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Independent School District No. 404 v. Castor11/4/2003
Appellants argue that the trial court improperly denied them attorney fees under Minn. Stat. § 466.07 (2002), Minn. Stat. § 123B.25(b) (2002), or Minn. R. Civ. P. 37.03. Respondent asked the court to review whether it is entitled to judgment on its conversion claim. While we conclude that Minn. Stat. § 466.07 applies to employer/employee claims, because the trial court did not err in finding that appellants acted in bad faith, they are not entitled to attorney fees under Minn. Stat. § 466.07 or Minn. Stat. §á123B.25(b). Because the trial court did not abuse its discretion in finding that respondent had reasonable grounds to believe that the party might prevail, appellants are not entitled to attorney fees under Minn. R. Civ. P. 37.03. Because there can be no conversion where the property is compensation to the party who allegedly converted it, we again affirm the trial court.
FACTS
Respondent Independent School District No. 404 (school district) commenced an action against appellants Dany Castor and Judy Castor alleging conversion of $20,123.25. Dany Castor was a part-time principal from 1975 until this action and a part-time superintendent for the school district between 1990 and 2000. His wife, Judy Castor, has been a special education teacher for the school district since 1989.
This matter arises out of the interpretation and application of article XI of the school district's contract with the Lake Benton Education Association, which provides as follows:
Section 1. Selection: The selection of the insurance carrier and policy shall be made by the school district as provided by law. Consideration will be given to recommendations submitted by the insured group.
Section 2. Health and Hospitalization Insurance: The school district shall contribute a sum of not to exceed $250.00 per month for 1993-1994 and not to exceed $322.00 per month for 1994-1995 toward the premium for coverage for each full time teacher employed by the school district who qualifies for and is enrolled in the school district's group health and hospitalization plan and/or group income protection plan and/or group dental plan or other group intensive care plan. Any additional cost of the premium shall be borne by the employee and paid by payroll deductions.
It is undisputed that the school district never selected a carrier or insurance policy as stated in section 1. Instead, over 20 years, the practice developed that teachers made assignments of their article XI compensation to various insurance products including accident benefits, prepaid insurance benefits, and whole life insurance. While teachers had the opportunity to obtain insurance benefits by the article XI assignments, they could not take the compensation as cash. If a teacher did not assign the money to an insurance product, the unassigned money remained in the school district's general fund.
For the period 1989-1993, Judy Castor did not request an assignment of all her article XI benefits. The school district retained the money for any unassigned amount. From 1994-2000, Judy Castor assigned her article XI benefits to repay loan balances on life-insurance policies in Dany Castor's name for which she was the named beneficiary. Her assignments for that time frame totaled $20,123.25. While Judy Castor's requests for assignments were presented to the school board in the standard manner, Dany Castor, who made the presentation, did not highlight to the board the fact that Judy Castor's article XI benefit was being used to repay loans on his life-insurance policies.
When a new superintendent replaced Dany Castor in July 2000, he questioned the legality of Judy Castor's current ass
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