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Mantle v. North Star Energy & Construction LLC

Supreme Court of Wyoming

May 21, 2019

ALEXANDER REED MANTLE and MARJORIE M. MANTLE, Appellants (Plaintiffs),
v.
NORTH STAR ENERGY & CONSTRUCTION LLC; GARY W. GARLAND; RAYMOND W. GARLAND; MATT R. GARLAND; THREE WAY, INC.; HOT IRON, INC.; MGM ENTERPRISES, INC.; GT INVESTMENTS, INC.; and WYODAK ENERGY SERVICES, LLC, Appellees (Defendants).

          Appeal from the District Court of Johnson County The Honorable John G. Fenn, Judge

          Representing Alexander Reed Mantle and Marjorie M. Mantle: Stephen R. Winship, Winship & Winship, PC, Casper, Wyoming. Argument by Mr. Winship.

          Representing North Star Energy & Construction LLC: Lance C. Overstreet, John M. Kuker, and Jeffrey M. Boldt, Overstreet Homar & Kuker, Cheyenne, Wyoming.

          Representing Gary W. Garland, Hot Iron, Inc., and GT Investments, Inc.: Kim D. Cannon & Codie D. Henderson, Davis & Cannon, LLP, Sheridan, Wyoming. Argument by Mr. Henderson.

          Representing Raymond W. Garland, Matt R. Garland, Three Way, Inc., and MGM Enterprises, Inc.: Judith A. W. Studer, Schwartz, Bon, Walker & Studer, LLC, Casper, Wyoming. Argument by Ms. Studer.

          Representing WyoDak Energy Services, LLC: No Appearance.

          Before DAVIS, C.J., and FOX, KAUTZ, BOOMGAARDEN, and GRAY, JJ.

          FOX, JUSTICE.

         [¶1] This is the sequel in the ongoing litigation arising from a business deal that went south. We addressed the appeal of the district court's decision after a bench trial in Mantle v. North Star Energy & Construction, LLC, 2019 WY 29, 437 P.3d 758 (Wyo. 2019) (Mantle I). Alex Mantle and Marjorie Mantle now appeal various post-trial issues. For the reasons discussed below, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

         ISSUES

         [¶2] The Mantles raise twelve issues, which we condense and rephrase as follows:

1. Did the district court have subject matter jurisdiction to offset the judgments when that issue was pending in this Court in Mantle I?
2. With respect to the Killmer Settlement Funds:
a. Is there a reviewable order in the record regarding whether the Garlands had standing to assert a direct claim against Mr. Killmer?
b. Did the Mantles have a superior security interest in the Killmer Settlement Funds by operation of the "general intangibles" clause of the FNB security agreement?
3. Did the district court err when it awarded North Star's attorneys, The Kuker Group, [1] their attorney fees from a portion of the Killmer Settlement Funds?
4. Did the district court err when it issued a nunc pro tunc order that removed Marjorie Mantle's name from the order that disbursed the Killmer Settlement Funds?

         FACTS

         [¶3] We briefly summarize the facts to provide context for the issues in this appeal. A more complete discussion can be found in Mantle I, 2019 WY 29, 437 P.3d 758. The Garland brothers, Gary, Ray, and Matt, each had their own companies involved in the oil and gas business. Id. at ¶ 1, 437 P.3d at 768. In November 2011, the brothers, with their companies, formed North Star Energy & Construction, LLC. Id. at ¶¶ 5-6, 437 P.3d at 769. Alex Mantle was appointed President. Id. at ¶ 6, 437 P.3d at 769. Karl Killmer was North Star's accountant. Id. In mid-2014, Mr. Mantle and Mr. Killmer proposed to buy North Star from the Garlands. Id. at ¶ 12, 437 P.3d at 770. The parties executed a Memorandum of Understanding (MOU) that memorialized their agreement, including Mr. Killmer's and the Mantles' personal guarantees of $6.1 million of the purchase price. Id. at ¶¶ 2, 16-17, 437 P.3d at 768, 771-72. Mr. Mantle and Mr. Killmer negotiated a $3-million loan from First Northern Bank (FNB) to fund the down payment. Id. at ¶ 13, 437 P.3d at 770. Ultimately, the transaction took the form of a leveraged buyout when the FNB loan was made to North Star. Id. at ¶¶ 14, 17, 437 P.3d at 770-72.

         [¶4] North Star's fortunes continued to decline, due to questionable business decisions and the dropping oil market. See id. at ¶¶ 26-32, 437 P.3d at 773-75. By December 2014, the Garlands stepped back in to try and save North Star. Id. at ¶ 33, 437 P.3d at 775. They were unsuccessful, and by August 2015 the Garlands began liquidation. Id. at ¶ 38, 437 P.3d at 776. In June 2015, the Mantles bought the $3-million FNB loan, which effectively made them a creditor of North Star. Id. at ¶ 40, 437 P.3d at 776-77.

         [¶5] In May 2015, Mr. Mantle and his wife, Marjorie, sued the Garlands, the Garlands' businesses, and North Star. Id. at ¶ 42, 437 P.3d at 777. Among other claims, the Mantles sought to collect on the $3-million FNB note. Id. The Garlands countered with their claim that Mr. Mantle and Mr. Killmer breached the $6.1-million guarantee in the MOU. Id.

         [¶6] The Garlands and North Star also sued Mr. Killmer for accountant malpractice.[2]Id. Mr. Killmer defaulted, id. at ¶ 44, 437 P.3d at 777, and then assigned to the Garlands and North Star any claim he had against his malpractice insurance carrier for failing to provide coverage or a defense. The district court then dismissed Mr. Killmer from the case with prejudice. Id. The Garlands and North Star eventually settled with Mr. Killmer's malpractice carrier. As part of the settlement, North Star received $121, 271, which, by order of the district court, was deposited into the court registry on February 22, 2017. The Garland brothers, and their respective companies, split the rest.

         [¶7] After a bench trial, the district court awarded the Mantles a $2, 712, 838.22 judgment against North Star based on the Mantles' assumption of the FNB loan. Id. at ¶ 47, 437 P.3d at 778. It also awarded the Mantles $250, 000 against Gary and $307, 000 against Ray based on some transfers of North Star property that Gary and Ray made after they resumed control of North Star in December 2014. Id. The court awarded the Garlands and their companies $6, 110, 000 against Mr. Mantle based on the MOU that he personally guaranteed. Id. at ¶ 48, 437 P.3d at 778. The court denied Gary's and Ray's first motions to offset the judgments. Id. at ¶ 49, 437 P.3d at 778.

         [¶8] The parties appealed various aspects of the district court's rulings, and we affirmed in all respects. Id. at ¶¶ 4, 160, 437 P.3d at 768-69, 808. Gary and Ray initially appealed the district court's denial of their motion to offset the judgments. While Mantle I was pending in this Court, the Mantles attempted to collect on their judgments against Gary ($250, 000) and Ray ($307, 000). To avoid this, Gary and Ray again moved the district court to grant their offset motion. This time, the district court granted the motion and offset the judgments. Gary and Ray notified this Court that they were dismissing their appeals of the offset issues in Mantle I. We specifically declined to address the offset issue in Mantle I. See id. at ¶ 108 n.20, 437 P.3d at 794 n.20.

         [¶9] Additional facts and proceedings will be discussed ...


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