Opinion
No. A06-722, A06-868.
Filed May 22, 2007.
Appeal from Ramsey Cottonwood County District Court, File Nos. 17-CV-05-213, 17-CV-06-247.
Joseph D. Roach, Patrick S. Williams, Jeffrey A. Abrahamson, Briggs and Morgan, P.A., Minneapolis, MN 55402 (for respondent).
John E. Mack, Mack Daby, P.A., New London, MN 56273 (for appellants).
Considered and decided by Willis, Presiding Judge; Klaphake, Judge; and Shumaker, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
After the court denied respondent's motion for summary judgment on the issue of whether or not the parties had created an equitable mortgage, the court, believing the parties agreed nevertheless to confer upon it the authority to decide the issue on that same record, granted a declaratory judgment to respondent. Because the parties did not clearly confer upon the court the authority to decide a disputed fact issue, we reverse and remand.
FACTS
What began as the district court's denial of the respondent's partial summary-judgment motion became, without a trial, the court's award of a declaratory judgment in respondent's favor. The appellants claim that this award was error, that a genuine issue of material fact exists for trial, and that the declaratory judgment resulted from a misunderstanding among the parties and the court as to both the scope of the summary judgment and the scope of the court's authority to decide as it ultimately did.
The following facts, which are either undisputed or, if disputed, are supported by admissible evidence in compliance with Minn. R. Civ. P. 56, show that appellants Leland Haugen and Ilene Haugen owned a farm in Cottonwood County, subject to a mortgage held by the Bank of Canby. The Haugens had financial problems, and they went to respondent United Prairie Bank (UPB) to try to obtain refinancing of their indebtedness.
At UPB, the Haugens spoke with Theodore Devine, UPB's vice-president and loan officer. He did not think UPB could lend the amount of money the Haugens requested but advised the Haugens that the entire refinancing could be accomplished through incorporating their business and selling their property to a third party, such as Devine's friend Mark Sahli. In its memorandum in support of its order denying UPB's partial summary-judgment motion, the court described the alleged plan as follows:
Ted Devine . . . advised [the Haugens] to convey their respective ownership in the Real Property to a new business entity, Haugen Nutrition Equipment, LLC. Pursuant to this advisement and upon their own personal judgment, the Real Property was conveyed by them to Mark Sahli on September 12, 2003 via warranty deed. On the same day, Mark Sahli reportedly entered into a contract for deed with Haugen Nutrition Equipment, LLC. Said contract for deed was signed by Ilene Haugen [for the corporation], . . . and notarized by Ted Devine. Thereafter, on October 15, 2004 the Sahlis conveyed their rights in the Real Property to [UPB] via warranty deed (in connection with their mortgage of the Real Property to [UPB] on August 29, 2003).
UPB eventually brought a quiet-title action and then moved for summary judgment on its claim that it owned the Haugen farmland. The Haugens contended that everyone involved in the refinancing plan understood and intended that the conveyance of the property to UPB was to create an equitable mortgage and not to transfer ownership of the real estate.
In its memorandum, the court stated:
The next matter for determination is whether there are genuine issues of material fact as to the existence of an equitable mortgage between [UPB] and Haugen Nutrition Equipment, LLC. The [Haugens] assert that the actions of Mark Sahli, [UPB], and themselves constitute an equitable mortgage relationship. The Court agrees.
The court then analyzed the law of equitable mortgages, ruled that "there are genuine issues of material fact as to the existence of an equitable mortgage arrangement between [UPB] and Haugen Nutritional Equipment, LLC[,]" and denied the motion for partial summary judgment.
UPB then moved for amended findings and for leave to file an amended complaint. In its supporting memorandum, UPB averred that the record was complete on the issue of equitable mortgage and requested the court to determine that issue. The Haugens' attorney responded by letter indicating that he had a conflict with the hearing date set for UPB's motions, that he believed it to be "highly probable that the trier of fact would find the transaction to be one which created an equitable mortgage . . . ," and stated:
What I would propose is that the Court determine, on the basis of what is before it, what facts it believes would determine one way or another, whether an equitable mortgage exists, and set a hearing on the same date as [the Haugens'] motion for partial summary judgment, for another partial summary judgment to be heard on this issue. I suspect that any outstanding facts likely can be supplied by one party or both. Then the Court would be in a position to determine the equitable mortgage issue with finality and also determine what terms should be incorporated in that mortgage, should it decide that an equitable mortgage has been created.
In response to the parties' respective filings, the court held a telephone conference with the attorneys. UPB's attorney told the court that it had all the facts before it, that the "issue as to whether this is a contract for deed or equitable mortgage is, of course, one for the court to decide, even if there are any disputed facts. I have . . . none more to give the Court." Haugens' attorney indicated that nothing UPB's lawyer had said was untrue, but that there might be facts that have to be determined at trial and he "at least would appreciate knowing what facts the Court believes would be unresolved and as are necessary to determine this issue."
Thereafter, the court granted a declaratory judgment to UPB holding, among other things, that the Haugens "failed in their burden to prove, by clear and convincing evidence, that an equitable mortgage was created between United Prairie Bank and Haugen Nutrition and Equipment based upon the evidence within the record." UPB then brought an unlawful-detainer action, the court issued a writ of recovery, and this appeal followed.
