author: G. BARRY ANDERSON, Judge.

text:
    STATE of Minnesota, Respondent, v. Scottie Paul SMITH, Appellant.
    No. C3-99-2208.
    Court of Appeals of Minnesota.
    Nov. 21, 2000.

      Michael Hatch, Minnesota Attorney General, St. Paul, Amy Klobuchar, Henne-pin County Attorney, Mary Martin Lynch, Assistant County Attorney, Minneapolis, for respondent.
    John M. Stuart, Minnesota State Public Defender, Scott G. Swanson, Assistant State Public Defender, Minneapolis, for appellant.
    Considered and decided by ANDERSON, Presiding Judge, KALITOWSKI, Judge, and SHUMAKER, Judge.
   OPINION

G. BARRY ANDERSON, Judge.

Appellant challenges his conviction for unlawful possession of a firearm, arguing that the evidence was insufficient to support his conviction because he was not conscious when police discovered the firearm near him. Appellant also argues that the prosecutor’s closing remarks concerning a fable and appellant’s activity the night before his arrest constitute prejudicial misconduct. Because we conclude that the evidence sufficiently supports the conviction and the prosecutor’s arguments did not amount to misconduct, we affirm.

FACTS

On the morning of June 13, 1999, two Minneapolis police officers found appellant Scottie Paul Smith slumped over in the driver’s seat of an automobile with the driver’s side door locked and the engine running. Appellant appeared to be asleep, and the officers saw the barrel of a handgun “sticking out from underneath the right side” of appellant’s leg. After officers announced themselves, appellant suddenly opened his eyes and unlocked the door. Neither officer observed signs of intoxication. Police ultimately arrested appellant.

Officers found the handgun resting on the vehicle’s driver’s seat. The barrel pointed toward the passenger door. Forensic testing showed that the handgun, a ten-millimeter Wyoming pistol, was cocked, and had bullets in the magazine and one in the chamber. Fingerprint testing showed that there were partial fingerprints on the gun, but none were of the quality necessary to compare with known fingerprints. Police also recovered a crack pipe from the automobile. The state charged appellant with unlawful possession of a firearm in violation of Minn.Stat. § 624.71S(l)(b)(1998).

The parties stipulated to a number of facts: (1) appellant told an investigating officer, and the investigator confirmed, that appellant rented the automobile in which officers found him; (2) the night before appellant’s arrest, appellant picked up a man known to him as “Tiger”; (3) appellant smoked crack that “Tiger” gave him and drove “Tiger” to a south Minneapolis address; (4) after 30 minutes, “Tiger” got out of the car and told appellant he would be “right back;” (5) appellant told the investigator that he did not know the handgun was in the car; (6) the investigator determined that a man named T.L. matched appellant’s description of “Tiger”; (7) appellant identified T.L. as a man named “Woods” from a photo array; (8) the investigator learned that T.L. is a suspected active drug dealer in south Minneapolis and often has someone else drive for him; and (9) police once arrested appellant in T.L.’s house.

Appellant testified that the day before his arrest he rented the automobile, drove “Tiger” to an address in Minneapolis, and drank beer before falling asleep. Appellant said he had never seen the handgun and thought “Tiger” had placed the handgun where police found it. From the same series of photographs shown to him by the investigator, appellant, at trial, identified T.L. as “Tiger.” Appellant explained that he did not identify T.L. as “Tiger” earlier because he feared “Tiger.”

The prosecutor began his closing argument with an Aesop fable. The moral of the fable, said the prosecutor, was that necessity is the mother of invention. The prosecutor argued that appellant had, by necessity, changed his identification testimony. The prosecutor also asked the jury to question what appellant was doing with “Tiger” and why the gun was cocked and loaded. The jury convicted appellant.

ISSUES

I. Was the evidence sufficient for a reasonable jury to find appellant guilty of unlawful possession of a firearm beyond a reasonable doubt?
II. Did the prosecutor’s closing remarks constitute prejudicial misconduct?

ANALYSIS

I.

Appellant first argues that the evidence was insufficient for the jury to convict him because the state failed to prove that appellant possessed the handgun. Our review of a challenge to the sufficiency of evidence is limited .to determining whether the evidence, viewed in the light most favorable to the conviction, supports the verdict. State v. Webb, 440 N.W.2d 426, 430 (Minn.1989). We must assume that the jury believed the state’s witnesses and disbelieved evidence that contradicted their testimony. State v. Wahlberg, 296 N.W.2d 408, 411 (Minn.1980).

A conviction based on circumstantial evidence warrants stricter scrutiny. State v. Bias, 419 N.W.2d 480, 484 (Minn.1988). Nevertheless, because the jury is in the best position to evaluate circumstantial evidence, a jury verdict is entitled to due deference. Webb, 440 N.W.2d at 430. Circumstantial evidence is entitled to the same weight as direct evidence if the circumstances proved are inconsistent with any rational hypothesis except that of the accused’s guilt. State v. Race, 383 N.W.2d 656, 661 (Minn.1986). The evidence as whole need not exclude all possibility that the defendant is innocent; it must only make such a theory seem unreasonable. State v. Anderson, 379 N.W.2d 70, 78 (Minn.1985).

In order to obtain a conviction for violation of Minn.Stat. § 624.713, subd. 1(b) (1998), the state must establish either actual or constructive possession of a firearm. State v. Loyd, 321 N.W.2d 901, 902 (Minn.1982). The state did not argue to the jury that appellant had actual possession of the handgun, which would have required proof that appellant physically had the handgun on his person. State v. Florine, 303 Minn. 103, 104, 226 N.W.2d 609, 610 (1975). Constructive possession may be proven by showing that (a) the police found the item in a place under the defendant’s exclusive control to which other people did not have access, or (b) that, if the police found the item in a place to which others had access, there is a strong probability, inferable from the evidence, that the defendant was consciously exercising dominion and control over the item at the time. Id. at 106, 226 N.W.2d at 611. Essentially, the constructive possession doctrine permits a conviction where the state cannot prove actual possession, but the inference is strong that the defendant physically possessed the item at one time and did not abandon his possessory interest in it. Id. at 104-05, 226 N.W.2d at 610.

Appellant contends that the state failed to prove possession under either of the two prongs of the Florine test. Appellant claims that the jury could not have reasonably concluded that the handgun was in a place “under his exclusive control to which other people did not normally have access” because appellant rented the car and transported a passenger the day before his arrest. Appellant also contends that the evidence did not create a “strong” probability that appellant consciously exercised control over the handgun because police found appellant asleep or unconscious. We disagree.

Proximity is an important consideration in assessing constructive possession. State v. Cusick, 387 N.W.2d 179, 181 (Minn.1986). Moreover, constructive possession need not be exclusive, but may be shared. State v. LaBarre, 292 Minn. 228, 237, 195 N.W.2d 435, 441 (1972). In addition, this court has recently held that a defendant may constructively possess a firearm if he placed the firearm where it was discovered. Salcido-Perez v. State, 615 N.W.2d 846 (Minn.App.2000), review denied (Minn. Sept. 13, 2000).

The jury was able to consider evidence that officers found appellant asleep or passed out in a partially locked vehicle with the engine running and that officers saw a loaded, cocked handgun underneath appellant’s right leg, barrel pointed toward the passenger door. The jury was also able to assess the degree of appellant’s control over the vehicle, “Tiger’s” reputation as a known drug dealer who uses a driver, appellant’s past association with “Tiger,” and appellant’s unwillingness to initially identify “Tiger” from a photo array. The jury was also in the best position to judge appellant’s credibility, including his testimony that he had never seen the handgun and his reasoning that “Tiger” must have put it where it was found.

On this evidence the jury could readily find that appellant had exclusive control over the driver’s side of the automobile. The jury could also conclude that appellant consciously placed the handgun where it was found and continued, by sitting on it, to exercise dominion and control over it despite falling asleep or passing out. Moreover, the jury could properly reject as unreasonable appellant’s theory that he was innocent because “Tiger” disposed of the loaded, cocked handgun by placing it underneath appellant’s leg while appellant slept. Given the legitimate inferences that can be drawn from the evidence, and considering the deference this court gives to a jury’s determinations on weight and credibility of evidence, we hold that a reasonable jury could conclude, beyond a reasonable doubt, that appellant constructively possessed the handgun.

