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Home My WebLink AboutHolmes & Graven Legal Ltr t. cc C C TY ~6-re... HOLMES & GRAVEN CHARTERED AUorne,.. at Law ROBERT A.. ALSOP RONALD H. BATTY STEPHEN J. BUlSUL JOHN B. DEAN MARy G. DoBBINS STEFANlE N. GALEY CORR.lNE A.. HEINE JAMES S. HOLMES DAVID J. KENNEDY JOHN R. LARsON WELUNGTON H. LAw CHARLts L. LEFEVERE JOHN M. LEFEvRE. JR. ROBERT J. LINDALL 470 PUlsbury Center, MlnntllpoUs, Minnesota ssm (612) 337-9300 A?K ,.. -0 1,C,a,~ '-~ ~. ROBEKT C. LoNG LAUItA K. MOLLET BARBAIlA L. PoRTWOOD JAMES M. STROMMEN J~J.THO~ON.~ LARIlY M. WERTHEIM BONNIE L. WILKINS GARY P. WINTER. DAVID L. GIlAYEN' (1919-1991) OF COUNSEL ROBERT C. CAllLSON ROBERT L. DAVIDSON T. JAY SALMEN FacsimUe (6U) 337~9310 WRITER'S DIRECT DIAL 337-9217 April 4, 1994 i ,. " ':i t'...i ~ ,I !: ~ . / .i :,' n ,1 'if' !,. " Donald R. Schneider Columbia Heights HRA 590 N . E. 40th Avenue Columbia Heights, MN 55421 ',~ '. ti,~ji, ' RE: Zaidan Holdings, Inc. v. Columbia Heights HRA, et al. .,' l:, Dear Don: Enclosed is a copy of Zaidan's appellate responsive brief is due on May 2, 1994. settlement discussions with Zaidan. brief, which we received today. Our Please advise regarding the status of Sincerely, HOLMES & GRAVEN, CHARTERED dtL-v~"':- ~ Corrine A. Heine Enclosure cc: Steve Bubul T '". , C2-94-432 STATE OF MINNESOTA IN COURT OF APPEALS Zaidan Holdings, Inc., Appellant, v. Housing and Redevelopment Authority of Columbia Heights, City of Columbia Heights, and County of Anoka, ~ ~ Respondents. '. . APPELLANT'S BRIEF Attornevs for Respondents: Attornevs for Appellant: Corrinne A. Heine (149743) HOLMES & GRAVEN 470 Pillsbury Center Minneapolis, MN 55402 (612) 337-9300 Thomas F. surprenant (127851) JACK D. ELMQUIST LAW OFFICES 2450 Centre Village 431 South 7th Street Minneapolis, MN 55415 (612) 371-9472 Paul A. Thompson (196137) KALINA, WILLS, WOODS, GISVOLD & CLARK 941 Hillwind Road N.E., #200 Minneapolis, MN 55432 (612) 789-9000 " (: Thomas G. Haluska (39986) ANOKA COUNTY ATTORNEY'S OFFICE 2100 Third Avenue Anoka, MN 55303-2265 (612) 323-5550 . ',,;-1 TABLE OF CONTENTS STATEMENT OF THE ISSUES............. ~ . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENT OF THE CASE......................................... 2 STJ\TEMENT ()~ FACTS............................................ 3 ~Ec;A~ A~c;tJ~ENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . lEi I. SUMMARY JUDGMENT IS ONLY APPROPRIATE UNDER NARROW CIRCUMSTANCES...........................16 II. THERE IS NO FACTUAL OR LEGAL BASIS FOR APPLICATION OF COLLATERAL ESTOPPEL IN FAVOR OF THE HRA...........17 A. PRIOR ISSUES IN THE TAX COURT NOT IDENTICAL............................. 18 - " B. ALL ISSUES NOT FULLY LITIGATED..................28 III. SUMMARY JUDGMENT AGAINST THE CITY WAS ~NAPPROPRIATE...............................29 A. CAUSES OF ACTION AGAINST THE CITY...............29 B. RES JUDICATA AND COLLATERAL ESTOPPEL............30 IV. SUMMARY JUDGMENT IN FAVOR OF THE COUNTY WAS INAPPROPRIATE.............................31 CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32 " i ~ ~ TABLE OF AUTHORITIES CASES Anchor Casualty Co. v. Bird Island Produce, 82 N.W.2d 48 (Minn. 1957).....................................20 Betlach v. Wavzata Condominium, 281 N.W.2d 328 (Minn. 1979)..........................................16, 17 Bonhiver v. Graff, 248 N.W.2d 291 (Minn. 1976)............25 Brooks Realtv v. Aetna Ins. Co., 128 N.W.2d 151 (Minn. 1964).......................................................................................... .17 Brown v. state Auto & Cas. Unds., 293 N.W.2d 822 (Minn. 1980).......................................................................................... .17 Campbell v. Insurance Service Aqencv, 424 N.W. 2d 785, 791 (Minn.App. 1988)................................ .26 - City of Minneapolis v. County of Beltrami, 288 N.W. 706 (Minn. 1939).................................................................................. .28 Dahle v. Aetna Cas. & Sur. Ins. Co., 352 N.W.2d 397 (Minn. 1984).................................................................................. .28 Ellis v. Minneapolis Commission on civil Riqhts, 319 N.W.2d 702 (Minn. 1982)...................................17 Gartner v. Gartner, 74 N.W.2d 809 (Minn. 1956)............21 Goldman v. Moonev, 24 F.R.D. 279 (W.D.Pa. 1959)...........29 Grondahl v. Bullock, 318 N.W.2d 240 (Minn. 1982)..........16 Hartz' Estate v. Cade, 77 N.W.2d 169 (Minn. 1956).........32 Hauser v. Mealev, 263 N.W.2d 803 (Minn. 1978).............31, 32 Hutton v. Bosiqer, 366 N.W.2d 358 (Minn.App. 1985)........20 ii .. -( International Harvester Co. v. Mississippi Land Co., 25 F.2d 355 (8th Cir. 1928), cert. denied 282 U.S. 905....31 Johnson v. Tavlor, 435 N.W.2d 127 (Minn.App. 1989)...~....26 Lesmeister v. Dillv, 330 N.W.2d 95 (Minn. 1983)...........27 Mesaba Aviation Div. v. County of Itasca, 258 N.W.2d 877 (Minn. 1977..........;.....................21 Nave v. Dovolos, 395 N.W.2d 393 (Minn.App. 1986)..........25 Nord v. Herreid, 305 N.W.2d 337 (Minn. 1981)..............16 Northern States Power Co. v. Franklin, 122 N.W.2d 26 (Minn. 1963)................................20 Papke v. Pearson, 280 N.W. 183 (Minn. 1949)...............21 Republic Nat. Life v. Lorraine Realtv, 279 N.W.2d 349. (Minn. 1979)......................................... .16 Schumacher v. Ihrke, 469 N.W.2d 329 (Minn.App. 1991)......17 -, Schwartz v. Greenfield. Stein & Weisinqer, 396 N.Y.S2d 582 eN. Y. 1977)...........................................26 Thornbrouqh v. Columbus & Greenville R. Co., 760 F.2d 633 (5th Cir. 1985).......................................23 Viet v. Anderson, 428 N.W.2d 429 (Minn.App. 1988).........26 Waqner v. Schweqman's South Town Liquor. Inc., 485 N.W.2d 730 (Minn.App. 1992)..................... ....... ...16 Widener v. Pacific Gas & Elec. Co., 75 Cal.App.3d 423, 142 Cal. Rptr. 304 (1977)................................ .24 STATUTES AND RULES Minn. stat. sec. 469.177..................................27 Rule 8.02, Minnesota Rules of civil Procedure.............20 Rule 56.03, Minnesota Rules of civil Procedure............16 -' iii ~ OTHER AUTHORITIES Moore's Federal Practice, sec. 36.08 and f.n. 28..........29 Restatement, Second, Torts, sec. 323......................26 iv T94/E77 , , STATEMENT OF THE ISSUES I. Was the defendant Housing and Redevelopment Authority of ColumJ:lia Heights ("HRA") entitled to summary judgment on all counts and theories of recovery of Plaintiff? The trial court held that summa~y judgment would be granted on the basis of collateral estoppel and because there was no agreement between the parties on which to base a claim. II. Was the defendant city of ColumJ:lia Heights ("City") en- titled to summary judgment on all counts and theories of recovery of Plaintiff? The trial court held that summary judgment would be granted on the basis that there was no evidence of an agreement between the parties on which to base a claim. III. Was the defendant County of Anoka ("County") entitled to summary judgment on all counts of Plaintiff's complaint? The trial court held that summary judgment would be granted on the basis of collateral estoppel and res judicata. IV. Were there any relevant facts supporting Plaintiff's mo- tion to amend its complaint? The trial court concluded that Plaintiff's motion to amend complaint was not supported by any facts which could raise a colorable claim. .' , 1 STATEMENT OF THE CASE Plaintiff commenced its action in District Court for the County of Anoka, naming the HRA, City, and County as defendants. In Count One of its complaint, it sought a declaratory judgment against the County. In Counts Two and Three of its complaint, it alleged wrongful delegation of authority and breach of contract against the HRA. The City was named as a necessary defendant, with a direct financial stake in the outcome. Following completion of discovery, all three defendants moved for summary judgment, claiming a number of grounds for relief. The motions came on for hearing on August 6, 1993 before the Hon. Stephen L. Muehlberg. Fourteen days prior to the hearing, Plaintiff served and filed a timely cross-motion to amend its complaint, raising three additional grounds for recovery. Defendants took the position that this motion was not properly before the Court because Plain- tiff had not contacted the Anoka County Scheduling Clerk to schedule its cross-motion, even though Plaintiff had noticed the motion for the same hearing time as the defendants' motions. On this basis alone, Judge Muehlberg refused to consider Plaintiff's cross-motion, or any grounds for a claim outside the specific wording of Plaintiff's complaint, and Plaintiff was required to re-schedule its motion to amend complaint. This motion was even- tually heard separately before a different District Judge, the Hon. Daniel M. Kammeyer. " 2 " ", On November 10, 1993, ninety-six days after the hearing on the defendants' motions for summary judgment, Judge Muehlberg ex- ecuted an Order granting summary judgment in favor of all defen- dants. The order was not accompanied by a memorandum of law and did not state the grounds for relief. In his order, Judge Muehlberg stated he would file an ,amended order containing a memorandum explaining the Court's reasoning within fourteen days. Thirteen days later, on November 23, 1993, Judge Muehlberg filed another order in which "the Court extends the time to file the memorandum supporting and explaining its summary judgment or- der for an additional fourteen days." In the meantime, on November 16, 1993, Judge Kammeyer en- tered a separate order denying Plaintiff's motion to amend com- plaint. A memorandum accompanied this order. Finally, on December 8, 1993, Judge Muehlberg filed an amended order granting summary judgment which was accompanied by an explanatory memorandum. Final judgment was entered by the Court Administrator on January 6, 1994. This appeal followed. STATEMENT OF FACTS There were lengthy recitations of fact by all four parties in connection with the summary judgment motions below. The Trial Court's recitation of facts in the memorandum eventually explain- ing its summary judgment decision is itself two pages in length and the following eleven pages (A-37 to A-47) contain more dis- "" 3 cussion of facts than analysis of applicable law. The separate Trial Court's memorandum accompanying denial of Plaintiff's mo- tion to amend complaint is similarly fact-laden. (A-20 to A-30) Plaintiff disagrees that there are no material issues of fact. Plaintiff also disagrees that application of pertinent law to any set of undisputed material ~acts, if they existed, would support the Trial Court's two decisions. For this reason, a fairly detailed recitation of the facts and factual disputes is set forth below. (a) Backqround Facts. Plaintiff is a family-owned Canadian corporation. As part of its business, Plaintiff purchases dis- tressed properties which show good prospects for rehabilitation. (A-97 to A-98) In April 1988, Towle Real Estate approached Plaintiff about buying the Columbia Heights Mall ("Mall"), which had been acquired by First Bank through a mortgage foreclosure. (A-126) The terms offered by First Bank required a closing of not later than June 30, 1988. (A-126) Plaintiff was interested in acquiring the Mall, and with assistance from Towle Real Estate, it began to discuss the conditions which would make its ownership and operation of the property economically feasible. (A-127) The main reason for the poor economic performance of the Mall was that the property taxes were exorbitant. (A-127) This fact, known to everyone including the HRA (A-llO), became the centerpiece of discussions between Plaintiff and the Defendants prior to closing. 4 i~-" The substance of these discussions is reflected in two docu- ments which summarize a number of representations by the various Defendants. In an undated handwritten note (A-129) which was transmitted to plaintiff, Mr. Pete Rand of Towle Real Estate wrote: The city HRA (Housing and Redevelopment Authority) Director Mr. Todd stutts (sic) expressed a willingness on the City's part to rebate to the new owner up to 50% of the City's portion of the taxes (the city's portion is $166,000) for up to 5 years. They would do this to assist the new owner in turning the Center around. The $83,000 per year from the City could be used to offset negative cash flow during the lease-up period. In a letter (A-l03) to Plaintiff dated June 2, 1988, Mr. stutz confirmed, on behalf of both the city and HRA: Specifically, we have the ability to assist in the fol- lowing areas: ...Property tax reduction through working with the County or rebate of tax increment payments to the buyer for a period of time to reduce operating ex- penses. The rebate of tax increment payments/property taxes is dependent upon review of development pro for- mas, etc. The HRA and City claim that this was not a promise of ass is- tance. They assert that it was modified by certain language in stutz's letter that: The HRA Board and City Council are receptive to a (sic) open dialogue on all of the factors which have limited the malls (sic) success. .' 