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HomeMy WebLinkAbout7.7.e. Executive Closed Session on McDonough Law Suits E x . ,-S� ` CTY,\ Q °I Q--, _2g, STATE OF MINNESOTA DISTRICT COURT COUNTY OF DAKOTA Michael McDonough, Plaintiff, V. The City of Rosemount, a Municipal Corporation, Defendant. FIRST JUDICIAL DISTRICT COURT FILE NO. C7-92-006327 NOTICE OF MOTION AND MOTION TO AMEND COMPLAINT TO: The Defendant above named and its attorney Mike Miles. HERTOGS, FLUEGEL, SLEBEN, POLK, JONES & LAVERDLERE, PA, 999 Westview Drive, Hastings, Minnesota 55033. NOTICE PLEASE TAKE NOTICE, that on the 14th day of July, 1992, at 9:00 a.m. or as soon thereafter as counsel may be heard, the undersigned will appear before the presiding Judge of the Dakota County District Court, Dakota County Judicial Center, 1560 Highway 55, Hastings, Minnesota and will then and there move the Court for the relief requested herein below. � Dated this day of �" vim— , 1992. DAVID E. ALBRIGHT, P.A. L* -M Markethouse, Suite 205 289 E. Fifth Street St. Paul, MN 55101 Telephone: (612) 223-8448 Atty. Reg. No. 165499 I MOTION Upon the Affidavit of Michael McDonough and the transcripts to be supplied to the Court prior to the Motion hereof and pursuant to Rule 15 of the Minnesota Rules of Civil Procedure for District Court and upon the entire record and file herein the Plaintiff moves the court for leave to serve and file its Amended Complaint in conformity with that attached hereto. Dated this day of ��i�� , 1992. -2- DAVID E. ALBRIGHT, P.A. By David E. Albright Attorney for Plaintiff Markethouse, Suite 205 289 E. Fifth Street St. Paul, MN 55101 Telephone: (612) 223-8448 Atty. Reg. No. 165499 STATE OF MINNESOTA COUNTY OF DAKOTA Michael McDonough, V. The City of Rosemount, a Municipal Corporation, Plaintiff, Defendant. FACTS DISTRICT COURT FIRST JUDICIAL DISTRICT COURT FILE NO. C7-92-006327 PLAINTIFF'S BRIEF SUPPORTING MOTION TO AMEND COMPLAINT This matter arises out of an Agreement by the City of Rosemount to purchase certain property from the Plaintiff, known as the "Sunrise Builders Property" on Highway 3 in Rosemount, Minnesota. On December 17, 1991, the Rosemount City Council voted to authorize the purchase of the property under certain terms and conditions with respect to financing. The essential terms were Fifty Thousand Dollars ($50,000.00) down payment, assumption of the underlying financing with the First State Bank of Rosemount and monthly payments to the Plaintiff for the difference in those amounts. All of the documents had been drafted by the City's attorney prior to the December 17, 1991 meeting. Those documents were approved, by Resolution, on 4 to 1 vote with an additional proviso that a reciprocal lease termination clause be inserted into the contract. There is no dispute that the lease termination clause was agreed to by Mr. McDonough and the City. On December 17, 1991, the day the Resolution of Purchase passed the City Council, there was a new Mayor -Elect and Councilman -Elect who had not yet taken office. The new Mayor -Elect was E.B. McMenomy and the new Councilman -Elect was Red Staats. Both Staats and McMenomy disapproved of the purchase. Shortly after the December 17, 1991 meeting Mayor -Elect McMenomy approached Councilmember Harry Willcox and indicated to him that "I am opposed to the McDonough purchase and I will do everything I can to prevent it". All Councilmembers voting at the December 17, 1991 Council meeting have indicated that they considered the action to be final with respect to the McDonough purchase as of the December 17, 1991 Council meeting. They did not intend or expect that it would be re -placed on the agenda unless McDonough did not agree to their additional term regarding the reciprocal lease termination clause. However, McMenomy knew that he would have a majority necessary to defeat the motion as long as the deal was not closed by the January 7, 1992 Council meeting. He therefore asked City Administrator Stephan Jilk to re -set the matter on the agenda of a future council meeting for the purpose of -2- reconsidering it. City Administrator Jilk did so at the request of Mayor -Elect McMenomy. Mr. Jilk also did this in specific violation of his instructions and the expectation of the Rosemount City Council. Pursuant to Jilk's and McMenomy's plan, nothing occurred until the night of January 7, 1992 when the new Mayor -Elect and Councilman -Elect Staats took office. This effectively changed a 4 to 1 vote in