II.

Appellant also contends that the prosecutor’s closing arguments denied him a fair trial. The general standard for determining whether a new trial is warranted due to prosecutorial misconduct is whether the misconduct, viewed in the light of the whole record, appears to be “inexcusable and so serious and prejudicial that defendant’s right to a fair trial was denied.” State v. Booker, 348 N.W.2d 753, 755 (Minn.1984) (quotation omitted). Though appellant did not object to some of the arguments, improper remarks may require reversal even if a timely objection was not made. State v. Salitros, 499 N.W.2d 815, 820 (Minn.1993). We pay “special attention” to statements that may inflame or prejudice the jury where credibility is a central issue. State v. Porter, 526 N.W.2d 359, 363 (Minn.1995).

A The Aesop Fable

Appellant first contends that the prosecutor’s use of a fable as “ancient wisdom” to illustrate why appellant’s identification testimony was inconsistent constitutes reversible error. The fable recounted how a crow, out of necessity, devised a plan that allowed it to drink from a vase. The prosecutor used the moral of the story, that necessity is the mother of invention, to argue that appellant, by necessity, made inconsistent identifications of “Tiger.”

The state’s argument need not be “colorless,” so long as it is based on the evidence produced at trial, or reasonable inferences from that evidence. State v. Gulbrandsen, 238 Minn. 508, 511, 57 N.W.2d 419, 422 (1953). Improper character attacks may constitute prosecutorial misconduct if the prosecutor’s references to the defendant’s character have the potential for planting in the jurors’ minds a prejudicial belief from otherwise inadmissible evidence. State v. Ives, 568 N.W.2d 710, 714 (Minn.1997). Consequently, an allegory may not go beyond acceptable bounds. See State v. Washington, 521 N.W.2d 35, 39 (Minn.1994) (“scorpion” fable an improper character reference); State v. Merrill, 428 N.W.2d 361, 372 (Minn.1988) (characterization of defendant as “an animal” improper).

But a prosecutor is not prevented from questioning the credibility of witnesses—including the defendant. State v. Ture, 353 N.W.2d 502, 516 (Minn.1984); see also State v. McDaniel, 534 N.W.2d 290, 293 (Minn.App.1995), revieio denied (Minn. Sept. 20, 1995) (applying the rule in a cross-examination context). In this case, the prosecutor did not compare appellant to the crow in order to suggest appellant was a crow. Instead, the prosecutor used the illustration of the crow’s resourcefulness to attack appellant’s credibility and explain his inconsistent identifications of “Tiger”. A persuasive final argument is more art than science; so long as an argument remains within acceptable bounds it should not be found wanting merely because it is colorful. Because we do not see any undue prejudice by using the fable in this manner, the prosecutor’s argument did not constitute misconduct warranting a new trial.

B. “Tiger”

Appellant also argues that the prosecutor’s speculative argument about what “Tiger” and appellant might have been doing the night before appellant’s arrest constitutes misconduct. The prosecutor said, “Was Tiger gonna do some nasty business in there and he wanted a back up when he was ready to go [?] Pure speculation, but maybe you should consider that. Why would it be cocked — [?].” The court overruled a defense objection, and the prosecutor did not return to the question.

A prosecutor may argue that a particular defense lacks merit, or may make arguments in anticipation of the defense’s closing arguments. Salitros, 499 N.W.2d at 818. In this case, the prosecutor’s argument merely asks the jury to consider the reasonableness of appellant’s claims in light of “Tiger’s” reputation as a known drug dealer who used a driver, appellant’s testimony that “Tiger” gave appellant cocaine, and the forensic evidence that the handgun was loaded and cocked. The prosecutor’s references to “Tiger” and his “nasty business,” are based on reasonable inferences that can be drawn from the evidence, and do not constitute prejudicial prosecutorial misconduct.

DECISION

Evidence that police found the defendant alone and asleep in a partly locked vehicle, engine running, with a handgun partially beneath his right leg is sufficient to find the defendant possessed a firearm. A jury could reasonably conclude, beyond a reasonable doubt, that the defendant constructively possessed the firearm by placing it where it was found, and did not abandon that possessory interest despite falling asleep. In addition, a prosecutor does not commit misconduct by using a fable, together with the evidence adduced at trial, to attack the defendant’s credibility or by questioning the reasonableness of appellant’s defense theory.

Affirmed.

      . Because we affirm on grounds of constructive possession, and because actual possession of the handgun was not clearly argued by the parties in the district court proceeding, we do not need to decide whether the facts of this case might also support an argument for actual possession of the firearm. A very persuasive argument could be advanced that appellant concealed the handgun underneath his leg and that such concealment is equivalent to or demonstrative of physical possession.


source: Caselaw Access Project

author: KALITOWSKI, Judge.

license: Public Domain

text:
    D & R STAR, INC., Respondent, v. WORLD BOWLING, INC., Harvey Cheever, Loren Kaiser, Leslie D. Cheever, Roundbank, Respondents, Gene R. Ackland, et al., Appellants, John Doe, et al., Defendants.
    No. C3-00-739.
    Court of Appeals of Minnesota.
    Nov. 21, 2000.

      Mark E. Fosse, Eric D. Larson, Dunlap & Seeger, P.A., Rochester, for respondent D & R Star.
    Keith L. Deike, Patton, Hoversten & Berg, P.A., Waseca, for appellants.
    James J. Dailey, Dailey Law Office, Mankato, for respondent Harvey Cheever.
    Robert E. Schmidt, Schmidt Law Office, Ltd., Waseca, for respondent Roundbank.
    Leslie D. Cheever, Rothsay, pro se respondent.
    Loren Kaiser, Albert Lea, pro se respondent.
    Considered and decided by KALITOWSKI, Presiding Judge, AMUNDSON, Judge, and HALBROOKS, Judge.
   OPINION

KALITOWSKI, Judge.

Appellants Gene and Theresa Ackland challenge the district court’s order for partial summary judgment in favor of D & R Star, Inc. Appellants contend the district court erred in determining that there was no genuine issue of material fact regarding whether D & R Star, Inc. had knowledge of the contents of appellants’ misfiled U.C .C.-l financing statement.

FACTS

During the months of March, April, and May of 1998, World Bowling, Inc., which included Harvey Cheever, Loren Kaiser, and Leslie Cheever, discussed purchasing Waseca Bowler’s World and its contents from appellants. On May 22, 1998, World Bowling and appellants signed a purchase agreement for the sale. The agreement stipulated that Leslie Cheever and Loren Kaiser would purchase the contents of the bowling alley from appellants for an aggregate total of $160,000. The agreement stated that appellants would take a security interest in the contents of the bowling alley and included the principal address of World Bowling, the address of the bowling alley, and the names and signatures of all the parties. The agreement also included a security agreement covering the contents of the bowling alley, and a descriptive list of the contents.

During May and June of 1998, Loren Kaiser met with Richard Hawkins, the president of D & R Star, Inc. (respondent), to obtain additional funds for the purchase of the bowling alley and its contents. Hawkins and Kaiser met approximately five times to discuss the upcoming transaction. Kaiser explained to Hawkins that appellants were selling the bowling alley contents for $160,000 with a $40,000 down payment. Hawkins reviewed the purchase agreement two to three weeks prior to the planned closing date of June 24, 1998. Hawkins admits that he knew World Bowling was purchasing the bowling alley from appellants, but denies knowing the specifics of the transaction.

Hawkins told Kaiser that he knew appellants and that he was familiar with the bowling alley and its contents. Hawkins also explicitly instructed Kaiser not to mention respondent’s involvement in the sale to appellants. Hawkins explained that prior business disagreements with Gene Ackland could end the sale if Ack-land found out respondent was involved.