5 ~ However, it must be emphasized that the letter was written specifically because Plaintiff needed certain assurances prior to the closing. (A-101 to A-102) Everyone was aware that the Mall could not succeed financially in its current circumstances and that Plaintiff would not consider an investment without a commit- ment to change the circumstances. (A-127) In this context, Mr. stutz closed his letter by saying: The HRA and City.. .will work to assist you in any reasonable way to help the project finally live up to it's (sic) original expectations. In his Affidavit dated July 27, 1993, Mr. Pete Rand of Towle Real Estate reported his understanding of the HRA/City's commit- ment: 7. Mr. stutz stated to me that the City would work with the new owner to assist him with the tax problem so the Mall could be turned around financially. (A-127) In reliance on the commitments of the City and HRA to provide the assistance necessary to gain relief from the "exorbitant" (stutz's own word) taxes (A-103), Zaidan closed on the Mall purchase on June 30, 1988. (A-32) (b) First Tax Relief Efforts. Following the closing, Plaintiff looked to the City and HRA for the promised tax relief. At this time, there was a minimum assessment agreement in place which stated that the assessed value of the Mall could not be less than $4 million. All parties had reason to believe the ac- tual market value of the Mall was substantially less than this $4 6 ~ million figure, though the County was, at the time, bound legally to tax the Mallon the basis of the $4 million minimum value. " (A-23) After the closing, the HRA and city shifted from the ap- proach of tax rebates to the alternative idea of reducing the minimum assessment value from $4 million to $2.64 million, in or- der to enable Plaintiff to seek from the County a substantial tax reduction from about $3.08 per square foot of gross leasable area to $2.00 per square foot. (A-111) In a special meeting of the HRA Board on December 20, 1988, the Board agreed to a three-year reduction of the minimum assess- ment value to create a new minimum tax level of $2.00 per square foot of gross leasable area, and asked Mr. stutz to prepare the necessary agreement. (A-111) At a regular meeting of the Board on January 10, 1989, the BRA approved a written amendment to the minimum assessment agree- ment, but conditioned final execution of the amendment on City Council concurrence. (A-112) On March 15, 1989, the Mayor, City Council, and City Manager were present at a regular meeting (A- 112) of the HRA Board. (This followed a work session on February 21 to review the proposed amendment attended by Mr. stutz, the Mayor, and city Council.) At the March 15 HRA Board meeting, the parties agreed to the modification of the minimum assessment agreement in order to enable Plaintiff to seek lower taxes from the County. (A-113) A resolution (A-78) approving and authoriz- ing execution of the amendment to the minimum assessment agree- " 7 ment was moved and passed at an HRA Board regular meeting on April 11, 1989. (A-114) The amendment was then executed by both Plaintiff and the HRA and recorded by the HRA. (A-84) In this action, the Defendants have argued that the amend- ment was not a binding contract to lower the minimum assessment value. They and the Court cite references in the minutes of the HRA Board meetings that the relief provided by the Defendants was "subject to" Plaintiff's obtaining an assessment reduction from the County. (A-114) This is not a correct legal or factual con- elusion. Plaintiff rightly contends that the amendment was a necessary and completed first step in obtaining relief. without a change in the contractual limitation created by the original minimum assessment agreement, Zaidan could not seek from the County a reduction of the property taxes which were perceived as exorbitant. However, in no sense was the amendment conditioned on a market value reduction by the County. From year-to-year, the County is always free to assess the property at what it believes to be the fair market value. And in fact, Plaintiff was pleased with the reduction of minimum value resulting from the amendment because, according to previous information from Mr. Pete Rand: The County Assessor agreed to reassess the project based on the terms of purchase. He did not say he would cut the value to whatever the purchase price is, but that he felt there was room for further reduction. (A-129) 8 (c) The Chanqe in Politics. Though the amendment provided Plaintiff with the necessary first step toward obtaining tax relief, the defendants' support and assistance were about to be withdrawn. The winds of political change were perhaps augured by the minutes of the April 11, 1989 HRA Board meeting, in which another commercial developer, Jim Ruvelson, stated that if Plain- tiff were receiving assistance, his financial problems also deserved help from the HRA, including property tax reductions. (A~114) (d) Enforcement of the Amendment to Minimum Assessment Aqreement. Before or shortly after the execution of the amend- ment, an Assistant County Assessor told the HRA executive direc- tor (in May 1989, Donald Schneider replaced Todd stutz) that he felt it was improper to state the minimum assessed value in terms of a desired tax result (i.e., a tax of $2.00 per square foot) instead of setting the minimum assessment value as a stated market value. (A-17 to A-18) This would have been an easy cor- rection to make since a market value of $2.64 million was specifically named in HRA minutes as the figure generating the $2.00 per square foot tax. (A-lll) Later, the County also ob- jected to the form of the amendment because it did not include a "certification clause" for the Assessor to certify the reasonableness of the market value. (A-57) The HRA never took steps to correct this minor drafting problem. (A-57) In 1990, relying on the amendment to minimum assessment agreement, Plaintiff filed a tax petition seeking to reduce the Mall's assessment value from $4 million to the new minimum value. 9 Despite the earlier conversations among all the parties, the County now raised (Schneider Deposition Ex. 12) three objections: (1) There was no statutory authority to permit the HRA to amend the minimum assessment agreement. (2) There was no certifica- tion language on the amendment where the Assessor could make the statutorily required certification that the stated minimum value was a reasonable estimate of the actual market value. (3) The new minimum assessment value needed to be expressed as a market value, not as a tax result. (A-122 to A-125) When the County took these positions, the HRA was well aware of the County's objections, but again it did nothing to act on them. From Plaintiff's point of view, the latter two objections were ones of form, and easily corrected. However, the first ob- jection concerning the validity of the amendment was a legal question of first impression in Minnesota, which might have to be litigated. (e) Tax Rebates. Plaintiff still had in hand the letter from the City and HRA assuring their assistance in any reasonable way to gain tax relief, including through tax rebates. And so, Plaintiff voluntarily dismissed its tax appeal (A-130) and returned to