Opinion
No. A03-1862.
Filed October 5, 2004.
Appeal from the District Court, Hennepin County, File No. Ct 00-012804.
James H. Kaster and Nicholas G.B. May, Nichols Kaster Anderson, Pllp, (for appellants)
William M. Drinane, Hanson Lulic Krall, LLC, (for respondents)
Considered and decided by Randall, Presiding Judge, Willis, Judge, and Minge, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Appellants sued respondents for legal malpractice and breach of contract to perform legal services. The jury found breach of contract and awarded damages. On appeal, appellants argue (a) the district court erroneously instructed the jury to consider the conduct of others in considering contract damages; (b) the special verdict form and jury instructions were confusing and contradictory; (c) errors in the instructions relating to the negligence claims affected the damages award; (d) the court failed to include amounts indicated in the special verdict form as damages. Appellants also contend they are entitled to a new trial or judgment notwithstanding the verdict (JNOV) on the negligence claims because (a) respondents waived their defense of contributory negligence; (b) the court improperly allowed the jury to consider the alleged fault of others; (c) they were deprived of a fair trial by the conduct of the district court judge; and (d) they are entitled to additional damages on the jury's special verdict award. We affirm on all issues.
FACTS
In 1981, appellant Bonnie Shapiro and her late husband Richard Shapiro incorporated their Renaissance-themed fair as King's Faires, Inc. (KF I) in Minnesota. A few years later, Mrs. Shapiro purchased 79 acres of land in Massachusetts on which to operate the fair. After incurring the cost of purchasing and improving the property, the Shapiros and KF I sought to restructure their debt. In 1987, the Shapiros retained respondents Samuel Stern and his law firm to assist them with their financial problems. Stern assisted the Shapiros in executing a sale and lease-back agreement with George Bartholomew, the former property owner, in which KF I leased the property with an option to purchase it back during the term of the lease. The lease, which ran through 2002, was drafted by Stern and contained a typographical error. Specifically, KF I was identified as "King's Faire, Inc." rather than the correct name of "King's Faires, Inc."
KF I failed to comply with the requirement in Minnesota law that it file annual reports with the state. Under Minn. Stat. § 302A.821, subd. 5, (Supp. 1991), the corporation was dissolved in 1991. The Shapiros were not notified of the corporation's dissolution because the secretary of state did not have their current address. Because KF I was a party to the lease, the lease option became immediately unenforceable.
In 1994, the Shapiros were offered the opportunity to repurchase the Massachusetts property. At some point during the negotiations, it is alleged that Stern and Mr. Shapiro discovered that KF I had been dissolved. In an effort to rectify the situation, a new company was formed that would hold itself out as KF I and act as though the dissolution had never occurred. The new corporation was incorporated with the state of Minnesota on August 23, 1995, as King's Faire, Inc. (KF II). KF II used the same tax identification number as KF I, and the new corporation's name was identical with the typographical error in the lease drafted by Stern.
It is disputed as to who discovered the dissolution first.
Mr. Shapiro was diagnosed with colon cancer in February 1994, and in the summer of 1995, he became very sick. Due to her husband's condition, Mrs. Shapiro decided not to repurchase the property, and the property was sold to Alphonse D'Amico in 1995. While negotiations for the repurchase of the property were being conducted, Stern advised the Shapiros to execute an estoppel certificate, erroneously confirming that KF II was the party to the lease and that the lease was in full force and effect.
In August 1996, Mr. Shapiro passed away. In early 1997, Mrs. Shapiro retained Massachusetts attorney Arthur Gold to advise her as to the enforceability of the option to purchase the Massachusetts land In a letter acknowledging that KF I was statutorily dissolved in 1991 and that KF II was formed in 1995, Gold erroneously advised Mrs. Shapiro that KF II had the right to exercise the option of purchasing the Massachusetts property. Relying on this advice, Mrs. Shapiro sought to enforce the option, but D'Amico refused to participate. Shortly thereafter, D'Amico learned that KF II was not the original party to the lease. D'Amico then brought suit against appellants seeking a declaratory judgment that KF II was not a party to the 1987 lease and was, therefore, a tenant-at-will. Ultimately, KF II settled the lawsuit with D'Amico under what it describes as extremely unfavorable terms. KF II stated that it had to pay more than it wanted to settle so that it could continue to operate the fair on the property.
