Lariat Cos. v. Wigley

• Decision Date: 21 February 2023
• Docket Number: A22-1118
• Parties: Lariat Companies Inc., Appellant, v. Barbara Wigley, Respondent, Michael Wigley, Defendant.
• Court: Minnesota Court of Appeals

Lariat Companies Inc., Appellant, v. Barbara Wigley, Respondent, Michael Wigley, Defendant.

No. A22-1118

Court of Appeals of Minnesota

February 21, 2023

This opinion is nonprecedential except as provided by Minn. R Civ. App. P. 136.01, subd. 1(c).

Hennepin County District Court File No. 27-CV-11-23736

George E. Warner, Jr., Warner Law, LLC, Minneapolis, Minnesota (for appellant)

Heather L. Marx, Samuel E. Mogensen, Cozen O'Connor Minneapolis, Minnesota (for respondent)

Considered and decided by Larson, Presiding Judge; Bratvold, Judge; and Gaïtas, Judge.

GAITAS, JUDGE

Appellant Lariat Companies, Inc. (Lariat) appeals the district court's order granting respondent Barbara Wigley (wife) relief from judgment pursuant to Minnesota Rule of Civil Procedure 60.02(e). The district court determined that wife had satisfied a 2013 judgment against both wife and her codefendant-husband Michael Wigley (husband) for fraudulent transfer of funds husband owed to Lariat. On appeal, Lariat contends that (1) wife's argument to the district court-that husband's bankruptcy payment applied toward the judgment-was procedurally barred by the doctrine of collateral estoppel and (2) husband's bankruptcy payment cannot be applied toward the judgment as a matter of law. Because we reject Lariat's collateral-estoppel argument and discern no error in the district court's determination that husband's bankruptcy payment applied toward the judgment, we affirm.

FACTS

This case comes to us after more than a decade of litigation. The saga began in October 2008 when husband-the majority owner and president of Baja Sol Cantina EP, LLC (Baja Sol)-executed a ten-year commercial lease with Lariat for a Baja Sol restaurant. As part of the lease agreement, husband signed a personal guarantee of Baja Sol's obligations to Lariat. Two years later, in June 2010, Baja Sol defaulted on its lease. Lariat sued Baja Sol and husband for breach of contract, and in July 2011 was awarded $2,224,237 for unpaid rent and attorney fees (unpaid rent judgment). See Lariat Cos., Inc. v. Baja Sol Cantina EP, LLC, No. A12-2202, 2013 WL 4404589, at *1 (Minn.App. Aug. 19, 2013) (affirming judgment on appeal).^[1] In November 2011, Lariat filed a separate lawsuit against wife alleging violations of the Minnesota Uniform Fraudulent Transfer Act (MUFTA), Minn. Stat. §§ 513.41-.51 (2010).^[2] Lariat alleged that in 2009 and 2010, husband fraudulently transferred various assets to wife to avoid paying Lariat the amount he owed in unpaid rent.^[3] In June 2012, Lariat moved to join husband as a named defendant in the MUFTA case and asked the district court to hold husband and wife (the Wigleys) jointly and severally liable for the fraudulent transfers. The district court granted the motion over the Wigleys' objection.

After a two-day court trial in November 2013, the district court found the Wigleys liable under MUFTA because they had transferred funds "with actual intent to hinder, delay, or defraud Lariat; without receipt of reasonably equivalent value in exchange for the transfers; and at a time when . . . [husband] was insolvent or became insolvent as a result of the transfers." Lariat Cos., Inc. v. Wigley, No. A17-0210, 2020 WL 5507811, at *2 (Minn.App. Sept. 14, 2020) (alteration in original), rev. denied (Minn. Dec. 15, 2020). The district court ultimately entered judgment against both husband and wife, jointly and severally, for $788,487.78 (MUFTA judgment).^[4] Wife moved the district court for amended findings, but her motion was stayed when husband filed for voluntary bankruptcy under the applicable federal law-Chapter 11-in February 2014.

Lariat filed a proof of claim in husband's bankruptcy proceedings seeking payment for the entire amount of the unpaid rent judgment and the entire MUFTA judgment. Husband objected to Lariat's proof of claim, and the Eighth Circuit's Bankruptcy Appellate Panel (B.A.P.) concluded that Lariat's proof of claim was limited by federal law, which caps the amount a landlord can recover in damages during a bankruptcy proceeding. See Wigley, 533 B.R. at 272 (relying on 11 U.S.C. § 502(b)(6) (2012)). The B.A.P. also determined that Lariat could not recover both the unpaid rent and MUFTA judgments from husband because they were duplicative. Id. at 272-73. On August 24, 2016, husband paid Lariat $637,581.07, and on September 22, 2016, the bankruptcy court granted husband's discharge. As of that day, he was no longer personally liable on the debt he owed to Lariat. See Lariat Cos., Inc. v. Wigley (In re Wigley), 951 F.3d 967, 969 (8th Cir. 2020).

