United Prairie Bank-Mountain Lake v. Haugen Nutrition & Equip., LLC, A09-0607

CourtSupreme Court of Minnesota (US)
Writing for the CourtSTRAS
PartiesUnited Prairie Bank-Mountain Lake, Respondent, v. Haugen Nutrition & Equipment, LLC, et al., Appellants.
Docket NumberA09-0607
Decision Date14 March 2012

United Prairie Bank-Mountain Lake, Respondent,
v.
Haugen Nutrition & Equipment, LLC, et al., Appellants.

A09-0607

STATE OF MINNESOTA IN SUPREME COURT

Filed: March 14, 2012


Court of Appeals

Stras, J.
Dissenting, Dietzen, J., Gildea, C.J.

Office of Appellate Courts

Samuel L. Hanson, Charles B. Rogers, Jason R. Asmus, Briggs and Morgan, P.A., Minneapolis, Minnesota, for respondent.

John E. Mack, Mack & Daby, P.A., New London, Minnesota, for appellants.

SYLLABUS

Under the Minnesota Constitution, appellants were entitled to a jury trial on respondent's claim for the recovery of attorney fees because the nature and character of respondent's claim was an action seeking monetary payment for indemnity based upon the express provisions of a contract, which is a legal rather than an equitable claim.

Reversed in part and remanded.

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OPINION

STRAS, Justice.

The question presented by this case is whether the Minnesota Constitution provides the right to a jury trial for a claim to recover attorney fees based on a contract. In 2004, appellants Leland Haugen, Ilene Haugen, and Haugen Nutrition and Equipment, LLC ("HNE"), defaulted on promissory notes held by respondent United Prairie Bank-Mountain Lake ("UPB"). The various loan agreements between the parties contained provisions in which appellants agreed to pay UPB's reasonable costs and attorney fees associated with the protection of UPB's security interests and the enforcement of appellants' obligation to repay the loans. The district court denied appellants' motion to submit the question of reasonable attorney fees to the jury and subsequently awarded UPB over $400,000 in attorney fees. The court of appeals affirmed, holding that UPB's claim for the recovery of attorney fees was equitable in nature and thus did not give rise to a jury trial right under the Minnesota Constitution. Because we conclude that appellants are constitutionally entitled to a jury determination on UPB's claim for attorney fees, we reverse in part and remand for further proceedings.

I.

Leland and Ilene Haugen owned two parcels of land in Cottonwood County, Minnesota, on which they farmed and operated a feed mill business. In 2002, the Haugens began to experience financial difficulties that affected their ability to make timely payments on their loans. UPB agreed to refinance the Haugens' debt and the parties devised a plan that involved transferring the Haugens' assets to an unrelated third

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party, Mark Sahli, and then forming a new entity, HNE, to purchase the assets from Sahli under a contract for deed.

The Haugens and HNE borrowed a total of $323,484.82 from UPB to complete the various transactions. UPB secured the loans with a mortgage on the two parcels of land in Cottonwood County, commercial security agreements, and personal guarantees executed by the Haugens. The promissory notes accompanying each of the new loans obligated the Haugens and HNE to "pay all costs of collection, replevin . . . or any other or similar type of cost." The notes further stated: "[I]f you hire an attorney to collect this note, I will pay attorney's fees plus court costs (except where prohibited by law)." The mortgage required HNE to pay "attorneys' fees, court costs, and other legal expenses" that were "incurred by [UPB] in enforcing or protecting [UPB]'s rights and remedies under this Mortgage." The commercial security agreements provided that, in the event UPB repossessed the secured property or took action to enforce the obligations of HNE, UPB could apply any proceeds recovered to the "expenses of enforcement, which includes reasonable attorneys' fees and legal expenses." Finally, in the personal guarantees, the Haugens agreed to pay "all costs and expenses (including reasonable attorneys' fees and legal expenses) incurred by [UPB] in connection with the protection, defense or enforcement of [these guarantees] in any litigation or bankruptcy or insolvency proceedings."

In December 2003, Meadowland Farmers Coop, which held a judgment against Leland Haugen and another company owned by the Haugens, brought an action against, among others, the Haugens, HNE, Sahli, and UPB challenging the transactions between

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those parties as fraudulent transfers. UPB incurred $117,110.24 in legal fees defending the action before the defendants settled with Meadowland.

