Arrowhead Bluffs, Inc., et al., Appellants, vs. Paul S. Blackburn, Respondent, Justin E. Blackburn, et al., Defendants.

Arrowhead Bluffs, Inc., et al., Appellants, vs. Paul S. Blackburn, Respondent, Justin E. Blackburn, et al., Defendants. A05-2054, Court of Appeals Unpublished, June 20, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-2054

 

Arrowhead Bluffs, Inc., et al.,

Appellants,

 

vs.

 

Paul S. Blackburn,

Respondent,

 

Justin E. Blackburn, et al.,

Defendants.

 

Filed June 20, 2006

Affirmed in part and reversed in part Worke, Judge

 

Wabasha County District Court

File No. 79-C3-00-000684

 

James P. Ryan, Jr., DeAnna J. Schleusner, Ryan & Grinde, Ltd., 407 14th Street NW, P. O. Box 6667, Rochester, MN 55903 (for appellants)

 

James Doran, William C. Weeding, 416 East Hennepin Avenue, Minneapolis, MN 55414 (for respondent)

 

            Considered and decided by Hudson, Presiding Judge; Kalitowski, Judge; and Worke, Judge.

U N P U B L I S H E D   O P I N I O N

WORKE, Judge

          Appellant Arrowhead Bluffs, Inc. challenges the district court's order on remand from this court, arguing that (1) respondent Paul S. Blackburn's claims are barred by Minn. R. Civ. P. 13.01 as compulsory counterclaims; (2) because the district court lacked jurisdiction over respondent, it should not have ruled on respondent's remaining claims; and (3) respondent's claims should be barred by res judicata, claim preclusion, and collateral estoppel.  We affirm the district court's determination that because the original action brought by appellant was a tort action, respondent was not required to file a compulsory counterclaim under rule 13.01.  Further, because respondent's interest in the mortgage, guarantee, and lien was immediately enforceable upon the district court's entry of directed verdict in favor of respondent, which was affirmed on appeal, we reverse the district court's determinations that it did not have jurisdiction over respondent's claims and that the doctrine of res judicata does not apply here. 

D E C I S I O N

            The factual history of this case has been detailed in Arrowhead Bluffs, Inc. v. Blackburn, Nos. C8-03-301 (Minn. App. Nov. 25, 2003), review denied (Minn. Feb. 17, 2004), and Arrowhead Bluffs, Inc. v. Blackburn, No. A04-1629 (Minn. App. Mar. 29, 2005).   On August 18, 2005, the district court issued an order addressing the questions raised by this court on remand, finding that (1) respondent was not required to file a compulsory counterclaim under Minn. R. Civ. P. 13.01, (2) the district court did not have jurisdiction over respondent because he was dismissed as a party to the original action and would have to bring a new and separate action to have his case heard, and (3) the doctrine of res judicata or law of the case were inapplicable.  This court is not bound by and need not give deference to a district court's decision on a purely legal issue.  Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 393 (Minn. 2003).  The application of law to undisputed facts is a question of law, which this court reviews de novo.  Morton Bldgs., Inc. v. Comm'r of Revenue, 488 N.W.2d 254, 257 (Minn. 1992).

Compulsory Counterclaim

            Appellant argues that respondent's claims are barred as compulsory counterclaims under Minn. R. Civ. P. 13.01.  The rule states, "[a] pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction that is the subject matter of the opposing party's claim[.]"  The Minnesota Supreme Court has held that "the word ‘transaction,' as used in [r]ule 13.01, does not embrace claims in tort."  House v. Hanson, 245 Minn. 466, 472, 72 N.W.2d 874, 878 (1955).  If a defendant fails to assert a counterclaim in a tort action, the defendant is not estopped from asserting any claim the defendant may have against the plaintiff in a subsequent action against the plaintiff.  Id. at 473, 72 N.W.2d at 878.  Therefore, the district court correctly concluded that because the original action brought by appellant was a tort action, the compulsory-counterclaim rule does not apply. 