Meanwhile, wife's motion for amended findings in the MUFTA case was reinstated. In July 2016, wife filed a second motion in that case, asking the district court to vacate the MUFTA judgment because husband's upcoming bankruptcy discharge would retroactively eliminate her own liability under MUFTA. In a December 2016 order, the district court denied wife's motion for amended findings and motion to vacate or reduce the MUFTA judgment. Wife appealed, but that appeal was stayed when wife, herself, filed for Chapter 11 bankruptcy.

In wife's bankruptcy proceedings, Lariat filed a proof of claim asserting that it was entitled to the entire amount of the MUFTA judgment plus interest. Wife objected, and the bankruptcy court eventually determined that Lariat's claim was limited by the same landlord damages cap that applied to husband's debt. See Lariat Cos., Inc. v. Wigley (In re Wigley), 593 B.R. 327, 329 (B.A.P. 8th Cir. 2018). The B.A.P. reversed the bankruptcy court, concluding that husband's discharge meant Lariat no longer had any allowable claim against wife. Id. at 331. But in March 2020, the Eighth Circuit reversed the B.A.P., determining that husband's discharge only extinguished husband's liability-not wife's. See Wigley, 951 F.3d at 971. The Eighth Circuit agreed with the bankruptcy court, however, that Lariat's claim was limited by the landlord damages cap. Id. at 971-72. Wife eventually paid Lariat $361,249.07-the maximum amount permitted under the landlord damages cap-plus interest.

In May 2020, we reinstated wife's appeal from the district court's 2016 order denying her motions for amended findings and to vacate or reduce the MUFTA judgment. In our subsequent decision in that appeal, we determined that the district court did not abuse its discretion by denying the motion for amended findings. Lariat Cos., Inc., 2020 WL 5507811, at *3-9. We also affirmed the denial of wife's motion to vacate or reduce the judgment because husband's successful discharge of his debts through bankruptcy did not also retroactively extinguish wife's liability under MUFTA. Id. at *9-13.

Following our affirmance of the MUFTA judgment on appeal, Lariat filed a motion for order in aid of execution, seeking the district court's assistance to recover wife's remaining balance for the MUFTA judgment. Wife opposed this motion. In March 2021, wife filed a motion seeking to apply husband's bankruptcy payment toward the outstanding balance of the MUFTA judgment. Wife's motion explained that, if husband's bankruptcy payment applied, the MUFTA judgment was satisfied in full by the combination of husband's bankruptcy payment, wife's bankruptcy payment, and other payments made directly to Lariat over the years. In its 2021 order, the district court granted wife's motion.^[5]Lariat immediately appealed, but we determined the appeal was premature.

In October 2021, the Eighth Circuit weighed in again on matters still being litigated in wife's Chapter 11 bankruptcy proceedings. The Eighth Circuit concluded that wife's MUFTA judgment was nondischargeable under federal law. See In re Wigley, 15 F.4^th 1208, 1212-13 (8th Cir. 2021) (citing 11 U.S.C. § 523(a)(2)(A) (2018)). This decision meant that wife was still personally liable for any amount still owed to satisfy the MUFTA judgment beyond what she paid during the bankruptcy proceedings.^[6]

In July 2022, the district court issued another order addressing the postjudgment interest rate that applied to the nondischargeable portion of the MUFTA judgment. Wife then paid Lariat the amount she owed in interest, $167,046.06. Lariat appealed the 2021 order once again. In this appeal, Lariat argues that the MUFTA judgment has not been satisfied because the district court erroneously determined that husband's bankruptcy payment should be credited toward that judgment.

DECISION

I. Wife was not collaterally estopped from arguing that husband's bankruptcy payment applied toward the MUFTA judgment.

Lariat contends that collateral estoppel precludes wife's claim that husband's bankruptcy payment should be credited towards the MUFTA judgment. The district court rejected this argument, and we do too.

Collateral estoppel, or issue preclusion, prohibits a party from relitigating an issue that was raised during prior proceedings. Ellis v. Minneapolis Comm'n on Civ. Rts., 319 N.W.2d 702, 703-4 (Minn. 1982). The doctrine of collateral estoppel applies if:

(1) the issue was identical to one in a prior adjudication; (2) there was a final judgment on the merits; (3) the estopped party was a party or in privity with a party to the prior adjudication; and (4) the estopped party was given a full and fair opportunity to be heard on the adjudicated issue.

Ill. Farmers Ins. Co. v. Reed, 662 N.W.2d 529 532-33 (Minn. 2003) (quoting Ellis, 319 N.W.2d at 702, 704). Collateral estoppel does not apply when an issue has not been actually litigated and decided. In re Tr. Created by Hill, 499 N.W.2d 475, 484 (Minn.App. 1993), rev. denied (Minn. July 15, 1993); see also Hauschildt v. Beckingham, 686 N.W.2d 829, 837-38 (Minn. 2004) ("The issue on which collateral estoppel is to be applied must be the same as...