the alternative approach of tax rebates. Following dismissal of the tax appeal, Plaintiff's employees met with the HRA executive director, the Mayor, and other city officials. (A-8?; Schneider Deposition Ex. 10) Then, in a letter dated March 21, 1991, Plaintiff formally requested assistance in the form of tax rebates. (A-l05) 10 After meeting again with Plaintiff, on March 25, 1991 the HRA executive director and city officials held an evening closed work session with the city Council. (A-61 et seq.; Schneider Deposition Ex.9) Schneider favored giving Plaintiff some form of relief. (A-6a) City Council members (including Bruce Nawrocki who served on both council and HRA,Board), the Mayor, and the City Manager were opposed any assistance to Plaintiff, based on fears that other property owners would demand relief from their taxes. (A-70 to A-71) Following this meeting, the city and HRA refused to help, stating in a letter to Plaintiff: We are sorry that we cannot honor your request but we must think of the ramifications of assisting your firm and not other firms with similar problems. (Schneider Dep. Ex. 10) '. When the City and HRA refused to honor their earlier promises of assistance, Plaintiff turned its hope once again to the executed agreement it had signed with the HRA. It filed a new tax appeal (1991), intending to litigate the County's main obj ection, namely, the val idi ty of the amendment. Naively perhaps, Plaintiff still expected the city and HRA to honor the substance of the amendment if this legal obstacle questioning its validity could be cleared. (A-130) (f) Tax Court Litiqation. Plaintiff moved for partial sum- mary judgment, seeking a ruling by the Tax Court that the HRA had J the authority to amend the minimum assessment agreement. (A-130) The Tax Court granted Plaintiff's motion, though it also ruled that it would not enforce the amendment without the statutorily 11 " mandated certification. (A-134) In fact, Plaintiff agreed that certification was necessary and it fully expected the HRA to honor its contract and make the technical changes in wording to clear the way for certification. In fact, Plaintiff's proposed order to the Tax Court on its partial summary judgment was worded as follows: That Petitioner's Motion for Partial Summary Judgment is granted and that as a matter of law, the amendment to the assessment agreement is valid and legally enforce- able after complying with reasonable requirements as to wording and form by the County Assessor and after cer- tification by the county Assessor. (A-133) (g) Effect of the Tax Court's Decision. In this action, in reaching its decision to grant summary judgment on the ground of collateral estoppel/res judicata, the Trial Court incorrectly states that Plaintiff has "admitted" that all issues relating to the validity of the amendment were fully litigated and decided in the Tax Court. In fact, in answer to a request for admission from the HRA, Plaintiff only affirmed that the authority of the HRA to amend the minimum assessment agreement, i.e., the va1iditv of the amendment as between Plaintiff and HRA, had been fully litigated and decided. with respect to the other claims between Plaintiff and the HRA/City, Plaintiff qualified its response to the admission as follows: Response: Admitted. The Tax Court ruled that the HRA had statutory authority to amend the original Assessment Agreement and therefore the Amendment was valid. However, the Tax Court lacked jurisdiction to consider the defendants' subsequent breach of contract, which is the main subject matter of this action. 12 " In other words, Plaintiff did not admit that there was a full litigation on the merits with respect to all issues in this action. plaintiff's theories of recovery, and the facts support- ing them, are discussed more fully below. Following the Tax Court's ruling, which cleared the County's main objection, Plaintiff immediate~y returned to the city and HRA, seeking the two technical changes requested by the county Assessor, i.e., restatement of the minimum assessment value as a market value and addition of certification language. (A-131) Using the $2.00 per square foot tax figure, at the parties' re- quest the County Assessor's Office worked backward to calculate a new minimum market value of $3.2 million. (A-140) Counsel for Plaintiff and for the HRA (A-132) then drafted an addendum to the amendment containing the new minimum assessment value and chang- ing the effective years since the first year of the three-year relief agreed to in the 1989 amendment had already passed. (A- 140) The subject of the addendum was discussed first in a staff meeting and then in a joint City/HRA work session in April 1992. (Schneider Dep. Ex. 1) The HRA's attorney recommended adoption of the addendum because of possible "legal liability" for breach of the 1989 amendment. (A-89) Council Member Nawrocki spoke against the addendum. (A-74 to A-75) (h) The Addendum to Amendment. A month later, the addendum which had been drafted by counsel for plaintiff and the HRA was considered and approved by the HRA board (Nawrocki dissenting). (Schneider Dep. Ex. 20) However, the HRA's approval was made 13 subject to City Council concurrence. As of this time, members of the HRA Board were well aware that the Mayor, Nawrocki, and other Council members were opposed to proving any tax relief to Plain- tiff. At a Council meeting on May 26, 1992, the City Council referred the matter of the addendum back to the HRA Board without positive action. (Schneider Dep. Ex. 21 and 22) At its next meeting, the Board voted unanimously not to execute the addendum. (A-92 to A-93) (i) The Final Tax Appeal. Previously, in anticipation of favorable ruling by the Tax Court on the question of the amendment's validity, and in order to preserve its rights of ap- peal, Plaintiff had filed a third tax appeal for taxes payable in 1992. (It also had the option to move to re-open the 1991 appeal once the amendment (and addendum) were in proper form and cer- tified by the County Assessor.) However, without HRA approval of the addendum to amendment, Plaintiff found itself bound again by the original minimum assessment agreement and unable to obtain a fair appraisal of the market value of the Mall. (A-132) Plaintiff and the County then stipulated to entry of judg- ment in the Tax Court. Once again, none of the issues involved in this action was raised nor litigated. The Tax Court entered judgment based on the stipulation of the parties, including the following: 7. The Tax Court does not have jurisdiction to mandate certification of the Amendment, or to consider claims of specific performance or breach of contract with respect to the Amendment and/or Addendum. (A-150) 14 (j) Basis of this Action. Plaintiff was unable to meet the operating expenses