Court Opinion

ID: 3211339
Source: CourtListenerOpinion
Date Created: 2016-06-09 06:08:05.105322+00
Date Added: 2024-06-11T14:03:46.252148
License: Public Domain

This opinion will be unpublished and
                         may not be cited except as provided by
                         Minn. Stat. § 480A.08, subd. 3 (2014).

                               STATE OF MINNESOTA
                               IN COURT OF APPEALS
                                     A15-1061

                          In re the Estate of: Bernice R. Murray
                              aka Bernice Murray, Deceased

                                  Filed March 7, 2016
                                        Affirmed
                                      Ross, Judge

                              Nicollet County District Court
                                 File No. 52-PR-12-334

Douglas B. Altman, Darron C. Knutson, Altman & Izek, Minneapolis, Minnesota (for
appellant)

Rodney J. Mason, Kimberly A. Mason, St. Paul, Minnesota (for respondents Chase and
Erin Jonason)

Barbara P. Berens, Carrie L. Zochert, Erin K. F. Lisle, Berens & Miller, P.A., Minneapolis,
Minnesota (for respondent Leland Jonason)

      Considered and decided by Bjorkman, Presiding Judge; Ross, Judge; and

Larkin, Judge.

                        UNPUBLISHED OPINION

ROSS, Judge

      This appeal concerns Michael Pint’s attempt to collect on a Hennepin County

judgment that he secured against his former business partner, Leland Jonason, by attaching

property that Jonason’s mother bequeathed to him but that Jonason disclaimed in a Nicollet

County probate proceeding. Pint personally guaranteed a line of credit that Jonason
obtained to fund their joint business venture. Jonason defaulted on the resulting loan and

Pint paid the lender the default amount. The lender assigned its rights to Pint, and Pint

obtained a corresponding judgment against Jonason. Jonason’s mother bequeathed

property to Jonason, but Jonason disclaimed the inheritance, preventing Pint from attaching

it to satisfy the judgment. The Nicollet County District Court denied Pint’s motion to

invalidate Jonason’s disclaimer, rejecting Pint’s argument that res judicata and the

Hennepin County judgment required it to grant the motion. We hold that res judicata did

not obligate the district court to reject Jonason’s argument that the guaranty’s broad waiver-

of-claims provision prevents Pint, acting as guarantor, from asserting a claim against

Jonason. And we hold that the district court correctly interpreted the waiver to determine

that Pint could not, as guarantor, assert a disclaimer-invalidating claim against Jonason.

We do not address Pint’s tardy argument that the waiver provision applies to him only as

guarantor but not as assignee, because Pint did not make the argument in the district court

and he mentions it for the first time in his reply brief on appeal. We therefore affirm.

                                          FACTS

       Michael Pint and Leland Jonason were partners in a mobile-home park business

venture. Pint primarily funded the company and Jonason primarily managed it. Short on

operational funds in October 2009, Jonason obtained a line of credit from Central Bank to

finance the park’s daily expenses, and Pint personally guaranteed the loan. The consequent

promissory note grew to $322,200 and came due in October 2012. Jonason failed to pay.

Pint paid Central Bank the $322,200 obligation pursuant to his guaranty, and the bank

assigned him its rights under the note.

                                              2
       Pint then sought recovery from Jonason in the district court in two counties—

Hennepin (the contract action) and Nicollet (the probate action). Pint sued Jonason in

Hennepin County District Court based on contract principles, seeking to collect on the

assigned promissory note that Pint purchased from Central Bank. The district court granted

Pint’s motion for summary judgment against Jonason in the amount of the note plus interest

and attorney’s fees, totaling $362,435.15. Jonason’s mother, Bernice Murray, died testate,

leaving Jonason half the residue of her estate, including Nicollet County real property.

Jonason executed and filed with the district court in Nicollet County a disclaimer of his

interest in the Nicollet County property. Murray’s will redirected the disclaimed property

to Chase and Erin Jonason, Leland Jonason’s children.