Later, Hawkins asked Kaiser to send a copy of the purchase agreement to respondent’s attorneys. Kaiser sent the purchase agreement with the security agreement attached. On June 24, 1998, World Bowling and appellants met to close on the sale of the bowling alley and its contents. The sale was not finalized on June 24, 1998, because World Bowling was awaiting the receipt of funds from respondent. Appellants still did not know of respondent’s involvement. The next day respondent transferred $100,000 to World Bowling. In exchange, World Bowling executed a security agreement with respondent for the contents of the bowling alley. Later that day, the sale of the bowling alley and its contents was finalized. World Bowling then executed a security agreement in favor of appellants for the contents of the bowling alley.

On June 30, 1998, appellants improperly filed their U.C.C.-l financing statement with the Waseca County recorder’s office. On July 2, 1998, respondent properly filed its U.C.C.-l with the Minnesota Secretary of State.

World Bowling subsequently defaulted on its loan with respondent and its purchase agreement with appellants. Respondent filed a summons and complaint on January 24, 2000, against World Bowling, appellants, and others who are not parties to this appeal. The complaint requested that the district court determine whether respondent or appellants had the senior perfected security interest in the personal property at issue. This determination turned on whether respondent had “knowledge of the contents” of appellants’ misfiled U.C.C.-l financing statement, thereby making it effective against them pursuant to Minn.Stat. § 336.9-401(2) (1998).

Following respondent’s motion for partial summary judgment the district court ruled in favor of respondent, concluding that as a matter of law respondent did not have knowledge of the contents of appellants’ misfiled U.C.C.-l. Subsequently, the court issued an amended order allowing appellants to immediately appeal the partial summary judgment pursuant to Minn. R. Civ. P. 54.02.

ISSUE

Did the district court err in determining there was no evidence in the record to raise a genuine issue of material fact as to whether respondent had knowledge of the contents of appellants’ misfiled U.C .C.-l financing statement pursuant to Minn.Stat. § 336.9-401(2) (1998)?

ANALYSIS

This court asks two questions on an appeal from summary judgment: “(1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law.” State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990) (citation omitted). This court must “view the evidence in the light most favorable to the party against whom judgment was granted.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993) (citation omitted).

The district court concluded there were no genuine issues of material fact because there was no evidence in the record to show that respondent had knowledge of the contents of appellants’ misfiled U.C.C.-l financing statement. This conclusion was based on the district court’s definition of the phrase “knowledge of the contents of such financing statement” in Minn.Stat. § 336.9-401(d)(2) (1998). Because this is a legal determination, our review of the district court is de novo. See Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn.1998) (holding that statutory construction is a question of law, which this court reviews de novo).

Generally, a creditor perfects a security interest in personal property by filing a U.C.C.-l with the office of the county recorder or the Secretary of State. Minn.Stat. § 336.9-401(1)(a)-(d) (1998). Here, all parties agree that appellants’ U.C.C.-l was improperly filed with the Waseca County recorder’s office on June 30, 1998, and therefore unperfected. Respondent properly filed its U.C.C.-l with the Secretary of State on July 2, 1998, thereby perfecting its interest.

Generally, respondent’s perfected security interest would have priority over any unperfected security interests. Minn. Stat. § 336.9—401(l)(a)—(d). But the U.C.C. specifically provides a good-faith exception for creditors who misfile:

A filing which is made in good faith in an improper place or not in all of the places required by this section is nevertheless effective with regard to any collateral as to which the filing complied with the requirements of this article and is also effective with regard to collateral covered by the financing statement against any person who has knowledge of the contents of such financing statement.

Minn.Stat. § 336.9-401(2) (1998). The fifth paragraph of the comment to section 336.9-401 states that the good-faith exception “rejects the occasional decisions that an improperly filed record is ineffective to give notice even to a person who knows of it.” Minn.Stat. Ann. § 336.9^401 U.C.C. cmt. at 5 (West Supp.2000).

The Minnesota enactment of the U.C.C. specifies that “knowledge,” as used in the Code, is defined as “actual” knowledge. MtomStat. § 336.1-201(25) (1998). And section 336.1-201(25) provides that actual knowledge is the equivalent to notice.

Prior versions of U.C.C. 9 — 401(2) required “knowledge of ‘the filing.’ ” 4 James J. White & Robert S. Summers, Uniform, Commercial Code § 31-17 at 195 (4th ed.1995). The removal of the word “filing” from the current law means that knowledge that the misfiled financing statement was filed is no longer required, but knowledge of what is contained in the financing statement is required. See generally In re Enark Industries, Inc., 86 Misc.2d 985, 383 N.Y.S.2d 796, 797-98 (App.Term 1976) (“The Code does not require that the [holder of the perfected security interest] see the statement filed or even know of the filing.”). Accord Security Finance Group, Inc. v. United States, 706 F.Supp. 83, 85 (D.D.C.1989).

Although there are no Minnesota cases addressing the definition of the term “knowledge of the contents of such financing statement,” the discussion of financing statements and section 336.9-401(2) in Production Credit Ass’n of West Cent. Minnesota v. Bartos, 430 N.W.2d 238 (Minn.App.1988), is instructive. A valid U'.C.C.-l includes the signatures and addresses of the debtor and the secured party, and a description of the collateral. Minn.Stat. § 336.9-402(1) (1998). A U.C.C.-1 provides “general notice or warning [to nonparties] that certain collateral might already be encumbered * * * ” and it puts subsequent creditors on notice to investigate further. Bartos, 430 N.W.2d at 241 (comparing a U.C.C.-1 to a security agreement, the latter requiring a higher level of specificity); see also In re Komfo Products Corp., 247 F.Supp. 229, 234 (E.D.Pa.1965) (stating that the purpose behind the filing rules is to put subsequent creditors on notice).

Applying the discussion in BaHos to the issue presented here, we conclude that a holder of a perfected security interest is charged with knowledge of the contents of a misfiled U.C.C.-l under section 336.9-401(2), when it has actual knowledge of the critical information required in a properly filed U.C.C.-l. See Minn.Stat. § 336.9-402(1). This critical information includes a general description of the collateral encumbered, and the names and addresses of the debtor and secured party. See id.

Other jurisdictions have reached the same conclusion in construing the phrase “knowledge of the contents.”- See In re Mistura, Inc., 22 B.R. 60, 34 U.C.C. Rep. Serv. 768, 769-70 (9th Cir.BAP 1982) (stating that the trend appears to be toward an expansive view of U.C.C. 9-401(2)). In Mistura, the appellate court remanded so a jury could determine whether the perfected creditor had knowledge of the required contents of the misfiled creditor’s U.C.C.-l. Id. 22 B.R. 60, 34 UCC Rep. Serv. at 770-71. Mistura stated that the creditor does not have to actually see the misfiled U.C.C.-l or know that it was misfiled if the creditor had actual knowledge of all the information that would be required in a properly filed U.C.C.-1. 22 B.R. 60, 34 U.C.C. Rep. Serv. at 772; see also First Nat’l Bank of Glasgow v. First Security Bank of Mont., 222 Mont. 118, 721 P.2d 1270, 1274 (1986) (holding that “knowledge of the contents” requires the perfected creditor to “know the names of the parties, their addresses, and a description of the collateral”).

Applying our construction of the statutory language at issue to the facts here leads us to conclude that the district court erred in finding there were no genuine issues of material fact. Kaiser’s affidavit claims that respondent discussed and viewed the May 22, 1998, purchase agreement and its attachments. Kaiser’s affidavit also alleges that respondent’s attorneys received a copy of the purchase agreement and its attachments. Hawkins’ affidavit, however, claims that respondent was aware World Bowling was purchasing the bowling alley from appellants but was never informed of the details of the purchase.

We reject respondent’s contention that it could not have actual knowledge of appellants’ misfiled U.C.C.-l because any details it knew about the purchase of the bowling alley and its contents took place before the U.C.C.-l was filed. First, respondent had notice that the bowling alley contents were encumbered because it was involved with the sale until the time of closing. Second, the plain language of section 386.9-401(2) does not require that knowledge of the contents be gained only after the U.C.C.-l is misfiled and we may not add this requirement to the statute. Martinco v. Hastings, 265 Minn. 490, 497, 122 N.W.2d 631, 638 (1963) (holding that “the courts cannot supply that which the legislature purposely omits or inadvertently overlooks”).

