Noble v. C.E.D.O., Inc.

374 N.W.2d 734, 1985 Minn. App. LEXIS 4515
CourtCourt of Appeals of Minnesota
DecidedSeptember 17, 1985
DocketC2-84-1952
StatusPublished
Cited by19 cases

This text of 374 N.W.2d 734 (Noble v. C.E.D.O., Inc.) 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
Noble v. C.E.D.O., Inc., 374 N.W.2d 734, 1985 Minn. App. LEXIS 4515 (Mich. Ct. App. 1985).

Opinion

OPINION

RANDALL, Judge.

Huber and Mann appeal from the order for judgment dated May 23, 1984, an order dated September 19, 1984, and a judgment entered October 25, 1984. The May 23, 1984, order for judgment is nonappealable. Rule 103.03, Minn.R.Civ.App.P.; see also, Swicker v. Ryan, 346 N.W.2d 367, 368 (Minn.Ct.App.1984). However, the September 19, 1984, order and the judgment entered October 25, 1984, made within the proper time limits, are appealable. Huber and Mann appeal the trial court’s denial of their motions for amended findings, a new trial, or judgment notwithstanding the verdict (JNOV).

FACTS

In 1975, appellants Huber and Mann, signed an application to purchase a Country Kitchen restaurant franchise on a “turnkey” franchise agreement. Both Country Kitchen International (“CKI”) and its subsidiary Country Properties, Inc. (“CPI”) are respondents in this action and will be collectively referred to as CKI in this opinion.

Under the “turnkey” agreement CKI was responsible for the physical aspects of the franchise including site location and construction. Huber and Mann were given input into site selection; however, the ultimate location decision was reserved for CKI. Huber and Mann were responsible for cleaning the restaurant building prior to opening once construction was completed, for hiring and training staff, and for minimal interior decoration decisions.

Huber and Mann informed CKI of a potential site next to Justus Lumber Company (“JLC”). CKI already knew of the location and, together with Country Properties, Inc. (“CPI”), it negotiated an agreement with JLC to lease the land and the building from JLC. Negotiations included setting the amount of the rental payments Huber and Mann were to make. Huber and Mann were not involved in these negotiations.

On November 9, 1975, CPI entered into a “net-net” lease for the restaurant and land with JLC.

During negotiations, JLC disclosed to CKI that the restaurant site had' once been a landfill dump. CKI informed appellants that the property was once a landfill but did not tell them of the possible consequences of building on a landfill. CKI did not disclose that building on a landfill would require pilings to be placed beneath the building, which would not only increase construction costs but also Huber and Mann’s rent payments. Landfills generate an explosive methane gas.

Dave Gustafson, CKI’s franchise director, was present at a meeting where Mr. Huibregtse of JLC showed some CKI employees and Chuck Eland of Country Builders, Inc. (“CBI”), the venting system JLC had installed in its warehouse located next to the proposed restaurant site on the same landfill to vent off methane gas from beneath its building.

On November 11, 1975, Huber and Mann, not yet incorporated but using the name Country Kitchens of Hopkins (“CK/H”), entered into a license agreement, a building lease, and a sign lease with CKI. The license, lease, and sign agreements bound Huber and Mann individually and as CK/H, Inc., which was incorporated on November 28,1975, after the leases and license agreement were signed.

Appellants successfully ran the business and decided, in spring of 1979, to sell to *738 Noble. They transferred all their stock in CK/H to Noble by a stock purchase agreement dated June 8, 1979, for $225,000. They remained as personal guarantors for Noble on the franchise and lease agreements under the stock transfer agreement terms.

Noble’s operation of CK/H was fraught with problems. His partner embezzled money, the quality of the service and food declined, and Noble was under fire from the Board of Health. In addition to these problems, he noticed a noxious smell in the restaurant which was ultimately determined to be methane gas generated from the landfill beneath the floor. The restaurant was temporarily closed by the health department and a venting system was installed.

A dispute arose among Noble, Huber and Mann, and CKI over who was responsible for correcting the gas leak. The fire mar-shall and health department approved reopening the restaurant in December, 1979, but Noble decided not to reopen. Pursuant to a written agreement, he transferred his stock back to appellants who, in turn, agreed to assume all liabilities to CKI under the license and lease agreements. The parties agreed to place the proceeds from the sale in escrow pending a judicial determination of proper distribution of the proceeds. Ultimately the trial court awarded this money to Huber and Mann to reduce their damage award.

Appellants sold the restaurant to Diebbs on February 4, 1980, for $175,000.

Noble sued Huber, 'Mann and CKI in March, 1980, for rescission of the stock sale agreement. He asserted claims for compensatory and punitive damages based on fraud and failure to disclose the dangers posed by methane gas. Appellants counterclaimed for breach of the stock purchase agreement. CKI denied Noble’s claims and counterclaimed for unpaid license and rental fees personally guaranteed by Huber and Mann for CK/H. Noble amended the complaint to join JLC.

Appellants crossclaimed against JLC for indemnification and damages alleging that JLC and CKI fraudulently concealed the potential methane gas problem in connection with the license and lease agreements and the Minnesota Franchise Act, Minn. Stat. § 80C (1984). CKI denied the claims, raised the Franchise Act’s statute of limitations as a defense, and crossclaimed against appellants for default of their guaranty of CK/H’s payments. Appellants amended their complaint to join CBI.

Shortly after he took over CK/H, Diebbs defaulted on his license and lease obligations to CKI and its promissory note to appellants. To mitigate damages and to resolve the dispute relating to Diebbs’ default, CKI and appellants entered into a limited mutual release releasing claims arising out of Diebbs’ default.

The claims between Noble, appellants, CKI, CPI, and JLC were settled after the trial. The only remaining issues are between appellants and CKI, CBI, CPI, and JLC.

The trial lasted approximately six weeks. The jury sat as an advisory jury as to Nobles’ recission claim and as a fact-finding jury as to the claims for money damages.

The trial court overturned portions of the jury verdict pertaining to the Huber and Mann claims against CKI. Where the jury had found CKI and JLC had committed fraud and that CKI violated the Franchise Act, the court set aside the jury findings and found that only JLC had committed fraud and that CKI had not violated the Franchise Act.

JLC, CKI and Huber and Mann filed post trial motions for a new trial or amended findings. Huber and Mann also moved for a JNOY. The trial court denied all motions.

ISSUES

1. Did the trial court err in setting aside jury findings that CKI and CPI committed fraud and violated the Franchise Act?

2. Did the trial court err in ordering appellants to pay rent, interest, and attorney fees as Noble’s guarantor?

*739 3. Did the trial court err in refusing to award attorney’s fees and costs for Franchise Act violations?

4.

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Cite This Page — Counsel Stack

Bluebook (online)
374 N.W.2d 734, 1985 Minn. App. LEXIS 4515, Counsel Stack Legal Research, https://law.counselstack.com/opinion/noble-v-cedo-inc-minnctapp-1985.