       Pint moved the district court in Nicollet County to vacate Jonason’s disclaimer in

the probate proceeding of Murray’s estate. He maintained that the disclaimer was void

under Minnesota Statutes section 524.2-1106(b)(4) (2014) because Leland Jonason was

insolvent. Chase and Erin Jonason responded that Pint did not have standing to vacate the

disclaimer and asserted other defenses. Leland Jonason also responded to Pint’s motion,

asserting that he was solvent at the relevant time and that, in any event, Pint’s guaranty

expressly waived any right to any claim against him based on the Central Bank note. At

the motion hearing, Pint’s counsel argued that res judicata barred Leland Jonason’s waiver

argument due to the Hennepin County judgment on the Central Bank note.

       The Nicollet County District Court denied Pint’s motion to vacate the disclaimer. It

first held that Pint had standing to challenge the disclaimer. But it determined that Pint’s

claim was barred by a waiver provision in Pint’s guaranty in which Pint agreed as follows:

                                             3
“I [Pint] also waive and relinquish all present and future claims, rights, and remedies

against borrower [Leland Jonason] or any other obligated party arising out of the creation

or my performance of this guaranty.” The district court refused to hold that the doctrine of

res judicata entitled Pint to a favorable determination based on the Hennepin County

District Court’s judgment. Pint appeals the Nicollet County order on the issues of res

judicata and its interpretation of the guaranty waiver. Chase and Erin Jonason have filed a

notice of related appeal challenging the district court’s determination that Pint has standing

to challenge the disclaimer’s validity.

                                      DECISION

                                              I

       We first address Chase and Erin Jonason’s challenge to the district court’s holding

that Pint has standing to contest the disclaimer in the probate proceeding. Because the facts

relevant to standing are undisputed, we review the district court’s standing determination

de novo, as a question of law. Olson v. State, 742 N.W.2d 681, 684 (Minn. App. 2007). A

party’s standing can rest on either of two circumstances: the plaintiff has suffered an injury-

in-fact or a statute confers standing. State by Humphrey v. Philip Morris Inc., 551 N.W.2d
490, 493 (Minn. 1996).

       The district court determined that Pint has statutory standing as an “interested

person” under Minnesota Statutes section 525.31 (2014) and can contest the disclaimer

based on our decision in In re Estate of Pawlik, 845 N.W.2d 249, 250 (Minn. App. 2014),

review denied (Minn. June 25, 2014). We agree that Pint has standing as an “interested

person,” but under a different provision, specifically, section 524.3-105 (2014).

                                              4
       This case is dissimilar to Pawlik, where we determined that an heir’s judgment

creditor had standing to petition the district court to declare that the decedent died intestate

and to apportion the estate to the heirs under Minnesota Statutes section 525.31. 845
N.W.2d at 254. That section declares that, when an intestate decedent has been dead for

three years, “any interested person” may petition the court to determine the descent of the

decedent’s property. Minn. Stat. § 525.31. In Pawlik, we relied on the probate code’s

general definition of “interested person” to include “heirs, devisees, children, spouses,

creditors, beneficiaries and any others having a property right in or claim against the estate

of a decedent, ward or protected person which may be affected by the proceeding.” Minn.

Stat. § 524.1-201(32) (2014). The definition adds, “The meaning as it relates to particular

persons may vary from time to time and must be determined according to the particular

purposes of, and matter involved in, any proceeding.” Id. We held that because the

petitioner’s judgment could be satisfied by the decedent’s property if inherited by the heir,

the petitioner was a “creditor or . . . other person having a property right in the decedent’s

estate.” Pawlik, 845 N.W.2d at 254.

       Here, unlike in Pawlik, it is undisputed that the decedent died testate, so our

reasoning in Pawlik does not control. Pint’s motion to vacate Jonason’s disclaimer rests

instead on statutory provisions codifying the Uniform Disclaimer of Property Interests Act,

which nowhere refers to “any interested person” or suggests who may challenge a

disclaimer. See Minn. Stat. §§ 524.2-1101–1116 (2014).