and debt service on the Mall, and eventually it lost the Mall to its lenders. It commenced this action, claiming damages and seeking the following relief: (1) Having received a favorable ruling from the Tax Court on the authority of the HRA to create the amendment to minimum assessment agreement, Plaintiff sought a declaratory judgment that the amendment was in proper form for certification by the County Assessor. (2) Alternatively, Plaintiff claimed that the amendment constituted a binding agreement with the HRA, which was subse- quently breached. (3) Finally, Plaintiff alleged that if the HRA's refusal to enter into the addendum was not a breach of contract, it was a wrongful delegation of authority to condition its approval on City Council concurrence. Following the close of discovery, Plaintiff sought to amend its complaint to raise additional theories of recovery based on the facts developed during discovery. Specifically, it claimed: (1) The HRA and city should be equitably estopped on the basis of promissory estoppel from denying the existence and validity of an agreement to provide Plaintiff with tax relief. (2) In the alternative, regardless of whether there was a contract and breach, the City and HRA should be liable for Plaintiff's damages which were caused by the Defendants' mis- representations. (3) Finally, in the course of the parties' dealings, the City and HRA, both by voluntary conduct and representations of assistance, assumed a duty to Plaintiff and subsequently breached their duty of care. In this appeal, Plaintiff seeks reversal of the summary judgment granted on its original complaint, as well as a reversal of the denial of its motion to amend complaint. Because most of 15 l the same legal discussion applies to both Trial Court decisions, the following legal argument will not, for the most part, distin- guish between the two motions and rulings. LEGAL ARGUMENT I. SUMMARY JUDGMENT IS ONLY APPROPRIATE UNDER NARROW CIRCUMSTANCES. The Trial Court may only grant summary judgment when all the factual materials under consideration (pleadings, depositions, affidavits, etc.) fail to disclose a single genuine issue of material fact. Rule 56.03, Minnesota Rules of Civil Procedure. Grondahl v. BUllock, 318 N.W.2d 240, 242 (Minn. 1982). Summary judgment is a "blunt instrument," to be applied with caution. Republic Nat. Life v. Lorraine Realtv, 279 N.W.2d 349 (Minn. 1979). In considering a motion for summary judgment, the Trial Court must view all the evidence in the light most favorable to the nonmoving party, and the burden of proof rests with the moving party. Grondahl v. BUllock, supra, 318 N.W.2d at 242. All doubts and factual inferences must be resolved against the moving party. Nord v. Herreid, 305 N.W.2d 337,339 (Minn. 1981). On appeal, the same standards are applied by the reviewing Court. All doubts and factual inferences must be resolved against the moving party. Nord v. Herreid, supra, 305 N.W.2d at 339; Waqner v. Schweqman's South Town Liquor. Inc., 485 N.W.2d 730 (Minn. App. 1992), review denied. The Court of Ap- peals is to determine whether any issue of material fact exists. Id.. see also, Betlach v. Wavzata Condominium, 281 N.W.2d 328 16 W?;; (Minn. 1979). In addition, the Court must review whether the Trial Court erred in its application of law to the facts. Schumacher v. Ihrke, 469 N.W.2d 329 (Minn. App. 1991). rr. ~HERE rs NO FACTUAL OR LEGAL BASrS FOR APPLrCATrON OF COLLATERAL ESTOPPEL rN FAVOR OF THE HRA. Two of the four elements required for application of the doctrine of collateral estoppel are: (1) the issues previously adjudicated are identical to the ones in issue, and (2) there was a full and fair opportunity for the estopped party to be heard on all the issues. Ellis v. Minneapolis commission on civil Riqhts, 319 N.W.2d 702, 704 (Minn. 1982). The burden of proving that all the issues in this action were actually litigated in the prior Tax Court proceeding is on the moving party. Brooks Realtv v. Aetna Ins. Co., 128 N.W.2d 151 (Minn. 1964). The HRA may only obtain summary judgment on the ground of collateral estoppel if it appears affirmatively and clearly that each issue in this ac- tion was actually litigated and that a decision as to each issue was necessary in the prior action. Id.; Brown v. State Auto & Cas. Unds., 293 N.W.2d 822 (Minn. 1980). In granting summary judgment on the basis of collateral es- toppel, the Trial Court erred in finding that the above two re- quirements were satisfied. In fact, the HRA failed to carry its burden. Issues of law and fact remain. A. Prior rssues in the Tax Court Not rdentica1: .' 17 (1) Formation of A Contract. The Trial Court states in its decision that the "tax court has determined that Plaintiff and the HRA did not form a valid contract." This is not correct. A reading of the Tax Court record demonstrates that only one narrow question of law was presented in Plaintiff's summary judgment mo- tion: whether the HRA could validly amend the original assess- ment agreement. Both Plaintiff and the County agreed that Plain- tiff could not enforce the amendment against the county until the County Assessor certified that the new minimum value was a reasonable estimate of market value. However, the HRA was not a party to the Tax Court proceeding and the question of whether the amendment, even without cer- tification, created any legal or equitable rights enforceable by Plaintiff against the HRA, was neither presented nor decided by the Tax Court. This is clear from the record. Plaintiff's at- torney who appeared in the Tax Court proceeding states in his af- fidavit submitted in opposition to the HRA's summary judgment mo- tion: At the hearing on [Plaintiff's] motion, the County op- posed summary judgment, taking the position that the HRA had no authority to amend its assessment agreement; the county also took the position that the Court lacked jurisdiction to rule that the county Assessor had a duty to certify the amendment. This issue was neither briefed, argued, nor decided by the Tax Court, though the Tax Court judge expressed the opinion at the hearing that the Court did lack jurisdiction. In its motion for summary judgment, the HRA did not present any evidence demonstrating that any of the other issues raised by Plaintiff in this action were addressed in the Tax Court. For 18 instance, in Count One of Plaintiff's complaint, dismissed by the Trial Court on the basis of collateral estoppel, Plaintiff seeks a declaration by the Trial Court on an issue outside the Tax CoUrt's jurisdiction, namely, whether the amendment is in proper form and shoUld be considered by the County Assessor. (Plaintiff does not seek a ruling that the amen~ent must be certified. The question of whether the estimate of market value was reasonable is within the Assessor's discretion. However, the Assessor's ob- jections to form are legal questions within the Trial Court's jurisdiction. ) Similarly, in County Two of its complaint, Plaintiff seeks to enforce the terms of the amendment against the HRA. This is different from the issue which was before the Tax Court. Plain- tiff does not argue that certification is unnecessary to be eligible for a lower County assessment. Rather, it claims the HRA failed to live up to an agreement which was enforceable be- tween the two of them. (2) Other Grounds for Recoverv. In opposing the HRA's sum- mary judgment motion, Plaintiff raised other theories supported by facts which fall within the general statement of claim in its complaint. These issues were not discussed by the Trial Court in reaching its decision, though they should have been. To repeat, in considering the HRA's motion for summary judgment, the Trial Court should have construed all the evidence in Plaintiff's favor to determine whether a triable issue existed. .' 