Opinion
No. C2-97-140.
Filed September 9, 1997.
Appeal from the District Court, Blue Earth County, File No. C2-95-1341.
John C. Peterson, Farrish, Johnson Maschka, (for Respondent Bresser).
Richard J. Thomas, Thomas H. Jensen, Burke Thomas, (for Respondent Friedrichs).
Warren F. Plunkett, Peter D. Plunkett, Warren F. Plunkett Associates, (for Appellant).
Considered and decided by Klaphake, Presiding Judge, Davies, Judge, and Peterson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
Minnesota Trust Company of Austin (MTC) appeals from judgments dismissing its third-party complaint against respondent Karl O. Friedrichs. Friedrichs has filed a notice of review, challenging the trial court's denial of his motion for bad-faith attorney fees. Respondent Karen A. Bresser, the guardian ad litem for the minor children, also has filed a brief on appeal.
Because the evidence reasonably supports the trial court's finding that Friedrichs was not an agent of MTC and because the trial court did not err in rejecting MTC's other claimed bases for holding Friedrichs liable, we affirm dismissal of MTC's third-party complaint against Friedrichs. Because MTC submitted a false affidavit in opposition to Friedrichs's motion for summary judgment, we reverse the trial court's denial of bad-faith attorney fees and remand for determination of those fees.
FACTS
Friedrichs, an attorney, was retained by Janell Bruns to establish a conservatorship for her two children who had inherited money from a relative. The trial court appointed Bruns conservator and directed that a $40,000 surety bond be filed.
Friedrichs decided to contact MTC because another attorney in his firm, James Manahan, had done business with MTC and had a packet of preexecuted surety bond supplies from MTC in his office. On July 15, 1992, Friedrichs spoke by telephone with Audrey Hurmence, a vice president at MTC. Hurmence instructed Friedrichs to provide MTC with an executed guarantee agreement, an executed joint control agreement (JCA), a completed bond form, and a bond premium. Hurmence testified that she informed Friedrichs that the JCA had to be filed with the financial institution or bank holding the conservatorship funds, but acknowledged that she did not tell Friedrichs that he personally had to file the JCA with the bank. Friedrichs testified that Hurmence never informed him that he needed to file the JCA with the bank.
The documents were executed and submitted to MTC. The company and agent copies of the bond application were signed "James Manahan, Agent," and listed Friedrichs as the attorney. The JCA was executed by Bruns and her husband. Under its terms, the Brunses agreed to deposit a copy of the document with the bank and agreed that the funds could be withdrawn only upon the Brunses' joint signatures. MTC issued the bond, and Friedrichs filed it with the court and obtained the letters of conservatorship.
Friedrichs provided Bruns with the letters and with copies of the bond, the guarantee agreement, and the JCA. Friedrichs did not instruct Bruns to file the JCA with the bank. Bruns thereafter obtained the funds but never established a conservatorship account. Instead, she and her husband spent the funds.
An order to show cause eventually was issued, ordering Bruns to appear and explain her failure to file annual accountings with the probate registrar. By this time, Friedrichs had withdrawn as her attorney. When Bruns failed to repay the funds as ordered by the court, Bresser was appointed guardian ad litem and commenced an action against MTC to collect on the $40,000 bond. MTC thereafter brought this third-party action against the Brunses and Friedrichs.
Bresser moved for summary judgment against MTC, and the trial court granted her motion. Friedrichs and MTC thereafter brought cross-motions for summary judgment. Friedrichs argued that he had no duty or obligation to MTC to insure that the JCA was sent to the bank and that the failure to file the document with the bank did not cause the loss in this case. MTC argued that Friedrichs was liable for failing to file the JCA with the bank and was negligent in his duties as an agent of MTC. MTC also moved for summary judgment against the Brunses because they failed to answer MTC's third-party complaint and for a stay of the judgment Bresser had obtained against MTC on the bond.
By order dated March 28, 1996, the trial court denied the cross-motions for summary judgment, noting that a fact issue remained as to whether Friedrichs was an agent of MTC. The court granted MTC's motion for summary judgment against the Brunses, but denied its motion for stay of entry of judgment.
A bench trial was held. The court thereafter found that Friedrichs was not an agent of MTC, that Friedrichs had no duty to notify financial institutions of MTC's requirements, and that MTC had established no negligence or other basis for holding Friedrichs liable. The court also denied Friedrichs's motion for bad-faith attorney fees finding that MTC acted in good faith. This appeal followed denial of MTC's new trial motion and entry of final judgment.
DECISION I.
The existence of an agency relationship presents a question of fact. Vacura v. Haar's Equip., Inc. , 364 N.W.2d 387, 391 (Minn. 1985). This court will reverse a trial court's factual findings only if clearly erroneous. Minn.R.Civ.P. 52.01.
