2003

Affirmed

Toussaint, Chief Judge

 

Washington County District Court

File No. C0023761

 

 

Ronald R. Bradley, 12340 Grouse Street Northwest, Minneapolis, MN  55448-1944 (for appellant)

 

Michael J. Weidner, Law Offices of Michael J. Weidner, Suite 230, 4660 Slater Road, Eagan, MN  55122 (for respondents Glen L. Mead)

 

Michael T. Hughes, 5805 State Bridge Road, Duluth, GA 30097 (pro se respondent)

 

IMYGE Motorcars of America, 377 S. Nevada Street, Carson City, NV 89703 (respondent)

 

            Considered and decided by Toussaint, Chief Judge; Kalitowski, Judge; and Schumacher, Judge.

U N P U B L I S H E D   O P I N I O N

TOUSSAINT, Chief Judge

            On appeal from final judgment, appellant argues that the district court erred in concluding that (1) appellant does not have standing to sue respondents; (2)  the court did not have long-arm jurisdiction over respondents; and (3) appellant produced insufficient evidence to pierce the corporate veil of IMYGE Motorcars of America.  Because the record shows that appellant does not have standing, we affirm.

F A C T S

Respondents Glen and Catherine Mead own Resident Agency National (Resident), a business located in Carson City, Nevada.  Resident has helped out-of-state owners incorporate Nevada corporations for twenty-five years.  Resident helped respondent Michael Hughes incorporate a business called Insearch Productions Corporation (Insearch) in June 2000.  The Meads listed themselves as officers of Insearch to complete the incorporation, then submitted letters of resignation as corporate officers of Insearch to the Nevada Secretary of State.  After incorporation, Insearch sought to amend the name of Insearch to IMYGE Motorcars of America (IMYGE).  The Meads had to reinstate themselves as corporate officers to complete the name change.  In November 2001, the Meads submitted another letter of resignation as corporate officers of IMYGE to the Nevada Secretary of State but these resignations were never recorded.  When the Meads discovered that they were still listed as officers of IMYGE, they refiled their resignations with the Nevada Secretary of State.  The resignations were recorded in October 2002 but were effective as of November 2001.

Automotive 36, Inc. operates two dealerships in Minnesota: Automotive 36 Inc., d/b/a Automotive 36 of Stillwater and Affordable Used Cars of Maplewood.  Anthony Magnotta is president and CEO of these dealerships.  Magnotta was interested in purchasing a 2001 Auburn reproduction automobile, and he discovered an Internet advertisement for Auburn automobiles sold by IMYGE.  Magnotta spoke to Hughes about purchasing an Auburn automobile from IMYGE.  In July 2001, $25,000 was transferred by wire to a Nevada bank account as a down payment on the purchase of a 2001 Auburn by "Anthony Magnotta, d/b/a Affordable Cars." Although "Affordable Cars" is not a registered entity with the Minnesota Secretary of State, "Anthony Magnotta d/b/a Affordable Cars" and IMYGE then entered into a contract for the purchase of an Auburn automobile in September 2001.  The automobile was never delivered, and the $25,000 paid toward the purchase of the automobile has not been refunded.

Magnotta discovered that the Meads were listed as the president, secretary, and treasurer of IMYGE with the Nevada Secretary of State.  Automotive 36, Inc., d/b/a/ Automotive 36 of Stillwater then filed a lawsuit against IMYGE, the Meads, Hughes, and Hughes's business partner Mark Fronk in Minnesota district court, alleging breach of contract, detrimental reliance, unjust enrichment, and fraud.   

Shortly before the matter was set for trial, the Meads filed a rule 12 motion to dismiss for lack of standing, lack of personal jurisdiction, and failure to state a claim upon which relief could be granted, and they presented matters outside the pleadings.  On November 18, 2002, the trial date, appellant's attorney argued before the district court that the rule 12-motion should be treated as one for summary judgment and disposed of as provided by Minn. R. Civ. P. 56.  See Minn. R. Civ. P. 12.02 (directing courts to handle a rule-12 motion as a motion for summary judgment if the court accepts matters outside the pleadings).