Appellants then sued respondents and Gold for damages, claiming legal malpractice. The district court dismissed the lawsuit against respondents based on the statute of limitations and dismissed the lawsuit against Gold for lack of personal jurisdiction. On appeal, this court affirmed the district court's dismissal of the suit against Gold. Shapiro v. Stern, No. C2-01-1214, 2002 WL 47039 (Minn.App. Jan. 15, 2002). But we reversed the summary judgment in favor of respondents based on appellants' claim that Stern committed malpractice in 1995 when he allegedly advised them regarding their negotiations to enforce the option. This court held that because appellants' claim included the loss of opportunity to mitigate potential damages due to their attorney's alleged malpractice, the extent of loss was a fact question for the jury. Thus, the matter was remanded back to the district court for trial.
A trial was held in June 2003. At trial, appellants presented evidence that after Mr. Shapiro's death; the Massachusetts property became available for purchase. Testimony indicated that appellants had the financial resources available to purchase the property at that time. Bartholomew also testified that he probably would have had no objection to inserting a new corporation as tenant in 1995. Nevertheless, Mrs. Shapiro testified that she believed she had a valid lease option to purchase the property, and therefore she did not believe it was necessary to purchase the property at that time. Had she known the lease option was invalid, Mrs. Shapiro testified that she would have taken steps to rectify the situation, either by attempting to execute a new lease with Bartholomew or by obtaining the money to buy the land
Michael Colich, Mrs. Shapiro's brother-in-law, testified that he had the financial resources available to him to purchase the property and offered to assist Mrs. Shapiro in purchasing the property.
Appellants also presented evidence that after Mr. Shapiro passed away and the property was sold to D'Amico, Mrs. Shapiro was approached about signing a long-term lease. D'Amico testified that he made numerous proposals regarding a long-term lease. These lease proposals were for periods of time as long as 20, 30, 40, or even 99 years, and some contained an option to purchase the property at the end of the lease term. Mrs. Shapiro testified that she declined to enter into a long-term lease with D'Amico because she intended to exercise her option under the 1987 lease.
On April 6, 1999, Mrs. Shapiro attempted to exercise her option to the buy the land under the 1987 lease. By this time, she had retained attorney Todd Freeman of the law firm Larkin, Hoffman, Daly Lindgren to represent KF II. Attorneys Freeman and Gary Van Cleve of Larkin Hoffman advised Mrs. Shapiro that "in neither our analysis nor that of Arthur Gold's does there appear to be any real risk that you will not be able to buy the property pursuant to the option in your lease."
Mrs. Shapiro testified that after appellants brought suit to enforce the lease option, D'Amico discovered that the lease option was unenforceable. Because the lease was unenforceable, Mrs. Shapiro testified that she ultimately settled the lawsuit against D'Amico based on the advice of her attorney who was handling the litigation matter. Mrs. Shapiro's daughter, Amiee Sedley, testified that KF II spent roughly $500,000 in legal fees in the legal battle with D'Amico. Sedley also testified that KF II would not have attempted to sue to enforce the option if they had known that the lease was unenforceable. Despite his knowledge that the lease was unenforceable, respondent Stern never provided Mrs. Shapiro with this information.
In support of the malpractice claim, appellants presented expert testimony that respondents' conduct fell below the standard of care in many ways. Appellants' experts testified that respondents committed malpractice because (1) Stern admittedly failed to communicate to his client, Mrs. Shapiro, that the lease and option were unenforceable, and (2) Stern actively participated in fraudulent activity by helping to create a corporation that would hold itself out as a different corporation.
In their defense, respondents claimed that in August 1995, Stern learned from Mr. Shapiro that KF I had been statutorily dissolved. According to Stern, Mr. Shapiro was going to form KF II regardless of Stern's advice against it and that he simply provided Mr. Shapiro with the forms to effectuate the incorporation of KF II. Stern testified that Mr. Shapiro knew that the dissolution of KF I rendered the lease option unenforceable, but he did not want to share that information with his wife. Stern admitted that, in retrospect, he probably should have told Mrs. Shapiro that the lease option was unenforceable or, at the very least, insisted that Mr. Shapiro tell his wife about the situation. But Stern pointed out that Mrs. Shapiro was unhappy with some of Stern's advice concerning other legal issues and that Mrs. Shapiro had retained other counsel that were advising her that she had a valid option to repurchase the Massachusetts property.
Because Mr. Shapiro died in 1997, Stern was the only party to the conversation available to testify during deposition or at trial regarding this conversation.