DECISION
On appeal, the Haugens contend that they did not concede authority to the district court to decide the issue of equitable mortgage on the record submitted. Rather, they argue that their attorney requested the court's advice on what facts might be needed to decide that issue, and they revert to the court's original denial of UPB's motion for partial summary judgment. They provide no standard of review for guidance in determining their appeal.
UPB argues that the parties conferred upon the court the authority to decide the matter on the record, and requested that the court do so. Because the court made its decision upon the assumption that the parties conceded its authority to do so, and made findings of fact to support that decision, UPB offers as the proper standard of review the question of whether the court's findings were clearly erroneous and whether the court erred in its conclusions of law. Citizens State Bank of Hayfield v. Leth, 450 N.W.2d 923, 925 (Minn.App. 1990). The application of this standard of review necessarily presumes that the parties conferred on the court the authority to decide a dispositive legal issue as to which the court had already ruled there existed a genuine issue of material fact.
On the issue of whether or not the parties' agreements, transactions, and conveyances resulted in an equitable mortgage, the court denied UPB's partial summary judgment, thereby holding that there were fact questions to be resolved before that issue could be determined. Absent certification by the district court, the denial of a summary-judgment motion is generally not appealable and is not subject to review until the action is concluded. Minn. R. Civ. App. P. 103.03(a), (i); Jostens, Inc. v. Federated Mut. Ins. Co., 612 N.W.2d 878, 883 (Minn. 2000).
Despite a court's determination on summary judgment that a fact issue exists for trial, there is no legal prohibition against the parties to an action agreeing that the record is as complete as possible and that the court may, on that record, draw such conclusions of law and order such relief as is appropriate.
UPB believed that the parties had submitted the matter on the record that existed when the court denied the summary-judgment motion. The court also obviously believed the same thing. The Haugens thought otherwise. Thus, the first issue for us is whether it can fairly be said that the parties conferred upon the court the authority to decide the matter of the equitable mortgage on the record before it, which incidentally had not been supplemented after the court found that the very same record showed fact issues for trial.
Litigants have a right to a trial except where there are no genuine fact issues to be litigated or where it is clear as a matter of law that a certain outcome is compelled, and courts must not deny that right without clear authority to do so. See Martens v. Minn. Mining Mfg. Co., 616 N.W.2d 732, 739 (Minn. 2000) (stating that dismissal is proper where a complaint fails to state a claim upon which relief may be granted); Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (stating that summary judgment is proper when "there is no genuine issue of material fact and . . . either party is entitled to a judgment as a matter of law"); see also Donnay v. Boulware, 275 Minn. 37, 45, 144 N.W.2d 711, 716 (1966) (requiring that parties have a full opportunity to present evidence when fact questions exist); Abdallah, Inc. v. Martin, 242 Minn. 416, 424, 65 N.W.2d 641, 646 (1954) (stating that district court should take "great care" to ensure litigants a right to trial if fact questions exist). Although we have no criticism of the district court, we do not find the requisite clarity to support the conclusion that the parties conferred authority on the court to decide the equitable-mortgage issue on the record before it.
In the attorneys' telephone conference with the court, counsel for UPB suggested that, in a summary-judgment posture, the court could resolve even disputed fact issues. This, of course, was incorrect. See DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997) (stating that "the function of the district court on a motion for summary judgment is not to weigh the evidence."). And combining the Haugens' attorney's letter to the court with his statements in the telephone conference, we cannot conclude that he was doing anything other than seeking a sort of advisory opinion as to what it would take to place the matter in a posture that would allow the court to decide the issue without a trial. He wanted to know what facts the court felt would be necessary for a summary resolution. He referred to having another hearing date for the argument of UPB's motion and a summary-judgment motion the Haugens would bring. He suggested that ultimately the court might be able to resolve the matter summarily but only after a disclosure of what would be necessary to do so. There was ambiguity in the Haugens' attorney's statements because he, like counsel for UPB, indicated a desire for a summary disposition, if that were possible. But such clarity as exists in his statements does not lead us reasonably to the conclusion that he wanted the court to decide the issue definitively on the record before it. Without an unambiguous stipulation that the court could decide the equitable-mortgage issue on the same record on which the court had already identified fact issues for trial, the Haugens should not be summarily deprived of their opportunity for a trial.
UPB also argues that, no matter what approach is taken to this appeal, ultimately the court's ruling is correct because the Haugens have indeed failed to show by clear-and-convincing evidence that the parties to the various transactions intended to create an equitable mortgage.
But recognizing that we are reviewing the posture of this case at the summary-judgment stage, the Haugens had no burden in response to UPB's partial summary-judgment motion to show that clear-and-convincing evidence existed on the issue of the equitable mortgage. See Schroeder v. St. Louis County, 708 N.W.2d 497, 507 (Minn. 2006) (stating that "summary judgment is inappropriate if the nonmoving party has the burden of proof on an issue and presents sufficient evidence to permit reasonable persons to draw different conclusions."). They needed only to show a genuine issue of material fact for trial, which, as evidenced by the court's denial of the motion, they did. Whether or not the evidence that would be presented at trial was of the quality and weight to meet the burden of clear-and-convincing proof would entail matters of credibility and weight to be resolved by the trier of fact and which could not properly be considered on summary judgment.
Thus, we reverse all rulings subsequent to the court's denial of UPB's summary-judgment motion, and we remand the case for reinstatement at that stage of the proceedings.