Froelich v. Aspenal, Inc.

Citations: 369 N.W.2d 37; 1985 Minn. App. LEXIS 4277Docket: C7-84-1994

Court: Court of Appeals of Minnesota; June 11, 1985; Minnesota; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

The Court of Appeals of Minnesota affirmed a judgment stating that respondents Tom Bonner, David Bednar, and Viking Explosives, Inc. are not indebted to Leo Froelich in the amount of $355,016.49. The facts reveal that on March 26, 1981, Froelich sold his feed and pellet plants to Aspenal, Inc. for $1,800,000, with remaining payments due over several years. Froelich had sought personal guarantees from Bonner and Bednar, but Aspenal faced financial difficulties and took possession of one plant under an interim lease. 

To assist Aspenal, Froelich provided a $75,577 loan, which Aspenal agreed to repay within 60 days. The loan was documented by a note guaranteed by Aspenal and subsequently by its officers. When Aspenal failed to repay, Froelich covered the loan amounting to $79,910.13. Aspenal also obtained a $450,000 SBA loan, with $100,000 earmarked for Froelich's payment due on April 1, 1982. Froelich released this amount for working capital, relying on Bonner's promise that it would not waive the April payment. Bonner later informed Froelich that this payment would be late.

In March 1982, after Froelich indicated he would pursue legal action, he met with Bednar, who guaranteed Froelich's debt to the bank and orally promised to reimburse Froelich for the April payment and the loan if Aspenal failed to pay. Although Bednar made a subsequent payment of $50,000 towards Aspenal's debt, Froelich's claims against Bonner, Bednar, and Viking Explosives relied on the doctrine of promissory estoppel, which implies a binding promise where reliance on that promise is justified to avoid injustice. The court ultimately ruled against Froelich's claims for personal guarantees.

Estoppel cannot be based on the actions of an agent, as a person acting as an agent for a disclosed principal is not a party to the contract, according to the Restatement (Second) of Agency. Froelich argues that Bonner's promise to pay $100,000 should be enforced personally against Bonner, despite it being made as an agent of Aspenal. Froelich testified that Bonner assured him, "If you do this [release the $100,000], I'll personally guarantee you that you'll get your money when it's due," a statement supported by an Aspenal plant manager who heard the conversation. Other witnesses corroborated Froelich's claim of a personal guarantee from Bonner, although Bonner could not recall the exact words, and the guarantee was not documented in writing, unlike Froelich's written guarantees for Aspenal's loans.

During the sale negotiations of the plant, Bonner and other corporate officers declined to provide personal guarantees. His statement was interpreted merely as an assurance that he would ensure Aspenal fulfilled its payment obligations. The trial court found no clear errors in its findings, affirming Froelich's status as a successful businessman.

Froelich also claimed three promises from Bednar, including personal guarantees for payments and loans, which Bednar denied discussing regarding the $100,000 installment and framed his commitments as efforts to assist Aspenal in making payments. Payments to Froelich were made from Aspenal's account following additional loans from Viking Explosives. Furthermore, Froelich alleged Bednar promised to ensure the Northern State Bank loan was paid, but evidence showed a discharge of Bednar's personal guarantee upon payment to the bank by Froelich. The court concluded that Bednar's assurances were made in his corporate capacity, with no evidence of personal guarantees. Ultimately, neither Bonner, Bednar, nor Viking Explosives, Inc. is indebted to Froelich, leading to an affirmation of the trial court's decision.