Finally, both the district court and respondent cite caselaw dealing with mechanic’s liens under Minn.Stat. § 514.05 to support a strict construction of the knowledge requirement. But, section 514 .05 contains different statutory language and definitions than the U.C.C. Section 514.05, subdivision 1, allows a creditor with a lien against an owner of land to take preference over any other encumbrances on that land, “unless the lienholder had actual notice thereof.” (Emphasis added.) Unlike section 514.05, the U.C.C. only requires “actual knowledge,” not “actual notice.” Minn.Stat. § 336.1-201(25) (stating that actual knowledge is the equivalent to notice). We conclude that because this case is controlled by the U.C.C., the mechanic’s lien statute and cases are not controlling in defining actual knowledge.

DECISION

The district court erred in determining there was no evidence in the record raising a genuine issue of material fact concerning whether D & R Star, Inc. had knowledge of the contents of appellants’ misfiled U.C.C.-l. We therefore reverse the district court’s order for partial summary judgment.

Reversed.

      . The purchase agreement included the sale of the bowling alley building and property, but this appeal involves only the personal property.


text:
    STATE of Minnesota, Respondent, v. Tamara Gay PEDERSON-MAXWELL, Appellant.
    No. C1-99-2112.
    Court of Appeals of Minnesota.
    Dec. 5, 2000.

      Michael Hatch, Minnesota Attorney General, James B. Early, Assistant Attorney General, St. Paul, and Wayne H. Swanson, Polk County Attorney, Crook-ston, for respondent.
    John D. Ellenbecker, Attorney at Law, St. Cloud, for appellant.
    Considered and decided by ANDERSON, Presiding Judge, KALITOWSKI and SHUMAKER, Judges.
   OPINION

G. BARRY ANDERSON, Judge.

Appellant Tamara Gay Pederson-Max-well was convicted of two counts of fifth-degree controlled substance crime and one count of failure to affix controlled substance tax stamps in violation of Minn.Stat. §§ 152.025, subds. 1(1), 2(1) and 3(a); 609.05, subd. 1; and 297D.09, subd. la (1998). On appeal, Pederson Maxwell claims the evidence should have been suppressed because it was the product of an improper search of her automobile.. We affirm.

FACTS

On July 10, 1998, at approximately 8:00 p.m., a confidential informant met with Crookston Police Department Detective Gerardo Moreno, and other law enforcement officers. The informant stated that he or she had met with individuals the previous day at the Polk County Fair in Fertile, Minnesota who stated they could supply the informant with controlled substances. The informant was supplied with $450 of “buy-money” and an electronic transmitter to record the purchase.

This informant met with Brian Christopher Johnson at the fair, and Johnson introduced the informant to Raymond Richard Krebs. Johnson and Krebs agreed to sell the informant two ounces of marijuana for $300 later in the evening.

The informant subsequently met with Krebs and Johnson. The three proceeded to a white four-door Dodge Spirit, which was registered to the appellant, Tamara Gay Pederson-Maxwell. Krebs entered the vehicle and told a female sleeping in the front seat (later identified as appellant) to open the trunk so he could get the “weed.” Krebs instead grabbed a pair of boots from the back seat of the vehicle and took approximately two ounces of marijuana out of one of the boots.

The informant, Krebs, and Johnson then entered a different vehicle and drove around for a short time. The informant, after being dropped off, met with Deputy Helget. The informant told Deputy Hel-get that Krebs and Johnson smoked a marijuana joint while they were in the car, and that Krebs provided the informant with approximately two ounces of marijuana in exchange for $300.

A short time later, the informant identified Krebs to Detective Moreno as the man who sold him the marijuana. The informant also identified appellant as the woman who was sleeping in the Dodge Spirit when Krebs obtained the marijuana. Krebs and appellant were placed under arrest. Johnson was also subsequently arrested. The officers searched Krebs and found $517 in cash, $290 of which was marked buy-money that the informant stated was paid in exchange for the marijuana. Appellant’s purse' was found to contain approximately two ounces of marijuana and $2,675 in cash. At trial, the evidence established that the actual amount of marijuana in appellant’s purse totaled 39.9 grams.

Detective Moreno asked appellant for permission to search the Dodge Spirit, but she refused. Appellant agreed to allow Detective Moreno to drive the vehicle from the fairgrounds to the Fertile Police Department.

Once at the police department, a trained drug-detection dog reacted to the presence of controlled substances in the vehicle and in the trunk. The vehicle was impounded and transported to the Northwest Regional Corrections Center in Crookston.

On July 13, 1998, officers searched the Dodge Spirit without a warrant. Three Tupperware containers filled with marijuana, a weight scale, a cellular phone, a pager, a .380 caliber semi-automatic handgun and an ammunition clip, a .38 caliber semi-automatic handgun with one loaded and one unloaded ammunition clip, an interchangeable .45 caliber barrel, ammunition, and other items were found in the trunk of the vehicle.

Appellant was charged with, and convicted of, two counts of fifth-degree controlled substance crime and one count of failing to affix a controlled substance tax stamp. Appellant’s motion to suppress the evidence obtained in the search of her car was denied based on stipulated facts and the trial court’s conclusion that the warrantless search was proper.

ISSUES

I. Did appellant waive the issue of illegal search by failing to raise it before the district court?

II. Was the warrantless search of appellant’s car trunk proper?

ANALYSIS

I.

Respondent maintains that appellant waived the issue of illegal search by failing to raise it before the district court. In order for constitutional challenges to the admission of evidence to be timely, objections to such evidence must be raised at the omnibus hearing. See State ex rel Rasmussen v. Tahash, 272 Minn. 539, 555, 141 N.W.2d 3, 14 (1965); State v. Lieberg, 553 N.W.2d 51, 56 (Minn.App.1996); State v. Brunes, 373 N.W.2d 381, 386 (Minn.App.1985). These evidentiary objections take the form of pretrial motions to suppress.

[A] pretrial motion to suppress should specify, with as much particularity as is reasonable under the circumstances, the grounds advanced for suppression in order to give the state as much advance notice as possible as to the contentions it must be prepared to meet at the hearing.

State v. Needham, 488 N.W.2d 294, 296 (Minn.1992). “In practice, the defense counsel at the outset of an omnibus hearing often makes a rather general statement of the issues.” Id.

Appellant’s motion requested, in part, the following relief:

Suppressing all evidence obtained as a result of the search of Defendant’s motor vehicle as said search was done in violation of Defendant’s rights as guaranteed by the United States Constitution, the Constitution of the State of Minnesota, and Minnesota State Law.

It is clear that appellant challenged the search of the vehicle and the state had notice of this defense. Accordingly, the state’s argument is without merit.

II.

Appellant challenges the war-rantless search of her automobile as improper, contending that the district court erred in denying her motion to suppress evidence recovered as a result of the search.

When reviewing pretrial orders on motions to suppress evidence, we may independently review the facts and determine, as a matter of law, whether the district court erred in suppressing- — or not suppressing — the evidence.

State v. Harris, 590 N.W.2d 90, 98 (Minn.1999) (citation omitted). When reviewing the legality of a seizure or search, this court will not reverse the district court’s findings unless clearly erroneous or contrary to law. State v. Dickerson, 481 N.W.2d 840, 843 (Minn.1992), aff'd, 508 U.S. 366, 113 S.Ct. 2130, 124 L.Ed.2d 334 (1993).

A warrantless search and seizure is per se unreasonable. U.S. Const. amend. IV; Minn. Const. art. I; State v. Othoudt, 482 N.W.2d 218, 221-22 (Minn.1992) (citing Katz v. United States, 389 U.S. 347, 357, 88 S.Ct. 507, 514, 19 L.Ed.2d 576 (1967)). Warrantless searches are only allowed in a “few specifically established and well delineated exceptions.” State v. Hanley, 363 N.W.2d 735, 738 (Minn.1985) (quoting Katz, 389 U.S. at 357, 88 S.Ct. at 514). One of these exceptions involves the search of motor vehicles. Carroll v. United States, 267 U.S. 132, 153, 45 S.Ct. 280, 285, 69 L.Ed. 543 (1925).

