State ex rel. Cooper v. Sports & Health Club, Inc.

438 N.W.2d 385, 1989 Minn. App. LEXIS 418, 1989 WL 32625
CourtCourt of Appeals of Minnesota
DecidedApril 11, 1989
DocketNo. C9-88-1908
StatusPublished

This text of 438 N.W.2d 385 (State ex rel. Cooper v. Sports & Health Club, 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
State ex rel. Cooper v. Sports & Health Club, Inc., 438 N.W.2d 385, 1989 Minn. App. LEXIS 418, 1989 WL 32625 (Mich. Ct. App. 1989).

Opinion

OPINION

FOLEY, Judge.

This is an appeal from a temporary injunction issued by the trial court under Minn.Stat. § 363.06, subd. 4(4) (1986) to enjoin appellant Arthur Owens from transferring or disposing of any stock of Balti[387]*387more Realty Company to Robert A. Williams and from pledging his BRC stock to any other person.1 We affirm.

FACTS

In State, by McClure v. Sports & Health Club, Inc., 370 N.W.2d 844 (Minn.1985), appeal dismissed, 478 U.S. 1015, 106 S.Ct. 3315, 92 L.Ed.2d 730 (1986), the Minnesota Supreme Court affirmed an order of a hearing examiner holding that Owens and others were personally liable for numerous violations of the Minnesota Human Rights Act, Minn.Stat. § 363.01 et seq. (1986). Although liability was determined, the amount of damages to each individual claimant has not yet been determined.

Upon petition of respondent, State of Minnesota by Stephen Cooper, Commissioner, Department of Human Rights, the trial court issued an order on December 9, 1987 restraining Owens from selling or transferring stock and requiring Owens to give notice to the department of human rights before selling or transferring any assets in his name or under his control. The jurisdictional basis for the trial court’s order was Minn.Stat. § 363.06, subd. 4(4), which provides in part:

If, at any time after the filing of a charge, the commissioner has reason to believe that a respondent has engaged in any unfair discriminatory practice, the commissioner may file a petition in the district court * * * seeking appropriate temporary relief against the respondent, pending final determination of proceedings under this chapter, including an order or decree restraining the respondent from doing or procuring an act tending to render ineffectual an order the commissioner may enter with respect to the complaint. The court shall have power to grant temporary relief or a restraining order as it deems just and proper * * *.

On June 13, 1988, the Department of Human Rights received notice from Owens that BRC was going to sell 346 authorized but unissued shares of its stock to Williams for $800,000 and that Owens intended to pledge the remaining 86V4 shares of BRC stock to Arnold & McDowell to secure payment of attorney fees incurred and to be incurred in connection with various matters.

The Department of Human Rights then commenced an action to determine the validity of the stock sale and whether the stock pledge was necessary. After hearing testimony from both Owens and Williams, including Owens’ previous deposition testimony, the trial court found:

The proposed transfer to Williams is so lacking in consideration that it could give rise to a proceeding under M.S. § 513.44, Fraudulent Transfers. The main asset which is to be exchanged for the BRC stock is an unsecured demand note. Only Williams would have the power to make a demand on the note, since he would be the new majority shareholder after the proposed transfer. The other asset to be transferred in exchange for the stock is a piece of undeveloped property that has an assessed value of only $58,000. There is no requirement in the transfer agreement that Williams develop the property. Though Williams plans to develop it into residential property, it is now zoned agricultural. In effect, Williams is getting an asset worth between $800,000 and $1,100,000 for nothing, and in return, Owens is getting nothing.

The trial court further found that Owens did not know which properties Williams had developed, had not seen Williams’ financial statements and did not examine the property that was to be transferred to BRC. Considering these facts, the trial court ordered:

1. Neither Owens nor his agents, employees, or attorneys shall sell, transfer, assign, or otherwise dispose of any stock of Baltimore Realty Company to Robert Williams.
2. Neither Owens nor his agents, employees or attorneys shall sell, transfer, [388]*388assign, or otherwise dispose of his 83V4 shares of Baltimore Realty Company to Arnold & McDowell, or to any other person.

That order was filed on August 4, 1988, and this appeal followed.

ISSUES

1. Did the trial court err in issuing a temporary injunction enjoining Owens from selling or transferring BRC stock to Williams and from selling or transferring 83¼ shares of that stock to any person pursuant to Minn.Stat. § 363.06, subd. 4(4) (1986)?

2. Did the trial court err by refusing to allow Arnold & McDowell or Baltimore Realty Company to participate in the hearing in this matter?

ANALYSIS

Standard of Review

The right to and the necessity for the granting or

refusal of * * * an injunction lies largely within the discretion of the trial court, whose action will not be disturbed on appeal unless from the whole record it appears that there has been an abuse of * * * discretion.

AMF Pinspotters, Inc. v. Harkins Bowling, Inc., 260 Minn. 499, 504, 110 N.W.2d 348, 351 (1961) (citing General Minnesota Utilities Co. v. Carlton County Cooperative Power Association, 221 Minn. 510, 22 N.W.2d 673 (1946)).

Further, the Minnesota Human Rights Act provides that its provisions “be construed liberally for the accomplishment of the purposes thereof.” Minn.Stat. § 363.11 (1986).

Owens' BRC Stock

Owens admitted in his deposition that his stock was the only source of revenue available to him to pay judgments against him:

Q. Isn’t it true that if you enter into this transaction with Mr. Williams and you pledge your stock to the law firms, that you will have no assets left to pay judgments with essentially? At least none of any value?
A. [By Owens] Well, that's true.

BRC essentially consists of a building and portion of land at 4917 Excelsior Boulevard in St. Louis Park, Minnesota, and Owens testified that the value of the stock was approximately $1,900 per share.

Owens argues that he is not attempting to violate the trial court’s order and insists that he is not transferring or otherwise disposing of his assets. Instead, he asserts that he only proposes to issue additional stock, and he would own, after the transaction, exactly what he owned before the stock issuance. Owens failed to reveal, however, that when the additional shares of stock are issued, the value of his own stock will not remain the same.

Owens’ Proposed Stock Transaction

In return for the 346 shares of BRC stock, Williams agreed to pay BRC $800,-000 in the following manner: $200,000 by the transfer of real property located in Minnesota, and the remaining $600,000 by the delivery of an unsecured promissory note.

The trial court observed that the undeveloped real property which Williams intended to transfer to Owens has an assessed value of only $58,000.

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Related

Allstate Sales & Leasing Co. v. Geis
412 N.W.2d 30 (Court of Appeals of Minnesota, 1987)
Burns v. Valene
214 N.W.2d 686 (Supreme Court of Minnesota, 1974)
Envall v. Independent School District No. 704
399 N.W.2d 593 (Court of Appeals of Minnesota, 1987)
State Ex Rel. McClure v. Sports & Health Club, Inc.
370 N.W.2d 844 (Supreme Court of Minnesota, 1985)
AMF Pinspotters, Inc. v. Harkins Bowling, Inc.
110 N.W.2d 348 (Supreme Court of Minnesota, 1961)

Cite This Page — Counsel Stack

Bluebook (online)
438 N.W.2d 385, 1989 Minn. App. LEXIS 418, 1989 WL 32625, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-ex-rel-cooper-v-sports-health-club-inc-minnctapp-1989.