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affirming attorney's fees award only as to third party, who settled claim before trial
Summary of this case from St. Jude Med. S.C., Inc. v. Biosense Webster, Inc.Opinion
No. C4-98-2031.
Filed July 20, 1999.
Appeal from the District Court, Goodhue County, File No. C097966.
Kevin F. Mark, (for respondent Wilson)
Catherine R. Quiggle, (for appellant Kvalsten)
Barbara J. Hoekstra, (for appellant Hiawatha National Bank)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
David R. Kvalsten and Hiawatha National Bank appeal from judgment for respondent Michael Wilson, arguing that the evidence does not support the jury's verdicts and that the district court abused its discretion in awarding attorney fees to Wilson. We affirm.
FACTS
On November 19, 1996, Carol Mickelson agreed to sell her cabin on an island in the Mississippi River near Red Wing to Wilson for $12,500. Wilson gave Mickelson $500 in earnest money and agreed to pay the balance at closing, which was anticipated to occur on December 31, 1996. The written purchase agreement required Mickelson to deliver marketable title to Wilson.
The real estate was subject to two mortgages held by Hiawatha, securing a loan with a balance of approximately $18,000. Mickelson defaulted on the loan in June 1996. Because Mickelson was in the process of selling the cabin, Hiawatha requested that she simply "bring [her] loan current" to avoid foreclosure. Closing did not occur on December 31, 1996, because Mickelson's attorney and realtor were unavailable. In January 1997, Kvalsten, Hiawatha's president, instructed Ron Kocher, one of Hiawatha's loan officers, to tell Mickelson that Kvalsten would pay $10,000 for the cabin and that he was "prepared to close within two days."
In February 1997, Duffy Schafer, Wilson's real-estate agent, delivered the cabin's abstract to a title company for examination. In addition to the mortgages, other problems affecting title were discovered, and Mickelson learned from her attorney that it would cost $3,000 to $4,000 to clear title to the cabin.
Because of the likelihood that the property would be flooded, Mickelson and Wilson executed a move-in agreement on March 22, 1997, which delivered possession of the property to Wilson so that he could secure it against high water.
On May 16, 1997, Kvalsten purchased the real estate from Mickelson for $10,000. Mickelson sent a letter to Wilson on May 23, 1997, declaring the November 19, 1996, purchase agreement "null and void" and terminating the move-in agreement. Wilson filed a lawsuit against Mickelson for breach of contract and against Kvalsten and Hiawatha for tortious interference with contract. Wilson settled his claim against Mickelson before trial.
The jury found that Kvalsten and Hiawatha intentionally interfered with the contract between Mickelson and Wilson and awarded Wilson $12,500 in compensatory damages. The district court granted Wilson's posttrial motion to amend his complaint to add a claim for punitive damages. The jury returned a second verdict finding that Kvalsten and Hiawatha acted with deliberate disregard for Wilson's rights and awarded him punitive damages of $15,000 against Kvalsten and $5,000 against Hiawatha.
The district court entered judgment for Wilson and ordered Kvalsten to convey the real estate to Wilson on the terms of the purchase agreement between Mickelson and Wilson. The court also awarded Wilson $4,940 in attorney fees and $1,057.23 for costs and disbursements. This appeal followed.
DECISION I. Intentional Interference with Contract
Kvalsten and Hiawatha claim the evidence does not support the jury's finding that they intentionally interfered with the contract between Mickelson and Wilson. We will not set aside a jury verdict unless it is "manifestly and palpably contrary to the evidence viewed as a whole and in the light most favorable to the verdict." Roemer v. Martin , 440 N.W.2d 122, 124 (Minn. 1989) (citation omitted). Tortious interference with a contractual relationship requires proof of five elements: "(1) the existence of a contract; (2) the alleged wrongdoer's knowledge of the contract; (3) intentional procurement of its breach; (4) without justification; and (5) damages." Kallok v. Medtronic, Inc. , 573 N.W.2d 356, 362 (Minn. 1998) (citation omitted). The jury was not asked to make separate findings with respect to each element.
A. Existence of Contract
Hiawatha contends that the evidence does not show that a contract existed between Mickelson and Wilson. The statute of frauds requires that a contract for the sale of land must (1) be in writing; (2) state the consideration; and (3) be subscribed by the seller. Minn. Stat. § 513.05 (1998). The Minnesota Supreme Court has also required the "parties to be identified with reasonable certainty, the land to be sufficiently described, and the general terms and conditions of the transaction to be specified." Greer v. Kooiker , 312 Minn. 499, 504, 253 N.W.2d 133, 138 (1977) (citations omitted).