favor of purchasing the property into a 3 to 2 vote against it. Mayor -Elect McMenomy promptly tabled the matter and brought it up for re -consideration on January 21, 1992 wherein the previous Resolution was rescinded and the deal was killed. As can be seen from the Affidavit of Mike McDonough, the above facts were disclosed only yesterday in the depositions of Mr. McMenomy and other Councilmembers. This Motion for leave to Amend the Complaint results from this new information. ARGUMENT Rule 15.01 provides, inter alia, as follows: it . . otherwise a party may amend a pleading by leave of court or by written consent by the adverse parties; and leave shall be freely given when justice so requires. . (Emphasis added) The case law in this state clearly embraces and implements the notion that "leave shall be freely given". A sampling of those cases and their holdings are as follows: Amendment of pleadings is liberally allowed even after Judgment has been entered. Crum v. Anchor Cas. Co., 119 N.W.2d 703 (Minn. 1983) -3- Under the Rules of Civil Procedure, amendments are to be freely allowed to encourage presentation of merits of the controversy. Roberge v. Cambridge Coop Creamery, Co., 67 N.W.2d 400 (Minn. 1955) Liberality in allowing amendments to pleading is greatest in the early stages of a lawsuit, decreases as it progresses and changes to a strictness ordinarily amounting to prohibition after the matter is litigated and received the normally final sanction of an adjudication by the trial court, affirmed by the court of appeal by last resort. Todd v. Bettingen, 113 N.W. 906 (Minn. 1907) The major consideration in a decision whether to permit the amendment of pleadings is the prejudice that may result and the burden is on the opposing party to prove such prejudice. Metag v. K -Mart Corp., 385 N.W.2d 684 (Minn. App. 1986) In the instant case, there is no potential prejudice to the Defendant by allowing amendment. As a matter of law, the need to defend further claims and theories does not amount to prejudice. The most recent and comprehensive analysis of this issue is found in Enval v. Independent School Dist. 704, 399 N.W.2d 593 (Minn. App. 1987). The court therein ruled that: "Ordinarily, unless a party opposing an amendment can establish some prejudice other than merely having to defend against an additional claim or defense, an amendment will be allowed." Citing with approval Hughes v. Micka, 269 Minn., 268, 275; 130 N.W.2d, 505, 510 (1964) In the instant case, it is clearly in the interest of judicial and litigant economy to have all claims arising out of this sordid affair dealt with in one trial. Firstly, the City is vicariously responsible for the torts of City Administrator Stephan Jilk. Most, if not all of the witnesses would be -4- required to testify in both trials, if the Court doesn't grant the Plaintiff's Motion to Amend and separate lawsuits result. The Plaintiff seeks to add claims arising under the original contract. Until June 23, 1992, the Plaintiff did not know exactly who torpedoed the Plaintiff's deal with the City. He now knows and is seeking to hold them responsible in this forum. The claims against the additional Defendants, Jilk and McMenomy, involve tortious misrepresentation and tortious interference with either contract or prospective economic relations. I am sure that the Court is well aware of the elements for a claim for misrepresentation. I will not belabor those elements here. However, the law, with respect to tortious interference with contract or prospective contractual relations is less well known and I think the Court needs to know them so that it may rule on this Motion. The elements for interference with contractual relations are five (5): 1. Existence of a valid contract 2. Defendant knowledge of the contract; 3. Defendant's intentional inducement of contracted party to refuse to perform his contract with Plaintiff; 4. Defendant's lack of justification; and 5. Damages 19 a Dunnells Digest, Torts Sec. 2.00 Royal Realty Company v Levin, 69 N.W.2d 667. -5- Further, the Defendant cannot avoid liability because the contract interfered with is within the Statute of Frauds, even if that Statute makes the contract unenforceable as between the original contracting parties. Royal Realty Company, v. Levin, 69 N.W.2d 667 (Minn. 1955) With respect to interference with prospective contractual relations, the elements are as follows: Intentional and improper interference by inducing another party