McGlothlin v. Steinmetz, No. A06-1016.

• Decision Date: 19 June 2008
• Docket Number: No. A06-1016.
• Citation: 751 N.W.2d 75
• Parties: Beth McGLOTHLIN, creditor, Respondent, v. Michael STEINMETZ, et al., Debtors, and State Farm Insurance Companies a/k/a State Farm Fire and Casualty Company, garnishee, Appellant.
• Court: Minnesota Supreme Court

751 N.W.2d 75

Beth McGLOTHLIN, creditor, Respondent, v. Michael STEINMETZ, et al., Debtors, and State Farm Insurance Companies a/k/a State Farm Fire and Casualty Company, garnishee, Appellant.

No. A06-1016.

Supreme Court of Minnesota.

June 19, 2008.

William Laurence Moran, Murnane Brandt, St. Paul, MN, for Appellant.

Stephen R. O'Brien, Keith D. Johnson, Minneapolis, MN, for Respondent.

Heard, considered, and decided by the court en banc.

OPINION

GILDEA, Justice.

This case arises out of an underlying personal injury action in which Beth McGlothlin sought damages against Dawn and Michael Steinmetz for injuries McGlothlin suffered as a result of a severe dog bite at the Steinmetz home. The Steinmetzes had a homeowners insurance policy issued by appellant-garnishee State Farm Insurance Companies. State Farm appeals from an unpublished decision of the court of appeals, McGlothlin v. Steinmetz, No. A06-1016, 2007 WL 1599035 (Minn.App. June 5, 2007), reversing the district court's denial of McGlothlin's motion to add State Farm as a party and to file a supplemental complaint pursuant to Minn.Stat. § 571.75, subd. 4 (2006). Because we conclude that the court of appeals applied the appropriate standard of review and that McGlothlin demonstrated probable cause that State Farm might be liable for her injuries, we affirm.

The parties do not dispute the facts that are material to the determination of this case. Those facts show that on April 8, 2003, a dog owned by the Steinmetzes attacked and bit McGlothlin on the nose and that the attack took place at the Steinmetz home. McGlothlin filed a complaint against the Steinmetzes, alleging negligence and seeking damages for medical expenses incurred and emotional distress suffered as a result of the attack. The Steinmetzes and McGlothlin entered into a Miller-Shugart settlement,¹ collectible only from State Farm. Based on the settlement, the district court ordered that judgment be entered in favor of McGlothlin in the amount of $300,000—the liability coverage limit under the Steinmetzes' homeowners insurance policy.

Pursuant to Minnesota's garnishment statute, McGlothlin next served a garnishment summons and disclosure on State Farm.² State Farm denied any liability based on the definition of "insured" in the Steinmetzes' homeowners insurance policy. The policy defined "insured" as "you and, if residents of your household: * * * your relatives." The policy excludes insureds from coverage for bodily injury. Because, according to State Farm, McGlothlin was a "resident," of the Steinmetz home, she was an insured and thus excluded from coverage for the injury at issue.³

McGlothlin then moved the district court to permit the addition of State Farm as a party to the action and to grant leave for her to file and serve a supplemental complaint on State Farm pursuant to Minn. Stat. § 571.75, subd. 4. State Farm opposed the motion and submitted an affidavit from a claims representative, which contained factual information on which State Farm relied in denying coverage. In reply, McGlothlin submitted affidavits from herself and the Steinmetzes. Based on these affidavits, McGlothlin argued that she was not a resident of the Steinmetz home and that State Farm had erroneously denied liability.

According to the affidavits, in May 2002, when she was 24 years old, McGlothlin began working for a marketing firm in Hopkins, Minnesota. She earned $14.16 per hour and her employer paid for her health insurance. When she took this job, McGlothlin was living with her parents in Bloomer, Wisconsin, on the farm where she was raised. McGlothlin and Dawn Steinmetz are half-sisters, and during the same month she began working in Hopkins, McGlothlin began living at the Steinmetz home in Eagan, Minnesota, during the work week in order to reduce her commute to work.

McGlothlin continued this living arrangement throughout 2002 and into 2003. McGlothlin spent weekends at her parents' home and weeknights at the Steinmetz house. At the beginning of each work week, McGlothlin drove directly from Wisconsin to her job in Hopkins. She would stay at the Steinmetz home Monday through Thursday nights and then drive directly from her job back to Wisconsin at the end of each work week. If McGlothlin was not working on a Friday, she would drive from Hopkins to Wisconsin on Thursday night.

