Langeland v. Farmers State Bank of Trimont
| Citation | 319 NW 2d 26 |
| Decision Date | 14 May 1982 |
| Docket Number | No. 81-308.,81-308. |
| Parties | Gerald LANGELAND, et al., Appellants, v. The FARMERS STATE BANK OF TRIMONT, Trimont, Minnesota, et al., defendants and third party plaintiffs, Respondents, Arthur T. Edman, defendant and third party plaintiff, Respondent, Welcome-Odin Farm Chemicals, Inc., etc., et al., Respondents, Fred C. Krahmer, third party defendant, Respondent. |
| Court | Minnesota Supreme Court |
Paul A. Skjervold, Minneapolis, for appellants.
Erickson, Zierke, Kuderer, Myster & Madsen and Elton A. Kuderer, Fairmont, for The Farmers State Bank of Trimont, et al.
Gislason, Dosland, Hunter and Malecki, C. Allen Dosland and Steven C. Isaacson, New Ulm, for Edman.
Pflueger & Kunz and Robert R. Pflueger, Ortonville, for Welcome-Odin Farm Chemicals, Inc.
Farrish, Johnson, Maschka & Hottinger and Gerald L. Maschka, Mankato, for Krahmer.
Heard, considered, and decided by the court en banc.
This is an appeal from an order granting motions to dismiss claims of interference with contractual relations and legal malpractice brought against a bank, an attorney, and a judgment creditor by farmowners who alleged that they had lost their right to redeem their farm from foreclosure due to the conduct of these defendants. Appellants also appeal from a denial of their request for attorneys fees.
Appellants Gerald and Marian Langeland had owned and resided upon their 80-acre farm for a number of years. Marian Langeland also owned a life estate in another 80-acre parcel nearby. The Langelands had suffered serious losses on their farming operation, and in 1977 asked respondent Leslie W. Peterson, the president of respondent Farmers State Bank, for financial advice. The Langelands and Peterson decided that the Langelands would rent the farm, and that the bank would lend them money to pay creditors. However, the Langelands were already behind in their mortgage payments, and on September 26, 1977, the Federal Land Bank, which held a first lien in the amount of $21,500, sold the farm for $24,518.77 at a foreclosure sale. Additional creditors acquired judgments thereafter.
Having decided to try to redeem the property within the 1-year redemption period, the Langelands entered into an agreement with the Farmers State Bank, mortgagee on a $50,000 mortgage junior to the Federal Land Bank mortgage, according to which the bank would lend them additional money to pay off the Federal Land Bank and other creditors. The Langelands signed another mortgage for $100,000, which was filed on September 18, 1978, and a $25,000 note.
The bank hired an attorney, respondent Arthur Edman, to handle the redemption of the farm. Edman filed a notice of intention to redeem only with respect to the bank's first mortgage of $50,000. The bank redeemed on the basis of the first mortgage by paying $26,820.26 to the Federal Land Bank and received a redemption certificate dated September 27, 1978.
On September 27, 1978, one of the judgment creditors, Welcome-Odin Farm Chemicals, Inc., which held a judgment of $853.50 against the Langelands, filed a timely notice of intention to redeem. Edman, misinterpreting the redemption statute, assumed incorrectly that each lienholder had 5 days after the end of the year of redemption in which to file a notice of intention to redeem. Consequently, he failed to file a notice for the bank's junior mortgage of $100,000, and Welcome-Odin became the holder of the sheriff's certificate.
Upon learning that Welcome-Odin had filed an intention to redeem, the bank entered into negotiations with Welcome-Odin's attorney, respondent Fred Krahmer. At a meeting at the bank on October 3, 1978, Krahmer informed Peterson that the bank had lost its chance to redeem as to the $100,000 mortgage. The bank and Edman claimed that Krahmer had agreed to accept the principal amount of the judgment and reasonable attorneys fees in satisfaction of the claim, and that by doing so, had waived Welcome-Odin's right to redeem. After Krahmer left his office, Peterson called Edman to discuss the matter. Edman advised Peterson to have the Langelands immediately tender the money owed on the judgment. On October 5 Marian Langeland signed a note for the purchase of a cashier's check for $904.71, payable to John Edman (Arthur Edman's son and law partner), attorney for Gerald Langeland. John Edman endorsed the check as follows:
Pay to the order of Fred Krahmer, Attorney for Odin Farm Chemicals, a division of Appleton Farm Chemicals, Inc. in full satisfaction of that judgment in the original amount of $853.50 entered on October 6, 1977, John Edman, Attorney for Gerald Langeland.
