IN THE SUPREME COURT
STATE OF NORTH DAKOTA
| Lord & Stevens, Inc., d/b/a Express Press, Plaintiff and Appellee, and Michael and Jenny Stevens, Involuntary Plaintiffs, vs. 3D Printing, Inc., Defendant and Appellant, and MBA Investments Three, LLC, Defendant. | Supreme Court No. 2007-0341 Cass County No. 09-06-C-03238 |
APPEAL FROM JUDGMENT ENTERED ON SEPTEMBER 18, 2007, OF THE DISTRICT COURT OF CASS COUNTY, STATE OF NORTH DAKOTA,
THE HONORABLE FRANK L. RACEK, PRESIDING
BRIEF OF APPELLEES
| Sara K. Sorenson ND ID #05826 Attorney for Appellees OHNSTAD TWICHELL, P.C. 901 - 13th Avenue East P.O. Box 458 West Fargo, ND 58078-0458 TEL (701) 282-3249 FAX (701) 282-0825 |
TABLE OF CONTENTS
Paragraph
Table of Authorities ii |
Statement of the Issue 1 |
Statement of the Facts 2 |
Law and Argument 13 |
I. Standard of Review 13 |
| II. The trial court did not clearly err when it determined that the |
| agreement between the parties contemplated that Express Press |
| was not obligated to pay expenses 16 |
| III. The trial court correctly determined that 3D had no valid unjust enrichment |
| claim 21 |
| Conclusion 25 |
| Certificate of Service |
TABLE OF AUTHORITIES
Paragraph
| CASES |
| B.J. Kadrmas, Inc. v. Oxbow Energy, LLC, 2007 ND 12, ¶ 18, 727 N.W.2d 270 (N.D. 2007) 13, 16 |
| Comstock Const., Inc. v. Sheyenne Disposal, Inc., 2002 ND 141, ¶ 13, 651 N.W.2d 656 (N.D. 2002) 13 |
| Estate of Zent, 459 N.W.2d 795 (N.D.1990) 19 |
| In re Estate of Hill, 492 N.W.2d 288 (N.D. 1992) 22 |
| In re Z.R., 1999 ND 214, ¶ 11, 602 N.W.2d 723 (N.D. 1999) 13 |
| Kirkland v. Oberquell, 405 N.W.2d 21 (N.D. 1987) 13 |
| Peko Oil USA v. Evans, 800 S.W.2d 572 (Tex. Ct. App. 1990) 23 |
| Rambo Associates, Inc. v. South Tama County Community School Dist., 487 F.3d 1178, 1188 (8th Cir. 2007) 20 |
| Ritter, Laber and Associates, Inc. v. Koch Oil, Inc., 2004 ND 117, ¶ 26, 680 N.W.2d 634 (N.D. 2004) 14 |
| Umscheid v. Simnacher, 482 N.Y.S.2d 295 (N.Y. 1984) 17 |
| Williston Co-op. Credit Union v. Pesek, 363 N.W.2d 548 (N.D. 1985) 13, 14, 21 |
| OTHER AUTHORITIES |
| Restatement of Restitution § 57 24 |
STATEMENT OF THE ISSUE
[¶ 1] The appellant, 3D Printing, Inc. (hereinafter "3D"), has classified the issue in this case as one of unjust enrichment. Yet, as 3D has acknowledged, an unjust enrichment is not cognizable when there is an agreement (either express or implied) between the parties. The district court found an agreement between the parties. Thus, the issue in this case is whether the district court clearly erred when it determined the terms of the agreement between the parties, two businesses, required no payment by one business for expenses incurred by the other.
STATEMENT OF THE FACTS
[¶ 2] None of the trial court's findings of fact are controverted by 3D. 3D does, however, present a number of "facts," in its statement of facts that were never found by the trial court. The findings of fact, as found by the trial court, are as follows. Lord & Stevens, Inc., is a corporation owned by Michael and Jenny Stevens and doing business as Express Press, a quick print printing company. (App. 29.) In 2005, the Stevenses sought to exit the printing business, a business that Mike Stevens had been in since 1983. (App. 29.) Jenny Stevens, who worked full time at Express Press, wished to stay at home to raise the couple's children. (App. 29.)
[¶ 3] Express Press operated out of a commercial building owned by Michael and Jenny Stevens. (App. 29.) Express Press also owned a Heidelberg four color press in addition to a complete line of equipment and inventory for the printing business. (App. 29.) The Stevenses sought to sell Express Press as a going concern without the building and the Heidelberg Press, both of which they were going to sell separately. (App. 29-30.)