A law enforcement officer may make a warrantless search of an automobile when there is probable cause to believe the vehicle contains contraband. Maryland v. Dyson, 527 U.S. 465, 467, 119 S.Ct. 2013, 2014, 144 L.Ed.2d 442 (1999) (a finding of probable cause “alone satisfies the automobile exception to the Fourth Amendment’s warrant requirement”); State v. Bigelow, 451 N.W.2d 311, 311 (Minn.1990) (holding that, if the police have probable cause to search a motor vehicle for drugs or other contraband, they may search every part of the vehicle and its contents which may conceal the object of the search); State v. Nace, 404 N.W.2d 357, 361 (Minn.App.1987), review denied (Minn. Jun 25, 1987) (under the automobile exception to the warrant requirement, only probable cause to believe that a car contains contraband is required because of a lower expectation of privacy in a motor vehicle).

Here, a trained drug-detection dog “sniffed” the exterior of the Dodge Spirit, alerting the deputy to the presence of controlled substances. The United States Supreme Court has previously concluded that a “canine sniff’ search is an “investigative technique * * ⅜ much less intrusive than a typical search” and does not constitute a “search” within the meaning of the Fourth Amendment. U.S. v. Place, 462 U.S. 696, 707, 103 S.Ct. 2637, 2644-45, 77 L.Ed.2d 110 (1983).

In the present case, the dog’s reaction did establish probable cause that there was contraband in the trunk of the car. Probable cause is defined as “some showing by evidence which fairly and reasonably tends to show the existence of the facts alleged.” Poor Richards, Inc. v. Chas. Olson & Sons & Wheel Serv. Co., 380 N.W.2d 225, 227 (Minn.App.1986) (citation omitted). A determination of “probable cause as it relates to warrantless searches” is subject to de novo review. In re Welfare of G.M., 560 N.W.2d 687, 690 (Minn.1997) (citing Ornelas v. United States, 517 U.S. 690, 698-99, 116 S.Ct. 1657, 1663, 134 L.Ed.2d 911 (1996)).

Probable cause to search an automobile exists where the facts and circumstances within the officer’s knowledge and of which he has reasonably trustworthy information are sufficient in themselves to warrant a reasonable man of reasonable caution in the belief that the automobile contains articles the officer is entitled to seize.

State v. Gallagher, 275 N.W.2d 803, 806 (Minn.1979) (citations omitted). Here, the officers clearly had probable cause to believe appellant’s automobile contained contraband, a conclusion not challenged by appellant.

Appellant makes the argument that the automobile exception requires that the police have probable cause and that the vehicle be “readily mobile.” Appellant cites two cases as a basis for this assertion. These cases, however, do not support appellant’s argument.

Appellant points to language in Pennsylvania v. Labron for the proposition that something more than probable cause is required to search a vehicle without a warrant:

If a car is readily mobile and probable cause exists to believe it contains contraband, the Fourth Amendment thus permits police to search the vehicle without more.

518 U.S. 938, 940, 116 S.Ct. 2485, 2487, 135 L.Ed.2d 1031 (1996). Appellant would have us interpret “readily mobile” as equivalent to exigent circumstances above and beyond mere probable cause. Taken by itself, the quoted language could lead one to believe that something more than probable cause is required to search a vehicle without a warrant. But this is simply a misreading of this case, as well as a misreading of the current state of the law.

Labron involved the consolidation of two cases where the Pennsylvania Supreme Court had invalidated automobile searches that were based on probable cause because there were no additional exigent circumstances present. Id. at 939-40, 116 S.Ct. at 2486-87. The United States Supreme Court concluded that “[tjhis was incorrect,” and went on to state that:

Our first cases establishing the automobile exception to the Fourth Amendment’s warrant requirement were based on the automobile’s “ready mobility,” an exigency sufficient to excuse failure to obtain a search warrant once probable cause to conduct the search is clear. More recent cases provide a further justification: the individual’s reduced expectation of privacy in an automobile, owing to its pervasive regulation. * * * As the state courts found, there was probable cause in both of these cases: ⅜ * * -yye conclude the searches of the automobiles in these cases did not violate the Fourth Amendment.

Id. at 940, 116 S.Ct. at 2487 (citations omitted). Thus, Labron validated automobile searches based on probable cause, without requiring separate exigency requirements.

The second case, Maryland v. Dyson, is equally unhelpful to appellant. After quoting Labron, the Supreme Court in Dyson noted:

In this case, the Court of Special Appeals found that there was “abundant probable cause” that the car contained contraband. This finding alone satisfies the automobile exception to the Fourth Amendment’s warrant requirement * * ⅞.

527 U.S. at 467, 119 S.Ct. at 2014 (emphasis added). Based on the language of these two cases, the automobile exception to the Fourth Amendment’s warrant requirement “does not have a separate exigency requirement.” Id.

DECISION

The district court properly denied appellant’s motion to suppress evidence obtained from the trunk of her automobile.

Affirmed.

      . Appellant was charged, but not tried on a conspiracy count.


author: LANSING, Judge.

text:
    LOVING & ASSOCIATES, INC., Appellant, v. Gibson CAROTHERS, Respondent.
    No. C6-00-718.
    Court of Appeals of Minnesota.
    Dec. 5, 2000.

      Christopher S. Hayhoe, Michael R. Schechter, Felhaber, Larson, Fenlon & Vogt, P.A., Minneapolis, for appellant.
    Thomas J. Flynn, Larkin, Hoffman, Daly & Lindgren, Ltd., Bloomington, for respondent.
    Considered and decided by KLAPHAKE, Presiding Judge, LANSING, Judge, and SCHUMACHER, Judge.
   OPINION

LANSING, Judge.

Loving & Associates, Inc., sued Gibson Carothers to enforce a personal guaranty he issued to Loving to secure a line of credit to Lake Street Shirts, Inc. The district court granted Carothers summary judgment on Loving’s claims, reasoning that the 1992 merger of Lake Street Shirts, Inc., and Stafford Blaine Designs, Ltd., discharged Carothers’s obligations under the guaranty by operation of law. Because we conclude that a merger does not necessarily discharge a guaranty by operation of law and that genuine issues of material fact remain to be decided, we reverse and remand.

FACTS

Lake Street Shirts, Inc. (LSS), is a Minnesota corporation in the business of screen-printing t-shirts and sweatshirts for sale to card and gift shops nationwide. Gibson Carothers and Herbert Fick incorporated LSS in 1989. Carothers owned 26% of the company’s stock and was its chairman and a director. But he was not involved in the company’s day-to-day operations.

In April 1989, LSS sought a line of credit from Loving & Associates, Inc., a national supplier of athletic apparel. Loving agreed to extend LSS credit, but it insisted on a personal guaranty from Car-others. Carothers thus signed a personal guaranty securing payment of “all sums owed by the Company [identified as ‘Lake Street Shirts’] to Loving and the performance by the Company of all terms and conditions of purchase orders * * * whether now existing or hereinafter entered into between the Company and Loving.” The guaranty was a continuing guaranty revocable only “by notice in writing to Loving.” Carothers did not envision the possibility of a merger when he signed the guaranty.

In 1992, a major distributor of LSS decided it would no longer distribute LSS shirts. In response, Fick proposed a merger between LSS and Stafford Blaine Designs, Ltd. (Stafford I), a company Fick had incorporated in 1988 to distribute high-end, licensed, screen-printed clothing. Carothers was not a shareholder in Stafford I and was not involved in its management or day-to-day operations.

In August 1992, LSS and Stafford I merged into Stafford-Lake, Inc ., which later assumed the name Stafford-Blaine Designs, Ltd. (Stafford II). According to Fick, other than as a minority shareholder, “Carothers had essentially no say in whether the companies merged or not.” Under the terms of the merger agreement, LSS and Stafford I ceased to exist and Stafford-Lake, the surviving corporation, assumed their liabilities and obligations. The merger agreement also provided that the merger would not affect the rights of the constituent corporations’ creditors. Carothers received a 12% ownership share in Stafford II.

The record shows no perceptible change in LSS’s operating procedures or management structure after the merger. LSS retained its pre-merger address and continued to operate under the name Lake Street Shirts Co. pursuant to a certificate of assumed name Stafford II filed in 1993. Fick continued to manage LSS and remained Loving’s principal contact. In turn, Loving continued to extend credit to LSS on the same terms as before the merger. At Fick’s request, Loving maintained separate accounts for LSS, Stafford I, and Aardvark Graphics, Stafford I’s predecessor.