At the conclusion of the trial, but prior to closing arguments, the district court produced jury instructions and a special verdict form. The instructions and special verdict form placed Mr. Shapiro and the law firm of Larkin Hoffman on the special verdict form and instructed the jury to apportion a percentage of fault to each party. Appellants objected to the jury instructions and portions of the special verdict form because prior to trial, appellants made various motions in limine to exclude certain evidence and arguments that appellants were negligent. Appellants also moved prior to trial to exclude any evidence or arguments relating to the malpractice of Larkin Hoffman. The district court overruled appellants' objections and included references to Larkin Hoffman and Mr. Shapiro on the verdict form.
The jury returned the special verdict form and concluded that respondents were negligent in their representation of appellants and that the negligence was a direct cause of harm to KF II. The jury also concluded that the negligence of Gold, Larkin Hoffman, and Mr. Shapiro contributed to the damage to KF II. Based on the district court's instruction that officers have a fiduciary duty to the shareholders of their corporations, the jury compared the fault of Mr. Shapiro to the attorneys and attributed 60% of the blame for KF II's damages to Mr. Shapiro.
The jury also awarded damages in accordance with the questions of the special verdict form. The questions and answers to questions 13, 14, and 18 read as follows:
13. What amount of money would fairly and adequately compensate Bonnie Shapiro, as an individual, for harm caused to her as a direct result of the negligence and/or breach of fiduciary duties of others since August 1995? $0.
14. What amount of money would fairly and adequately compensate King's Faire, Inc. (KF II) for harm directly caused by the negligence and/or breach of fiduciary duties by others since August 1995? $178.703.20.
18. What amount of money, if any, in excess of the damages found in Questions 13 and 14, would fairly and adequately compensate King's Faire, Inc (KF II) for harm directly caused by Defendants' breach of contract? $89,351.60.
Because the jury apportioned 60% of the fault to Mr. Shapiro, the district court ordered judgment in favor of appellants only in the amount of $89,351.60, which was the amount of damages awarded for respondents' breach of contract. Appellants subsequently moved for a new trial or JNOV, claiming, among other things, that the amount of damages awarded was totally inadequate. The district court denied appellants' motions. This appeal followed.
DECISION I.
Trial courts are allowed considerable latitude in selecting the language of jury instructions. Alholm v. Wilt, 394 N.W.2d 488, 490 (Minn. 1986). This court will not reverse a trial court's decisions unless the instructions constituted an abuse of discretion. Id. Generally, a new trial on damages will be ordered only when the verdict is so inadequate or excessive that it could only have been rendered out of passion or prejudice. Seim v. Garavalia, 306 N.W.2d 806, 813 (Minn. 1981).
Appellants argue that the district court abused its discretion in denying their motion for a new trial because the jury instructions and special verdict form were contrary to law and properly objected to at trial. A trial court commits reversible error when it gives inconsistent and contradictory instructions on a material issue. Janke v. Duluth and Northeastern R. Co., 489 N.W.2d 545, 549 (Minn.App. 1992).
Where the instructions are misleading and conflicting on a material issue, a new trial should ordinarily be granted unless the error is cured by withdrawal of the defective instruction. But an erroneous statement of the law clearly applicable to the facts of the case is not cured by subsequent correct instructions which do not specifically correct the misstatement.
Lindstrom v. Yellow Taxi Co. of Minneapolis, 298 Minn. 224, 229, 214 N.W.2d 672, 676 (1974). Jury instructions must be viewed as a whole before determining whether they were misleading or confusing to the jury. Malik v. Johnson, 300 Minn. 252, 257, 219 N.W.2d 631, 635 (1974).
At trial, appellants asserted that respondents were liable for (1) breach of contract, (2) negligence, and (3) breach of fiduciary duty. Appellants now contend that they are entitled to a new trial on their breach-of-contract claim because (1) the district court erroneously instructed the jury to consider the conduct of others in considering KF II's contract damages, (2) the special verdict form and jury instructions were confusing and contradictory, and (3) the errors in the jury instructions related to the negligence claims directly affected KF II's contract claim.
A. Instructions pertaining to the conduct of others
Appellants argue that the jury instruction that allowed the jury to consider the conduct of others is an erroneous statement of the law because the jury is not to utilize a comparative fault analysis or reduce damages based on the alleged fault of others in a breach-of-contract claim. To adequately address appellants' claim, a review of the instructions as a whole is necessary to determine whether the challenged instruction actually pertains to appellants' contract claim.