The November 19, 1996, purchase agreement satisfies the requirements of a contract for the sale of land. The written agreement identifies the price and was signed by Mickelson. The agreement also identifies the parties, describes the land, and states the terms and conditions of the sale. Both Mickelson and Wilson testified as to the existence of the agreement at trial, and it was admitted into evidence. The fact that closing did not occur on December 31, 1996, did not, by itself, terminate the contract. See Chin v. Zoet , 418 N.W.2d 191, 194 (Minn.App. 1988) (stating that right to rescind is not absolute and can be waived); Appollo v. Reynolds , 364 N.W.2d 422, 424-25 (Minn.App. 1985) (concluding that party had waived condition and allowing sale to proceed, despite fact that closing date had passed).
B. Knowledge of Contract
Both Kvalsten and Hiawatha contend there was insufficient evidence to demonstrate that they knew a contract still existed between Mickelson and Wilson after closing did not occur on December 31, 1996. But to prove such knowledge by the alleged wrongdoer, a plaintiff need only prove that
[a] defendant had knowledge of facts which, if followed by reasonable inquiry, would have led to complete disclosure of the contractual relations and rights of the parties.
Kjesbo v. Ricks , 517 N.W.2d 585, 588 n. 3 (Minn. 1994) (citation omitted).
The record shows that: (1) both Kvalsten and Hiawatha knew of the existence of the November 19, 1996, purchase agreement between Mickelson and Wilson; (2) both Kvalsten and Hiawatha were aware of Mickelson and Wilson's ongoing efforts to close after December 31, 1996; (3) loan committee minutes show that Hiawatha knew of the continuing efforts of Schafer (Wilson's realtor) and Speight (Wilson's attorney) to close after December 31, 1996; (4) Kvalsten admitted that, as of February 1997, he knew "things [were] back on track"; and (5) both Kvalsten and Hiawatha knew that on May 6, 1997, Schafer forwarded to Hiawatha a letter from Speight, stating that his client was ready to close immediately and escrow the proceeds of the sale to Wilson if the mortgages were released.
Viewing the evidence in the light most favorable to the verdict, there was sufficient evidence for the jury to conclude that Kvalsten and Hiawatha had knowledge of facts that, if followed by reasonable inquiry, would have led to complete disclosure of the ongoing contractual relations and rights of Mickelson and Wilson after December 31, 1996, despite the fact that the anticipated closing date had passed.
C. Intentional Procurement of Breach
Kvalsten and Hiawatha contend there was insufficient evidence to demonstrate that their actions intentionally procured a breach of the contract between Mickelson and Wilson, claiming they encouraged Mickelson to pursue her sale to Wilson.
But the record demonstrates that (1) Kocher first told Mickelson of Kvalsten's offer to purchase her property in January 1997, when Mickelson intended to proceed with the sale to Wilson; (2) Kvalsten knew of Mickelson's title problems and explained to her that she should not close and escrow the proceeds unless she had a written agreement that would net her $10,000 after paying the costs to clear title, but he also knew this was impossible under her agreement with Wilson; (3) sometime during the spring of 1997, Kvalsten reminded Mickelson of his offer to purchase the property for $10,000, regardless of title defects; (4) Hiawatha was fully aware of Kvalsten's offer and his efforts to purchase the property; (5) Kocher told Mickelson it was unlikely the bank would release the mortgages if she closed with Wilson and escrowed the proceeds, but nothing in the record shows that the loan committee considered and rejected this option; (6) sometime after December 31, 1996, Kvalsten advised Mickelson that, because the closing date had passed, her purchase agreement with Wilson was no longer enforceable; (7) Hiawatha, at the direction of Kvalsten, intended to begin foreclosure proceedings on May 14, 1997; (8) Mickelson contacted Kvalsten on May 14, 1997, and asked if his offer to purchase her property was still good; and (9) Mickelson sold the cabin to Kvalsten on May 16, 1997.
Viewing the evidence in the light most favorable to the jury's verdict, there was sufficient evidence to find that Kvalsten's actions, both personally and as president of Hiawatha, along with the acquiescence of those working under his direction, intentionally procured the breach of the contract between Mickelson and Wilson. See Roemer , 440 N.W.2d at 124 (stating that verdict will be sustained if it is possible to do so on any reasonable theory of evidence); see also Ouellette by Ouellette v. Subak , 391 N.W.2d 810, 817 (Minn. 1986) (noting that verdict will not be set aside unless evidence against it is practically conclusive).
