Langford Tool & Drill Co. v. The 401 Group, LLC

CourtCourt of Appeals of Minnesota
DecidedJanuary 12, 2015
DocketA14-507
StatusUnpublished

This text of Langford Tool & Drill Co. v. The 401 Group, LLC (Langford Tool & Drill Co. v. The 401 Group, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Langford Tool & Drill Co. v. The 401 Group, LLC, (Mich. Ct. App. 2015).

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A14-0507

Langford Tool & Drill Co., Plaintiff,

vs.

The 401 Group, LLC, et al., Defendants,

and

ADB Construction Company, Inc., et al., Intervenors and Third Party Plaintiffs,

Positive Companies, Inc., Respondent,

SR Mechanical, Inc., Intervenor and Third Party Plaintiff,

Sohan Uppal, Appellant,

UN Hospitality, LLC, Third Party Defendant,

Central Bank, as successor in interest to Mainstreet Bank, Third Party Plaintiff, vs.

Olsen Fire Protection, et al., Third Party Defendants,

Egan Companies, Inc., Intervening Mechanic’s Lien Claimant,

Century Construction Company, Inc., Third Party Plaintiff,

The 401 Group, LLC, Third Party Defendant,

J. H. Larson Electrical Company, Third Party Plaintiff,

UN Hospitality, et al., Third Party Defendants.

Filed January 12, 2015 Reversed Cleary, Chief Judge Concurring specially, Johnson, Judge

2 Hennepin County District Court File No. 27-CV-09-20489

Gary G. Fuchs, Elizabeth E. Rein, Hammargren & Meyer, P.A., Bloomington, Minnesota (for respondent Positive Companies, Inc.)

Kay Nord Hunt, Barry A. O’Neil, Lommen Abdo, P.A., Minneapolis, Minnesota (for appellant Sohan Uppal)

Considered and decided by Johnson, Presiding Judge; Cleary, Chief Judge; and

Reyes, Judge.

UNPUBLISHED OPINION

CLEARY, Chief Judge

The district court held a bifurcated trial on breach of contract and unjust-

enrichment claims. After the jury found there was no oral contract between the parties,

the district court concluded that appellant had been unjustly enriched in the amount of

$1,267,814. Because we hold that appellant did not receive a benefit in his status as a

member of a limited liability company or personal guarantor, we reverse the district

court’s judgment.

FACTS

Appellant Sohan Uppal is an owner of The 401 Group, LLC (“401 Group”), a

Minnesota limited liability company (“LLC”). Appellant’s wife and son are the other

owners of the 401 Group. Respondent Positive Companies, Inc. is a general contractor.

The 401 Group entered into two contracts with respondent for the improvement of real

property and a restaurant located at 401 First Avenue North, Minneapolis, Minnesota.

3 Under the terms of the first contract, dated October 18, 2008, respondent would

furnish labor, material, skill, and equipment necessary to renovate the real property for an

amount of $1,836,143. During the performance of the contract, respondent and the 401

Group agreed to change orders through which respondent did additional work and

received more payments. Under the terms of the second contract, dated March 23, 2009,

respondent agreed to furnish labor, material, skill, and equipment necessary for work on a

restaurant located in the 401 building. The contract price was $1 with work to be added

by change orders. Respondent and the 401 Group agreed to a number of change orders

under the second contract.

Before entering into the first contract, the 401 Group obtained two loans from

Mainstreet Bank for a total of $6,130,000. The loan agreement provided that Mainstreet

Bank would make periodic advances to appellant. The loan agreement contained

collateral, including a mortgage on the 401 property, assignments of rent, and the

personal guaranty of appellant and his wife. Mainstreet Bank recorded a first and second

mortgage on the 401 property on May 15, 2008, and had priority to any other interests.

Mainstreet Bank ceased funding the draw requests because it alleged that the

scope and type of renovations being performed at the project had changed dramatically.

Mainstreet Bank did not resume funding the project and respondent and other

subcontractors ceased working on the renovations. At the time that work ceased, the

restaurant portion of the project was not complete. The Federal Deposit Insurance

Corporation closed down Mainstreet Bank, and all of the bank’s assets—including the

loan at issue—were purchased by Central Bank. Because of the problems with the banks,

4 appellant began making payments on behalf of the 401 Group to the contractors from his

personal account. Appellant paid close to $700,000 to respondent and its subcontractors

during fall 2009. Appellant believed that he was just making bridge loans to 401 Group,

and that he would eventually be reimbursed from Central Bank under the terms of the

loan agreements. Appellant had previously received payments from the bank for bridge

loans made to the 401 Group. Appellant also made promises to respondent that he would

personally pay for respondent’s construction work. The parties stipulated that appellant

had received $1,087,449 worth of unpaid work at the time he made promises to be

personally liable. After making the promises, respondent did another $180,365 worth of

unpaid work.

The underlying litigation began when a subcontractor sued the 401 Group, Uppal

Enterprises LLC, Mainstreet Bank (Central Bank joined as successor in interest), and

other subcontractors in a mechanic’s lien action. ADB Construction Company, Inc.

intervened and served a third-party summons and complaint against respondent.

Respondent asserted counterclaims and cross-claims against appellant, including breach

of contract and unjust enrichment. As the senior lien holder, Central Bank foreclosed on

the 401 property and bought it for $3,750,000 at a sheriff’s sale. The sale was not enough

to cover the 401 Group’s liabilities, and Central Bank obtained a deficiency judgment

against appellant based on his personal guaranty in the amount of $5,601,654.03, plus

continuing interest, fees, and costs.1 By the time the case got to trial, all of the claims had

1 Notably, neither contract between the 401 Group and respondent has a personal guaranty of appellant.

5 been resolved except those between appellant and respondent, and appellant and a third-

party subcontractor.

The district court ordered a bifurcated trial with the contract claim going to the

jury and the unjust-enrichment claim reserved for a bench trial in case the jury found

there was no contract. The jury concluded that there was no oral contract between

respondent and appellant for respondent’s construction work. However, the district court

entered judgment against the 401 Group in the amount of $1,267,814 based on its

contract with respondent. After the jury trial, respondent and appellant submitted

motions regarding unjust enrichment. The district court never conducted a bench trial on

issues of fact relating to unjust enrichment, but it did have a hearing on October 31, 2013.

At the hearing, appellant argued that he was an owner of an LLC and protected from

personal liability under corporate law. Respondent argued that it had no adequate remedy

at law, and that the evidence in the record supported a judgment on the unjust-enrichment

claim.

The district court issued findings of fact and conclusions of law, holding that

appellant had been unjustly enriched in the amount of $1,267,814. The district court

found that appellant had made oral promises to respondent that he would personally pay

for respondent’s services. The district court found appellant had personally benefitted

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