[¶ 4] 3D Printing, Inc. ("3D"), was a corporation that started in January 2006. (App. 30.) It was also in the printing business. (App. 30.) On April 7, 2006, the Stevenses entered into an agreement with 3D, which provided that 3D would take over Express Press' outstanding loans in the approximate amount of $388,000. (App. 30.) In exchange, Express Press would turn over its equipment, customers, and goodwill to 3D. Express Press was to separately sell the building that it occupied, and the large Heidelberg Press, which were not part of this anticipated purchase. (App. 30.)
[¶ 5] All parties contemplated that Express Press would move into the building occupied by 3D pending completion of the sale. (App. 30.) All parties agreed that until the sale was finalized both companies would maintain their own financial records, their own employees, their own accounts, and separately operate their businesses. (App. 30.) There was no agreement to share expenses between the companies, and there was no contemplation that the two companies would share profits. (App. 30.) Over a course of approximately six months, the parties needed to demonstrate that a combined entity would be profitable so that 3D could assume the loans of Express Press. (App. 30.) The target date for completion of this purchase was October 1, 2006. (App. 30.) The terms of the sale were the same whether the sale took place on October 1, 2006, or before. (App. 31.)
[¶ 6] 3D made arrangements to move Express Press into its building. (App. 31.) The move started in May 2006, and it was completed by June 2006. (App. 31.) Together, the combined entities had equipment that was duplicated. (App. 31.) The parties agreed which equipment would be used and which equipment would be stored. (App. 31.) While Express Press was in the 3D Building, 3D used the printers and employees of Express Press for 3D print jobs. (App. 31.) Likewise, Express Press used 3D printers and employees for Express Press print jobs. (App. 31.) At the time Express Press moved into the 3D building, 3D was aware that any large format printing work would have to be done by 3D because Express Press sold its large press pursuant to the agreement of the parties. (App. 31.) 3D knew that this was being done and that Express Press employees were not trained on 3D's large press. (App. 31.) Neither company requested reimbursement of the other for the sharing of equipment or employees. (App. 31.)
[¶ 7] 3D never incurred any additional expense, other than some moving expenses, as a result of Express Press moving into its buildings. (App. 31.) 3D's employees remained constant; its rent did not increase; there was no evidence that utilities increased; and Express Press was providing paper and other raw materials for the work it was doing. (App. 31.)
[¶ 8] Express Press's move into the building benefitted 3D because Express Press had equipment that was in good working order and 3D had some equipment that was not working. (App. 31.) Express Press provided management services to 3D. (App. 32.) Express Press also provided mailing services to 3D, which 3D was unable to provide. (App. 32, 33.) Express Press gave 3D invoices for this work so that 3D could charge its customers for this service, but Express Press never anticipated being reimbursed for this work. (App. 33.)
[¶ 9] Express Press also did work on various 3D projects. (App. 33.) The Express Press production manager ultimately became the production manager for both companies while being paid by Express Press. (App. 33.) Express Press, however, did not keep detailed records of the services performed for 3D other than for the mailing services, because it was never anticipated that 3D would be charged for this work. (App. 33.)
[¶ 10] Although Express Press had a number of staff people leave during the time that it was on the 3D property, it had a minimal effect on 3D. (App. 33.) A bookkeeper left, but these duties were transferred to Express Press's CPA. (App. 33.) Express Press brought in a designer from another one of the Stevenses' businesses when an Express Press employee left. (App. 33.) No customer service work was transferred to 3D. (App. 33.) A receptionist that the two entities used was first an Express Press employee until she moved, at which time 3D hired a replacement. (App. 33.)
[¶ 11] 3D struggled financially, and its financial problems increased during the time Express Press was on the 3D premises. (App. 31.) At times, 3D was unable to get paper. (App. 31.) 3D was never in a position to complete the purchase of Express Press due to its poor financial condition. (App. 31.) The Stevenses believed that in accordance with their agreement with 3D, they needed to wait until October 1, 2006, before they were able to look for another purchaser of their business. (App. 32.) On October 10, 2006, when 3D learned that Express Press was selling its business to another organization, 3D presented Express Press with an invoice for certain expenses (in excess of $100,000), supposedly incurred during the time Express Press was in the 3D building. (App. 32.)