D. Justification
Kvalsten and Hiawatha contend their actions were justified as legitimate efforts to protect the bank's mortgage interests.
There is no wrongful interference with a contract where one asserts "in good faith a legally protected interest of his own * * * believ[ing] that his interest may otherwise be impaired or destroyed by the performance of the contract or transaction."
Kjesbo , 517 N.W.2d at 588 (quoting Restatement (Second) of Torts § 773 (1979)). Whether interference is justified is generally an issue of fact. Id. (stating that test is what is reasonable conduct under circumstances). The burden of proving justification is on the defendants. Id.
Kvalsten argues that reasonable and lawful methods of debt collection cannot form the basis of a claim of tortious interference with contract, citing New Concept Confinement Tech. Feeders, Inc. v. Kuecker , 364 N.W.2d 450, 453 (Minn.App. 1985) (concluding that actions in pursuing debt were justified), review denied (Minn. May 31, 1985). But the sale of Mickelson's cabin to either Wilson or Kvalsten would not have generated cash sufficient to pay off her loan. And Hiawatha intended, in any event, to take a mortgage on another piece of real estate owned by Mickelson to cover the deficiency. The bank's interests, therefore, would have been protected if Mickelson and Wilson had closed and escrowed the proceeds of the sale, allowing a portion of the purchase price to be applied to the cost of clearing title. Because Hiawatha's security for Mickelson's loan would not have been impaired or destroyed by the performance of the original contract, at least not to any greater degree than by the sale to Kvalsten, Kvalsten's and Hiawatha's actions were not justified on that ground.
E. Damages
Wilson testified that because of Kvalsten's and Hiawatha's actions, he was unable to use the property for recreational purposes and lost an opportunity to improve the property by acquiring free sand from a dredging operation. Thus, there was evidence that Wilson suffered damages as a result of the intentional interference with his contract with Mickelson.
Because the jury's verdict regarding intentional interference with a contract was not manifestly and palpably contrary to the evidence when viewed as a whole and in the light most favorable to the verdict, we do not set it aside on appeal.
II. Compensatory Damages
Kvalsten and Hiawatha claim that the evidence does not support the jury's award of $12,500 in compensatory damages to Wilson. This court will not interfere with a jury's award of damages unless the failure to do so would be shocking or would result in plain injustice. Hughes v. Sinclair Mktg., Inc. , 389 N.W.2d 194, 199 (Minn. 1986). Damages that are speculative, remote, or conjectural are not recoverable. Sievert v. First Nat'l Bank , 358 N.W.2d 409, 415 (Minn.App. 1984) (requiring proof of damages to reasonable degree of certainty as established by preponderance of evidence), review denied (Minn. Feb. 5, 1985).
Wilson testified that he had planned on year-around use of the cabin for boating, hunting, skiing, and snowmobiling. Schafer, Wilson's realtor, testified that Wilson could have closed and escrowed the proceeds of the sale as early as March 1997. Schafer also estimated that the cabin's rental value was between $150 and $200 per weekend. Wilson testified that he had previously paid between $500 and $600 per weekend to rent similar accommodations.
The district court instructed the jury that damages for intentional interference with a contractual relationship included "the benefits of the contract and any losses that were directly caused by the interference." Viewing the evidence in the light most favorable to the verdict, the jury could have reasonably concluded that Wilson lost approximately 60 weeks' use of the cabin. After accounting for the $500 earnest-money deposit, the jury's award of compensatory damages is the equivalent of $200 per week. The award is neither shocking nor unjust.
III. Punitive Damages
Kvalsten and Hiawatha claim the evidence does not support the jury's awards of $15,000 and $5,000, respectively, against them in punitive damages. Because of the "open-ended and volatile nature of punitive damages," we exercise close supervision over such an award. Mrozka v. Archdiocese of St. Paul Minneapolis , 482 N.W.2d 806, 813 (Minn.App. 1992), review denied (Minn. May 24, 1992); see also Minn. Stat. § 549.20, subd. 5 (1998) (providing for review of award of punitive damages).
In civil actions, punitive damages are allowed "only upon clear and convincing evidence that the acts of the defendant show deliberate disregard for the rights or safety of others." Id. , subd. 1(a) (1998). A defendant acts with deliberate disregard for the rights or safety of others if
the defendant has knowledge of facts or intentionally disregards facts that create a high probability of injury to the rights or safety of others and:
(1) deliberately proceeds to act in conscious or intentional disregard of the high degree of probability of injury to the rights or safety of others; or
(2) deliberately proceeds to act with indifference to the high probability of injury to the rights or safety of others.