The challenged instruction states that: "In determining what, if any, damages [respondents] are responsible for, you may consider conduct on the part of others who owed duties to [appellants] and whether that conduct caused all or part of the damages." Immediately prior to this instruction, the district court instructed the jury as follows: "In answering the questions 13 and 14 on the special verdict form [regarding negligence and breach of fiduciary duty], you are to decide the amount of money that will fairly and adequately compensate [appellants] for any harm they may have suffered as a direct result of the fault of [respondents] and or others." Prior to these instructions, the district court defined "direct cause" and advised the jury of the possibility of more than one direct cause of harm. The district court specifically instructed the jury that:
Fault consists of negligence and/or breach of fiduciary duty. If you find that Richard Shapiro's fault is greater than 50%, then [KF II] will receive no damages. If you find that Richard Shapiro's fault is 50% or less, then [KF II's] damages will be reduced by that percent. If you assigned a percentage of fault to Richard Shapiro, I will do the reduction of damages. You are not to reduce any damage amounts yourselves for this reason. This instruction is not meant to suggest that you should find anyone at fault. It is to tell you the relationship between the percentage of fault and the damages received.
Immediately following the challenged instruction (pertaining to the jury's consideration of the conduct of others), the district court instructed the jury that: "If you answer question 18 yes [pertaining to the breach-of-contract claim], you are to determine the amount of money that will fairly and adequately compensate [appellants] for the damages caused by the breach of contract." Although the elements for a breach of contract claim do appear in the instructions before the challenged instruction, lending credence to appellants' argument, the special verdict form says nothing about the consideration of the conduct of others in determining whether respondents breached their contract with appellants. Specifically, the special verdict form states:
15. Did a contract exist for the performance of legal services between [respondents] and [appellants]?
16. If your answer to question 15 is yes, answer this question: Did [respondents] breach the contract?
17. If your answer to question 16 is yes, answer this question: Did the breach of contract by [respondents] directly cause harm to appellants?
18. If your answer to 17 is yes, answer this question: What amount of money, if any, in excess of the damages found in questions 13 and 14, would fairly compensate [appellants] for harm directly caused by [respondents'] breach of contract?
Appellants acknowledge in their brief that question 18 seeks a damage calculation solely against respondents. But appellants contend that "it is very reasonable to assume [the challenged instruction] was heeded by the jury in determining appellants' contract damages."
We are not persuaded. The instructions say nothing about the conduct of others with respect to the breach-of-contract claim. The challenged instruction, on its face, instructs the jury on the determination of whether respondents caused damage. It does not instruct regarding the determination of the amount or damages with respect to the breach-of-contract claim. Appellants merely assume that the jury considered the conduct of others in the breach-of-contract claim because the instruction was given prior to the instruction concerning the breach-of-contract claim. When the jury instructions are viewed as a whole, the challenged instruction does not instruct the jury to consider the conduct of others with respect to the breach-of-contract claim. We note that it is theoretically possible that a jury can take an improper inference from jury instructions and that can work to the disadvantage of one party or the other. But that is always a possibility, even when the jury instructions are simple and fully agreed on by each party. On review, an appellate court can only look at the black and white words of the jury instructions. We cannot see into the jurors' minds.
Appellants also contend that the instruction is erroneous because it instructs the jury to consider the conduct of others in determining appellants' damages. In support of their argument, appellants cite Minn. Stat. § 604.01, subd. 1 (2002), for the proposition that in the contributory fault context, it is the jury that determines the amount of damages and the percentage of fault attributable to each party, but it is the court that reduces the amount of damages in proportion to the amount of fault attributable to the person recovering. Based on the language of the instruction, appellants assert that it must be assumed that the jury reduced the damages inappropriately.
Although appellants correctly state that the district court is to reduce the amount of damages in proportion to the amount of fault attributable to each party, the district court did exactly that here. As stated above, the district court instructed the jury with respect to the negligence and breach of fiduciary duty claims, to consider Mr. Shapiro's fault and assign a percentage to any fault that is attributed to him. The district court then stated that it would do the reduction in damages and that the jury was not to reduce the damages based on any fault attributed to Mr. Shapiro. Accordingly, the instructions were proper because the instructions explicitly state that the district court, and not the jury, was to reduce damages based on the fault of others.
B. Special verdict form and jury instructions
Next, appellants contend that a new trial is warranted because the special verdict form and jury instructions were confusing and contradictory. In support of their claim, appellants cite Janke for the proposition that material contradictions between the special verdict form and jury instructions warrant a new trial. 489 N.W.2d at 549.
