Opinion
A20-1058
03-29-2021
Joel S. Rabbe, et al., Appellants, v. Farmers State Bank of Trimont, a Minnesota Bank Corporation, Respondent.
ORDER OPINION
Martin County District Court
File No. 46-CV-19-1259 Considered and decided by Worke, Presiding Judge; Reyes, Judge; and Jesson, Judge.
BASED ON THE FILE, RECORD, AND PROCEEDINGS, AND BECAUSE:
1. The facts underlying this farmer-lender dispute between appellants-Rabbes (including Rabbe individuals and entities) and respondent Farmers State Bank of Trimont (FSB) are recited in numerous opinions of this court. The operative facts include the following. FSB loaned the Rabbes more than $17 million in 2013 and 2014. Rabbe v. Farmers State Bank of Trimont, No. A19-1353, 2020 WL 2312931, at *1 (Minn. App. May 11, 2020), review denied (Minn. July 21, 2020). Due to an accounting error, the Rabbes' assets were overvalued. Id. FSB declared itself insecure and that the Rabbes defaulted on the loans. Id.
2. The parties entered into a forbearance agreement, on which the Rabbes defaulted. Id. at *2. The parties then entered into an amended forbearance agreement (AFA). Id. Both forbearance agreements contain a provision under which the Rabbes agree to release FSB from all claims arising from events preceding the forbearance agreements. Id. Additionally, the AFA includes a provision to "negotiate in good faith towards a global resolution" of the Rabbes' indebtedness. Id. The Rabbes defaulted on the AFA, after which the parties unsuccessfully attempted farmer-lender mediation. Id.
3. In October 2015, FSB brought a foreclosure action (the foreclosure litigation). Id. The district court granted summary judgment in favor of FSB, in part because (1) the forbearance agreements were enforceable and (2) FSB negotiated in good faith during farmer-lender mediation. Id. at *3. The Rabbes appealed, but the parties later voluntarily dismissed the appeal by stipulation. Id.; see also Farmers State Bank of Trimont v. Rabbe, No. A16-0891 (Minn. App. July 3, 2017) (order).
4. In late 2017, the Rabbes filed a lender-liability lawsuit against FSB and other defendants (the lender-liability litigation). Rabbe, 2020 WL 2312931 at *3. Their amended complaint included the following counts: (I) breach of fiduciary duty; (II) principal-agent liability; (III) breach of covenant of good faith and fair dealing; (IV) duress; (V) fraud; (VI) negligent misrepresentation; (VII) negligence; (VIII) breach of contract; (IX) unjust enrichment; and (X) violation of Minn. Stat. § 325D.53 et seq.
5. The district court dismissed the Rabbes' amended complaint and denied their second motion to amend except for an antitrust claim that the Rabbes later abandoned. Id. Three of the district court's reasons for dismissal are relevant here. First, it determined that the release in both forbearance agreements precluded all but count X of the Rabbes' claims. Id. Second, it found that Minn. Stat. § 513.33 (2020), which requires credit agreements to be in writing, precluded the Rabbes from arguing that FSB's alleged oral promise fraudulently induced them to enter into the forbearance agreement. Id. Third, it determined that the foreclosure litigation collaterally estopped the Rabbes from contesting whether FSB failed to negotiate in good faith or lacked intent to do so during farmer-lender mediation. Id. at *5. The Rabbes appealed, and we affirmed. See generally id.
6. The Rabbes commenced this litigation regarding lender liability in December 2019. Their amended complaint alleges numerous counts as follows: (I) judgment procured by fraud in violation of Minn. Stat. § 548.14; (II) independent rule 60 action; (III) fraud in the collateral adjustment; (IV) fraud in the default; (V) fraud in the inducement; (VI) fraud in securing summary judgment; (VII) violation of Minn. Stat § 336.1-309 (good faith in acceleration); (VIII) violation of Minn. Stat. § 336.1-304 (covenant of good faith and fair dealing); (IX) violation of Minn. Stat. § 583.27 (the Farmer-Lender Mediation Act); (X) negligence; (XI) negligent performance of loan administration; (XII) breach of contract; (XIII) breach of fiduciary duty; (XIV) breach of fiduciary duty to Joyce Rabbe; (XV) unjust enrichment; (XVI) declaratory judgment; (XVII) cancellation of instruments; and (XVIII) resulting trust.
We have reproduced the Rabbes' claims as expressed in their amended complaint and express no opinion regarding the appropriateness or accuracy of their terminology.
7. FSB filed a motion to dismiss the amended complaint, which the district court converted to a motion for summary judgment. The district court found that counts III through VIII and X through XIV were nearly identical to claims in the lender-liability litigation, and that counts I, II, and IX, though not identical to prior claims, involved the same set of operative facts as in prior litigation. And it found that counts XVI through XVIII were requests for relief rather than claims. It therefore concluded that all of the Rabbes' claims were precluded by res judicata.
The district court appears to have left count XV (unjust enrichment) off of this list. However, in its memorandum, it notes that "count XVI [sic] (Unjust Enrichment) is the same as count IX" (unjust enrichment) in the lender-liability litigation. We therefore interpret the district court's order to include count XV among those counts that are "nearly identical" to prior claims.