MTC insists that the following facts prove an agency relationship existed in this case: (1) Friedrichs was a member of a law firm that had MTC's surety bond supplies in its possession so that any firm member could write a bond; (2) Friedrichs had a client in need of a bond; and (3) Friedrichs contacted MTC and was told he could obtain a bond by filling out the bond, obtaining an executed guarantee agreement, completing a joint control agreement (JCA), and paying a bond premium. We disagree. An agency is a fiduciary relationship that results when a principal manifests to an agent that the agent may act on his account, when the agent consents to so act, and when the principal has the right of control over the agent. Jurek v. Thompson , 308 Minn. 191, 197, 241 N.W.2d 788, 791-92 (1976) (citing Restatement (Second) of Agency § 1 (1957)). In this case, (1) Friedrichs never consented to enter into an agency relationship with MTC; (2) Friedrichs never provided legal representation to MTC; (3) MTC never manifested its consent that Friedrichs act as its agent; and (4) MTC did not exercise any control over Friedrichs. At most, MTC communicated to Friedrichs that he would have to fulfill certain requirements before MTC would issue a bond to Friedrichs's client, and any control MTC exercised over Friedrichs terminated once that bond was issued. Under these circumstances, the trial court's finding of non-agency is not clearly erroneous.
Even if Friedrichs was MTC's agent, there is no evidence that he breached any duty toward MTC: the terms of the JCA did not obligate Friedrichs to deposit it with the bank, and Friedrichs and Hurmence both testified that Friedrichs was never asked to personally deposit the JCA with the bank. Nor is there any evidence that filing the JCA with the bank would have prevented MTC's loss: the JCA merely required the signatures of both Bruns and her husband to withdraw funds, and the evidence established that both of the Brunses were responsible for wrongfully withdrawing the funds.
MTC next argues that Friedrichs owed some other duty to MTC. However, Minnesota courts have refused to hold an attorney liable to a nonclient for malpractice. See, e.g., Schuler v. Meschke , 435 N.W.2d 156, 162 (Minn.App. 1989) (citing Eustis v. David Agency, Inc. , 417 N.W.2d 295, 298 (Minn.App. 1987)), review denied (Minn. Apr. 19, 1989). While an attorney may be liable, under some circumstances, to a nonclient for negligent misrepresentation, one of the requirements for negligent misrepresentation is that the actor supply false information to others. Cf. Bonhiver v. Graff , 311 Minn. 111, 122, 248 N.W.2d 291, 298 (Minn. 1976) (accountant liability under Restatement § 522). Here, there is absolutely no evidence that Friedrichs ever represented to anyone that he had deposited or would deposit the JCA with the bank.
MTC further argues that the conservatorship bond was "void ab initio" because Friedrichs failed to follow MTC's underwriting conditions when he failed to deposit the JCA with the bank. This argument, however, was not presented to the trial court and cannot be raised for the first time on appeal. See Thiele v. Stich , 425 N.W.2d 580, 582 (Minn. 1988).
MTC finally argues that the trial court abused its discretion by failing to stay entry of the judgment Bresser obtained against MTC. In its March 28, 1996 order, however, the trial court properly exercised its discretion and concluded a stay was not warranted or necessary because a decision on MTC's claim against Friedrichs would not affect the judgment Bresser had obtained against MTC on the bond. See Minn.R.Civ.P. 62.06 (court may stay enforcement of final judgment entered upon some but not all claims presented in an action).
II.
By notice of review, Friedrichs challenges the trial court's denial of his motion for bad-faith attorney fees. We will not reverse a trial court's decision on this issue absent an abuse of discretion. Uselman v. Uselman , 464 N.W.2d 130, 140-45 (Minn. 1990) (involving sanctions under Minn. Stat. § 549.21, subd. 2 and Minn.R.Civ.P. 11); Radloff v. First American Nat'l Bank , 470 N.W.2d 154, 156 (Minn.App. 1991), review denied (Minn. July 24, 1991).
Friedrichs insists that MTC acted in bad faith because MTC had no objectively reasonable basis for pursuing an action against him, because no evidence supported any of MTC's claims, and because an affidavit filed by MTC in connection with its motion for summary judgment contained "clear falsehoods calculated to mislead" the court. While we cannot conclude that MTC's third-party complaint contains intentional misstatements of fact and legal theory, we can conclude with certainty that the summary judgment affidavit was false and prejudicial.
The summary judgment affidavit, dated February 23, 1996, was submitted by Warren Plunkett, a vice president and chief underwriter for MTC. In that affidavit, Plunkett states that "on or about July 16, 1992, your affiant received a request from Friedrichs * * * to write a surety bond" and that "your affiant" gave Friedrichs the underwriting instructions as a prerequisite to writing the bond. At trial in July 1996, however, Plunkett admitted that he never spoke to Friedrichs regarding the bond. The only person at MTC to actually speak to Friedrichs in July 1992 was Hurmence, who at the time of the summary judgment motion had no memory of her conversation with Friedrichs. It was not until the day of trial in July 1996, when Hurmence heard Friedrichs's voice in the courthouse, that she remembered having spoken to him in July 1992.
Thus, Plunkett's affidavit contained intentional and false statements in violation of Minn.R.Civ.P. 56.05 (requires affidavits submitted in connection with summary judgment motion to "be made on personal knowledge [and] set forth such facts as would be admissible in evidence."). Plunkett's affidavit also was prejudicial: it was the only affidavit submitted by MTC in connection with the parties' cross-motions for summary judgment, and was crucial to the trial court's decision to deny summary judgment and order a trial on the agency issue.
Under these circumstances, we conclude that the trial court abused its discretion in denying Friedrichs's motion for bad-faith attorney fees. Such a sanction is warranted under Minn.R.Civ.P. 11, Minn.R.Civ.P. 56.07, or Minn. Stat. § 549.21, subd. 1 (1996). We therefore reverse and remand for determination of reasonable fees incurred by Friedrichs from the time of the summary judgment motion through appeal.