19 In making this determination, the focus should be on the facts before the Court, and if recovery is possible on any legal theory, summary judgment must be denied. with the demise of code pleading, the formal character of the complaint no longer deter- mines the cause of action, and pleadings are to be liberally con- strued to promote trials on the merits, even when a plaintiff has misconstrued the nature of the claim. Hutton v. Bosiqer, 366 N.W.2d 358, 361 (Minn.App. 1985). The rules of civil procedure only require a short and plain statement of a claim. Rule 8.02, Minnesota Rules of civil Procedure; Northern states Power Co. v. Franklin, 122 N.W.2d 26, 29 (Minn. 1963). Indeed, as the Supreme Court has stated: One of the primary purposes of the new rules of civil procedure is to enable the court to give judgment ac- cording to the facts stated and proved without reference to the form used or legal conclusions adopted by the pleader. Anchor Casualtv Co. v. Bird Island Produce, 82 N.W.2d 48, 55 (Minn. 1957). In opposition to summary judgment (and in its motion to amend complaint), Plaintiff has pointed to numerous facts sup- porting various forms of relief. In all these cases, the facts and legal questions were never considered nor decided by the Tax Court. These include: 20 (a) Reformation of Contract. Even assuming the amendment is invalid, the Trial Court could use its equitable powers to reform the amendment to give it the effect intended by the parties. Explaining the scope of the Court's equitable reforma- tion powers, the Supreme Court has stated: The important point is that there was in fact a valid aqreement between the parties and not that the contract as drawn was valid. (emphasis in original) Gartner v. Gartner, 74 N.W.2d 809, 812 (Minn. 1956); see also, Papke v. Pearson, 280 N.W. 183, 186 (Minn. 1949). Even assuming the County Assessor was correct that the amendment cannot be considered for certification because of the way the minimum value was stated, there is ample evidence of a meeting of the minds between Plaintiff and HRA, and of the sub- stance of the agreement the parties reached. (b) Estoppel. Again, even assuming no valid contract was formed by the amendment between Plaintiff and the HRA, Plaintiff has raised numerous factual questions about whether promissory estoppel should prevent the HRA from denying that a contract ex- isted. Promissory estoppel is available against a governmental authority where specific representations of assistance were made, inviting reliance, and Plaintiff changed its position as a result, making it inequitable for the authority to retract its promise. Mesaba Aviation oiv. v. Countv of Itasca, 258 N.W.2d 877,880-881 (Minn. 1977). 21 In this case, Plaintiff has presented the affidavit and handwritten note of Mr. Pete Rand reporting representations by an employee of both the city and HRA that the City and HRA were willing to rebate taxes to make ownership of the Mall financially viable. Later, in a letter, this same HRA executive director and city planner promised that the Defendants would assist Plaintiff in any reasonable way to help the project. He also stated that the Defendants had the specific ability to assist with tax rebates or property tax reductions through working with the County. Separate from its opposition to the HRA's summary judgment motion, Plaintiff moved to amend its complaint to assert promis- sory estoppel. In denying the motion, the Court purports to make what it terms a "fair reading" of the evidence, concluding there was no affirmative misconduct or actual knowledge of false rep- resentations to justify estoppel. Assuming, arcruendo, that a necessary element for estoppel against the government is some- thing more than simple inadvertence, mistake, or imperfect con- duct, there is ample evidence here. Throughout the initial con- versations, the Defendants knew that Plaintiff was unwilling to invest in the Mall without assurances about tax reductions. Everyone believed the taxes were exorbitant and the Mall would not succeed without tax assistance. In other words, Plaintiff risked a substantial investment loss without the promised assis- tance. 22 " What Mr. stutz knew, or thought, when he made representa- tions to Plaintiff is, by definition, within the unique knowledge of Mr. stutz. As in most cases involving knowledge, motive, and intent, proof is circumstantial and based on inference and, for this reason, summary judgment is usually inappropriate. Cf., Lewis v. Eauitable Life Assur. Soc." 389 N.W.2d 876, 890 (Minn. 1986); Thornbrouqh v. Columbus & Greenville R. Co., 760 F.2d 633, 640-641 (5th Cir. 1985). In this case, Mr. stutz stated in his letter that the HRA Board and city Council had discussed their role in providing as- sistance. Was this true? There are no documents supporting this statement. stutz wrote that the HRA and City were ready and willing to provide tax rebates, and he made a more specific rep- resentation about this to Pete Rand. Yet only a year later, the two governmental authorities who were supposedly willing to provide assistance categorcially refused to provide tax rebates, raising the inference that the city and HRA never intended to do what they promised. In addition, again assuming, arquendo, that "affirmative misconduct" on the part of the government must be shown, several other questions arise. First, since promissory estoppel is an equitable remedy, must it be narrowly circumscribed to affirma- tive misconduct in the actual representation? suppose the repre- sentation was made honestly but the course of dealings afterward exhibited bad faith. Shouldn't the same equitable considerations apply? " " 23 Second, is the question of affirmative misconduct suscep- tible to summary disposition? Courts have dealt with the same