In Janke, the district court instructed the jury to reduce Janke's damages by the amount of his contributory negligence. Id. The special verdict form, however, told the jury not to consider negligence in determining damages. Id. On appeal, this court noted that the record did not indicate how the jury arrived at its damages award or whether the jury considered Janke's negligence in making the award. Because the court was unable to determine whether the jury followed the district court's instructions to reduce damages or whether, as the special verdict form directs, the jury did not consider negligence in determining the amount of damages, the court of appeals reversed and remanded for a new trial on the issue of damages. See id. (concluding that a new trial was warranted because the jury instructions were inconsistent and contradictory).
Here, appellants point to the following three jury instructions as confusing and contradictory:
(1) In determining what, if any, damages Defendant Samuel Stern and Stern Anderson, P.A. are responsible for, you may consider conduct on the part of others who owed duties to [appellants] and whether that conduct caused all or part of the damages.
(2) Any damages awarded for breach of contract should put King's Faire, Inc. (KF II) in the position it would have been if the contract had not been breached by [respondents] Samuel Stern and Stern Anderson, P.A.
(3) What amount of money, if any, in excess of the damages found in Questions 13 and 14, would fairly and adequately compensate King's Faire, Inc. (KF II) for harm directly caused by [respondent's] breach of contract.
Appellants claim that the instructions are inconsistent because one instruction directs the jury to award damages that would put KF II in the position it would have been had respondents not breached the contract, while the other instruction directs the jury to consider the "conduct of others" in coming to a contract damage award. We disagree. Appellants essentially pull out three instructions and assert that when these three instructions are read together, without the benefit of the instructions as a whole, they are confusing and contradictory. But jury instructions must be viewed as a whole in determining whether they were misleading or confusing to the jury. See Malik, 300 Minn. at 257, 219 N.W.2d at 635.
At trial, appellants sought damages under theories of negligence, breach of contract, and breach-of-fiduciary-duty. Extensive discussions were held on the record concerning the possibility of the jury awarding multiple damages if the damages found under each theory were not distinguished from each other in some way. In objecting to an instruction that would alleviate such a problem, appellants stated that if such a problem arose, "we can deal with that later on."
The district court decided to address the problem at that time by crafting a verdict form to prevent an improper duplication of damages. It combined appellants' negligence and breach-of-fiduciary-duty claims for the purposes of the related special verdict damage question for those theories, and for the question related to contract damages, limiting the amount of recovery to any amount in excess of damages found for negligence or breach of fiduciary duty. When read together, in light of the special verdict form, the instructions are clear enough. The instructions begin by discussing various evidence and credibility issues. Next, the instructions discuss various direct and superseding cause issues and percentage-of-fault issues, followed by breach-of-contract issues and duties of attorneys issues. The instructions then instruct the jury as to questions 13 and 14 of the special verdict form and state that the jury may consider the conduct on the part of others in determining whether respondents caused all or part of any of the damages. Finally, the instructions provide that if the jury finds that respondents breached their contract, the jury is to determine the amount of money that would compensate appellants for respondents' breach of contract. The instructions state that: "Any damages awarded for breach of contract should put [appellants] in the position it would have been in if the contract had not been breached by [respondents]."
The instructions essentially instruct the jury as to appellants' negligence and breach-of-fiduciary-duty claims and then instruct the jury as to the breach-of-contract claim. The special verdict form mirrors these instructions. The jury was instructed to determine whether respondents were negligent or breached a fiduciary duty. The jury found in the affirmative, but also concluded that other parties were also contributorily negligent. The jury then apportioned a percentage of fault to the various parties and determined the amount of damage resulting from the total harm caused by the comparative causative fault of the various parties to be $178,703.20.
As for the breach-of-contract claim, the jury was instructed to determine what amount of money, if any, in excess of the damages found in the negligence and breach-of-fiduciary-duty claims, would fairly and adequately compensate KF II for harm directly caused by respondents' breach of contract. The jury determined this amount to be $89,351.60. Unlike Janke, it is clear how the jury arrived at its damages award and that the jury followed the district court's instructions in arriving at the figures. We conclude that the special verdict form and jury instructions, when read together, are not inconsistent and contradictory.
C. Effect of alleged jury instruction errors in the negligence claims on the contract claim
Appellants argue that they are entitled to a new trialon the issue of damages on their breach-of-contract claim because errors in the jury instructions pertaining to the negligence claim directly affected their contract claim. Appellants assert that because the district court erroneously instructed the jury to reduce damages on appellants' negligence claims based on the conduct of others; the jury reduced the damage award in questions 13 and 14. Appellants contend that this led the jury to reduce their damage recovery under question 18 because appellants' contract damages were contingent on the jury's findings of negligence damages.
