Brown v. Lee

• Decision Date: 17 February 2015
• Docket Number: No. A14–1031.,A14–1031.
• Citation: 859 N.W.2d 836
• Parties: Judy BROWN, Appellant, v. Judith M. LEE, Respondent.
• Court: Minnesota Court of Appeals

859 N.W.2d 836

Judy BROWN, Appellant
v.
Judith M. LEE, Respondent.

No. A14–1031.

Court of Appeals of Minnesota.

Feb. 17, 2015.
Review Denied May 19, 2015.

Robert M. McClay, McClay • Alton, P.L.L.P., St. Paul, MN, for appellant.

Craig A. Brandt, Snyder & Brandt, P.A., Minneapolis, MN, for respondent.

Considered and decided by SMITH, Presiding Judge; SCHELLHAS, Judge; and HOOTEN, Judge.

OPINION

SCHELLHAS, Judge.

Appellant challenges the district court's summary-judgment dismissal of her contribution claim against respondent. We reverse and remand.

FACTS

In 2005, Gordon Brown personally guaranteed the debt of Weeres Industries Corp. (WIC) to Peoples National Bank of Mora, including future debt. In 2006 and 2009, Peoples made loans to WIC. In 2009, Judith Lee personally guaranteed the debt of “WEERES INDUSTRIES, INC.” (WII) to Peoples.

In January 2010, Peoples sued “[WIC] a/k/a [WII],” Gordon Brown, Lee, and numerous other business entities for the debt of WIC. Peoples alleged that “[WIC] a/k/a [WII]” had defaulted on its loans and that Gordon Brown and Lee had breached their guaranties. In March 2010, Peoples and all defendants except Lee entered into a forbearance agreement and executed a confession of judgment that Peoples could file in district court against any defendant that defaulted under the forbearance agreement. Gordon Brown defaulted. Before entry of judgment against him, Gordon Brown petitioned for dissolution of his marriage to appellant Judy Brown. In October 2010, the Browns dissolved their marriage. The dissolution judgment incorporated the terms of a marital termination agreement, under which Gordon Brown transferred substantially all of the Browns' assets to Judy Brown while retaining sole responsibility for their debts. Citizens State Bank Norwood Young Am. v. Brown, 849 N.W.2d 55, 58, 64 (Minn.2014).

In September 2011, the district court entered judgment against Gordon Brown for his default under the forbearance agreement, and Peoples sued the Browns for fraudulent transfer. A jury found that the Browns had violated the Minnesota Uniform Fraudulent Transfer Act by fraudulently conveying property with the intent to hinder creditors. In November 2012, the district court entered judgment against the Browns, voiding the fraudulent transfers to the extent necessary to satisfy

859 N.W.2d 839

Peoples's claim of $324,833.03.¹ On December 14, 2012, under power of attorney from Gordon Brown, Judy Brown assigned to herself Gordon Brown's right of contribution that he “may have” against Lee, arising out of Lee's personal guaranty of WII's debt to Peoples. On December 18, 2012, Gordon Brown died.

In April 2013, Judy Brown sued Lee, alleging that Judy Brown had paid Peoples $280,000 “representing monies owed on [WIC's] Notes” and that Lee, as a coguarantor, was jointly and severally liable for one-half that amount, “approximately $140,000 and any additional sums she may pay to Peoples.” Lee denied liability, counterclaimed, and moved for summary judgment on Judy Brown's contribution claim and partial summary judgment on her counterclaim for indemnification of legal expenses. The district court granted the motion, dismissed Judy Brown's contribution claim, granted partial summary judgment to Lee on her indemnification counterclaim, and denied Judy Brown's request for permission to move for reconsideration.

This appeal follows.

ISSUES

I. Is Judy Brown entitled to seek contribution from Lee as a coguarantor?

II. Does the doctrine of unclean hands bar Judy Brown's contribution claim?

ANALYSIS

“Summary judgment is appropriate when the evidence, viewed in the light most favorable to the nonmoving party, establishes that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law.” Citizens State Bank, 849 N.W.2d at 61 ; see also Minn. R. Civ. P. 56.03. “[Appellate courts] review de novo a district court's grant of summary judgment” and “view the evidence in the light most favorable to the party against whom summary judgment was granted to determine whether there are any genuine issues of material fact and whether the district court correctly applied the law.” Dukowitz v. Hannon Sec. Servs., 841 N.W.2d 147, 150 (Minn.2014). “[Appellate courts] may affirm a grant of summary judgment if it can be sustained on any grounds.” Doe v. Archdiocese of St. Paul, 817 N.W.2d 150, 163 (Minn.2012).