The parties disagree on when Fick informed Loving of the merger. Without specifying a time frame, Fick claims he told Loving of the merger and apprised Loving of the financial status of the newly formed corporation from time to time thereafter. Loving, on the other hand, claims it first learned of the merger in December 1995, when Fick wrote a letter to all creditors informing them that Stafford II was having financial difficulties.

At the time of the merger, LSS was grossing approximately $3 million in annual sales. Stafford I was grossing $3.7 million. Although the merger forced Stafford II to move into a more expensive facility and resulted in increased operating expenses, Stafford II remained profitable and paid Loving’s bills through 1994.

In 1995, however, Stafford II began experiencing financial difficulties as a result of rapid expansion, poor management, production difficulties, and industry changes. In response, it sent all creditors several proposals to restructure the debt. Loving was among Stafford II’s creditors, and it was also on the committee assigned to review the restructuring proposals and to report to the remaining creditors. Although Stafford II continued to operate under the various plans agreed to by its creditors, in 1998 management decided to sell the company’s assets.

Relying on Carothers’s guaranty, Loving then brought this action to recover $37,529.98 owing on the LSS account for goods delivered between November and December 1995. Carothers refused payment and moved for summary judgment, claiming the merger had discharged the guaranty by operation of law. Loving opposed Carothers’s summary-judgment motion but did not move for summary judgment itself. The district court agreed that the merger had discharged the guaranty by operation of law and granted Carothers summary judgment. This appeal followed.

ISSUE

As a matter of law, did the merger between Lake Street Shirts, Inc., and Stafford-Blaine Designs, Ltd., discharge Car-others from liability under the guaranty for the post-merger performance of Lake Street Shirts?

ANALYSIS

Whether a continuing guaranty extends to debts incurred by a debtor after it merges with another organization is a question of first impression in Minnesota. Relying on Minn.Stat. § 302A.641 (1998), the district court held that the merger of LSS and Stafford I discharged Carothers’s obligations under the guaranty by operation of law because LSS ceased to exist upon the merger. Alternatively, the district court held that the guaranty unambiguously extended only to the debts of the company originally existing as Lake Street Shirts. We disagree that Carothers has established a basis for summary judgment on either ground.

I. The Effect of the Merger Statute

Minn.Stat. § 302A.641 governs the effect of mergers. It provides that upon a merger, “[t]he separate existence of all constituent organizations * * * ceases[J” Minn.Stat. § 302A.641, subd. 2(b). But it also provides that the surviving organization inherits the rights and privileges of the constituent organizations and becomes responsible for their liabilities and obligations. Id., subd. 2(d), (e). For that reason, a constituent organization ceases to exist upon a merger only in the sense that it has no separate existence.

A corporation is essentially the legal identity of a set of contractual obligations and entitlements. United States Shoe Corp. v. Hackett, 793 F.2d 161, 163 (7th Cir.1986). These obligations and entitlements do not cease to exist when the legal identity that embodies them changes. Instead, they transfer to the surviving organization by operation of law. Id. at 163-64. A merger does not, therefore, necessarily extinguish a continuing guaranty as a matter of law. See CBS, Inc. v. Film Corp. of America, 545 F.Supp. 1382, 1387 (E.D.Pa.1982) (concluding “the rights of a company pursuant to a guaranty agreement survive the merger of that company with another, even though the originally guaranteed company is not the survivor corporation of the merger”); see also Essex Int’l, Inc. v. damage, 440 F.2d 547, 550 (7th Cir.1971) (stating “a merger or consolidation involving the creditor corporation does not necessarily discharge a guarantor any more than a mere change in corporate name does”).

By the same token, a continuing guaranty is not enforceable as a matter of law merely because it survives a merger. Contrary to Loving’s argument, a guaranty is not a “right or privilege” of a constituent organization within the meaning of Minn.Stat. § 302A.641, subd. 2(d). Instead, it is an independent contract between a guarantor and a creditor and is collateral to the contractual obligation between the creditor and a debtor. Schmidt v. McKenzie, 215 Minn. 1, 6-8, 9 N.W.2d 1, 3-4 (1943). Because guaranties confer a right on the creditor rather than the debt- or, a guaranty securing the performance of a constituent organization does not vest in the surviving corporation upon a merger by operation of Minn.Stat. § 302A.641, subd. 2(d). See Worth Corp. v. Metropolitan Cas. Ins. Co., 142 Misc. 734, 255 N.Y.S. 470, 472 (App.Term 1932) (stating surety’s post-merger liability does not depend on whether surviving corporation succeeds to constituent corporation’s assets).

Through caselaw, courts have developed a rule that, combines both contractual and a multi-factor equitable analysis to determine whether a guaranty is enforceable after a debtor undergoes a change in composition or business structure. Virtually all courts agree that whether a guaranty is enforceable to secure post-merger obligations depends in the first instance on the terms of the guaranty. But when a guarantee does not provide for the contingency of a change in the debtor’s composition or business structure, the inquiry necessarily broadens to whether the merger alters the debtor’s identity significantly and thereby changes without the debtor’s consent the obligation the guarantor initially assumed under the guaranty. See, e.g., United States Shoe Corp., 793 F.2d at 162-63; Essex, 440 F.2d at 550. Combining a contractual and a multi-factor equitable or commercial-reasonableness analysis prevents a guarantor from circumventing a continuing guaranty simply by changing the name, composition, or legal identity of the organization whose performance the guaranty secures and thereby guards against the elevation of form over substance. This dual approach is consistent with the Restatement of Suretyship and Guaranty. See Restatement (Third) of Suretyship and Guaranty § 37 (1996). We adopt this approach in evaluating whether the guaranty at issue in this case extends to LSS’s post-merger debts.

II. The Terms of the Guaranty

We first turn to the terms of the guaranty. Because a guaranty is a contract, its terms must be understood in their plain and ordinary sense in light of the parties’ intentions and the circumstances under which the guaranty was given. Marquette Trust Co. v. Doyle, 176 Minn. 529, 533, 224 N.W. 149, 151 (1929). The terms of a guarantor’s obligation may not be unduly restricted by technical interpretation. Bradshaw v. Barber, 125 Minn. 479, 481-82, 147 N.W. 650, 650 (1914). Nor, on the other hand, may they be enlarged beyond the fair and natural import of the guaranty’s terms. Id.

Relying on the terms of the guaranty and on Borg Warner Acceptance Corp. v. Shakopee Sports Ctr., Inc., 431 N.W.2d 539 (Minn.1988), Loving argues the guaranty unambiguously extends to the post-merger debts of LSS because it is unconditional and revocable only by written notice to Loving. In Borg Warner, the court held that stockholders who had withdrawn from the corporation whose debts they had guaranteed remained liable for obligations the corporation incurred after they withdrew because they failed to revoke the guaranty. Id. at 541.

We disagree that Carothers’s failure to revoke the guaranty renders it enforceable as a matter of law. Because an unrevoked continuing guaranty may be revoked by operation of law, a guarantor’s failure to revoke, although relevant, is not dispositive. Borg Warner is limited to its facts and applies only in cases in which the principal retains its identity after undergoing a change in composition or structure.

Carothers does not dispute that the guaranty, until terminated, is enforceable to secure LSS’s pre-merger debts. But he argues he is not liable for LSS’s post-merger obligations because, by its terms, the guaranty unambiguously secures only the pre-merger performance of Lake Street Shirts, not its post-merger performance. Carothers claims that because the parties did not contemplate a merger when they signed the guaranty, to construe the guaranty as extending to LSS’s post-merger performance would amount to redrafting the original contract. Carothers relies on Wheeling Steel Corp. v. Neu, 90 F.2d 139 (8th Cir.1937), a case in which the court refused to hold the guarantor liable for the obligations of a company other than the company specifically referred to in the guaranty, even though both companies were substantially identical.

