Richard W. Huffman, James T. Smith, Huffman, Usem, Crawford
& Greenberg, P.A., Minneapolis, Minnesota, for
F. Herr, Martin S. Fallon, Leora M. Maccabee, Jesse D.
Mondry, Maslon LLP, Minneapolis, Minnesota, for respondent.
appellate court's review of a decision to grant a motion
to dismiss under Minn. R. Civ. P. 12.02(e) on the ground that
a claim is barred by a statute of limitation is de novo and
limited to the facts set out in the complaint. All facts must
be construed in favor of the nonmoving party.
Under the "some damage" rule of damage accrual,
damage can consist of harm that causes "financial
liability" or harm that causes "the loss of a legal
right." Financial harm results in some damage when the
resulting liability is immediate, concrete, compensable,
noncontingent, and at least partly ascertainable. Harm taking
the form of the loss of a legal right results in some damage
where the wrongful conduct allowed the claimant's legal
rights to be adversely, immediately, and irredeemably changed
allegations of the complaint did not establish that
appellants suffered some damage in the form of a loss of a
legal right, but did establish that appellants suffered some
damage in the form of financial harm in August 2012, when the
Estate-and by extension, appellants-stopped receiving
payments on its subordinated Note. The district court erred
by granting the motion to dismiss because respondent failed
at this stage in the proceedings to establish that appellants
suffered some damage before August 2012.
case presents a statute of limitations question requiring us
to revisit the "some damage" rule of accrual used
to evaluate when the statute of limitations begins to run in
Minnesota. Appellants Jill Hansen and Leif Layman appeal from
an unpublished decision of the court of appeals affirming the
district court's dismissal of their complaint against
respondent U.S. Bank on statute of limitations grounds.
Because U.S. Bank failed to establish based on the pleadings
that appellants suffered "some damage" in the form
of financial harm before August 2012-less than six years
before appellants filed their lawsuit-the district court
erred by granting the motion to dismiss. We therefore reverse
the decision of the court of appeals and remand to the
district court to reinstate the complaint and for further
Hansen is the daughter of the late Robert J. Hansen. Leif
Layman is the son of Jill Hansen and the grandson of Robert
J. Hansen. Both are beneficiaries of Robert J. Hansen's
Estate (the Estate). We will refer to Jill Hansen and Leif
Layman as the "Beneficiaries."
about August 18, 2009, Robert Hansen and his brother, Bryan
Hansen, negotiated a purchase agreement to sell certain real
property located in Vadnais Heights to Community Facilities
Partnership of Vadnais Heights, LLC (CFP) to be used for a
community sports complex. In the original purchase agreement,
CFP agreed to pay the Hansens $2.5 million in cash at closing
and give the Hansens a $2 million tax-exempt subordinate
nonrecourse 30-year note (the Note) issued by the City of
Vadnais Heights and bearing interest at a rate of eight
percent per annum, payable semi-annually. Payments on the
Note were to be made by CFP or its designated payer using
anticipated revenue from the sports complex.
November 22, 2009, Robert Hansen died. In the probate action
for Robert Hansen's estate, Ramsey County District Court
appointed U.S. Bank, along with Barbara Pagel (Robert's
widow), as co-Special Administrators of the Estate to
supervise and oversee the closing on the sale of the land to
CFP. In early April 2010, CFP, Bryan Hansen, and the
Estate's Special Administrators amended the purchase
agreement. The amendments changed the terms of the Note from
"tax-exempt" to "taxable." The amendments
also increased the cash payment due at closing to $2, 625,
000 to compensate for the change in taxable status. And the
interest rate on the Note was increased from 8 percent to
April 2010 amendments also altered several provisions in the
purchase agreement. Specifically, the amendments changed
section 2.D, entitled "Terms of the Note, " to
require the following:
Prior to closing, an independent certified public accounting
firm or financial professional selected by Seller shall
forecast more than enough net operating income is expected to
pay the debt service on all improvements and on all
Tax-Exempt and Taxable Bonds and Taxable Notes applicable to
this Project, its operation, and the property retained by the
amendments also modified section 10 of the purchase
agreement, entitled "Obligations of Buyer at Closing,
" to read as follows:
At Closing, Buyer shall master lease the Project to the City
[of Vadnais Heights] for a rent which the City shall pay
which shall be sufficient in amount to pay all Project
operating expenses and all principal and interest payments
under the Series A, B and C Bonds and the Taxable Subordinate
Note payable to Seller.
amendments did not change Section 10(A)(ii) of the purchase
agreement, which required CFP to
provide Seller with . . . (ii) a five-year compiled financial
forecast prepared by an independent firm of certified public
accountants or other independent financial consultant which
shows that projected net operating income of the Project is
more than the amount necessary to pay the debt service on the
Buyer's financing for such improvements and the debt
service on the Bonds and the Note.
provisions form the core of the statute of limitations
dispute now before us. The Beneficiaries allege that U.S.