The district court held a trial on November 18, and the court heard testimony from two witnesses.  The district court then issued findings of fact, conclusions of law, and an order for judgment.  Based on "all of the files and records" and the "testimony at trial" the district court concluded that (1) Automotive 36 of Stillwater did not have standing to sue the respondents; (2) Minnesota lacked jurisdiction over the respondents; and (3) that Automotive 36 of Stillwater failed to produce sufficient evidence to warrant piercing IMYGE's corporate veil.  Magnotta now appeals from the final judgment. 

D E C I S I O N

            On appeal, a district court's findings of fact are given great deference, and shall not be set aside unless clearly erroneous.  Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999).  If there is reasonable evidence to support the district court's findings of fact, a reviewing court will not disturb those findings.  Id.  But a reviewing court is not bound by and need not give deference to a district court's decision on a purely legal issue.  Modrow v. JP Foodservice Inc., 656 N.W.2d 389, 393 (Minn. 2003). [1]

A court's jurisdiction to hear a case depends on the existence of a justiciable controversy.  Lewis v. Cont'l Bank Corp., 494 U.S. 472, 477-78, 110 S. Ct. 1249, 1253-54 (1990).  A justiciable controversy exists when there is "a genuine conflict in the tangible interests of opposing litigants."  Izaak Walton League of Am. Endowment, Inc. v. State, Dep't. of Natural Res., 312 Minn. 587, 589, 252 N.W.2d 852, 854 (1977).  A genuine conflict in the interests of opposing litigants is not enough to invoke the court's jurisdiction; a litigant must also have standing.  State by Humphrey v. Philip Morris, Inc., 551 N.W.2d 490, 493 (Minn. 1996).  A litigant has standing when he or she has suffered an actual injury or otherwise has a sufficient stake in a justiciable controversy to seek relief from a court.  Cochrane v. Tudor Oaks Condo. Project, 529 N.W.2d 429, 433 (Minn. App. 1995), review denied (Minn. May 31, 1995). 

Automotive 36 argues that it has standing to sue in this cause of action because it is in privity to the contract at issue in this case and, therefore, it is the real party in interest to the contract.  Every action must be prosecuted in the name of the real party in interest.  Minn. R. Civ. P. 17.01.  The purpose of the rule is to prevent other claimants from making further demands against a defendant for the same relief.  Norby v. Bankers Life Co., 304 Minn. 464, 467, 231 N.W.2d 665, 668 (1975).  Determining the real party in interest is a question of fact.  Minn. Educ. Ass'n v. Indep. Sch. Dist. No. 404, 287 N.W.2d. 666, 668 (Minn. 1980).

Generally, no one can sue for the breach of contract who is not a party or in privity to the contract.  N. Nat'l Bank v. N. Minn. Nat'l Bank, 244 Minn. 202, 208, 70 N.W.2d 118, 123 (1955).  Privity of contract is established by showing legal relationship to the contract or its parties.  La Mourea v. Rhude, 209 Minn. 53, 57, (295 N.W. 304, 307) (1940).

The district court found that Automotive 36 failed to show it "was ever an entity which legally entered into any completed transaction with any of the [respondents]," or that there was a "connection or relationship" between Automotive 36 and the money wired to IMYGE as the down payment on the Auburn.  The court concluded that Automotive 36 does not have standing to sue in this case.  Although the district court did not specifically find that Automotive 36 is not in privity to the contract in this case, we can infer such a finding from a reading of the district court's order as a whole.  In re Welfare of J.K., 641 N.W.2d 617, 621 (Minn. App. 2002).  The record supports such a finding.

"Anthony Magnotta, d/b/a Affordable Cars" and IMYGE are the only parties to the contract at issue in this case.  "Affordable Cars" is not a registered business entity with the Minnesota Secretary of State, and there is no evidence in the record that shows Automotive 36 has a connection or relationship with a business entitled "Affordable Cars."  Although Magnotta is the president of Automotive 36, the contract shows he was doing business on behalf of "Affordable Cars," not Automotive 36. 

