Opinion
No. CX-97-225.
Filed September 2, 1997.
Appeal from the District Court, Goodhue County, File No. C296599.
William Oehler, Ward Oehler, Ltd., (for Respondent)
Paul H. Grinde, Ryan Grinde, Ltd., (for Appellants)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
Appellants Hines Thurn Feedlot Inc., James Thurn, and Deryl Hines challenge the district court's grant of summary judgment to respondent Zumbrota Livestock Auction Market, Inc., whereby the district court determined that Thurn and Hines are individually liable to Zumbrota. We reverse and remand.
FACTS
Hines Thurn Feedlot Inc. (the corporation) was incorporated in January 1990, with Thurn and Hines as its sole officers. Since that time, the corporation has done business under the assumed name "Thurn-Hines Livestock." Both the legal and assumed names appear on the corporation's invoices, bank account, and checks.
The corporation began purchasing livestock from Zumbrota in the summer or fall of 1994. In October 1995, the corporation made three livestock purchases from Zumbrota, and Zumbrota sent invoices to "Thurn-Hines Lvstk" or "Thurn Hines Livst." The corporation sent Zumbrota three checks for these purchases totalling $544,646.65. Printed on each check was:
THURN — HINES LIVESTOCK HINES THURN FEEDLOT INC. BOX 55, EDGEWOOD, IA 52042
The checks all were signed by Jean Offerman, an employee of the corporation, but did not indicate the capacity in which Offerman signed.
The corporation stopped payment on the three checks on October 31, 1995, allegedly because a check it received from another cattle company had bounced. The corporation delivered cattle valued at $190,697.25 as partial payment for the debt to Zumbrota, and it made an additional $6,100 payment on or about March 18, 1996.
By a complaint dated March 22, 1996, Zumbrota commenced an action alleging that appellants breached their contract with Zumbrota by failing to pay in full for the livestock purchased in October 1995 and that they made false representations with the intent to induce Zumbrota to sell them livestock. Zumbrota moved for summary judgment, arguing that Thurn and Hines are liable individually for the balance of the purchase price as agents for an undisclosed principal and as members of a joint business enterprise. Zumbrota also argued that the district court should pierce the corporate veil of Hines Thurn Feedlot Inc. to hold Thurn and Hines individually liable. Appellants moved for partial summary judgment on the ground that, as a matter of law, in this case the corporate veil cannot be pierced. The district court granted Zumbrota's motion for summary judgment and denied appellants' motion.
DECISION
A district court may grant summary judgment only if there is no genuine issue as to any material fact and either party is entitled to judgment as a matter of law. Minn.R.Civ.P. 56.03. On appeal from summary judgment, the reviewing court evaluates (1) whether any genuine issues of material fact exist and (2) whether the district court erred in applying the law. State by Cooper v. French , 460 N.W.2d 2, 4 (Minn. 1990).
1. Agents acting for undisclosed/partially disclosed principal.
A corporate officer generally is not liable for corporate debts because, as an agent for a disclosed principal, he or she is not a party to contracts between the corporation and its creditors. Haas v. Harris , 347 N.W.2d 838, 839-40 (Minn.App. 1984). An agent, however, is a party to the agreement and liable on contracts when "the agent acts for a partially disclosed principal or on his own for an undisclosed principal." Id. at 840 (citing Restatement (Second) of Agency §§ 321, 322 (1958)). Thomas Webster, vice president of Zumbrota, stated that he knew the business enterprise only as "Thurn Hines." Thurn and Hines claim that they held themselves out as representatives of the corporation in all business dealings with Zumbrota.
The district court concluded as a matter of law that Thurn and Hines "are individually liable to Zumbrota Livestock as agents for an undisclosed principal." The court relied on Haas , where a defendant who did not tell the plaintiffs they were dealing with a corporation was held personally liable on contracts between the parties. 347 N.W.2d at 840. The district court concluded that this case is factually similar to Haas because Zumbrota did not have "actual knowledge of the corporate status of the debtor."