[¶ 12] During the time Express Press was in 3D's building, 3D never requested Express Press to pay any portion of the expenses 3D was incurring. (App. 31.) This was in accordance with the agreement of the parties. (App. 31.)
LAW AND ARGUMENT
I. Standard of Review
[¶ 13] The trial court explicitly found, in accordance with the agreement of the parties, that Express Press was not obligated to pay any portion of the expenses 3D was incurring. (App. 31.) A trial court's findings concerning the terms of a contract are factual determinations. Cf. Comstock Const., Inc. v. Sheyenne Disposal, Inc., 2002 ND 141, ¶ 13, 651 N.W.2d 656 (N.D. 2002); B.J. Kadrmas, Inc. v. Oxbow Energy, LLC, 2007 ND 12, ¶ 18, 727 N.W.2d 270, 276 (N.D. 2007) (analyzing the trial court's determination as to whether an implied-in-fact contract was formed and the terms of that contract under a clearly erroneous standard). "[Q]uestions of fact decided by the trial court upon conflicting evidence are not subject to reexamination by this Court on appeal." Williston Co-op. Credit Union v. Pesek, 363 N.W.2d 548, 549-50 (N.D. 1985). Deference is to be given to the findings of the trial court. In re Z.R., 1999 ND 214, ¶ 11, 602 N.W.2d 723 (N.D. 1999). In addition, the trial court's findings can only be reversed if this Court is shown evidence "leaving it with a definite and firm conviction that a mistake has been made in the findings of fact." Kirkland v. Oberquell, 405 N.W.2d 21, 23 (N.D. 1987). 3D has pointed to no such evidence. The trial court's factual findings are not clearly erroneous and must be affirmed. Id.
[¶ 14] 3D argues that the standard of review is de novo, arguing that a finding of unjust enrichment is a legal issue. Yet, if this Court finds that the trial court did not clearly err in its determination of the terms of the agreement between 3D and Express Press, an unjust enrichment claim is not cognizable. See Ritter, Laber and Associates, Inc. v. Koch Oil, Inc., 2004 ND 117, ¶ 26, 680 N.W.2d 634 (N.D. 2004) ("[Unjust enrichment" serves as a basis for requiring restitution of benefits conferred in the absence of an expressed or implied in fact contract."). Thus, in order to address 3D's alleged legal issue, this Court will first have to hold that the trial court's finding concerning the terms of the agreement between the parties was clearly erroneous. Williston Co-op. Credit Union v. Pesek, 363 N.W.2d 548, 549 n.2 (N.D. 1985) (finding that when a legal issue is premised upon a different view of the facts than as found by the trial court, the issue only becomes relevant if the trial court erred in its factual findings).
[¶ 15] In addition, 3D's analysis of the unjust enrichment claim is, itself, premised upon a different view of the facts than as found by the trial court, and the Court first reviews these factual findings under the clearly erroneous standard. Id.
II. The trial court did not clearly err when it determined that the agreement between the parties contemplated that Express Press was not obligated to pay expenses.
[¶ 16] In a contract that is not spelled out, "the court merely attempts to determine from the surrounding circumstances what the parties actually intended." B.J. Kadrmas, Inc. v. Oxbow Energy, LLC, 2007 ND 12, ¶ 11, 727 N.W.2d 270, 273 (N.D. 2007) (citations omitted). That the agreement between the parties contemplated that no expenses would be paid by Express Press is not only supported by the admissions of the testifying principals of 3D, it is also supported by 3D's actions. During the time Express Press was in 3D's building, 3D never requested Express Press to pay any portion of the expenses 3D was incurring. (App. 31.) 3D contemplated, however, that Express Press would move into 3D's building. (App. 30.) 3D did not incur any additional expenses, other than moving expenses, as a result of this move. (App. 31.)
[¶ 17] 3D facilitated Express Press' move into the 3D building, and 3D knew at the outset that any large format printing work of Express Press would have to be done by 3D. (App. 32.) Even though it was struggling financially, 3D never requested payment for any expenses it now alleges are owed it from Express Press. (App. 31.) In addition, 3D never created an invoice for the jobs for which it has claimed payment. Cf. Umscheid v. Simnacher, 482 N.Y.S.2d 295, 299 (N.Y. 1984) ("Also significant is the absence of proof in the record that a bill for services rendered was ever presented to the respondent, thereby suggesting that the services were gratuitously rendered and that an implied contract was an afterthought."). Finally, the purchase price for Express Press was the same, no matter the length of time that Express Press was in the 3D building. (App. 30-31.)
