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Service Oil, Inc. v. Gjestvang

Supreme Court of North Dakota

March 30, 2015

Service Oil, Inc. and Steven Dirk Lenthe, Plaintiffs Service Oil, Inc., Appellant and Cross-Appellee
Rory D. Gjestvang, Brad A. Bjerke, LaRayne K. Haakenson, Don Stetson, Defendants and Appellees and Rodney Demers and Les Laidlaw, Defendants Rory D. Gjestvang, Brad A. Bjerke and LaRayne Haakenson, Defendants, Third-Party Plaintiffs, Appellees, and Cross-Appellants
Steven Dirk Lenthe, Third-Party Defendant

Editorial Note:

The opinion cannot be considered final until disposition of such petition for rehearing by the court or expiration of 14 days from filing date.

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[Copyrighted Material Omitted]

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Appeal from the District Court of Cass County, East Central Judicial District, the Honorable Steven L. Marquart, Judge.

Joseph A. Turman, Fargo, N.D., for plaintiffs, appellant and cross-appellee.

Leslie B. Oliver (argued) and Amanda E. Peterson (appeared), Bismarck, N.D., for defendants and appellees Rory D. Gjestvang, Brad A. Bjerke and LaRayne K. Haakenson.

David A. Tschider, Bismarck, N.D., for defendant and appellee Don Stetson.

Daniel J. Crothers, Dale V. Sandstrom, Mary Muehlen Maring, S.J., William A. Neumann, S.J., Gerald W. VandeWalle, C.J. Opinion of the Court by Crothers, Justice. The Honorable Mary Muehlen Maring, S.J., and the Honorable William A. Neumann, S.J., sitting in place of Kapsner, J., and McEvers, J., disqualified.


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Crothers, Justice.

[¶1] Service Oil, Inc., appeals and Rory Gjestvang, Brad Bjerke and LaRayne Haakenson cross-appeal from a judgment entered after a bench trial dismissing the parties' claims involving their business relationship. The district court's underlying findings of fact are not clearly erroneous and the court did not err in

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dismissing all the parties' claims. We affirm.


[¶2] Steven Dirk Lenthe was the sole owner of Service Oil, which operated convenience stores in North Dakota, and defendants Gjestvang, Bjerke, Haakenson and Don Stetson were employees of Service Oil. Gjestvang started working for Service Oil in 1985, serving as operations manager from 1992 until April 2010. Bjerke was supervisor of eastern North Dakota stores from 1997 until 2010. Haakenson was district supervisor and manager of the Bismarck travel center from 1993 until May 2010.

[¶3] This lawsuit stems from a transaction involving the purchase of repossessed wholesale inventory, initially located in a warehouse in Bismarck, and an agreement for the sale of that inventory through Service Oil. In March 2007, American Bank Center in Bismarck contacted Haakenson about purchasing a large volume of repossessed inventory. Gjestvang and Haakenson discussed the matter with Lenthe, and he agreed to provide $700,000 to purchase the inventory. In April 2007, Lenthe, Gjestvang, Haakenson and Bjerke executed a Warehouse Business Agreement to sell the inventory. The agreement described the parties' compensation:

" A Profit and Loss Statement will be carefully used to track all true expenses throughout the period of operation. Brad Bjerke, LaRayne Haakenson, and Rory Gjestvang will handle all operations of the warehouse in conjunction with current duties. Stamart and Northtown Grill will be top priority with the Warehouse being worked around that schedule.
" Compensation will be $30,000 each for Brad Bjerke, LaRayne Haakenson and Rory Gjestvang, with 1/2 paid at the end of August if the proper progress is made in deleting warehouse stock. The remaining 1/2 will be paid after year end.
" The previous compensation will be included in the P& L Statement. The final year end profit as defined in the P& L Statement will be divided accordingly:
50% to owner Dirk Lenthe
25% to Rory Gjestvang
12.5% to Brad Bjerke
12.5% to LaRayne Haakenson
" This arrangement will continue into the next year if necessary with the same agreement in place."

[¶4] At about the same time of the agreement, Service Oil finalized the purchase agreement and lease with American Bank Center, resulting in Service Oil purchasing the inventory in Bismarck for its newly established " Merchandise Depot" division for $700,000. In May 2009 Service Oil moved the warehouse operation and remaining inventory to Fargo.

[¶5] In early 2009, Gjestvang created a separate entity called " Prairie Distributing" and, on May 1, 2009, rented a building for its warehouse business. In May 2009, defendants Les Laidlaw and Rodney Demers started an entity under the trade name " Laidlaw Sales." Laidlaw and Demers also were sales representatives of Prairie Distributing. Gjestvang purchased merchandise for Prairie Distributing and used the services of Demers and Laidlaw to sell products to Service Oil, which was done without informing Service Oil.

[¶6] In 2010, Service Oil sued Gjestvang, Bjerke, Haakenson, Stetson, Demers and Laidlaw. Service Oil alleged the defendants conspired to deceive Service Oil and sought a refund of commission overpayments from Gjestvang, Bjerke and Haakenson. Service Oil also asserted a claim against Gjestvang for conversion of

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certain brand-name gloves, asserting the gloves were Service Oil's property and were retrieved from Prairie Distributing's garbage.

[¶7] The defendants denied Service Oil's claims and asserted a counterclaim, as well as a third-party complaint against Lenthe. The defendants alleged Service Oil breached its duty of loyalty under a claimed partnership or joint venture between themselves and Service Oil. Defendants Gjestvang, Bjerke and Haakenson asserted they were entitled to additional payments under the Warehouse Business Agreement and sought to pierce Service Oil's corporate veil to hold Lenthe personally liable for claimed damages. Gjestvang also sued Service Oil and Lenthe for interference with business relationship or expectancy.

[¶8] After a bench trial the district court dismissed all the parties' claims. The court held that the sole purpose of the Warehouse Business Agreement was to " delet[e] the Merchandise Depot original stock" and that the Agreement did not create either a joint venture or a partnership between Service Oil, Lenthe, Gjestvang, Haakenson or Bjerke. The court further found it was impossible to determine whether Service Oil incurred any damages from alleged overpayment of commissions because no accurate inventories were taken of the Merchandise Depot inventory when it was first acquired, no accurate inventories exist for when Merchandise Depot was moved from Bismarck to Fargo and no accurate records in the interim differentiate between the original inventory and new inventory.

[¶9] The district court found Gjestvang, Haakenson and Bjerke had no fiduciary duty to disclose that Prairie Distributing was selling merchandise to Service Oil through Laidlaw Sales because Prairie Distributing was not in competition with Service Oil. The court determined Service Oil's claims for fraud or deceit and for conspiracy to defraud also failed because the Prairie Distributing merchandise sold to Service Oil through Laidlaw Sales resulted in greater profits to Service Oil than the products Service Oil sold from Merchandise Depot or other third-party vendors. The district court also rejected Service Oil's claim for conversion against Gjestvang, finding he had not converted any property belonging to Service Oil.

[¶10] The district court dismissed Gjestvang's claim for interference of business relations, determining Gjestvang failed to prove he incurred damages from Service Oil's alleged ...

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