       But Minnesota’s probate code offers wider ground on which Pint can establish

standing as an “interested person.” Particularly, section 524.3-105 provides that “[a]ny

                                               5
interested person in a decedent’s estate . . . may petition the court for orders in formal

proceedings within the court’s jurisdiction including but not limited to those described in

this article.” Pint filed his petition in the district court in Nicollet County where Murray’s

will was “in formal proceedings,” and Pint is an “interested person” as a judgment creditor

of an heir named in that will based on “the particular purposes of, and matter involved in,

[the] proceeding.” Minn. Stat. § 524.1-201(32). Similar to the petitioner in Pawlik, if Pint

prevails on his motion to vacate the disclaimer, he may be able to satisfy his judgment

using Jonason’s interest in the inherited property. See Pawlik, 845 N.W.2d at 254. We hold

that Pint is an “interested person” under section 524.3-105 and can petition the district court

in Murray’s probate proceeding. We affirm the district court’s holding that Pint has

standing to challenge Jonason’s disclaimer.

                                               II

         Pint relies on his judgment in the Hennepin County lawsuit and maintains that the

district court in Nicollet County was precluded by res judicata from considering whether

the waiver-of-all-claims provision in the guaranty bars him from challenging Jonason’s

disclaimer in the probate proceeding. We review de novo whether res judicata is available

for the district court to apply. Hauschildt v. Beckingham, 686 N.W.2d 829, 840 (Minn.

2004).

         We clarify Pint’s res judicata claim as it concerns the related doctrine of collateral

estoppel. The terms res judicata (commonly referred to as claim preclusion) and collateral

estoppel (commonly referred to as issue preclusion) are sometimes used interchangeably,

but the doctrines are distinct. Id. at 837. Res judicata prevents parties from relitigating

                                               6
claims resolved in a final adjudication, even if the later litigation raises new legal theories.

Id. By contrast, collateral estoppel prevents the litigation of specific legal issues that have

been formerly adjudicated. Id. A party can rely on res judicata in a later claim only if the

later claim involves the “same set of factual circumstances” as the previously adjudicated

claim, see id. at 840, while a party can rely on collateral estoppel only when the specific

issue was resolved in the prior adjudication, see id. at 837. Although collateral estoppel

potentially applies to more circumstances than res judicata, collateral estoppel requires that

the estopped party had a “full and fair opportunity to be heard on the adjudicated issue.”

Id. Res judicata, which tends to apply in fewer circumstances, more broadly prevents

litigating issues that either were litigated or that could have been litigated. See id. at 840.

       The distinction is relevant here, because Pint does not assert collateral estoppel. He

expressly raises only res judicata, maintaining that the district court in Nicollet County was

bound to disregard any waiver assertion because the district court in Hennepin County had

already entered judgment on Pint’s damages claim. We therefore will limit our analysis to

the doctrine of res judicata.

       A four-part test determines whether res judicata is available. Res judicata bars a

subsequent claim when “(1) the earlier claim involved the same set of factual

circumstances; (2) the earlier claim involved the same parties or their privies; (3) there was

a final judgment on the merits; [and] (4) the estopped party had a full and fair opportunity

to litigate the matter.” Id. All four elements must be established for res judicata to apply.

Id.

                                               7
       We agree with the district court that res judicata does not apply here. Pint’s res

judicata claim fails under the first element. The Hennepin County action involving

Jonason’s indebtedness to Pint for his payment of the Central Bank note involves different

factual circumstances from Pint’s motion challenging the validity of Jonason’s disclaimer.

Each of the claims (that Pint is entitled to judgment for paying Jonason’s defaulted loan

and that Jonason is entitled to disclaim his bequeathed property) requires evidence that

differs from the other.

       Pint’s Hennepin County contract claim and his Nicollet County motion to vacate

Jonason’s disclaimer would depend on some of the same evidence, but the factual

similarities are insufficient for us to say that the claims are the same or that they constitute

the same cause of action. The district court in the contract case entered judgment based on

the facts that Jonason failed to pay the Central Bank loan as required by the terms of his

line of credit and that Pint made the payment and was assigned the bank’s rights on the

note. By contrast, to invalidate Jonason’s disclaimer in the probate case, Pint would need

to produce evidence that Jonason is indebted to Pint and that Jonason was insolvent when

his waiver became irrevocable. See Minn. Stat. § 524.2-1106(b)(4). Determining

insolvency requires evidence about Jonason’s assets and liabilities, see Minn. Stat. § 524.2-

1102(9), and this evidence is irrelevant to the Hennepin County contract claim. The two

claims also arose at different times. This is significant because we will not hold that claims

arise from the same cause of action if “the right to assert the second claim did not arise at

the same time as the right to assert the first claim.” Care Inst., Inc.-Roseville v. County of

Ramsey, 612 N.W.2d 443, 447 (Minn. 2000). The Hennepin County action arose when Pint

                                               8
paid the balance and was immediately assigned the bank’s rights in October 2012, three

months before Jonason disclaimed his interest in the Nicollet County property.