In addition, Magnotta admitted that he took out a personal loan to pay the down payment on the Auburn, but claimed that he did so as the "personal guarantor" of "Affordable Cars."  When Magnotta was advised by opposing counsel that there is no business entity entitled "Affordable Cars" in Minnesota, Magnotta testified that the loan paperwork should have indicated he was doing business as "Affordable Used Cars of Maplewood" but he had no control over the bank paperwork.  When asked if the bank created the paperwork based on information that he provided, Magnotta answered "yes."  The district court's order indicates that the court found Magnotta's testimony regarding control over the information contained in the loan paperwork uncredible, and we defer to the district court's credibility determinations.  Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988).  Because Magnotta admitted he obtained a personal loan to make the down payment, and because the record does not establish a connection between Automotive 36 and "Affordable Cars," the record supports the court's finding that Automotive 36 does not have a legal connection to the down payment on the Auburn.

Because Automotive 36 failed to show a legal connection or relationship to the Auburn contract or down payment, it has not established it is in privity to the contract.  The district court, therefore, did not err in concluding that Automotive 36 does not have standing to sue in this case.  It should also be noted that while "Affordable Cars" is not a legal entity that could enforce the contract at issue in this case, Anthony Magnotta has the right to sue IMYGE to enforce the contract.  Because this action potentially exposes IMYGE to another action, concluding that Automotive 36 does not have standing to sue in this case fulfills the purpose of rule 17.01.  See Norby, 304 Minn. at 467, 231 N.W.2d at 668 (stating purpose of rule 17.01 is to prevent other claimants from making further demands against a defendant for the same relief).

Automotive 36 argues in the alternative that it was the third-party beneficiary of the contract created between "Anthony Magnotta, d/b/a Affordable Cars" and IMYGE.  Again, the district court's finding that Automotive 36 is not a third-party beneficiary of the contract at issue in this case can be inferred from the district court's order as a whole.  In re Welfare of J.K., 641 N.W.2d at 621.

A third party can establish third-party beneficiary status and associated rights by showing that the contracting parties intended to benefit the third party at the time the contract was executed.  Julian Johnson Constr. Corp. v. Parranto, 352 N.W.2d 808, 811 (Minn. App. 1984).  Unless the contract expresses the parties' intent to benefit a third party through contractual performance, the third party is no more than an incidental beneficiary and cannot enforce the contract.  Wurm v. John Deere Leasing Co., 405 N.W.2d 484, 486 (Minn. App. 1987).  Usually, when there is no reference to the third party in the contract, there is no intent to benefit the third party.  614 Co. v. Minneapolis Cmty. Dev. Agency, 547 N.W.2d 400, 410 (Minn. App. 1996).  "But the absence of the third party's name does not preclude a finding of intent to benefit a third party if the circumstances show otherwise."  Id.  (quotation omitted). 

A third party may recover as an intended beneficiary by satisfying either the "intent to benefit" or "duty owed" test.  Cretex Co., Inc., v. Constr. Leaders, Inc., 342 N.W.2d 135, 139 (Minn. 1984).  To establish intent to benefit, the contract must express some intent by the parties to benefit the third party though contractual performance.  Chard Realty, Inc. v. City of Shakopee, 392 N.W.2d 716, 720 (Minn. App. 1986), review denied (Minn. Nov. 19, 1986).    To establish a duty owed, the promisor's performance under the contract must discharge a duty otherwise owed the third party by the promisee."  Id.

Automotive 36 is not directly mentioned in the contract at issue in this case and would presumably be only an incidental beneficiary to the contract, assuming the Auburn was received and displayed at a dealership operated by Automotive 36.  Consequently, Automotive 36 does not have a right to enforce the contract as a third-party beneficiary unless it satisfies the "intent to benefit" or "duty owed" tests.  The contract does not express any intent by "Anthony Magnotta, d/b/a Affordable Cars" or IMYGE to benefit Automotive 36 through contractual performance, and the record does not contain any evidence that IMYGE's performance under the contract would discharge a duty owed to Automotive 36 by Anthony Magnotta or "Affordable Cars."  Thus, we find this argument unpersuasive.

Because we hold that Automotive 36 does not have standing, we do not reach the other issues raised on appeal. 

Affirmed.

 

 

 

[1] Respondent argues that the November 18, 2002, proceeding was a summary judgment motion hearing, not a trial, and that the summary judgment standard of review applies.  While the motion was before the court, it also held a trial as scheduled, made findings, and entered judgment, and appeal was taken from that judgment.  Consequently, the standard of review applicable to summary judgment does not apply.