I.

“Contribution is an equitable remedy that allows one who has discharged more than his fair share of a common liability or burden to recover from another who is also liable the proportionate share which the other should pay or bear.” In re Individual 35W Bridge Litig., 806 N.W.2d 811, 815 (Minn.2011) (quotation omitted). Because contribution is an equitable remedy, a more deferential standard of review than de novo may be applicable when the district court has balanced the equities and determined not to award equitable relief. See RAM Mut. Ins. v. Rohde, 820 N.W.2d 1, 6 n. 3 (Minn.2012). But in this case, a more deferential standard of review is not applicable because, without balancing the equities, the district court concluded that Judy Brown's contribution claim fails as a matter of law because Judy Brown and Lee do not have

859 N.W.2d 840

common liability. See id. at 3–4, 6 n. 3 (stating that, on appeal from summary judgment, standard of review more deferential than de novo was not applicable when district court determined as a matter of law that plaintiff could not maintain subrogation action).

“Contribution requires, first, a common liability of two or more actors to the injured party, and second, payment by one of the actors of more than its fair share of the common liability.” City of Willmar v. Short–Elliott–Hendrickson, Inc., 512 N.W.2d 872, 874 (Minn.1994) ; see Engvall v. Soo Line R.R., 632 N.W.2d 560, 568 (Minn.2001) (“The very essence of the action of contribution is common liability.” (quotation omitted)). “Common liability exists when both parties are liable to the plaintiff for the same damages, even though their liability may depend on different legal theories.” Willmar, 512 N.W.2d at 874. “[T]he nature of the common liability is of secondary importance to the fact of common liability itself.” Id.

Right of contribution of coguarantors

The Minnesota Supreme Court has recognized a “well established rule which gives a right of contribution from his cosureties to a surety who has paid more than his proportion of the common liability.”² Nat'l Sur. Co. v. Becklund, 169 Minn. 177, 178, 210 N.W. 882, 883 (1926) ; see Wilkin Cty. v. First State Bank of Rothsay, 170 Minn. 115, 119, 212 N.W. 183, 185 (1927) ( “If a surety is compelled to pay more than his share he may enforce contribution from the others.”); Estate of Frantz v. Page, 426 N.W.2d 894, 902 (Minn.App.1988) (“Generally, a coguarantor is not liable for more than his pro-rata share of [a] debt, absent an agreement to the contrary.”), review denied (Minn. Sept. 16, 1988); see also Halpern v. Rosenbloom, 459 F.Supp. 1346, 1354 (S.D.N.Y.1978) (“[E]quity implies a contract between co-guarantors and an action for contribution is based on that contract,” and “as between the co-guarantors, no consideration is required to support an action for contribution.”); 23 Samuel Williston, A Treatise on the Law of Contracts § 61.64 (4th ed.2002) (“The right to contribution may frequently be given by express contract or by a contract implied in fact, but the existence of the right does not depend on such a contract.”). The Wisconsin Supreme Court has stated that the right of contribution is not dependent on “whether the sureties are jointly and severally bound, or only severally; or whether their suretyship arises under the same obligation or instrument, or under divers[e] obligations or instruments, if all the instruments are for the identical debt.” Kafka v. Pope, 194 Wis.2d 234, 533 N.W.2d 491, 495 (1995) (quotation omitted).

Common liability of Lee and Judy Brown

The district court concluded that Judy Brown and Lee do not have common liability. The court reasoned that Judy Brown was not personally liable to Peoples for Gordon Brown's original debt and that her obligation to Peoples “stem[med] only from receiving funds fraudulently.” Although Judy Brown was not personally liable to Peoples for Gordon Brown's original debt, we disagree that her contribution claim therefore fails as a matter of law. If Lee intended to guarantee the debts of WIC, Lee and Gordon Brown had common liability as coguarantors because WIC's default on its loans from Peoples triggered Peoples's right to enforce both Lee's and

859 N.W.2d 841

Gordon Brown's personal guaranties. Based on that alleged common liability with Lee, Gordon Brown assigned to Judy Brown any right of contribution from Lee. Additionally, although Judy Brown's liability to Peoples arose out of the Browns' fraudulent transfer, her liability is directly related to Gordon Brown's original debt to Peoples.

Without citation...