Questions 13 and 14 pertain to appellants' negligence and breach-of-fiduciary-duty claims.
We disagree. As stated above, the instructions plainly state that the jury was not to reduce the damages based on the negligence of others. The instructions state that the district court would do any reductions in damages if the jury allocated a percentage of fault to Mr. Shapiro. The instructions with regard to damages concerning the breach-of-contract claims were unrelated to the negligence claims, and appellants have not demonstrated that the award for the negligence claim affected the damages award in the breach-of-contract claim.
Appellants also contend that the instructions are contradictory because the district court instructed the jury that it would reduce damages if the jury assigned fault to Mr. Shapiro, but made no mention as to whether the jury should reduce damages for the fault of Larkin Hoffman or Arthur Gold. Appellants contend that because the district court failed to instruct the jury not to reduce damages for harm caused by Larkin Hoffman or Arthur Gold, the jury likely took that task upon themselves to further reduce the amount awarded in the negligence damages questions after the jury concluded that both Larkin Hoffman and Gold were each 10% responsible for KF II's harm. Appellants' claim relies on speculation that because Larkin Hoffman and Gold were not on the special verdict form, the jury did not follow the instructions correctly. But the jury heard testimony regarding the conduct of Richard Shapiro, Larkin Hoffman, Gold, and others. The jury determined that Shapiro was 60% negligent and Larkin Hoffman and Gold were 10% negligent, respectively. Appellants' unhappiness with the percentages of fault allocated by the jury, and the resulting lack of any award for negligence against respondents, does not support appellants' speculation that the jury did not follow the district court's instructions or that the jury did not understand the effect of their allocating 60% of the fault to Richard Shapiro. Accordingly, the instructions are not inconsistent or contradictory. We conclude the district court did not abuse its discretion by denying appellants' motion for a new trial on their breach-of-contract claims.
II.
Appellants argue that they are entitled to a new trial on their negligence claims because (1) respondents waived their defense of contributory negligence by failing to assert it in their answer or at any other time in the proceeding, (2) the district court improperly allowed the jury to consider the alleged fault of Richard Shapiro, and (3) the district court improperly allowed the jury to consider the alleged fault of Larkin Hoffman.
The district court has the discretion to grant a new trial, and this court will not disturb the decision absent a clear abuse of that discretion. Halla Nursery, Inc. v. Baumann-Furrie Co., 454 N.W.2d 905, 910 (Minn. 1990). The verdict must stand unless it is "manifestly and palpably contrary to the evidence, viewed in a light most favorable to the verdict." ZumBerge v. N. States Power Co., 481 N.W.2d 103, 110 (Minn.App. 1992), review denied (Minn. Apr. 29, 1992).
A. Contributory negligence defense
Appellants assert that when respondents filed their answer, they failed to raise the affirmative defense of contributory negligence. Appellants contend that because respondents failed to plead the affirmative defense of contributory negligence, they waived the right to include Mr. Shapiro and Larkin Hoffman on the special verdict form, and therefore a new trial on appellants' negligence claims is necessary.
"Contributory negligence is an affirmative defense and must be pleaded." H.L. Elliott Jobbing Co. v. Chicago St. Pl, M. O. Ry Co., 136 Minn. 138, 139, 161 N.W. 390, 390-91 (1917). But if contributory negligence appears from the plaintiff's own evidence or from evidence admitted without objection, the defendant may take advantage of it, even though it is not pleaded. Willmar Gas Co. v. Duininck, 239 Minn. 173, 176, 58 N.W.2d 197, 199 (1953).
In their answer, respondents asserted multiple affirmative defenses, including the allegations that any damages suffered by appellants was the result of superseding or intervening cause including acts of third parties, and that appellants failed to join an indispensable party. Consequently, respondents did not waive the defense of contributory negligence. Respondents asserted in their answer that others caused any damage sustained by appellants.
B. Alleged fault of Richard Shapiro
Next, appellants argue that the district court improperly allowed the jury to consider the alleged fault of Mr. Shapiro because (1) Mr. Shapiro did not owe a fiduciary duty to Mrs. Shapiro, (2) there was no evidence in the record that respondent Stern communicated to Mr. Shapiro that the lease and option were unenforceable, and (3) it is improper to compare the fault of an attorney with a non-attorney.
