Opinion
No. A03-1386.
Filed May 4, 2004.
Appeal from the District Court, Ramsey County, File No. C1-02-001601.
John G. Westrick, Westrick McDowall-Nix, P.L.L.P., (for appellant).
Gregory J. Holly, McGuigan Holly, P.L.C., (for respondent).
Considered and decided by Shumaker, Presiding Judge; Kalitowski, 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This opinion will be unpublished and may not be cited except as provided by Minn.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UNPUBLISHED OPINION
Appellant argues that the district court erred when it (1) found that no loans were made to respondent corporation, (2) allowed respondent to plead ultra vires as an affirmative defense, and (3) denied his motion for amended findings for interest on the corporate loan. Because the record supports the district court's findings that there were no corporate loans, and thus amended findings providing for interest on corporate loans are not appropriate; and ultra vires was not raised as a defense, we affirm.
FACTS
The question in this case is whether two unpaid loans were made to an individual or to a corporation. After a bench trial, the district court found that the loans were not valid corporate loans. The lender appealed.
In 1995, Mark Van Wie formed respondent Great Waters Brewing Company (GWBC). Initially, Van Wie was the corporation's sole shareholder. Other people bought shares beginning in the spring of 1996. Van Wie served as GWBC's president, director, CEO, and CFO until April 2001.
Sometime before May 1996, Van Wie asked appellant Jeff Williamson for a loan so that Van Wie could start a brewpub. Williamson made two loans. The first was by check dated May 16, 1996, in the sum of $10,000, and the second was by check dated October 28, 1997, in the sum of $5,000. Both checks were made payable to Van Wie. Van Wie endorsed both in blank and deposited them in GWBC's bank account. There was no written loan agreement, promissory note, or security instrument for either loan. Neither was there an express oral agreement as to whether the loans were to Van Wie individually or to GWBC. And the parties had no agreement as to interest or time for repayment.
On October 31, 2000, Van Wie entered the loans on a GWBC balance sheet, designating them "shareholder loan." He did not reflect the loans in GWBC's 1997 tax return, which he signed, and there were no GWBC resolutions or authorizations regarding the loans. Both Van Wie and Williamson testified at trial that the loans were made to GWBC and not to Van Wie individually.
After Van Wie left the corporation, Williamson demanded that GWBC repay the loans. GWBC denied responsibility for the loans.
In this appeal, Williamson contends that the district court erred in concluding that the loans were not valid corporate loans, in allowing GWBC to improperly raise ultra vires as a defense, and in denying his motion for amended findings of fact and conclusions of law.
DECISION
A district court's findings of fact "shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial judge to judge the credibility of the witnesses." Powell v. MVE Holdings, Inc., 626 N.W.2d 451, 457 (Minn. App. 2001) (quoting Minn. R. Civ. P. 52.01), review denied (Minn. July 24, 2001). On appeal, a "district court's findings will be reversed only if the reviewing court is left with a definite and firm conviction that the district court has made a mistake." Id. (quotations omitted). This court exercises its independent judgment on purely legal questions. Frost-Benco Elec. Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984).
Ultra Vires Issue
We consider the ultra vires issue first because it lacks even a scintilla of merit. In its Order and Memorandum addressing Williamson's post-trial motions, the district court responds to the contention that it relied on an ultra vires defense in finding in favor of GWBC:
This court did not find the alleged loans to GWBC invalid based on an ultra vires defense. Such a finding would necessarily be premised on a finding that loans were actually made to GWBC. This court found they were not. It did not base its decision on the idea that Van Wie lacked the authority to obligate GWBC. This court further agrees with GWBC's statement that it "did not base its defense on whether or not the corporation can borrow money in its own right, but rather whether it did borrow money in this instance."
Thus, GWBC did not rely on an ultra vires defense and the district court did not base its findings or conclusions on a consideration of ultra vires action. Nothing in the record, expressly or impliedly, suggests otherwise.
Identity of Borrower
Williamson offers case authority for the proposition that when a party presents evidence that he has advanced money to another under circumstances suggesting the advance is a loan, that party makes out a prima facie case that the transaction was indeed a loan. Williamson then argues that once a prima facie case is made, the opponent must rebut it on penalty of losing the lawsuit.
There is no dispute that Williamson made loans totaling $15,000. The sole issue is the identity of the borrower. The case authorities that Williamson cites in support of his argument not only do not resolve that issue, they do not even address it.
Williamson had the burden of proving that he lent money to GWBC rather than to Van Wie as an individual. See Chemlease Worldwide, Inc. v. Brace, Inc., 338 N.W.2d 428, 437 (Minn. 1983) (holding that "[g]enerally in law, the party who stands to benefit from the establishment of the affirmative of a proposition of fact essential to a claim bears the burden of proof as to that proposition").
A loan agreement is a contract. See Westland Capital Corp. v. Lucht Eng'g, Inc., 308 N.W.2d 709, 714 (Minn. 1981) (applying contract law to loan agreement). Courts are to interpret a contract in such a manner as to give effect to the parties' mutual intention at the time of contracting. Carl Bolander Sons, Inc. v. United Stockyards Corp., 298 Minn. 428, 433, 215 N.W.2d 473, 476 (1974). The district court here had to decide whether, at the time of contracting, the parties intended the loans to be individual or corporate. The evidence is in conflict, and it was the court's obligation and prerogative to resolve that conflict. In doing so, the court is entitled to make credibility assessments. An appellate court cannot properly overturn a district court's findings unless they are clearly erroneous.
There is sufficient evidence to show that the loans were made to Van Wie as an individual. Van Wie called Williamson and said he wanted to start a brewpub business. A reasonable inference from this request is that there was no business yet in existence. Van Wie did not mention the corporation at this time. Williamson sent checks payable to Van Wie individually and Van Wie endorsed them as an individual would. Up to this point — a point at which it could be inferred that the loan agreement was not only complete but also partially executed — there is no evidence of corporate involvement. All the words and actions reasonably suggest that Williamson lent money to an individual so that the individual could use it to start a business.
Van Wie's deposit of the checks in the corporate bank account supports an inference that at least he intended this to be corporate money. Even then there is no evidence of mutuality of that intention. Then there are conflicts in the evidence. Listing the loans on the corporation's balance sheet as "shareholder loan" is equivocal because there is no evidence that the corporation or its shareholders authorized the loan. It is a reasonable inference that if Van Wie intended the loans to constitute a shareholder loan he would have taken the proper steps to make it so. And his failure to list the debt on the corporations' tax return supports an inference that the debt was not a corporate one. Thus, all the corporate activity that occurred after the loans were agreed to and partially executed is either equivocal or contradicts the notion that the parties' mutual intent was to create corporate loans. Finally, the court could reasonably have rejected Van Wie's self-serving statement that he and Williamson intended the loans to be corporate because an inference to be drawn is that Van Wie was trying to avoid liability for the debt. The court's findings of fact were not clearly erroneous.
Amended Findings
Findings of fact will not be reversed on appeal unless manifestly and palpably contrary to evidence without reasonable evidentiary support. Equip. Advertiser, Inc., v. Harris, 271 Minn. 451, 455, 136 N.W.2d 302, 304 (1965). Williamson argues that the district court's findings should be amended to provide for interest due under Minn. Stat. § 334.01, subd. 1 (2002), which provides "interest for any legal indebtedness shall be at the rate of $6 upon $100 for a year, unless a different rate is contracted for in writing." Because the district court did not err in its findings that the loan was not a corporate loan, we conclude that the court did not err as a matter of law by not amending its findings to allow for interest due.