But the Restatement of Agency defines disclosed, partially disclosed, and undisclosed principals in terms of notice, rather than actual knowledge:
(1) If, at the time of a transaction conducted by an agent, the other party thereto has notice that the agent is acting for a principal and of the principal's identity, the principal is a disclosed principal.
(2) If the other party has notice that the agent is or may be acting for a principal but has no notice of the principal's identity, the principal for whom the agent is acting is a partially disclosed principal.
(3) If the other party has no notice that the agent is acting for a principal, the one for whom he acts is an undisclosed principal.
Restatement (Second) of Agency § 4 (1958). "Notice" is defined as follows:
(1) A person has notice of a fact if he knows the fact, has reason to know it, should know it, or has been given notification of it.
(2) A person is given notification of a fact by another if the latter
(a) informs him of the fact by adequate or specified means or of other facts from which he has reason to know or should know the facts * * *.
Restatement (Second) of Agency § 9 (1958).
The facts here are similar to those in Paynesville Farmers Union Oil Co. v. Ever Ready Oil Co. , 379 N.W.2d 186 (Minn.App. 1985), review denied (Minn. Mar. 14, 1986), where this court affirmed a finding that a corporation was a disclosed principal. The Paynesville court concluded that the defendants' payments by corporate checks during the five-year period immediately preceding the corporation's bankruptcy gave the plaintiff notice that the defendants had incorporated the business with which the plaintiff was dealing. Id. at 188. The district court attempted to distinguish Paynesville on the ground that the checks in that case identified the signer as a corporate officer, but that fact does not appear in the Paynesville opinion. See id.
The district court further noted that appellants did not object to the fact that Zumbrota's invoices were directed to "Thurn-Hines." To avoid personal liability, however, a corporate officer need not expressly notify a creditor that the business is incorporated if the creditor has notice of that fact. Id. There is evidence that during the year or so Hines Thurn Feedlot Inc. did business with Zumbrota, it paid all its bills by checks bearing the corporate name. There is, therefore, a fact question as to whether Zumbrota had notice that it was dealing with a corporation, and the district court erred in determining on summary judgment that Thurn and Hines acted as agents for an undisclosed principal.
2. Equitable estoppel.
The district court also decided that Thurn and Hines are personally liable by application of the doctrine of equitable estoppel, concluding that Zumbrota was justified in believing Thurn and Hines "were acting alone or as a business enterprise." A party asserting equitable estoppel must show a knowing misrepresentation of a material fact made with the intention that it be acted on and reliance on the misrepresentation to the party's detriment. Alwes v. Hartford Life Accident Ins. Co. , 372 N.W.2d 376, 379 (Minn.App. 1985). There is a question of material fact regarding whether Thurn or Hines misrepresented or concealed the existence of the corporation because they allege that "[i]n all business dealings with Zumbrota Livestock, we held ourselves out as employees and representatives of the corporation and not as individuals." See W.H. Barber Co. v. McNamara-Vivant Contracting Co. , 293 N.W.2d 351, 357 (Minn. 1979) (concluding that misrepresentation or concealment of material facts is indispensable element of equitable estoppel). The question of whether its receipt of checks bearing the corporation's name put Zumbrota on notice that it was dealing with a corporation also is relevant to the equitable estoppel inquiry. See West Concord Conservation Club, Inc. v. Chilson , 306 N.W.2d 893, 896 (Minn. 1981) (concluding party that negligently fails to take notice of facts alleged to be misrepresented cannot invoke equitable estoppel). The district court erred in granting summary judgment to Zumbrota on the ground of equitable estoppel.
3. Corporate veil.
Zumbrota argues that this court should pierce the corporate veil of Hines Thurn Feedlot Inc. to find Thurn and Hines personally liable. See Victoria Elevator Co. v. Meriden Grain Co. , 283 N.W.2d 509, 512 (Minn. 1979) (adopting test for determining when corporate entity should be disregarded to impose liability on individual shareholder). Because the district court granted summary judgment on other grounds and did not address this issue, we will not consider it here. See Thiele v. Stich , 425 N.W.2d 580, 582 (Minn. 1988) (concluding that reviewing court generally must consider only those issues addressed by district court).