[¶ 18] Under these circumstances, the trial court's factual finding that the agreement between the parties did not contemplate the payment of any expenses is not clearly erroneous, and the trial court's decision should be affirmed.
[¶ 19] Because the agreement between the parties contemplated that no payment would be made for "expenses" incurred by 3D, there is no cognizable claim for unjust enrichment. Cf. Estate of Zent, 459 N.W.2d 795, 798 (N.D.1990) (finding that a contract implied in law or a claim of unjust enrichment is a fiction of law adopted to achieve justice where no true contract exists). 3D claims, however, that the agreement between the parties was "silent as to reimbursement for expenses," and this provides an exception to the general rule that the existence of a contract precludes any finding of unjust enrichment. (Appellant's Brief at 14.) 3D incorrectly analyzes the law and the facts to get to this incorrect conclusion.
[¶ 20] As explained above, the trial court found that the contract between the parties specifically did not require the payment of any expenses that 3D now claims. 3D does not explain how this conclusion is clearly erroneous. 3D also cites to several cases for the proposition that the existence of a contract does not necessarily preclude a finding of unjust enrichment. (Appellant's Brief at 14.) This proposition is true, as explained in the cases cited by 3D, when there is additional performance not contemplated by the contract. See, e.g., Rambo Associates, Inc. v. South Tama County Community School Dist., 487 F.3d 1178, 1188 (8th Cir. 2007) (explaining that recovery for unjust enrichment could be had for "extra services" other than those set forth in the written contract). Here, unlike in the cases cited by 3D, it was contemplated from the outset that Express Press would move into the 3D building until the proposed sale, and that 3D would provide labor on Express Press jobs until the proposed sale. (App. 30, 32.) There simply was no additional services provided by 3D that were not contemplated in the agreement between 3D and Express Press.
III. The trial court correctly determined that 3D had no valid unjust enrichment claim.
[¶ 21] In its analysis of unjust enrichment, 3D takes issue with a number of the district court's factual findings, which are entitled to deference. Williston Co-op. Credit Union v. Pesek, 363 N.W.2d 548, 550 (N.D. 1985) ("Where two parties present conflicting testimony on material issues of fact, we will not reexamine the trial court's findings based upon the testimony.").
[¶ 22] In any event, the trial court correctly determined that 3D failed to prove all elements of an unjust enrichment claim; particularly, 3D failed to prove that there was an "absence of justification." (App. at 39) (citing In re Estate of Hill, 492 N.W.2d 288, 295 (N.D. 1992)). Relying on a Restatement and a legion of cases, the trial court specifically found that there was a justification for Express Press not paying 3D's "expenses"; namely, 3D incurred the "expenses" in anticipation of obtaining a future business opportunity--the opportunity to acquire Express Press. (App. at 39-40.)
[¶ 23] The trial court's decision is supported by a number of cases. All courts that have considered the question have found that "expenses" incurred in the expectation of a future business advantage or opportunity cannot form the basis of a cause of action for unjust enrichment. Peko Oil USA v. Evans, 800 S.W.2d 572, 577 (Tex. Ct. App. 1990) (citing cases). 3D has failed to distinguish any of these cases or cite to any case that holds to the contrary.
[¶ 24] Moreover, the Restatement on Restitution further supports the trial court's position:
A person who has conferred a benefit upon another, manifesting that he does not expect compensation therefor, is not entitled to restitution merely because his expectation that the other will make a gift to him or enter into a contract with him is not realized.
Restatement of Restitution § 57. The trial court correctly determined that no recovery should be had for unjust enrichment.
CONCLUSION
[¶25] Each of the following reasons provides a basis for affirmance: (1) the trial court did not clearly err when it determined the agreement between the parties contemplated Express Press was not obligated to pay any expenses of 3D; and (2) the trial court correctly concluded that any expenses incurred were in the hopes of obtaining a business advantage, and no claim for unjust enrichment exists under these circumstances.
The Judgment of the District Court should be affirmed.
Dated: June 2, 2008.
| /s/ Sara K. Sorenson |
| Sara K. Sorenson |
| ND ID #05826 |
| Attorney for Appellees |
| OHNSTAD TWICHELL, P.C. |
| 901 - 13th Avenue East |
| P.O. Box 458 |
| West Fargo, ND 58078-0458 |
| TEL (701) 282-3249 |
| FAX (701) 282-0825 |