Jurisdiction

            On remand, this court questioned whether the district court had jurisdiction over respondent's motion in the fraud action.  Appellant argues that because the district court determined that respondent "was dismissed as a [party] . . . . [and] is no longer a party to the original action and accordingly would have to bring a new separate action to have his case heard[,]" it did not have jurisdiction over respondent and the analysis should have stopped there.  The district court's conclusion, however, is based on a finding that respondent "was dismissed as a defendant before the case went to trial."  (Emphasis added.)  Respondent was never dismissed as a party in the original action.  It was respondent's subsequent appeal that was dismissed by this court because the district court did not address the issue of how the findings of fact or the judgment in favor of respondents on Justin Blackburn's counterclaim affects respondent's interest.

            Respondent's interest in the mortgage, guarantee, and lien became enforceable immediately upon entry of the directed verdict.  This conclusion is further supported by the fact that the district court issued an order on May 3, 2004, which states:

IT IS HEREBY ORDERED that the matter of the enforceability and validity of defendant Paul Blackburn's contract interest in the subject premises, having been fully litigated, including appeal to the Court of Appeals and denial of a petition for hearing by the [Minnesota] Supreme Court, has been determined with finality.  Defendant Paul Blackburn's contract interest is enforceable.  (Emphasis added.)

 

Because respondent was a party to the original action, a directed verdict was granted in his favor, and this court affirmed the directed verdict on appeal, the district court had jurisdiction to hear respondent's motion in the fraud action.  Therefore, respondent is not required to file a new and separate action to enforce his interest in the documents, and the district court's ruling on this issue is reversed. 

            Finally, respondent spends a significant amount of time arguing how the directed verdict by the district court and the jury verdict in favor of appellant on Justin Blackburn's counterclaims are irreconcilable.  This appeal, however, deals solely with the interests of Paul Blackburn; the issues raised regarding the problems between the directed verdict and the jury verdict against Justin Blackburn were final upon the original appeal.

Res Judicata

            The doctrine of res judicata can preclude the litigation of claims that previously have been litigated or could have been litigated in a former action.  Mattson v. Underwriters at Lloyds of London, 414 N.W.2d 717, 719 (Minn. 1987).  This court reviews the district court's application of res judicata as a question of law. Care Inst., Inc.-Roseville v. County of Ramsey, 612 N.W.2d 443, 446 (Minn. 2000).  Res judicata is properly invoked when (1) there is a final judgment on the merits; (2) a subsequent suit involves the same cause of action; and (3) the parties are identical or are in privity with the former parties.  In re Trusts by Hormel, 543 N.W.2d 668, 671 (Minn. App. 1996). 

            On remand, the district court found that the directed verdict "simply held that [appellant] had not made a prima facie case for a finding of fraud or misrepresentation" and that the issue of whether respondent had an enforceable mortgage, guarantee, and lien was not dealt with by way of the directed verdict.  At trial, however, appellant sought to invalidate the documents based on fraud or misrepresentation.  Therefore, the core issue at trial was the validity of the documents.  Respondent's interest immediately became enforceable upon the district court's entry of a directed verdict in favor of respondent, and it constitutes a final judgment on the merits.  Further, the subsequent proceedingrespondent's motion seeking to enforce the settlement agreement or, in the alternative, for a determination that he had an enforceable interest in the documentsinvolved the same parties and cause of action. 

            Because the elements of the doctrine of res judicata on the issue of whether respondent's interest in the documents was enforceable have been met, the district court's conclusion that the doctrine is inapplicable is reversed.  Further, as stated earlier, respondent is not required to bring a separate action for a determination regarding the enforceability of the documents because his interest became enforceable immediately upon entry of the directed verdict in his favor.  Based on the directed verdict in favor of respondent and the subsequent settlement agreement, the award of $92,500 to respondent is affirmed. 

            Affirmed in part and reversed in part.