Justia Commercial Law Opinion Summaries

A dispute arose between a surety bond company, Granite Re, Inc. (Granite), and a creditor bank, United Prairie Bank (UPB), over entitlement to funds held by a receiver in a receivership action. Granite issued payment bonds to Molnau Trucking LLC (Molnau) for public works projects, but Molnau defaulted on both the projects and loans from UPB. The issue was whether Granite or UPB had priority to the bonded contract funds held by the receiver. Granite argued for priority under equitable subrogation, having paid laborers and suppliers, while UPB claimed priority under the UCC, having perfected its security interests in Molnau’s accounts receivable before Granite issued the bonds.The district court granted summary judgment in favor of UPB, recognizing Granite’s equitable subrogation rights but ruling that UPB’s perfected security interest had priority. The court of appeals affirmed, applying a “mistake of fact” standard from mortgage context case law, which Granite did not meet.The Minnesota Supreme Court reviewed the case and held that the “mistake of fact” standard does not apply to performing construction sureties. The court concluded that Granite, as a surety, has the right to equitable subrogation without needing to show a mistake of fact. The court further held that a surety’s right to equitable subrogation is not a security interest subject to the UCC’s first-in-time priority rule. Instead, a performing surety has priority over a secured creditor regarding bonded contract funds.The Minnesota Supreme Court reversed the court of appeals’ decision and remanded the case to the district court for entry of judgment in favor of Granite, allowing Granite to request redistribution of the bonded contract funds. View "In re Receivership of United Prairie Bank v. Molnau Trucking LLC" on Justia Law

A seller’s fraudulent statements about the fitness of a vehicle for the purpose for which it was purchased make disclaimers in purchase documents stating that the buyer purchased the vehicle “as is” ineffective.The district court in this case awarded relief to the buyer on both fraud and breach of warranty theories. The Supreme Court affirmed, holding (1) the buyer’s fraudulent statements about the fitness of the vehicle being sold for the purpose for which the vehicle was purchased made the “as is” disclaimers of implied warranties in the purchase documents ineffective under Minn. Stat. 336.2-316(3)(a); and (2) under the Uniform Commercial Code, a party may seek remedies for fraud, including breach of warranty, even after the rescission of a purchase contract, and therefore, the district court did not err in awarding damages under both fraud and breach of an implied warranty theories of liability. View "Sorchaga v. Ride Auto, LLC" on Justia Law

Whitney National Bank (Whitney) obtained a judgment against Daniel Fitzpatrick and his business entities (collectively, Fitzpatrick). In a separate matter, Fitzpatrick, represented by O’Brien & Wolf, LLP, obtained a judgment against the City of Oronoco. Whitney served a garnishment summons on the City to establish and perfect a garnishment lien against the judgment proceeds won by Fitzpatrick. O’Brien subsequently filed a motion to establish and determine the amount and priority of its attorney’s lien. The district court held that Whitney’s garnishment lien was superior to O’Brien’s attorney’s lien, concluding that a cause-of-action attorney’s lien is perfected, as against third parties, from the time the attorney files notice of the lien claim. The court of appeals reversed. The Supreme Court affirmed, holding that the plain language of Minn. Stat. 481.13(1)(a)(1) does not require an attorney with a cause-of-action attorney’s lien to file notice of the lien claim for the lien to have priority over third-party claims. View "City of Oronoco v. Fitzpatrick Real Estate, LLC" on Justia Law

Nissan North America, Inc., a motor vehicle manufacturer, and Stephen McDaniels, a prospective Nissan dealer (collectively, Defendants), sought to relocate a Nissan dealership to a location 7.6 miles from a dealership operated by Wayzata Nissan, LLC. Wayzata filed an action against Defendants and then moved for a temporary restraining order, challenging the relocation under the Minnesota Motor Vehicle Sale and Distribution Act, Minn. Stat. 80E.01-.17. The district court denied the motion, determining that the exception in section 80E.14(1) for the “relocation of an existing dealer” applied. The court of appeals affirmed. The Supreme Court reversed on the merits, holding (1) even though the relocation at issue has already occurred this appeal is not moot; (2) the notice and good-cause requirements of section 80E.14(1) apply on the date that a manufacturer develops the intention to authorize a relocation, not on the date of the physical relocation of a dealership; and (3) the existing-dealer exception does not apply when the relocation of a dealership is accompanied by a change in the person or entity operating the dealership, and therefore, the existing-dealer exception does not apply in this case. View "Wayzata Nissan, LLC v. Nissan N. Am., Inc." on Justia Law