On November 17, 2004, UPB notified HNE that it was in default on one of the promissory notes, which resulted in HNE's default under each of the notes. Neither HNE nor the Haugens responded to UPB's default notice. On May 2, 2005, UPB brought the present action, asserting a number of claims, including the right to collect the amounts due under the promissory notes. UPB's amended complaint included two claims for breach of contract, one against the Haugens and HNE as "borrowers" for breach of the loan documents, and the other against the Haugens as "guarantors" for breach of their personal guaranties. In the prayer for relief, UPB sought a number of remedies, including a judgment "[a]warding damages, including all accrued interest, charges and reasonable attorneys' fees and costs . . . in an amount to be determined at trial." Haugen and HNE responded by asserting ten counterclaims, each of which the district court eventually dismissed.

The district court denied appellants' request for a jury determination regarding the amount of attorney fees sought by UPB. Following a 2-day trial, the court entered judgment against appellants and awarded UPB $403,821.82 in attorney fees. The court awarded $286,711.58 to UPB for its attorney fees incurred in this case1 and another $117,110.24 for attorney fees incurred by UPB in defending the Meadowland lawsuit.

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The court subsequently denied appellants' post-trial motion for a new trial or amended findings on attorney fees, concluding that appellants were not constitutionally entitled to a jury determination on attorney fees because the calculation of such fees was "a question of fact within the discretion of the district court." The court of appeals affirmed. United Prairie Bank-Mountain Lake v. Haugen Nutrition & Equip., LLC, 782 N.W.2d 263 (Minn. App. 2010). We granted appellants' petition for review.

II.

The question in this case is whether the Minnesota Constitution provides a right to a jury trial for a claim to recover attorney fees based on a contract. The interpretation and application of the Minnesota Constitution is a legal question that is reviewed de novo. Olson v. Synergistic Techs. Bus. Sys., Inc., 628 N.W.2d 142, 148 (Minn. 2001).

Article I, Section 4 of the Minnesota Constitution states that "[t]he right of trial by jury shall remain inviolate, and shall extend to all cases at law without regard to the amount in controversy." Minn. Const. art. I, § 4 (emphasis added). "This provision is intended to continue, unimpaired and inviolate, the right to trial by jury as it existed in the Territory of Minnesota when [the Minnesota Constitution] was adopted in 1857." Abraham v. Cnty. of Hennepin, 639 N.W.2d 342, 348 (Minn. 2002). A party is therefore constitutionally entitled to a trial by jury "if a party raising that same theory for relief at the time the Minnesota Constitution was adopted also would have been entitled to a jury trial." Olson, 628 N.W.2d at 149. Alternatively, "if that same type of action did not entitle a party to a jury trial at the time the Minnesota Constitution was adopted," then the Minnesota Constitution does not recognize a right to a jury trial today. Id.

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However, Article I, Section 4 does not freeze the right to a jury trial to only those causes of action that existed in 1857. See Abraham, 639 N.W.2d at 349. Instead, our case law requires us to analyze current causes of action and pleading practices in the context of the theories of relief available in, and the jurisprudence of, the 1850s. See Olson, 628 N.W.2d at 149. The focus of the inquiry therefore depends "on whether Minnesota's territorial courts guaranteed the right to a jury trial in the type of action" pled in a complaint. Id. (emphasis added). The answer to that question depends, in turn, on whether the claim in the complaint is an "action[] at law, for which the constitution guarantees a right to jury trial, [or an] action[] in equity, for which there is no constitutional right to jury trial." Abraham, 639 N.W.2d at 349. If the action is one at law, "either party may demand a jury trial." Olson, 628 N.W.2d at 149 (quoting Morton Brick & Tile Co. v. Sodergren, 130 Minn. 252, 254, 153 N.W. 527, 528 (1915)).

Two cases are illustrative of our approach in determining the nature and character of a cause of action. In Olson, we considered whether a constitutional right to a jury trial existed for a claim of promissory estoppel. 628 N.W.2d at 149-53. Although a separate, independent claim for promissory estoppel did not exist in 1857, we traced the origins of the doctrine to the English chancery courts. Id. at 149-50. After tracing its history, we ultimately concluded that the "equitable cause of action based on good-faith reliance forms the roots of our modern doctrine of promissory estoppel." Id. at 152. In concluding that a jury trial was not required, we examined the nature and character of the cause of action by examining the pleadings and the elements of plaintiff's promissory estoppel claim. Id. at 152-53.

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