types of issues involving state of mind, credibility, and cir- cumstantial proof which necessarily follow such fact questions as "malice" or "recklessness." The reasoning of one Court is in- . . structJ.ve: As in all cases, civil or criminal, turning upon the state of an individual's mind, direct evidence may be rare; usually, the trier of fact is required to draw in- ferences of the state of mind at issue from surrounding acts, utterances, writings, or other indicia. Reckless- ness is, after all, only negligence raised to a higher power. To hold otherwise would require that plaintiff prove the ultimate fact of recklessness without being able to adduce proof of the underlying facts from which a jury could infer recklessness. It would limit suc- cessful suits to those cases in which there is a direct proof by a party's admission of the ultimate fact... widener v. Pacific Gas & Elec. co., 75 cal.App. 3d 423, 142 Cal. Rptr. 304, 314-315 (1977) (reversing jnov on state of mind issue). In denying Plaintiff's motion to amend complaint, the Trial Court looked for direct proof that stutz's representations about the intentions of the City and HRA were false. Plaintiff believes that the subsequent course of dealings suggests a lot about the reckless or insincere intentions of the government authorities when they made their representations, and that the ultimate fact inferences should be left to the trier of fact. 24 (c) Nealiaent Misrecresentation. In opposing summary judg- ment, plaintiff also argued that the facts support a claim of "misrepresentation. II Its proposed amendment to complaint con- tained the following wording, in paragraph 29: Defendants misrepresented to plaintiff that they were willing and able to provide tax relief to plaintiff to assist Zaidan in making the Property financially suc- cessful. In the following paragraph, Plaintiff alleged detrimental reliance by Plaintiff, which acted in the good faith belief that the representations were true. In Minnesota, misrepresentations may be deliberate or " negligent. Bonhiver v. Graff, 248 N.W.2d 291 (Minn. 1976); Nave v. DovOlos, 395 N.W.2d 393 (Minn. App. 1986). In ruling against '. Plaintiff, the Trial Court misconstrued Plaintiff's claim for recovery and searched for direct evidence of fraud. However, the above-quoted language in the proposed amended complaint did not allege fraud, and the facts suggest strongly that Mr. stutz made his representations negligently, i. e. , wi thout knowledge of whether they were true or false, when he stated the Defendants' present intention to assist with tax relief. (d) Neqliqence. In his letter to Plaintiff, stutz stated on behalf of the City and HRA that they would assist in any reasonable way. This promise was accompanied, both in the letter and previously, by a specific undertaking to help Plaintiff ob- " 25 " ~ tain tax relief. At the time the promise of assistance was made , stutz knew that Plaintiff would be relying on the promise of as- sistance. It is well recognized that a party may by its promises of assistance undertake a duty to another, which must then be exer- cised with reasonable care. Restatement, Second, Torts, sec. 323. In denying Plaintiff's motion to amend, the Trial Court noted that this section of the Restatement applies to actions in- volving physical harm. However, the Court gave no reasons why the same legal principle shouldn't apply to undertakings dis- charged negligently which result in economic loss or property damage. In fact, other authorities have relied on the general prin- ciple of sec. 323 in cases involving other damages contexts. See, e.g., Campbell v. Insurance Service Aoencv, 424 N.W.2d 785, 791 (Minn.App. 1988) (recognizing negligence cause of action against insurance agent based on loss of policy proceeds). For instance, in the area of legal malpractice, absent a client con- tract, an attorney may nevertheless assume an obligation to a third party actionable in tort. viet v. Anderson, 428 N.W.2d 429, 431-432 (Minn. App. 1988); see also, Schwartz v. Greenfield. Stein & Weisinoer, 396 N.Y.S.2d 582 (1977). And a legal malprac- tice claim certainly involves economic loss, not personal injury. Johnson v. Tavlor, 435 N.W.2d 127 (Minn.App. 1989), review denied. .. 26 '0.fjJ " The Trial Court also reasoned that negligence did not apply to Plaintiff's facts because there cannot be a tort claim for negligent breach of contract, citing Lesmeister v. Dillv, 330 N.W.2d 95, 102 (Minn. 1983). However, Plaintiff's claim should not be read as alleging negligent breach of contract. Rather, Plaintiff seeks to allege, as an alternative to claims of mis- representation, that if honest representations were given, they created a duty requiring exercise of reasonable care. Plaintiff is fully entitled to propose negligence and breach of contract as alternative theories of recovery. (e) Breach of Contract. The ruling by the Tax Court focused on a different issue than that raised by Plaintiff. Cer- tification under Minn. stat. sec. 469.177 may be necessary before Plaintiff may obtain tax relief using a new minimum assessment value. However, the question of whether the HRA's approval of the amendment created enforceable promises between the HRA and Plaintiff is an entirely separate matter. The initial action of the HRA Board was a formal ratification of a commitment to change the minimum value. Plaintiff contends that this commitment by the HRA is enforceable by plaintiff, regardless of whether the contract as first written was enforceable against the County. Plaintiff contends that the HRA used the technical objec- tions of the County to avoid its contractual obligations. The intent of the parties, namely to lower the minimum assessment value for three years, is clear from the HRA Board minutes. This is what the parties bargained for. This is the commitment that the HRA Board formally approved. When the HRA refused to execute " { 27 ~ the addendum to give effect to the parties' agreement, it breached its contract with Plaintiff. Plaintiff contends there was either a binding agreement created by the HRA Board's ratification of an amendment to lower the minimum assessment value, or there was sufficient action and inducement in 1988 and 1989 that recovery may be had on a quasi-contractual theory for the HRA's lack of action in 1990 and 1991. citv of Minneapolis v. Countv of Beltrami, 288 N.W. 706 (Minn. 1939): Buffalo Bituminous. Inc. v. Maple Hill Estates. Inc., 250 N.W.2d 182 (Minn. 1977). B. All Issues Not fully Litigated. In determining that all the issues in this action were fully litigated and decided in the Tax Court, the Trial Court relied almost exclusively on a purported "admission" to this effect by Plaintiff. The above discussion should make it clear that very few of the issues, and none of the