       Because the Hennepin County action and the current action to vacate the disclaimer

are not the same claim or cause of action, the first element of res judicata is not met. This

alone prevents res judicata from barring Jonason from asserting his waiver-clause

argument. We therefore hold that the doctrine does not bar the district court’s analysis of

the guaranty waiver clause. We do not address any possible application of collateral

estoppel because Pint did not raise the issue on appeal and the district court did not consider

it. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).

                                             III

       We turn to the effect of the disputed waiver provision. The guaranty that Pint signed

so that Jonason could obtain the line of credit from Central Bank contained a broad waiver

provision, stating that the guarantor (Pint) relinquished all claims against the borrower

(Jonason). The district court reasoned from the waiver’s plain language that Pint agreed to

forego any possible claim against Jonason for payment of the loan, precluding Pint from

collecting from Jonason. We review the district court’s interpretation of a contract de novo.

Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004). We discern

the parties’ intent from the plain language of the contract. Id. If a provision is “clear and

unambiguous,” we will avoid rewriting, modifying, or limiting its effect. Id. We construe

guaranties the same way we construe other contracts. Geneva JPM 2003-PM1, LLC v.

Geneva FSCX I, LLC, 843 N.W.2d 263, 266 (Minn. App. 2014).

                                              9
       Pint’s guaranty carries the following definitions: “I” includes the guarantor, and the

document identifies Pint as guarantor; “You” means the lender, its successors and

assignees, and the document identifies Central Bank as the lender; and “Borrower” refers

to Leland Jonason. The guaranty contains a waiver provision spanning two paragraphs.

The first paragraph appears to refer to waiving rights that might be held against the bank.

The disputed interpretation arises from the second paragraph:

              I [Pint] also waive and relinquish all present and future claims,
              rights, and remedies against borrower [Leland Jonason] or any
              other obligated party arising out of the creation or my
              performance of this guaranty. My waiver includes, but is not
              limited to, the right of contribution, reimbursement,
              indemnification, subrogation, exoneration, and any right to
              participate in any claim or remedy you may have against the
              borrower, collateral, or other party obligated for borrower’s
              debts, whether or not not [sic] such claim; remedy, or right
              arises in equity or under contract, statute or common law.

       We affirm the district court’s decision that the waiver’s plain language demonstrates

Pint’s intent to waive any present or future claims against Jonason arising from Pint’s

performance of the guaranty. The waiver is broad and clear.

       We reject Pint’s argument that the waiver reflects the intent merely to prevent Pint

from interfering with Central Bank’s efforts to collect directly from the borrower. Pint

points to the second paragraph’s second sentence, and he emphasizes that it lists several

possible causes of action including “any right to participate in any claim or remedy you

[Central Bank] may have against the borrower.” Pint maintains that by referring

specifically to Central Bank’s rights, the phrase limits the entire provision so as to prevent

only Pint’s interfering with Central Bank’s claims against Jonason. The argument has at

                                             10
least three flaws. First, it ignores the fact that the identified, purportedly limiting phrase is

part of a list that begins, “includes, but is not limited to.” Second, it overlooks the

organization of the list, the first part of which concerns Pint’s individual “right of” several

identified methods of recovery, and then adds also, “and any right to” share in any of the

bank’s methods of recovery. This separate grouping of the two classes of recovery methods

(those implicitly belonging to Pint directly and those belonging to the bank indirectly)

belies Pint’s argument that there is only a single class. And third, the brief reference to

interference with the Central Bank’s claims does not expressly or impliedly modify the

prior sweeping sentence—“I also waive and relinquish all present and future claims, rights,

and remedies against borrower or any other obligated party arising out of the creation or

my performance of this guaranty.”