to refuse to enter into a contract or continue a prospective relation thereby preventing a party from acquiring or continuing the prospective relationship." United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628 (Minn. 1982) It is the claim of the Plaintiff herein that Jilk and McMenomy interfered with either the contract or the prospective contractual relationship between the Plaintiff and the City of Rosemount. They did so by "stonewalling" the closing of the transaction to buy time for McMenomy and Staats to take office and kill the deal entirely. Although Mayor -Elect McMenomy may have had the authority to do this after he was sworn in, he was totally without authority to do so prior to January 7, 1992. With respect to City Administrator Jilk, he specifically disobeyed his instructions from the City Council and stonewalled the deal in an attempt to curry favor with the new Mayor -Elect. However, to do so he had to sell out his obligations to his current employers, the currently constituted Rosemount City Council. -6- For the foregoing reasons, it is respectfully submitted that this Court should grant the Plaintiffs leave to amend their Complaint in conformity with the Amended Summons and Amended Complaint attached herewith. Dated this day of ��/" , 1992. DAVID E. ALBRIGHT, P.A. By G� David E. Al right Attorney for Plaintiff Markethouse, Suite 205 289 E. Fifth Street St. Paul, MN 55101 Telephone: (612) 223-8448 Atty. Reg. No. 165499 -7- DAVID E. ALBRIGHT, P.A. ATTORNEYAT LAW Markethouse, Suite 205 289 E. Fifth Street St. Paul, MN 55101 (612) 223-8448 Fax No. (612) 223-8394 June 24, 1992 Mr. Mike Miles, Esq. HERTOGS, FLUEGEL, SLEBEN, POLK, JONES & LAVERDLERE, PA, 999 Westview Drive Hastings, Minnesota 55033. Re: Mike McDonough v. City of Rosemount Dear Mr. Miles: Enclosed herewith and served upon you by United States Mail is the Plaintiff's Notice of Motion and Motion to Amend Complaint and the Affidavit of Michael McDonough and the Plaintiff's Brief Supporting Motion regarding the above -referenced matter. If you have any questions or problems, please do not hesitate to contact me. Yours truly, I U David E. Albright DEA/cat Enclosure Licensed in Minnesota & Wisconsin STATE OF MINNESOTA COUNTY. OF DAKOTA DISTRICT COURT FIRST JUDICIAL DISTRICT COURT FILE NO. C7-92-006327 Michael McDonough, Plaintiff, V. The City of Rosemount, a AMENDED SUMMONS Municipal Corporation, E.B. McMenomy, only in his individual capacity and Stephan Jilk in his individual capacity, Defendants. ------------------------------------- THE STATE OF MINNESOTA TO THE ABOVE-NAMED DEFENDANTS: You are hereby summoned and required to answer the Complaint of the Plaintiff in the above -entitled action, which Complaint is hereto attached and herewith served upon you, and to serve a copy of your Answer to said Complaint upon the attorney for the Plaintiff within twenty (20) days after the service of this Summons upon you, exclusive of the date of service, and ifY ou fail to do so' Pp Plaintiff will apply y to the. Court for the relief demanded in said Complaint. Dated this day of _�`- 1992. DAVID E. ALBRIGHT, By David E. Albright Attorney for Plaintiff Markethouse, Suite 205 289 E. Fifth Street St. Paul, MN 55101 Telephone: (612) 223-8448 Atty. Reg. No. 165499 STATE OF MINNESOTA COUNTY OF DAKOTA ------------------------------------- Michael McDonough, Plaintiff, V. The City of Rosemount, a Municipal Corporation, E.B. McMenomy, only in his individual capacity and Stephan Jilk in his individual capacity, Defendants. DISTRICT COURT FIRST JUDICIAL DISTRICT COURT FILE NO. C7-92-005327 AMENDED COMPLAINT COMES NOW the Plaintiff Michael McDonough and for his Amended Complaint against the Defendants, alleges and shows to the Court as follows: COUNT I. I. That the Plaintiff Michael McDonough is an adult resident of the City of Rosemount and the County of Dakota. II. That the Defendant is a municipal corporation formed and operating pursuant to the laws of the State of Minnesota pertaining to municipal corporations. That on or about December 17, 1991 the Plaintiff and the Defendant City of Rosemount entered into an Agreement for the sale of certain real property known as the "Sunrise Builders Property" which is located on Highway 3, Rosemount Minnesota. IV. That the Defendant agreed to purchase the property .for the sum of Three Hundred Sixteen Thousand Dollars ($316,000.00) with a Fifty Thousand Dollar ($50,000.00) cash down payment and monthly payments