Id. , subd. 1(b)(1-2) (1998).
The factors by which an award of punitive damages shall be measured include:
the seriousness of hazard to the public arising from the defendant's misconduct, the profitability of the misconduct to the defendant, the duration of the misconduct and any concealment of it, the degree of the defendant's awareness of the hazard and of its excessiveness, the attitude and conduct of the defendant upon discovery of the misconduct, the number and level of employees involved in causing or concealing the misconduct, the financial condition of the defendant, and the total effect of other punishment likely to be imposed upon the defendant as a result of the misconduct, including compensatory and punitive damage awards to the plaintiff and other similarly situated persons, and the severity of any criminal penalty to which the defendant may be subject.
Id. , subd. 3 (1998).
The evidence produced at trial showed clearly and convincingly that both Kvalsten and Hiawatha knew of the existence of a contract between Mickelson and Wilson and intentionally procured its breach without justification. Because the jury could reasonably conclude that Kvalsten's and Hiawatha's actions deliberately disregarded Wilson's contract rights, punitive damages were permissible. And based on Kvalsten's and Hiawatha's conduct and their respective assets, the jury's awards of punitive damages are not unreasonable or excessive.
Hiawatha also claims that the district court erred in granting Wilson's motion to amend his complaint to add a claim for punitive damages, arguing that Wilson did not produce prima facie evidence to support his motion. See Minn. Stat. § 549.191 (1998) (providing that court shall grant motion if there is prima facie evidence in support). We will not reverse the district court's decision to grant a motion to add a claim for punitive damages absent an abuse of discretion. LeDoux v. Northwest Publ'g, Inc. , 521 N.W.2d 59, 69 (Minn.App. 1994), review denied (Minn. Nov. 16, 1994).
Because there was evidence to support the jury's awards of punitive damages, there also was prima facie evidence to support the claims. Thus, the district court did not abuse its discretion in granting Wilson's motion to amend his complaint to add a claim for punitive damages.
IV. Attorney Fees
Hiawatha claims that the district court abused its discretion in awarding $4,940 in attorney fees to Wilson. On appeal, we review an award or denial of attorney fees under an abuse-of-discretion standard. Becker v. Alloy Hardfacing Eng'g Co. , 401 N.W.2d 655, 661 (Minn. 1987).
As an exception to the American rule regarding attorney fees, the Minnesota Supreme Court has permitted an award of attorney fees "as damages if the defendant's tortious act thrusts or projects the plaintiff into litigation with a third party." Kallok , 573 N.W.2d at 363 (citations omitted). Here, the actions of Kvalsten and Hiawatha forced Wilson into litigation with Mickelson for breach of contract, and the district court awarded attorney fees to Wilson on that ground.
Hiawatha argues that the attorney-fee rule described in Kallok does not apply here because (1) the jury awarded Wilson compensatory damages; (2) it cannot be held responsible for attorney fees incurred before it was made a party; and (3) Wilson's litigation against Mickelson ended before trial. But the supreme court did not establish such limitations in Kallok , and Hiawatha provides no authority in support of its argument. See State by Humphrey v. Modern Recycling, Inc. , 558 N.W.2d 770, 772 (Minn.App. 1997) (stating that issue unsupported by authority is waived and will not be considered on appeal).
Hiawatha also argues that Wilson's request for attorney fees was procedurally flawed because it did not comply with Minn.R.Gen.Pract. 119.02 (providing requirements for affidavit accompanying motion for attorney fees). The affidavit generally complied with the rule, except for a failure to identify who performed the work and the hourly rate with respect to fees for Wilson's first attorney. And in any event, Hiawatha has not shown that the alleged defects in the affidavit were prejudicial. See Kallio v. Ford Motor Co. , 407 N.W.2d 92, 98 (Minn. 1987) ("Although error may exist, unless the error is prejudicial, no grounds exist for reversal.").
In addition, Hiawatha argues that certain of the fees claimed by Wilson should be excluded because they are not within the scope of the rule described in Kallok . Wilson claimed $17,195.83 in attorney fees. But in the district court, Kvalsten suggested that Wilson reasonably incurred $4,940 in attorney fees related to his litigation against Mickelson. The district court appears to have adopted Kvalsten's figure. And Hiawatha suggested no alternative. We therefore conclude that the district court did not abuse its discretion in awarding $4,940 in attorney fees to Wilson in connection with his litigation against Mickelson.