We are not persuaded by Carothers’s claim that the guaranty unambiguously extends only to Lake Street Shirts’s pre-merger performance. By its terms, the guaranty extends to “the performance by [Lake Street Shirts] of all terms and conditions of purchase orders ⅜ * * whether now existing or hereinafter entered into between [Lake Street Shirts] and Loving.” The guaranty unconditionally guarantees the present and future performance of “Lake Street Shirts” and is silent on the consequences of a merger. By asking us to read the guaranty as extending only to the pre-merger performance of Lake Street Shirts, Carothers is thus asking us to read a limitation into the guaranty that may have been intended but is neither expressly stated nor reasonably implied. We decline to do so. Instead, we conclude that absent language expressly disclaiming or assuming liability for Lake Street Shirts’s performance in the event of a merger, the guaranty’s enforceability depends on whether the merger changed the identity of Lake Street Shirts and imposed on Car-others without his consent an obligation that differed materially from the obligation he undertook when he signed the guaranty-

III. New Identity and Increased Risk

Whether changes in the principal are of sufficient magnitude to justify releasing a guarantor is a determination courts must make on a case-by-case basis. Fehr Bros., Inc. v. Scheinman, 121 A.D.2d 13, 509 N.Y.S.2d 304, 307-08 (1986). Courts agree that minimal changes do not affect a guarantor’s obligation. See Annotation, Change in Name, Location, Composition, or Structure of Obligor Commercial Enterprise Subsequent to Execution of Guaranty or Surety Agreement as Affecting Liability of Guarantor or Surety to the Obligee, 69 A.L.R.3d 567, 572 (1976). The reincorporation and name-change of a principal, for example, have been held to be insufficient to discharge a guarantor’s obligations absent a corresponding change in operating procedures or business structure. See, e.g., Folk v. Continental Can Co., 97 F.2d 322, 324 (4th Cir.1938) (upholding guaranty after change in principal’s business structure on finding that “[t]he business of the old company was conducted as usual by the [new company] with substantially the same officers and with the same assets which the new company had absorbed”). This is particularly true when the guarantor himself participates in the change or the change could reasonably have been anticipated. See, e.g., New York Am., Inc. v. Hub Advertising Agency, 136 Misc. 596, 240 N.Y.S. 367, 368 (N.Y.City Ct.1930) (holding guarantor was “estopped from using the cloak of a corporate entity to which he himself was a party to relieve him of any liability under [guaranty issued before incorporation to secure partnership’s debts]”); People v. Backus, 117 N.Y. 196, 22 N.E. 759, 760 (1889) (upholding guaranty after bank’s corporate existence was extended through renewal of its charter pursuant to an amendment to the National Banking Act on finding that guarantors had signed the guaranty knowing that bank was subject to banking laws, which could be amended at any time); Richardson v. Steuben County, 226 N.Y. 18, 122 N.E. 449, 451-52 (1919) (holding change in membership of partnership that owned bank did not release surety from liability for bank’s obligations because banking houses ordinarily continue their identity for generations and could do so only through a constant succession of partners).

Whether more substantial changes in the principal affect a guarantor’s obligation depends primarily on (a) whether the changes result in a new principal in terms of management, control, operating procedures, and business dealings; and (b) whether the changes materially alter the nature of the performance required of the guarantor. Thus, changes that allow the principal to survive as an independent entity and do not affect the guarantor’s original undertaking do not discharge a guaranty. See, e.g., Alton Banking & Trust Co. v. Sweeney, 135 Ill.App.3d 96, 89 Ill.Dec. 926, 481 N.E.2d 769, 773-74 (1985) (change in principal’s business from used-car lot to new-car dealership did not constitute material change warranting guarantor’s release from obligations under continuing guaranty, where guarantor owned both businesses and assented to the change, and amount of dealership’s indebtedness did not exceed amount specified in guaranty); New York Am., 240 N.Y.S. at 368 (partnership’s decision to incorporate did not release partner-guarantor from liability for new corporation’s debts because new corporation continued to conduct same business, at same address, under same name, with same directors and stockholders; business relation between creditor and principal continued unaffected; and partner-guarantor participated in decision to incorporate and became stockholder and director of newly formed corporation); Caldor, Inc. v. Mattel, Inc., 817 F.Supp. 408 (S.D.N.Y.1993) (finding that merger and subsequent spinoff of subsidiary, with resulting loss of control by parent-guarantor, did not fundamentally alter parent-guarantor’s risk under guaranty because subsidiary continued to operate same business under substantially same conditions as before merger and spinoff).

On the other hand, changes that result in a significantly different business organization and increase the guarantor’s exposure to liability serve to release the guarantor from obligations under the guaranty. Thus, the merger of a principal into another corporation discharged the guarantor’s obligation under a continuing guaranty because the principal did not survive the merger as an independent entity. Worth Corp., 255 N.Y.S. at 474-75. Instead, it assumed the name, character, corporate structure, and organization of the surviving corporation. Id. at 473. Similarly, the incorporation of a sole proprietorship and the subsequent acquisition of majority control by new stockholders released the guarantors from liability because they changed “the essential nature of the business enterprise!,]” diluted the guarantors’ control over the business, and “greatly expanded” their liability. Teledyne Midr-Am. Corp. v. HOH Corp., 486 F.2d 987, 990 (9th Cir.1973).

Carothers’s post-merger liability under the guaranty thus depends on whether the merger changed Lake Street Shirts’s corporate identity significantly and thereby materially increased the risk Carothers assumed when he signed the guaranty. Other relevant factors include whether Car-others participated in effecting the merger or otherwise assented to it, whether he could reasonably have anticipated a material increase in the risk he assumed under the guaranty, whether Loving had notice of the change before performing, and whether Carothers opted to revoke the guaranty. See United States Shoe Corp., 793 F.2d at 163 (stating “guarantor may consent to the increased risk by creating it”); Fehr Bros., 509 N.Y.S.2d at 310 (concluding guarantor, “in making a voluntary business decision which created the conditions causing the risk to increase and in failing to carry out the simple task of relieving himself of his obligations by providing written notice to plaintiff of his intent to terminate the guaranty, implicitly consented to that increased risk”); Mountain States Tel. & Tel. v. Lee, 95 Idaho 134, 504 P.2d 807, 808-09 (1972) (guarantor not released after formation of new principal corporation because he participated in change as stockholder and officer, failed to revoke, and did not inform creditor of the change).

A. New Identity

Our review of the undisputed facts in the record shows that the merger did not result in a significantly new entity, the debts of which Carothers never intended to guarantee. LSS continued to operate the same business, under the same name, at the same address, under substantially the same management. Fick continued to oversee the company’s day-to-day operations. The record contains no indication that the company’s operating procedures changed. And the relationship between LSS and Loving did not change: Loving continued to extend credit to LSS as an entity separate from Stafford II under the same terms as before the merger, continued to deal with Fick as its principal contact, and continued to maintain a separate account for LSS. The record thus conclusively establishes that LSS did not undergo a change of identity after the merger.

B. Increased Risk

The next question then is whether as a matter of law the merger materially increased the risk Carothers undertook when he signed the guaranty. Minnesota courts have used an increased-risk analysis in determining whether a material alteration in the contract between the principal and the creditor discharges a guarantor. See, e.g., Minnesota Fed. Sav. & Loan Ass’n v. Central Enters. of Superior, Inc., 311 Minn. 46, 51, 247 N.W.2d 46, 50 (1976); Estate of Frantz v. Page, 426 N.W.2d 894, 898 (Minn.App.1988), review denied (Minn. Sept. 16,1988).

Carothers argues that his risk increased as a result of the merger because LSS doubled in size and his control over LSS decreased in direct proportion to his ownership interest in Stafford II. But a bigger business entity does not necessarily create a materially bigger risk. In fact, Stafford II was profitable until 1994 despite the increase in size. Additionally, it is unlikely that Carothers’s alleged loss of control over LSS affected his risk under the guaranty because Carothers was not involved in the day-to-day operations of LSS and LSS continued under substantially the same management as before the merger.