on a balance of Sixty-six Thousand Dollars ($66,00.0.00) together with assumption of the underlying first mortgage to the First State Bank of Rosemount of Two Hundred Thousand Dollars ($200,000.00). V. That subsequent to the contract, the Defendant breached the Agreement on or about January 21, 1992 by renouncing the Agreement and refusing to close. IV. That the Defendant's refusal to close the Agreement was not brought about by any act or breach of the Plaintiff, but was a conscious decision by the Defendant to simply change its mind in that it no longer desired to purchase the property. VII. That the Plaintiff has fully performed on his part and that demand for performance has been made and refused by the Defendant. '-2- VIII. That the Plaintiff has been damaged thereby in an amount to be determined by the Court in excess of Fifty Thousand Dollars ($50,000.00). COUNT II. IX Reallege the previous allegations of this Complaint as if fully set forth herein at length. X. That during the period of late November and into early January of 1992, the Defendant City of Rosemount, by its agents, made the following representations to the Plaintiff: a. That the deal was final and would need no further City Council approval; b. That the City, and its agents, were diligently preparing documents for signature; c. That the Plaintiff had nothing to worry about with respect to the closing of the deal; d. That the City and its agents were working diligently for the purpose of having the deal closed before the end of December, 1991; e. That no problems had occurred which could have affected the deal; and f. That the City fully intended to close the real estate transaction by the end of 1991. XI. That the City, through its agents, impliedly represented that they were doing nothing to prevent the deal from closing. -3- XII. That, upon information and belief, each of the above representations was untrue. XIII. That the Plaintiff relied upon each of the above representations to guide his actions, or inactions. XIV. That the Plaintiff has been damaged thereby in the amount of at least Fifty Thousand Dollars ($50,000.00) which was the down payment. XV. That the Plaintiff has been further damaged by the City's misrepresentations as set forth above in a separate amount in excess of Fifty Thousand Dollars ($50,000.00) with respect to expected losses on the foreclosure of the property, loss of creditworthiness, interest, and other consequential damages proximately caused by the City's misrepresentations. XVI. That the above representations were made by Stephan Jilk in his official capacity as City Administrator and by Attorney Eric Short in his official capacity, and under such circumstances where they were the ostensible agents of the Defendant City of Rosemount and the City is vicariously responsible for their actions . -4- COUNT III. XVII. Reallege the previous allegations of this Complaint as if fully set forth herein at length. XVIII That the Defendant individual Stephan Jilk made the above representations and further represented to the Plaintiff, from and after December 17, 1991, that he was doing all that was possible to do to see this matter closed before the end of the year and that all was going well toward that end. XIX. That at said time, Stephan Jilk knew or had reason to know that all representations herein were untrue. XX. That the Plaintiff relied on each of these representations to his detriment. XXI. That the Plaintiff has been damaged by Stephan Jilk's misrepresentations, as an individual, in an amount in excess of Fifty Thousand Dollars ($50,000.00). COUNT IV. XXII. Reallege the previous allegations of this Complaint as if fully set forth herein at length. -5- XXIII That on and after December 17, 1991 the individual Defendants E.B. McMenomy and Stephan Jilk knew, or should have known, that the Plaintiff had a contract for the sale of his realty to the City of Rosemount, or at a minimum knew or should have known that he had prospective advantageous relationships with the City of Rosemount. XXIV. That the Defendants Jilk and McMenomy, with full knowledge of the relationship between the City of Rosemount and the Plaintiff, and without justification, sought to damage and to destroy those relationships and succeeded in doing so. XXV. That Defendants Jilk and McMenomy acted as conspirators with respect to the claims herein. XXVI. That the Plaintiff has been damaged thereby, in terms of lost economic advantage, in an amount in excess of Fifty Thousand Dollars ($50,000.00), together with attorney's fees necessarily incurred in bringing this action against the City of Rosemount, loss of credit rating and standing in the community, worry, embarrassment, and financial woe in an amount in excess of Fifty Thousand Dollars ($50,000.00)- -6- WHEREFORE, the Plaintiff Michael McDonough requests Judgment as follows: 1. Money Judgment against the City under the purchase agreement for the property in the sum of Fifty Thousand Dollars ($50,000.00). 