Regarding the arrangement with the Steinmetzes, the record reflects that McGlothlin paid them $150 per month for rent and utilities. She had a key to their house and her own room there, where she was permitted to keep some of her clothes. McGlothlin had access to the Steinmetz kitchen, but she ate out frequently and purchased her own food, which she kept in a separate refrigerator near her room in the basement. She typically stayed in her room in the evening and did not interact with the Steinmetzes. Dawn Steinmetz traveled often for work and was not typically home during the week, and she and McGlothlin would not talk to one another while she was away. McGlothlin was responsible for cleaning her room and the nearby bathroom. She occasionally fed and walked the Steinmetz dogs, but was not required to do so.

With respect to her parents' home in Wisconsin, McGlothlin also had a key to this house and had her own room there. But she paid no rent to her parents for her accommodations at their home, and when she was with her parents, the family typically ate meals together from groceries purchased by McGlothlin's parents. Her parents also assisted McGlothlin financially by helping to pay student loans and medical bills, and by providing other spending money. McGlothlin's chores at her parents' home included cleaning the entire house, laundry, and caring for her dogs and cat. McGlothlin lists her mailing address as her parents' home, although her employer listed both her parents' and the Steinmetzes' addresses as her places of residence for employment records.⁴ McGlothlin's car is registered and insured in Wisconsin. She holds a Wisconsin driver's license, and is registered to vote there. McGlothlin's checking and savings accounts are located in Wisconsin, but she has a Minnesota cellular telephone number.

After a hearing on McGlothlin's motion to add State Farm as a party and for leave for her to file and serve a supplemental complaint, the district court issued an order denying the motion. The court concluded that "[t]he undisputed facts of this case support a finding that, at a minimum, Ms. McGlothlin had dual residency in Bloomer, Wisconsin and at her sister's home in Eagan, Minnesota." Because the court concluded that McGlothlin was a resident of the Steinmetz home, she was excluded from coverage under the insurance policy. The court therefore held that McGlothlin had not established probable cause that State Farm was liable, and it denied McGlothlin's motion.

The court of appeals reversed. Applying a de novo standard of review, the court determined that the evidence regarding residency was "evenly divided" and "establishe[d] probable grounds that a reasonable fact-finder might determine that McGlothlin was not a resident of the Steinmetz home and that State Farm, therefore, is liable to McGlothlin under the insurance policy." McGlothlin, 2007 WL 1599035, at *4. We granted State Farm's petition for review.

State Farm argues that the court of appeals wrongly applied a de novo standard of review and, in the alternative, that even under a de novo standard the district court should be affirmed. We address each argument in turn.

I.

We first examine whether the court of appeals erred by reviewing de novo the district court's determination that McGlothlin had not met the garnishment statute's probable cause standard. Under the statute, "where the garnishee denies liability, the creditor may move the court * * * for an order making the garnishee a party to the civil action and granting the creditor leave to file a supplemental complaint against the garnishee * * *. If probable cause is shown, the motion shall be granted." Minn.Stat. § 571.75, subd. 4. State Farm argues that a "determination of `probable cause' in a garnishment action should not be disturbed unless `manifestly contrary to the evidence and without reasonable evidentiary support.'" (Quoting Altman v. Levine & Tanz, Inc., 256 Minn. 48, 51, 97 N.W.2d 460, 463 (1959).) State Farm further contends that the court of appeals erred when it applied a de novo standard of review in this case. McGlothlin argues that probable cause determinations should be reviewed de novo.

Outside the specific context at issue in this case—a probable cause determination under the garnishment statute—we have recognized that a probable cause determination is one of law and is reviewed de novo. See Chafoulias v. Peterson, 668 N.W.2d 642, 651 (Minn.2003) (noting that in cases involving the existence of probable cause for a search and seizure, we have stated that "the determination of probable cause is a question of law for the court and that an appellate court makes an independent review of the record to determine probable cause * * * where the historical facts material to the existence of probable cause are not contested"); Shane v. Comm'r of Pub. Safety, 587 N.W.2d 639, 641 (Minn.1998) ("When the facts of a case are undisputed, probable cause is a question of law to be reviewed de novo."); State v. Lee, 585 N.W.2d 378, 383 (Minn. 1998) (noting that "we review the district court's findings of historical fact relating to the probable cause determination for clear error under the clearly erroneous standard but we independently review de novo the issue of probable cause"); Smith v. Munch, 65 Minn. 256, 260, 68 N.W. 19, 21 (1896) (noting that "[i]t is also the settled law that what facts, and whether particular facts, constitute probable cause, is a question of law for the court; but what facts exist in a particular case, when there is a dispute in reference to them, is a question" of fact)....