Steele County District Court File No. 74-CV-09-860
Michael R. Quinlivan, Pearson Quinlivan, PLC, Maplewood, Minnesota (for respondents)
Charles A. Bird, Bird, Jacobsen & Stevens, P.C., Rochester, Minnesota (for appellant)
Considered and decided by Chutich, Presiding Judge; Peterson, Judge; and Smith, Judge.
In this dispute involving transfers of stock within an extended family, appellant-mother argues that the district court erred by granting summary judgment in favor of respondent-children, asserting that purported transfers of bank stock to respondent-children by their paternal aunt were invalid because the transfers did not comply with the Uniform Transfers to Minors Act. During the pendency of this appeal, respondent-children moved to strike from the record on appeal portions of appellant-mother's submissions that were not considered by the district court in its determination of the partial final judgment. We reverse and remand, and we grant respondent-children's motion to strike.
Defendant Stephen Habberstad is a third-generation banker whose family owned two banks. The stockholders of the banks created Country Banker's, Inc. (CBI), a holding company that now owns the stock of the banks. Habberstad's marriage to appellant Kimberly Habberstad was dissolved by judgment and decree in Houston County in 2010. Respondents are three of the four children of the marriage, Eric, Brendan, and Nicole (n/k/a Nicole Wiczek).
In 2010, respondents initiated an action against their parents in Steele County. Respondents sought a declaratory judgment that defendant violated the Uniform Transfers to Minors Act (UTMA), Minn. Stat. §§ 527.21-.44 (2012), by transferring to himself or to appellant certain CBI stock shares that are in defendant's possession, which he held as custodian (the custodial shares), and that they are the owners of the custodial shares. Respondents also alleged that appellant "had actual or constructive notice" of defendant's conduct and sought an accounting of the dividends and distributions generated by the custodial shares. Respondents' complaint also included claims for rescission of the stock transfers, breach of statutory custodial duties, breach of fiduciary duties, conversion, constructive fraud, fraudulent misrepresentation, negligent misrepresentation, equitable estoppel, constructive trust, and punitive damages.
The custodial shares are more than 3, 000 CBI stock shares that were part of a transaction referred to as the "Fair Oaks exchange, " which involved an exchange of assets between defendant and his sister, Sally Williamson. In the 2010 dissolution judgment, the Houston County district court found that in 1993 defendant exchanged his and appellant's ownership interest in the Fair Oaks Apartments for Sally Williamson's 6, 730 shares of CBI stock. As part of the exchange, Sally Williamson purportedly transferred 3, 130.5 shares of the CBI stock to respondents under the UTMA.
In the dissolution judgment, the Houston County district court found that respondents had filed this lawsuit against their parents in Steele County claiming an interest in the shares involved in the Fair Oaks exchange. The court then specifically declined to address the custodial shares until the conclusion of this action. On appeal in the dissolution, this court noted that respondents had sued their parents and that the Houston County district court had excluded the custodial shares from the marital estate and the property division. Habberstad v. Habberstad, No. A10-2126, 2011 WL 5299645, at *1 n.1 (Minn.App. Nov. 7, 2011).
In late 2007 and early 2008, respondents each signed affidavits stating that they had gifted the custodial shares to defendant. Respondents now allege that the affidavits were factually inaccurate because they did not intend to gift the custodial shares to their father and took that action only upon his advice, in order to "prevent the liquidation of" those assets.
In his answer to the amended complaint in this action, defendant sought a declaratory judgment that respondents had gifted the custodial shares to him. In her separate answer to the complaint, appellant asserted a counterclaim against respondents that "3, 129 of the [custodial] shares were unlawfully and fraudulently signed by Sally Williamson and then delivered to [defendant] in a sham gift transaction at the direction and control of [defendant] for the purpose of avoiding income taxes and not for the purpose of gifting said shares to [respondents]." According to appellant, "[a]ny transfers to [respondents] . . . were made without the knowledge or consent or donative intent of [appellant]." And [appellant] knew only that bank stock was being paid as part of a contract exchanging an interest in Fair Oaks Apartments." Appellant also alleged that respondents joined defendant in a conspiracy to defraud her and asserted cross-claims against defendant for intentional misrepresentation, conspiracy to defraud, theft and conversion, forgery, and waste. She further sought ...