1. Fiduciary duty owed by Richard Shapiro
The jury instructions issued by the district court included instructions relating to the fiduciary duty of corporation's chief executives. The special verdict form asked the jury to determine if Mr. Shapiro was the chief executive officer (CEO) of KF II, and, if so, whether Mr. Shapiro breached his fiduciary duty to Mrs. Shapiro while acting in that capacity. The jury answered in the affirmative to both questions.
Appellants contend that the inclusion of Mr. Shapiro on the special verdict form was factually improper because there were no facts presented at trial on which the jury could conclude that Mr. Shapiro held any officer position with KF II. We disagree. Mrs. Shapiro testified at trial that she was the sole shareholder of both KF I and KF II in order to shield the corporation's assets and income from Mr. Shapiro's creditors pertaining to his separate concert-promoting business and other ventures that were financially risky. Mrs. Shapiro also testified that although she was the sole shareholder of KF I and KF II, the business was a family business. Mrs. Shapiro testified further that her husband Mr. Shapiro was her partner in business and the CEO, and that she was number two. She stated that "all of her rights went to [Mr. Shapiro], as far as making business decisions for King's Faire." The jury also heard testimony from Stern that after the dissolution of KF I, it was Mr. Shapiro who contacted him and arranged to have KF II incorporated. Therefore, there was sufficient evidence presented at trial to enable the jury to conclude that Mr. Shapiro was the CEO of KF II.
Appellants also contend Mr. Shapiro could not be the CEO of KF II because in August 1995, when Mr. Shapiro and Stern discussed the corporate status of KF I, neither KF I nor KF II existed because KF I had been statutorily dissolved and KF II had not yet been created. In support of their contention, appellant's point to Karl Cambronne's expert testimony that KF II was a de facto corporation and that Mr. Shapiro was the CEO of the de facto corporation. But appellants contend that de facto corporations do not exist in Minnesota. Appellants claim, therefore, that the legal basis for claiming that Mr. Shapiro was KF II's CEO was error because he could not be the CEO of a de facto corporation, and therefore Mr. Shapiro owed no fiduciary duty to Mrs. Shapiro.
"A de facto corporation exists when there is (1) some law under which a corporation with the powers assumed might lawfully have been created; (2) a colorable and bona fide attempt to perfect an organization under such a law; [or] (3) user of the rights claimed to have been conferred by the law." Almac, Inc. v. JRH Development, Inc., 391 N.W.2d 919, 924 (Minn.App. 1986). But this court stated that the doctrine of de facto corporations is inapplicable in Minnesota after enactment of Minn. Stat. § 302A.153 (1982). Warthan v. Midwest Consolidated Insurance Agencies, Inc., 450 N.W.2d 145, 147-48 (Minn.App. 1990). Because the concept of a de facto corporation is inapplicable in Minnesota, Mr. Shapiro could not have been the CEO of KF II during the time between KF I's statutory dissolution and the incorporation of KF II. But, the special verdict forms did not require a finding that Mr. Shapiro was the CEO of a de facto corporation. Rather the special verdict form asked the jury to determine if Mr. Shapiro was the CEO of KF II, and if so, whether he breached his fiduciary duty to Mrs. Shapiro while acting in that capacity. The evidence supports the conclusion that after KF II was incorporated, Mr. Shapiro acted as CEO of KF II. Because Mr. Shapiro acted as CEO of KF II, he did owe a fiduciary duty to Mrs. Shapiro. The district court did not err by including him on the special verdict form.
2. Communication concerning the enforceability of the lease option
Appellants argue that the district court erred by allowing the jury to consider the alleged negligence of Mr. Shapiro because there were no facts in the record from which the jury could conclude that Mr. Shapiro knew the lease and option were unenforceable. But the record does reflect that Mr. Shapiro knew the lease option was unenforceable. Stern specifically testified that he knew that Mr. Shapiro knew that the dissolution of KF I rendered the lease option unenforceable. The district court did not err by instructing the jury as to Mr. Shapiro's negligence.
3. Fault of an attorney as compared to a non-attorney
Appellants further contend that it was error to compare the negligence of Mr. Shapiro, a non-attorney, to that of an attorney such as Stern, Gold, or Larkin Hoffman. But in Halla, a case cited by appellants, the Minnesota Supreme Court stated that not only should a professional accountant be held to a professional standard of care, but also so should the businessperson who hires the accountant be expected to conduct his business affairs in a reasonable and prudent manner. 454 N.W.2d at 909. Thus, the court held that it was proper to instruct the jury on the comparative fault of the defendant accountant and the plaintiff business. Id.