       We also are not convinced by Pint’s next argument that, because Jonason was not

an intended beneficiary of the guaranty, he cannot enforce the waiver provision in his

defense. Minnesota has adopted the Restatement (Second) of Contracts section 302 (1979),

which provides in relevant part as follows:

              (1) Unless otherwise agreed between promisor and promisee,
              a beneficiary of a promise is an intended beneficiary if
              recognition of a right to performance in the beneficiary is
              appropriate to effectuate the intention of the parties and either

                      (a) the performance of the promise will satisfy an
                          obligation of the promisee to pay money to the
                          beneficiary; or

                      (b) the circumstances indicate that the promisee
                          intends to give the beneficiary the benefit of the
                          promised performance.

                                               11
See Cretex Cos. v. Constr. Leaders, Inc., 342 N.W.2d 135, 139 (Minn. 1984). “Under this

approach, if recognition of third-party beneficiary rights is ‘appropriate’ and either the duty

owed or the intent to benefit test is met, the third party can recover as an ‘intended

beneficiary.’” Id.

       The guaranty is clearly intended to benefit Jonason. If the intent to benefit a third

party exists, it must be found in the contract “as read in light of all the surrounding

circumstances.” Buchman Plumbing Co. v. Regents of the Univ. of Minn., 298 Minn. 328,

334, 215 N.W.2d 479, 483 (1974). A nonparty may be an intended beneficiary even if the

contract requires performance to the beneficiary only indirectly. Hickman v. SAFECO Ins.

Co. of Am., 695 N.W.2d 365, 370 n.8 (Minn. 2005). The first provision of the guaranty

states, “For good and valuable consideration . . . to induce you, at your option, to make

loans or engage in any other transactions with borrower from time to time, I absolutely and

unconditionally guarantee the full payment of the following debts . . . .” This language

reflects the intent to benefit Jonason by inducing Central Bank “to make loans or engage

in any other transactions with borrower from time to time.” The surrounding circumstances

inform us that the guaranty was necessary for Jonason to secure the line of credit that he

sought to cover the business’s operating expenses. The clear intent was to benefit the

borrower.

       Finally, Pint argues that the district court’s interpretation of the waiver as precluding

him from all recovery against Jonason leads to an absurd result. He essentially maintains

that the result is unfair; he paid Jonason’s debt and the district court would leave him with

no recovery. This argument on equitable grounds does not dissuade us from our legal

                                              12
holding for three reasons. First, we will construe and apply a contract by its plain terms

“even if the result is harsh.” Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346–47

(Minn. 2003). Second, the district court deciding the probate matter did not determine that

Pint cannot recover on his previous judgment; that issue was not before it. Its holding

merely determined that Pint’s stated arguments do not provide any basis to invalidate

Jonason’s disclaimer of his inheritance. And third, the argument misses the fact that the

guaranty’s waiver provision applies only to Pint as guarantor; it does not on its face

prevent Pint from recovering as assignee, having stepped into the bank’s shoes and having

acquired the bank’s collection rights by assignment. Pint seems to recognize this, raising

the argument as a ground for reversal in his reply brief and at oral argument. If the position

has merit (as it seems to), it defeats Pint’s argument that the district court’s decision leads

to an unfair or absurd result. We of course will not decide the argument or rely on it to

reverse the district court’s waiver holding, because Pint never made the argument in the

district court. See Thiele, 425 N.W.2d at 582. And even if he had, because he failed to raise

the issue in his initial brief on appeal, he denied the respondents the ability to respond to

the argument, and we treat it as waived. See McIntire v. State, 458 N.W.2d 714, 717 n.2

(Minn. App. 1990), review denied (Minn. Sept. 28, 1990).

       Because we hold that the district court properly decided that Pint (as guarantor)

waived all recourse from Jonason under the plain language of the guaranty waiver

provision (and because Pint failed to argue that the guaranty does not limit his right to

pursue a claim as assignee), we need not reach Pint’s challenge to the district court’s

determination about the need for an evidentiary hearing on whether Jonason was insolvent

                                              13
at the relevant time. We also need not address Chase and Erin Jonason’s unclean-hands

argument.

      Affirmed.

                                         14