Bank, acting as a co-Special Administrator for the Estate,
never obtained any of the required financial forecasts or
revenue assurances and failed to require CFP to master lease
the property to the City of Vadnais Heights.
transaction closed on April 27, 2010, and the Estate received
its share of the $2, 625, 000 initial payment as well as the
$2 million Note as consideration for its interest in the
land. The Note was a non-recourse revenue note that contained
no obligation on the part of the City of Vadnais Heights to
pay for the debt out of its general funds. Furthermore, the
Note was explicitly subordinated to $24, 700, 000 in other
bond commitments involved in the construction of the sports
complex. The first payment on the Note was scheduled to occur
in February 2011.
three days after closing, on April 30, 2010, U.S. Bank and
Pagel were discharged as co-Special Administrators, but
contemporaneously appointed as co-Personal Representatives of
the Estate. The Beneficiaries allege that, several years
after closing, they discovered that two financial reports or
forecasts for the project's anticipated revenue had been
prepared and provided to CFP and/or the City. Each document
purportedly showed that the revenue projections relied upon
unsupported revenue commitments and therefore were
overstated. Between 2010 and 2012, the sports complex
suffered revenue shortfalls. CFP started making payments on
the Note in February 2011 as agreed. But in August 2012, the
City of Vadnais Heights stopped financial support of the
sports complex and the Estate stopped receiving payments on
January 24, 2017, the Beneficiaries sued U.S. Bank, alleging
breach of fiduciary duty and unjust enrichment. The Beneficiaries
allege that U.S. Bank breached its fiduciary duties to them
by failing to (1) require CFP to provide financial forecasts;
(2) select an independent certified public accounting
firm/financial professional to forecast sufficient operating
income; (3) require CFP to show a lease with the City of
Vadnais Heights sufficient to maintain payments on the Note;
and (4) hold itself liable, as a Personal Representative of
the Estate, for its three previous failures.
Bank did not serve an answer. Instead, on April 20, 2017,
U.S. Bank moved to dismiss the complaint under Minn. R. Civ.
P. 12.02(e) for failure to state a claim upon which relief
could be granted. U.S. Bank asserted, among other things,
that the Beneficiaries failed to satisfy the applicable
six-year statute of limitations. See, e.g., Minn.
Stat. § 541.05 (2018). U.S. Bank's argument rested
solely on the fact that the alleged breaches of fiduciary
duty occurred before the 2010 closing, more than six years
before the lawsuit. U.S. Bank did not identify any specific
damage that occurred in 2010 connected with those breaches.
The Beneficiaries responded that they had suffered damages no
earlier than August 2012, the date that the Estate stopped
receiving payments on its Note, which was less than six years
before the date that they filed suit.
district court granted U.S. Bank's motion to dismiss on
statute of limitations grounds. It held that, under
Minnesota's "some damage" accrual rule, the
Beneficiaries incurred some damage on April 27, 2010, when
U.S. Bank closed on the sale of the property without,
allegedly, performing its required due diligence. The
district court did not identify any damages suffered by the
Beneficiaries upon closing. Nevertheless, the district court
held that the Beneficiaries could have raised claims against
U.S. Bank in April 2010, more than six years before this
action was commenced.
court of appeals affirmed. Hansen v. U.S. Bank Nat'l
Ass'n, No. A17-1608, 2018 WL 3213105 (Minn.App. July
2, 2018). Regarding the breach of fiduciary duty claim, the
court reasoned that "when the sale of the property
closed without the required forecast[s, ] . . . [the
Beneficiaries] reached the 'point of no return'
because they lost the opportunity to demand the forecast, to
renegotiate the terms of the purchase agreement, or to cancel
the purchase agreement." Id. at *4 (quoting
Antone v. Mirviss, 720 N.W.2d 331, 337 (Minn.
2006)). Although the precise amount of damages was not
ascertainable, the court noted that "some damage"
occurred on April 27, 2010, and therefore the statute of
limitations began running on that date. Id.
granted the Beneficiaries' request for review on the
question of when the statute of limitations began to run ...