2. Money Judgment against the City under the theory of vicarious liability for the torts of Stephan Jilk and Eric Short in the amount found by the jury of all damages incurred by the breach of the City's contract as well as all damages flowing from the misrepresentation of Jilk. 3. Money Judgment against Defendant Jilk in an amount in excess of Fifty Thousand Dollars ($50,000.00) including attorney's fees, loss of credit rating and standing in the community, prejudgment interest and all other consequential damages upon the theories of misrepresentation and tortious interference with contractual or prospective contractual relations, together with all damages caused by his conspiracy with Defendant McMenomy. 4. Money Judgment against Defendant McMenomy in a sum in excess of Fifty Thousand Dollars upon the theories of tortious interference with contractual or prospective relations and jointly and severally for the damages incurred by the Plaintiff due to the on going conspiracy. -7- 5. Such other and further relief as to the Court may seem just and equitable. Dated this day of , 1992. DAVID E. ALBRIGHT, PA r - By Da d E. Albright Attorney for Plaintiffs Markethouse, Suite 204 289 E. Fifth Street St. Paul, MN 55101 Telephone: (612) 223-8448 Atty. Reg. No. 165499 ACKNOWLEDGMENT The undersigned hereby acknowledges that costs, disbursements, and reasonable attorney and witness fees may be awarded pursuant to Minn. Stat. Sec. 549.21, subd.2, to the party against whom the allegations in this pleading are asserted. DAVID E. ALBRI , P.A. �P' Yea' David E. Albright, Attorney -8- STATE OF MINNESOTA COUNTY OF DAKOTA Michael McDonough, Plaintiff, V. The City of Rosemount, a Municipal Corporation, Defendant. STATE OF MINNESOTA) ) ss. COUNTY OF RAMSEY ) DISTRICT COURT FIRST JUDICIAL DISTRICT COURT FILE NO. C7-92-006327 AFFIDAVIT OF MICHAEL MCDONOUGH MICHAEL MCDONOUGH, being first duly sworn on oath states as follows: 1. My name is Michael McDonough and I am the Plaintiff herein. 2. That I attended the depositions of Rosemount City Councilmember Klassen, Willcox, and Wipperman, together with the deposition of Mayor Ed McMenomy on June 23, 1992. 3. That I make this Affidavit to set forth my recollection of their testimony. As soon as the transcripts are available, I will forward the relevant portions to the Court and to Mr. Mike Miles who represents the Defendants. 4. That prior to the December 17, 1991 City Council Meeting, a period of negotiations occurred between myself and representatives of the City concerning the purchase of my realty known as the "Sunrise Builders Property". 5. That those negotiations culminated in a Resolution which was adopted on December 17, 1991 by the Rosemount City Council authorizing the consummation of the deal. The City Council's Resolution is attached hereto as Exhibit A. 6. That the Resolution did contain a proviso that I agree to a reciprocal lease termination clause. Discussions were had between Eric Short, who was acting on behalf of the City, and myself. I did in fact agree to the reciprocal termination clause. 7. That I was told by Stephan Jilk and Eric Short that everything was going along fine and that there were no problems on the horizon and that there was no cause to worry. Rather, the documents would be prepared by the end of the year and would be executed without any need for further action by the City Council or any other governing body. 8. That I was always ready to close on the deal. However, although I didn't know why at the time, it seemed like Mr. Jilk and Mr. Short were stalling because, although there was no disagreement, the documents never seemed to be ready for execution. 9. That I attended the deposition of Councilmember Willcox yesterday, June 23, 1992. He testified that he had -2- personally called Attorney Short in December of 1991 and told him to get the documents done and signed. Councilmember Willcox further testified that he was contacted by Mr. McMenomy on the evening of the December 17, 1991 City Council Meeting. He testified that Mr. McMenomy stated to him " I am opposed to this purchase and I will do everything that I can to stop it". 