When John Edman delivered the check to Krahmer on the same day, Krahmer refused to accept it, stating that he had just redeemed in favor of Welcome-Odin. By tendering $78,623.23 to the sheriff, Krahmer was able to obtain for Welcome-Odin title to the Langelands' property, which was worth approximately $200,000.
Peterson claimed to have sent the Langelands a letter on October 19, 1978, that explained the situation, but the Langelands denied ever having received the letter. Peterson stated that he was unable to contact the Langelands before that time because he was in the hospital. The Langelands claimed to have been unaware that they had lost the property until December 19, when Gerald Langeland went to the bank to borrow some money for Christmas. At that time, Peterson informed him that title to the farm had been lost to a junior judgment creditor. Although Peterson told Langeland that he would get back to him some time between Christmas and New Years Day, the Langelands received no further word from anyone regarding the matter. The Langelands claimed that after they lost the title to their farm, they became ill, had marital problems, incurred difficulty obtaining credit, and that they and their children were publicly embarrassed and humiliated. Gerald Langeland stated that he was unable to work for a few weeks but kept no record of this. Neither Gerald nor Marian sought medical advice or counseling for their problems.
The Langelands commenced suit against the bank, Peterson, Edman, Welcome-Odin, and Krahmer, alleging negligent infliction of emotional distress and tortious interference with contract. The trial court set aside the certificate of redemption that was issued to Welcome-Odin because it was discovered that no such business entity actually existed; Welcome-Odin proved to be merely a division of Appleton Farm Chemicals, Inc., not a separate corporation. Krahmer, who apparently relied on information provided by Welcome-Odin representatives, believed incorrectly that Welcome-Odin was a corporate entity and attempted to redeem in the name of Welcome-Odin Farm Chemicals, Inc.
After the trial court set aside Welcome-Odin's redemption, the Langelands were restored to the ownership of the farm subject to the bank's $100,000 mortgage. On June 2, 1980, the court granted Krahmer's motion for summary judgment regarding the interference with contractual relations claim but retained the Langelands' claim for attorneys fees and expenses.
Prior to the trial, the court ordered the issue of attorneys fees to be severed from the main claim and heard by the court alone. The Langelands' attorney contended that he was entitled to $60,000 in fees, 70% payable by Edman, 20% by Peterson, and 10% by Welcome-Odin and Krahmer. He accepted the case on a contingent fee basis of one-third of the value of the Langelands' land or one-third of the land itself. He contended that the issues raised were novel and complex, and he estimated that he spent about 300 hours on the case. The Langelands had already paid him a retainer of $5,500. With the consent of all parties, the other attorneys involved in this case testified as to what they believed a reasonable fee would be for this matter. All concluded that a reasonable fee would be about $5,000; several commented that $60,000 would be unconscionable. The trial court agreed that a fair fee would be no more than $5,000. The court based this conclusion in part on the fact that the certificate was set aside as a result of the concerted efforts of Edman, Peterson, the bank, and the Langelands' attorney, not by the Langelands' attorney acting alone. The Langelands' motion to recover attorneys fees was denied.
On November 19, 1980, after jury selection and opening statements, the district court granted all defendants' motions for dismissal of the Langelands' claim for damages. The court also denied the motions of the bank and Peterson for leave to assert a cross-claim against Edman on the ground that with respect to services in connection with the setting aside of the certificate of redemption, Peterson and the bank were volunteers, and nothing that Edman did contributed to any difficulties the bank encountered in that regard.
The record was found to contain no evidence that Edman's failure to redeem contributed to the expenses incurred by Peterson and the bank. In addition, the court denied Welcome-Odin's motion for leave to assert a cross-claim for attorneys fees against Krahmer, first, because Krahmer's error in using the incorrect name in attempting to redeem was due to information given him by a representative of Welcome-Odin; second, because agents of Welcome-Odin were aware of the error; and finally, because the claim, which was made almost 2 years after the suit was brought, appeared to the court to be little more than an afterthought.
This case raises the following issues:
1. May the Langelands recover damages for emotional distress that allegedly resulted from the failure of the bank, the bank's attorney, and its president to redeem the bank's interest in their farm in a timely manner?
2. May the Langelands recover damages from the judgment creditor, Welcome-Odin, who redeemed the farm, and its attorney, Fred Krahmer, for alleged interference with the Langelands' contractual relations with the bank.
3....
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