Loving argues that because it maintained a separate account for LSS, Caroth-ers’s post-merger risk remained limited to LSS’s debts and is thus consistent with the risk he assumed when he signed the guaranty. But the record does not establish whether the merger resulted in a significant increase in capital that would have allowed LSS to obtain more credit from Loving than it could have obtained before the merger. Arguably, a significant increase in capital and the resulting increase in LSS’s ability to obtain credit may have increased the risk inherent in LSS’s separate account when Carothers signed the guaranty. We thus conclude that a question of fact remains on whether the merger increased Carothers’s risk under the guaranty. A fact question also remains on whether Loving knew of the merger before it extended additional credit to LSS. Because. the record raises issues of material fact, summary judgment is not appropriate. Accordingly, we reverse and remand.

DECISION

The merger of LSS and Stafford I did not release Carothers by operation of law from liability under the guaranty for the post-merger performance of LSS. Because the guaranty is silent on the contingency of a merger and fact questions remain on whether the merger impermissibly increased the risk Carothers assumed under the guaranty initially, we reverse and remand.

Reversed and remanded.

      . Stafford I owed Loving more than $100,000 for goods delivered between October 1995 and March 1998. Loving brought a separate action against Fick, seeking to enforce Fields personal guaranty for Stafford I's debts. The district court denied Fick summary judgment on Loving’s claims, reasoning that issues of material fact remained on whether Fick's post-merger conduct evidenced an intent to honor the guaranty as a continuing guaranty.


author: THOMAS G. FORSBERG, Judge

text:
    STATE of Minnesota, City of Medina, Appellant, v. Carter Keith OHRT, Respondent.
    No. C9-00-891.
    Court of Appeals of Minnesota.
    Dec. 12, 2000.

      Mike Hatch, Attorney General, St. Paul, MN; and Steven M. Tallen, Tallen & Baertschi, Minneapolis, MN, (for appellant).
    Thomas W. Krause, John P. Worrell, Hoene and Krause, P.A., St. Paul, MN, (for respondent).
    Considered and decided by STONEBURNER, Presiding Judge, FORSBERG, Judge, and HOLTAN, Judge.

       Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const, art. VI, § 10.

   OPINION

THOMAS G. FORSBERG, Judge

This appeal is from an order deferring sentencing on respondent Carter Ohrt’s guilty plea to domestic assault and providing that the plea would be vacated and the case dismissed after two years if Ohrt successfully completed probation. This court accepted jurisdiction over the appeal, concluding that the district court’s order was equivalent to a stay of adjudication, appealable by the state as a pretrial order. See State v. Thoma, 569 N.W.2d 205, 208 (Minn.App.), aff'd mem., 571 N.W.2d 773 (Minn.1997). We reverse.

FACTS

The state charged Ohrt with fifth-degree domestic assault for an incident occurring on May 11, 2000. Ohrt’s wife told police that Ohrt pushed her down, grabbed her by the arm and by the neck and face, and dragged her to the couple’s garage.

Ohrt signed a petition to plead guilty, which outlined a plea agreement under which Ohrt would plead guilty to the offense as charged and the prosecutor would recommend a stayed jail sentence if Ohrt turned out to have no prior incidents of domestic assault.

At the guilty plea hearing, the district court, noting that it had received a report from the probation office, and that the victim did not want a no-contact order, stated its willingness to “handle this matter pursuant to [Minn.Stat. § ] 609.135.” The court stated it was “not going to sentence Mr. Ohrt today,” but instead place him on probation for two years. After Ohrt’s attorney established the factual basis for the plea, the court stated:

I’m not going to sentence you today. And I will never sentence you if you meet the conditions that I impose on you now. If you do that, then at the end of the two-year period, the plea that you’ve entered today will be crossed out and vacated and the case will be dismissed.

ISSUE

Did the district court err in staying adjudication of conviction?

ANALYSIS

The state argues that the district court erred in deferring adjudication of Ohrt’s conviction and in providing that, upon successful completion of probation, the plea would be vacated and the charge dismissed. The state argues that the circumstances of this case do not support a stay of adjudication. See State v. Krotzer, 548 N.W.2d 252, 254-55 (Minn.1996) (holding that courts have inherent authority in “special circumstances” to stay adjudication); cf. State v. Foss, 556 N.W.2d 540, 541 (Minn.1996) (explaining that stays of adjudication should only be used sparingly and to correct a clear abuse of the prosecutor’s discretion in charging).

At the guilty plea hearing, the prosecutor noted that he had agreed to a stay of imposition, as part of the plea agreement, but objected to providing for a later vacation of the plea and dismissal of the charge. The prosecutor noted that if the plea were later vacated and the charge dismissed, it could not be used to enhance a later offense. See Minn.Stat. § 609.2242, subd. 2 (1998).

The district court did not issue a written order giving its reasons for declining to sentence Ohrt. The court did note, in the course of the hearing, that Ohrt had no prior offenses and appeared to be a good risk on probation, that the victim was not seeking a no-contact order, that Ohrt deserved a chance to avoid a criminal record, and that many prosecutors in the county did not object to that type of disposition.

The legislature has authorized stays of imposition, but has not made any provision for deferring or staying adjudication as part of that disposition. See Minn.Stat. § 609.135, subd. 1(a) (1998); cf. Minn. Stat. § 609.095(b) (1998) (providing that except in drug cases or by agreement of the parties, court may not refuse to adjudicate guilt). The supreme court has noted a trial court order providing for vacation and dismissal as part of a stay of imposition. City of St. Paul v. Froysland, 310 Minn. 268, 269, 246 N.W.2d 435, 436 (1976). But there is no precedential authority approving such a disposition. See Minn.Stat. § 609.13, subd. 1(2) (1998) (providing that if felony defendant given stay of imposition successfully serves probation the conviction is deemed to be a misdemeanor); United States v. Johnson, 43 F.3d 1211, 1214-15 (8th Cir.1995) (holding that Minnesota stay of imposition is “sentence” for purposes of federal sentencing guidelines even if no term of probation was imposed); State v. Clipper, 429 N.W.2d 698, 701 (Minn.App.1988) (holding that “felony conviction” for which imposition of sentence was stayed could be counted as prior felony conviction under sentencing guidelines).

The available authority treats a stay of imposition as a conviction, not merely a plea or finding of guilt on which adjudication has been stayed. Thus, the district court lacked authority to dispose of the ease as it did unless there were “special circumstances” supporting a stay of adjudication under Krotzer.

The district court mentioned Ohrt’s lack of a prior criminal record, his amenability to probation, and the benefits of avoiding a criminal record when discussing its disposition. But the lack of a criminal record is not a “special circumstance” supporting a stay of adjudication. State v. Leming, 617 N.W.2d 587, 589 (Minn.App.2000). Collateral consequences of a conviction do not constitute “special circumstances” supporting a stay of adjudication. Thoma, 569 N.W.2d at 209; see also State v. Scaife, 608 N.W.2d 163, 164-65 (Minn.App.2000), review denied (Minn. May 16, 2000). The benefit to Ohrt of avoiding those consequences does not support the deferral of adjudication. Neither does the apparent agreement of the victim to that disposition. Leming, 617 N.W.2d at 589.

In order to stay adjudication, the district court must find a clear abuse of discretion in the prosecutor’s exercise of the charging function. Foss, 556 N.W.2d at 541. We conclude that the district court should provide reasons, whether in writing or on the record, to support its conclusion that there are “special circumstances” supporting a stay of adjudication. The district court is required to provide reasons supporting a sentencing departure. Williams v. State, 361 N.W.2d 840, 844 (Minn.1985). Written reasons are required if the court dismisses a complaint “in furtherance of justice.” Minn.Stat. § 631.21 (1998). Specific findings are necessary to provide an adequate record for appellate review of many types of orders. See State v. Balma, 549 N.W.2d 102, 105 (Minn.App.1996). Before staying adjudication of a criminal conviction, the district court should provide reasons supporting its conclusion that “special circumstances” exist, in the form of a clear abuse of discretion in charging, that warrant a stay of adjudication.

The record on appeal does not reveal any “special circumstances” supporting the district court’s stay, or deferral, of adjudication.

DECISION

The district court erred in staying adjudication.

Reversed.

         Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

      . However, a “conviction” is defined to include a plea of guilty “accepted and recorded by the court.” Minn.Stat. § 609.02, subd. 5(1) (1998).