8. Res judicata is a finality doctrine that mandates an end to litigation. Hauschildt v. Beckingham, 686 N.W.2d 829, 840 (Minn. 2004). Res judicata bars subsequent claims if: "(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. We review whether these elements are met de novo. Id.
9. Same set of factual circumstances: "Res judicata applies equally to claims actually litigated and to claims that could have been litigated in the earlier action." Brown-Wilbert, Inc. v. Copeland Buhl & Co., P.L.L.P., 732 N.W.2d 209, 220 (Minn. 2007) (citation omitted). A claim is "a group of operative facts giving rise to one or more bases for suing." Hauschildt, 686 N.W.2d at 840 (quotation and citations omitted). The Rabbes' claims in this lawsuit stem from three sets of operative facts: (1) FSB's actions during negotiations prior to the forbearance agreements; (2) FSB's review of the Rabbes' financial information and post-loan-default management of the loans and the Rabbes' business; and (3) FSB's conduct during farmer-lender mediation after the Rabbes defaulted on the AFA. The parties litigated claims arising from these same operative facts in the foreclosure and lender-liability litigations. In this lawsuit, the Rabbes merely assert alternative theories, tort claims, and statutory violations that could have been raised in prior litigation. Further, the Rabbes failed to present any new factual circumstances for the district court's consideration. This element is met.
10. Same parties or privies: Neither party disputes that the parties are the same as in prior litigation. This element is met.
11. Final judgment on the merits: The district court granted summary judgment to respondents in the foreclosure litigation, and the Rabbes appealed, but then the parties later voluntarily stipulated to dismissal with prejudice. The district court entered final judgment on the stipulated dismissal order. See Dykes v. Sukup Mfg. Co., 781 N.W.2d 578, 583 (Minn. 2010) (stating that a stipulation of dismissal and resulting judgment operate as bar to subsequent litigation on issues raised or that could have been raised in the original lawsuit). Additionally, we affirmed the dismissal of the lender-liability litigation, which is also final. See Rabbe, 2020 WL 2312931 at *1. This element is met.
12. Full and fair opportunity to be heard: The Rabbes had a full and fair opportunity to be heard on claims arising from the facts at issue here, in both the foreclosure and lender-liability litigations. This element is also met.
13. Because all four res judicata elements are met here, the district court did not err by dismissing the Rabbes' claims as precluded by res judicata.
14. In addition to dismissing the Rabbes' complaint, the district court imposed sanctions on the Rabbes and their attorney under Minn. Stat. § 549.211 (2020) and found that the Rabbes were frivolous litigants under Minn. Gen. R. Prac. 9 because they filed claims identical to or sharing the same operative facts as recent litigation.
Appellants do not challenge sanctions imposed under Minn. Stat. § 549.211. We therefore do not disturb the district court's decision to impose statutory sanctions. --------
15. The district court may impose sanctions on a frivolous litigant under Minn. Gen. R. Prac. 9. A "frivolous litigant" is "[a] person who . . . repeatedly relitigates or attempts to relitigate" a claim after a final determination. Id., 9.06(b)(1). A "claim" is "any relief requested in the form of a claim, counterclaim, cross claim, third party claim, or lien filed, served, commenced, maintained, or pending in any federal or state court . . . ." Id., 9.06(a). The district court must consider seven factors in determining whether to impose sanctions, including "the frequency and number of claims pursued by the frivolous litigant," "whether there is a reasonable probability that the frivolous litigant will prevail on the claim," and the "injury incurred by other litigants prevailing against the frivolous litigant." Id., 9.02(b)(1), (2), and (4). We review the district court's decision to impose sanctions for an abuse of discretion. See Szarzynski v. Szarzynski, 732 N.W.2d 285, 295 (Minn. App. 2007).
16. Here, the district court found that the Rabbes filed duplicative claims that had no reasonable probability of success and sought to file a notice of lis pendens after being ordered not to file additional notices of lis pendens by another district court. It also found that less-severe sanctions would not sufficiently protect FSB and imposed several conditions on the Rabbes filing future lawsuits against FSB.
17. The Rabbes do not challenge the district court's rule 9 analysis but instead reiterate their res judicata arguments. In any event, the record supports the district court's findings because the Rabbes' claims have been determined against them in two prior lawsuits and they have been sanctioned once before for filing notices of lis pendens. See Rabbe v. Farmers State Bank of Trimont, No. A20-0066, 2021 WL 772311 (Minn. App. Mar. 1, 2021) (affirming district court's orders discharging notices of lis pendens, enjoining Rabbes from recording additional notices, and finding contempt against Joel Rabbe). The district court therefore did not abuse its discretion by determining that the Rabbes are frivolous litigants and imposing sanctions.
IT IS HEREBY ORDERED:
1. The district court's order and judgment dismissing the Rabbes' complaint and imposing sanctions under Minn. Stat. § 549.211 and Minn. R. Gen. Prac. 9 is affirmed.
2. Pursuant to Minn. R. Civ. App. P. 136.01, subd. 1(c), this order opinion is nonprecedential, except as law of the case, res judicata, or collateral estoppel.
Dated: March 29, 2021
BY THE COURT
/s/_________
Judge Peter M. Reyes, Jr.