Here, the record reflects that Mr. Shapiro was a savvy businessman. He was involved in several business ventures, some successful and some not so successful. Because businessmen are expected to conduct their affairs in a reasonable and prudent manner, the district court did not err by including Mr. Shapiro on the comparative fault instruction form. See id.
C. Alleged fault of Larkin Hoffman
Finally, appellants argue that it was error to include the law firm of Larkin Hoffman on the special verdict form because the record is devoid of any evidence that Larkin Hoffman was negligent. We disagree. The evidence shows Larkin Hoffman gave appellants the same questionable legal advice appellants had received from Gold and his law firm, whom appellants were suing for legal malpractice. Appellants fail to demonstrate how the legal malpractice between the two is different or why the jury, in apportioning appellants' damages, should not have taken the fault of Larkin Hoffman into consideration. The jury apportioned 10% fault to Larkin Hoffman, and the evidence supports the apportionment. Accordingly, the jury determination was not manifestly or palpably contrary to the evidence, and appellants are not entitled to a new trial on their negligence claims.
III.
Appellants argue that the district court erred by denying their motion for JNOV on their negligence claims. JNOV is appropriate when the jury's verdict has no reasonable support in fact or is contrary to the law. Frykman v. University of Minnesota-Duluth, 611 N.W.2d 379, 380 (Minn.App. 2000). On appellate review, the trial court's denial of a JNOV must be affirmed if, in the record, there is any competent evidence reasonably tending to sustain the verdict. Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn. 1998). An appellate court must not set aside the verdict if it can be sustained on any reasonable theory of evidence. Id.
Here, appellants assert that they were entitled to JNOV on their negligence claim because the jury's determination that Larkin Hoffman and Mr. Shapiro were at fault was contrary to law. But as discussed above, Mr. Shapiro owed a duty to Mrs. Shapiro because he was the CEO of KF II after KF II was created. It was also proper to compare the negligence of Richard Shapiro to that of an attorney. See Halla Nursery, Inc., 454 N.W.2d at 909. Finally, there was sufficient evidence in the record to support the jury's conclusion that Larkin Hoffman was negligent. The district court properly denied appellants' motion for JNOV.
IV.
Appellants argue that they are entitled to a new trial because of improper conduct by the trial judge. A new trial will be granted only when a judge's conduct is so prejudicial that a fair and impartial determination by the jury is improbable. Fortier v. Ritter's Hairdressing Studios, Inc., 282 Minn. 382, 386, 164 N.W.2d 897, 899-900 (1969).
Appellants contend that the trial judge repeatedly made arguments, asserted defenses, and brought motions sua sponte on respondent's behalf. Appellants also contend that the trial judge drafted jury instructions meant to limit appellant's recovery, resulting in prejudicial error. But appellants failed to object to any alleged improper conduct on the part of the district court. See Nugent v. Kerr, 543 N.W.2d 688 (Minn.App. 1996) (holding that plaintiff was not entitled to a new trial where plaintiff failed to object to the judge's alleged misconduct when it occurred and did not request a curative instruction). In addition, appellants have not demonstrated how they were prejudiced by the alleged conduct of the trial judge. See id. at 692 (holding that plaintiff failed to demonstrate prejudice where the jury awarded her no damages for her disorder but awarded more than $31,000 in compensatory damages). The jury found that respondent had breached a contract for legal services and awarded appellant $89,351.60. Appellants failed to show that the trial judge's conduct was so prejudicial that a new trial is warranted.
V.
The jury awarded appellants $178,703.20 for their negligence and breach-of-fiduciary-duty claims. The jury then awarded appellants $89,351.60 for their breach-of-contract claims. The sum total of these awards is $268,054.80. Appellants contend that they are entitled to this amount.
Under Minn. Stat. § 604.01, subd. 1, a plaintiff may not recover damages in a suit against another party when the plaintiff's own fault exceeded that of the defendants. Here, the jury apportioned 60% of fault to Mr. Shapiro with respect to the negligence and breach-of-fiduciary-duty claims. The jury also determined that the amount of damage resulting from the harm caused by the combined causative fault of Mr. Shapiro, Gold, Larkin Hoffman, and respondents amounts to $178,703.20. But because Mr. Shapiro's causative fault exceeded respondents' percentage of fault, appellants are not entitled to judgment against respondents for any portion of the $178,703.20 amount. The amount appellants can collect consists of the $89,351.60 award for the breach-of-contract claim. The district court properly entered judgment in favor of appellants for this amount.
Affirmed.
I concur in the result.