Robert Kagel v. Christian Brackey, Kagel Acquisition Company, LLC

CourtCourt of Appeals of Minnesota
DecidedJanuary 25, 2016
DocketA15-934
StatusUnpublished

This text of Robert Kagel v. Christian Brackey, Kagel Acquisition Company, LLC (Robert Kagel v. Christian Brackey, Kagel Acquisition Company, 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
Robert Kagel v. Christian Brackey, Kagel Acquisition Company, LLC, (Mich. Ct. App. 2016).

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This opinion will be unpublished and may not be cited except as provided by Minn.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 A15-0934

Robert Kagel, Respondent,

vs.

Christian Brackey, et al., Appellants,

Kagel Acquisition Company, LLC, Defendant.

Filed January 25, 2016 Affirmed in part, reversed in part, and remanded Smith, Judge

Hennepin County District Court File No. 27-CV-12-12925

Scott S. Payzant, Leonard, O’Brien, Spencer, Gale & Sayre, Ltd., Minneapolis, Minnesota (for respondent)

Shawn M. Perry, Perry & Perry, PLLP, Minneapolis, Minnesota (for appellants)

Considered and decided by Bjorkman, Presiding Judge; Smith, Judge; and

Klaphake, Judge.

 Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10. UNPUBLISHED OPINION

SMITH, Judge

We affirm the district court’s forced-buyout order because the record supports the

district court’s findings on the requisite statutory requirements, and we affirm the district

court’s denial of attorney fees and costs against co-appellant Robert Brackey because he

was not a party. But we reverse the district court’s valuation determination because the

district court abused its discretion when it failed to consider appellant Christian

Brackey’s (Brackey) evidence of rent owed, and we reverse the district court’s dismissal

of Robert Brackey’s motion to intervene as a matter of right because he met the

requirements to intervene. We therefore remand for further proceedings.

FACTS

This appeal stems from a dispute between two owners of four limited liability

companies: Pear Marketing, LLC; Bay Auto Finance, LLC; In a Pinch, LCC; and Kagel

Acquisition Company, LLC (KAC). Respondent Robert Kagel (Kagel) and Brackey

operated a used-car business together through these companies. Pear Marketing, Bay

Auto Finance, and In a Pinch were businesses related to auto sales, and KAC owned the

building that housed the other three businesses.

In 2011, due to a business dispute, Kagel and Brackey entered into a mediated

settlement agreement (MSA), and Brackey and KAC, along with the other companies,

signed a confession of judgment in favor of Kagel for $1,306,000 plus interest. The

MSA provided for the liquidation of the four companies and limited Brackey’s

involvement in the businesses.

2 Brackey ignored the MSA’s prohibitions, and Kagel then initiated an arbitration to

obtain a finding of Brackey’s default under the MSA. Before the arbitration, the parties

entered into a second agreement. The second agreement provided that, among other

things, $1.15 million would be deposited into escrow for Kagel no later than

September 9, 2011, and that if the conditions were not met, Kagel could file the

previously referenced confession of judgment. The conditions were not met, so Kagel

filed the confession of judgment.

In June 2012, Kagel initiated this action. Shortly thereafter, Robert Brackey,

Brackey’s father, moved to intervene as a matter of right under Minn. R. Civ. P. 24.01 to

protect the security interest he had perfected in the financial rights of Brackey’s KAC

membership interest. In July 2012, Kagel moved to force a buyout of Brackey’s

membership interest in KAC under Minn. Stat. § 322B.833 (2014) or, alternatively,

Minn. Stat. § 575.05 (2014).

The district court ordered a process whereby the parties would obtain an appraisal

of KAC’s property, Kagel would then make an offer on the property, and if the parties

could not agree on the sale, they would be deemed deadlocked under Minn. Stat.

§ 322B.833, subd. 1(2)(i). Kagel and Brackey agreed on an appraiser, and the appraiser

estimated the property’s value at $1.95 million, less necessary repairs.

Kagel then proposed alternatives for the disposition of KAC’s property: (1) that

Kagel buy KAC’s property; (2) that they sell KAC’s property to Robert Brackey; or (3) a

later suggestion that they list KAC’s property with a real-estate agent. Brackey rejected

all proposals.

3 In September 2013, the district court determined that the parties were deadlocked,

that Brackey had acted fraudulently and in a manner prejudicial to Kagel in his capacity

as a 50% owner of KAC, and that Kagel was a creditor of KAC and therefore that a

forced buyout of Brackey’s membership interest in KAC was within the district court’s

equitable powers. See Minn. Stat. § 322B.833, subds. 1, 2. Alternatively, the district

court found that the transfer was warranted under Minn. Stat. § 575.05 because Kagel

was Brackey’s creditor and Brackey’s limited liability company (LLC) membership

interest was nonexempt property.

The district court ordered Brackey to transfer his membership interest to Kagel

and ordered the parties to determine the fair value of Brackey’s membership interest,

which would equal the reduction in Kagel’s judgment against Brackey. If the parties

could not agree on fair value within 40 days, the district court would determine the

amount of the reduction. The district court also dismissed Robert Brackey’s motion to

intervene with prejudice and granted Kagel’s request for attorney fees and costs against

Brackey under Minn. Stat. § 322B.833, subd. 7.

In October 2013, Brackey transferred his membership interest in KAC to Kagel.

Kagel, on behalf of KAC, entered into a purchase agreement for the sale of KAC’s

property for $1.5 million to the City of Brooklyn Center Economic Development

Authority (BCEDA). Later, Brackey moved the district court to issue a new scheduling

order, to permit additional discovery, and to require KAC to appear through independent

counsel. He also requested leave to amend his answer.

4 Because the parties could not agree on the value of Brackey’s interest, the district

court held a hearing in February 2014. The district court considered the matter finished,

with the valuation determination the only remaining issue, and made clear that it would

not reopen the case. The district court considered KAC’s property to be KAC’s only

asset and ignored Brackey’s assertions to the contrary.

In April 2014, BCEDA and Kagel, acting as the sole agent on behalf of KAC,

closed on the sale of KAC’s property for $1.5 million. As part of the sale, Kagel released

his judgment lien against KAC’s property. Using the proceeds from the sale, KAC paid

off the two mortgages against the property, taxes, and other fees, leaving $194,286.90

remaining for KAC.

In May 2014, the district court denied Brackey’s motions, determined the value of

Brackey’s membership interest via the property sale, and ordered Brackey to pay Kagel’s

fees and costs in the amount of $54,177.54. The district court determined that Kagel’s

judgment against Brackey would be reduced by $194,286.90. The district court also

denied Kagel’s request for attorney fees and costs from Robert Brackey because he was

not a party.

DECISION

I.

A court-ordered statutory buyout is an equitable remedy, see Minn. Stat.

§ 322B.833, subds. 1, 2, and a court of equity “is to be accorded broad latitude,”

Bolander v. Bolander, 703 N.W.2d 529, 548 (Minn. App. 2005), review denied (Minn.

Nov. 15, 2005). “We review the district court’s exercise of equitable relief for abuse of

5 discretion.” Bolander, 703 N.W.2d at 548.

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