dispositive ones, were even considered, much less, litigated, in the Tax Court. From the above recitation of the facts, and from the cir- cumscribed wording of its "admission," it is clear that Plaintiff intended to admit only what was perceived to be the effect of the Tax Court decision, namely, that the amendment was valid against the HRA, and the HRA had the authority to enter into an agreement modifying the original minimum assessment agreement. The Trial Court erred in deciding an ultimate issue of the case based on a qualified admission. See, e.g., Dahle v. Aetna Cas. & Sur. Ins. Co., 352 N.W.2d 397 (Minn. 1984). Even in the case of an unqualified admission, its introduction at trial is 28 subject to evidentiary objections. Cf., Goldman v. Moonev, 24 F.R.O. 279 (w.o.Pa. 1959). Thus, while an admission seeking a legal conclusion may be asked under the broad scope of Rule 36.01, Minnesota Rules of Civil Procedure, such an admission does not end the question. In this case, the admission request involved a complex mix- ture of law and facts and sought a legal conclusion. This is perhaps proper. However, such a question would not be admissible at trial and hence the admission would not be admissible either. Id., 24 F.R.D. at 280; Moore's Federal Practice, sec. 36.08 and f.n. 28 (1986). ~ In this case, Plaintiff only admitted that the Tax Court had \ found the amendment to be valid. Plaintiff specifically stated , that the issue of the Defendants' breach of their agreement was not litigated. other factual and legal questions, such as the effect of Todd stutz's written and oral representations, were not the subject of an admission, and they certainly were not litigated in the Tax Court. The Trial Court erred in ruling that all issues in this action were fully litigated and decided by the Tax Court. III. SUMMARY JUDGMENT IN FAVOR OF THE CITY WAS INAPPROPRIATE. A. Causes of Action Against the city. < 29 In granting summary judgment in favor of the city, the Trial Court first decided, in summary fashion, that there was no evidence of wrongful conduct by the City. In fact, Plaintiff presented considerable evidence, including the following: (1) Todd stutz was an officer both of the HRA (executive director) and of the city (city planner) when he made representa- , tions in writing concerning tax assistance from the City and HRA. (2) Minutes of meetings in 1989 show that the approval of the amendment to minimum assessment agreement involved the joint participation of both the City and the HRA. (3) Pete Rand's handwritten notes reflect a representation by Todd stutz that the citv was willing to rebate taxes. (4) In 1991, it was the city (by its Mayor) which refused Plaintiff's request for tax rebates. ,. (5) While the city approved the 1989 amendment, it refused in 1991 to effectuate the intent of the amendment. In both 1989 and 1991, the city was an essential party to all contract nego- tiations and commitments. B. Res Judicata and Collateral Estoppel. The Trial Court further concluded, though it didn't fully discuss the issue, that Plaintiff's action against the City is "probably" precluded by collateral estoppel and res judicata. For all of the reasons discussed at length above, collateral estoppel should not apply. The issues in this case simply weren't litigated in the Trial Court. 30 Res judicata is equally inappropriate. First, for the doctrine to apply, the parties to both actions must be identical or in privity. Certainly the County, which was the only de fen- dant in the Tax Court action, is not the same party as the city. Nor are their interests the same. Second, res judicata only app~ies where all issues in the earlier proceeding were fully litigated or could have been litigated. It also applies only where the determination of the issues was necessary in the prior action. Negligence, breach of contract, misrepresentation, promissory estoppel, and the ques- tion of whether the amendment was in proper form for certifica- tion, not only weren't litigated in the Tax court, they are ques- tions outside the Tax Court's jurisdiction. Hence, this essen- " tial requirement for res judicata (and collateral estoppel) . simply cannot be satisfied. Hauser v. Mealev, 263 N.W.2d 803 (Minn. 1978) (res judicata will not bar litigation of claims that were outside the earlier court's jurisdiction); see also, Inter- national Harvester Co. v. Mississippi Land co., 25 F.2d 355 (8th Cir. 1928), cert. denied 282 U.S. 905. XV. SUMMARY JUDGMENT XN FAVOR OF THE COUNTY WAS INAPPROPRIATE. The County is named as a defendant because one of Plaintiff's claims is for a declaratory judgment that the amend- ment was in proper form for certification. This issue certainly involves the County. After all, it was the County which first ; refused to certify the amendment, objecting to the form of the 31 . < amendment. Yet the County moved for summary judgment arguing, among other grounds, that declaratory relief is inappropriate, or, alternatively, the action is barred by res jUdicata/collateral estoppel. Interestingly, the Trial Court rejected the County's sub- stantive arguments that: (1) there are no rights to review, and (2) the Court lacks authority to substitute its discretion for that of the County Assessor. These conclusions are quite right. Whether the amendment was written in a certifiable form is cer- tainly a legal issue which was created when the County Assessor objected to form. And certainly, for the Court to decide whether the amendment may be considered for certification is not the same thing as the Court telling the County Assessor whether to certify the minimum market value as reasonable. Plaintiff is not seeking substitution of the Court's judgment for the Assessor's statutory discretion to determine reasonable market value. Yet the Trial Court granted summary judgment on the basis of collateral estoppel, and "perhaps" res judicata. This is con- trary to the facts and law. Hauser v. Mealev, 263 N.W.2d 803, 807 (Minn. 1978); see also, Hartz' Estate v. Cade, 77 N.W.2d 169, 172 (Minn. 1956). In fact, in 1992 the County stipulated with Plaintiff that the Tax Court lacked jurisdiction to decide the question of certifiable form. Without jurisdiction, the Tax Court certainly couldn't consider nor decide the question, nor would its determination be binding. Res judicata and estoppel simply do not apply. 32 . \ . . CONCLUSION For the above-stated reasons, the Trial Court's grant of summary judgment in favor of Defendants should be reversed. Plaintiff'S motion to amend complaint should have been granted. Dated: 3/50/'14 t I JACK D. ELMQUIST LAW OFFICES j}{+-3~ Thomas F. Surprenant (127851) 2450 Centre Village 431 South 7th Street Minneapolis, MN 55415 (612) 371-9472 Attorneys for Plaintiff/ Appellant Zaidan Holdings, Inc. . \ . T94/E69 . JJ