10. That Mr. McMenomy also testified, and I heard him say, that he contacted Steve Jilk very shortly after the December 17, 1991 Council Meeting. He asked him to put the matter back on the agenda for January 7, 1992. Jilk did this and.McMenomy said that he did it because McMenomy asked him to. 11. That Councilmembers Willcox, Wipperman, and Klassen all testified at their depositions that there was no need or expectation that this matter would come back before the City Council and that it was just a matter of Jilk executing the documents drafted by Eric Short. 12. That two voting members of the Council in December of 1991 left the Council in January of 1992. They were Mayor Vern Napper and Councilmen Oxborough. Both have told me that they also intended this to be a final City Council action and that all that was necessary was to actually execute the documents. 13. That Councilmember Willcox described Mr. Jilk's actions as a violation of his duty and authority and further that he should be reprimanded or even fired for what he did in this case. -3- 14. That Mayor McMenomy was sworn in on January 7, 1992 at the regular Council Meeting. Prior to that he was not an official of the City of Rosemount. Further your Affiant sayeth not. Dated this 2'% day of J�>v , 1992. Subscribed and sworn to before me this a519 day of hi ne- -, 1992. ary bli(Y ! NOTARY PUBLIC -MINNESOTA WASHINGTON COUNTY 4. ----My Cm-sam Enwes FEB. 19.19% -4- Z' t11. J taua.t Council 1991, at ROSEMOUNT CITY PROCEEDINGS REGULAR MEETING DECEMBER 17, 1991 to due ylofand Rosemountthereof duly heldregular on Tuesday, December City of the Cit December17, City 7:30 p.m. in the Council Chambers. Mayor Napper called the meeting to order with Councilmembers Willcox, Wippermann, Oxborough and Klassen present. Mayor Napper led the group in the Pledge of Allegiance. Al Meyer, who was appointed to serve as the City's representative on the a St. Paul South Light Rail Transit Corridor Advisory Committee, p resesummary on the status of light rail transit proposed for Ramsey and Dakota Counties. Mr. Meyer advised that although the advisory committee recommended initiation of an Environmental Impact Study, it has been decided to delay this study for possibly another three years. Mr. Meyer described the projected costs, proposed locations of the light rail transit corridor, and how this transit system could be funded through state and federal funding. Mayor Napper thanked Mr. Meyer for his involvement on the committee and the interesting information he provided. See Clerk's File 1991-42. MOTION by Napper to approve the Consent Agenda as presented. SECOND by Klassen. MOTION by Napper to approve the Consent Agenda with the inclusion of the recommendation to promote Eric Day to theMaintenance Napper,Level xboII positin.Klassen. SECOND by Klassen.- Ayes: Willcox, Wipper, PPer Nays: 0. See Clerk's File 1991-42. Poll of original motion: Ayes: Wippermann, Napper, Oxborough, Klassen, Willcox. Nays: 0. Administrator Stephan Jilk presented for Council consideration and approval a Contract for Deed, Loan Agreement and Lease Agreement regarding the purchase of the Sunrise Builders property in the amount of $316,000. Administrator Jilk advised the City would pay a $50,000 down payment, make monthly payments on $66,000 and make monthly payments on a first mortgage with First State Bank of Rosemount in the amount of $200,000. City Attorney Eric Short reviewed the proposed lease agreement for Mr. McDonougl to make payments of $750 a month for his continued use of the property for up to three years. Following discussion by Council, Council agreed a reciprocal termination clause should be includedin and lease agreement an, that the City would pay the property Clerk's File 1991-42. MOTION by Napper to approve the purchase agreements with Mike McDonough an the First State Bank of Rosemount for the purchase of the Sunrise Builders Property and the rental of the property to Mike McDonough at a rate of $75 per month for up to three years. SECOND by Willcox. Ayes: Napper, Oxborough, Willcox, Wippermann. Nays: Klassen. Parks & Recreation Director David Bechtold presented the Planning Commission's recommendation for approval of the Parks System Master Plan. Director Bechtold also presented an application to the Metropolitan Counc!