Minneapolis Auto Auction, Respondent, vs. Larry Barnabo, Appellant.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C4-02-1922

 

Minneapolis Auto Auction,

Respondent,

 

vs.

 

Larry Barnabo,

Appellant.

 

Filed August 26, 2003

Reversed; motion granted in part and denied in part Hudson, Judge

 

Hennepin County District Court

File No. CT0109921

 

Eric J. Magnuson, Diane B. Bratvold, Joshua A. Hasko, Rider Bennett, LLP, 333 South Seventh Street, Suite 2000, Minneapolis, Minnesota 55402 (for respondent)

 

Thomas M. Scott, Campbell Knutson Professional Association, 1380 Corporate Center Curve, Suite 317, Eagan, Minnesota 55121 (for appellant)

 

            Considered and decided by Willis, Presiding Judge, Hudson, Judge, and Forsberg, Judge.*

U N P U B L I S H E D   O P I N I O N

HUDSON, Judge

            Respondent Minneapolis Auto Auction (MAA) sued appellant Larry Barnabo on a guarantee purportedly executed by Barnabo in favor of MAA, but which Barnabo alleged was forged.  On the theory that the question had been litigated by consent, the district court allowed the jury to determine whether Barnabo had authorized others to sign the guarantee on his behalf.  The jury found for MAA on this agency theory.  On appeal, Barnabo argues that the parties did not litigate the agency theory by consent and that he is not liable for attorney fees MAA incurred in enforcing the guarantee.  Because the district court should not have allowed the agency question to go to the jury and because the district court misread the guarantee, we reverse.  We grant in part and deny in part MAA's motion to strike documents from the appendix to Barnabo's brief. 

FACTS

            A car dealership owned by Barnabo hired Jeffery Zahn and Todd Hayes as managers to run the dealership.  Zahn and Hayes then submitted to MAA the documents necessary to allow Zahn and Hayes to buy, on the dealership's behalf, used cars from MAA.  MAA later obtained a default judgment against the dealership for certain bad checks and sued Barnabo on a guarantee of the dealership's debts that Barnabo purportedly signed.  Barnabo alleged that his signature on the guarantee was forged, and the case went to trial.  At the close of evidence, the district court denied MAA's motion to amend its complaint to include an allegation that Barnabo ratified the guarantee.  MAA also moved to amend its complaint to allege that Barnabo authorized his managers to sign the guarantee on his (Barnabo's) behalf.  Barnabo opposed this motion, alleging that he was unaware that agency had been at issue.  The district court granted MAA's motion, ruling that the agency issue had been litigated by consent.  The jury ruled for MAA on the agency theory, and the district court later awarded MAA attorney fees under the guarantee.  After denial of his posttrial motions, Barnabo appeals, arguing that the parties did not litigate the agency theory by consent and that he is not liable for the attorney fees MAA incurred in enforcing the guarantee.

DECISION

I

            MAA seeks to strike certain documents from the appendix to Barnabo's brief.  Generally, appellate courts do not consider material outside the record on appeal.  Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).  Similarly, references in a brief to material stricken from a brief's appendix are stricken.  Hoover v. Norwest Private Mortgage Banking, 632 N.W.2d 534, 543-44 n.7 (Minn. 2001).  The record on appeal is "[t]he papers filed in the trial court, the exhibits, and the transcript of the proceedings, if any[.]"  Minn. R. Civ. App. P. 110.01. 

            Because the answers to interrogatories that are at issue are not in the district court file, they are stricken.  The other documents that are at issue are affidavits of Zahn and Hayes and the exhibits to those affidavits.  Because the exhibits are copies of the guarantee and because the guarantee was entered at trial as an exhibit, we decline to strike the copies of the guarantee.

Regarding the affidavits, during discovery and after Barnabo alleged that his signature on the guarantee was forged, MAA gave Barnabo affidavits of Zahn and Hayes in which Zahn and Hayes stated that they recognized the signature on the guarantee as Barnabo's, that neither Zahn nor Hayes had signed the guarantee, and that they had no reason to believe that the signature on the guarantee was not Barnabo's.  In addressing whether the jury instructions should include an instruction regarding the inferences a jury can draw when certain evidence is not entered at trial, Barnabo's counsel referred to the affidavits, noting the statements in them by Zahn and Hayes that they did not sign the guarantee.  Barnabo, however, did not submit the affidavits or seek a continuance to do so.  The affidavits were later submitted to the district court as exhibits to an affidavit of Barnabo's counsel supporting Barnabo's motion for a new trial. 

Barnabo sought a new trial arguing that he was surprised and prejudiced by MAA's allegation that Zahn and Hayes had authority to sign the guarantee as Barnabo's agents, because agency had not been pleaded in MAA's complaint or presented at trial.  In addition, Barnabo again argued that he had no reason to believe agency was at issue given Zahn's and Hayes's denials (in their affidavits) that they had signed the guarantee.  Barnabo added that had he been on notice of the agency theory, he would have subpoenaed Zahn and Hayes and questioned them about their affidavits.

Under Minn. R. Civ. P. 59.02, motions for a new trial "shall be made and heard on the files, exhibits, and minutes of the court.  Pertinent facts that would not be part of the minutes may be shown by affidavit."  "[M]inutes" refers to "the court's own trial notes, notes made by a clerk, and the unofficial and nontranscribed notes of the court reporter."  2 David F. Herr & Roger S. Haydock, Minnesota Practice § 59.21 (West 1998).  Here, because the affidavits of Zahn and Hayes were not part of the file, the exhibits, or the minutes of the court before Barnabo moved for a new trial, their existence and content could be shown at the time of Barnabo's new-trial motion only if, under rule 59.02, their existence and content were "pertinent facts" not already part of the record.  But because Barnabo could have sought a continuance or a recess to produce the affidavits when MAA moved to amend its complaint to include the agency theory, the affidavits could have been made part of the file at that time and hence been part of the file when Barnabo later moved for a new trial.  Thus, while the affidavits were missing from the record at the time of Barnabo's new-trial motion, they were missing because Barnabo failed to produce them earlier.  Cf. Schiro v. Raymond, 237 Minn. 271, 277, 54 N.W.2d 329, 333 (1952) (stating "[o]nly evidence which could not have been procured by reasonable diligence before the trial will warrant a new trial"); Mair v. Schwartz, 179 Minn. 586, 587, 229 N.W. 565, 565 (1930) (stating that affidavits on a motion for a new trial intended to add to and supplement testimony cannot be considered); Safeco Ins. Co. of America v. Dain Bosworth, Inc., 531 N.W.2d 867, 874 (Minn. App. 1995) (refusing to strike evidence submitted in motion seeking relief from judgment because order denying relief was appealed), review denied (Minn. July 20, 1995).  Therefore, we strike the affidavits pursuant to rule 59.02.  Accordingly, we decline to address the other reasons MAA proffers for striking the affidavits. 

II

            Barnabo argues that the district court abused its discretion by allowing MAA to amend its complaint to add the agency theory.  We agree.  The rules allow pleadings to be amended to include issues litigated by consent.  See Minn. R. Civ. P. 15.02 (addressing litigation by consent).  Generally, whether to permit amendment of the pleadings is discretionary with the district court, and its decision will not be reversed absent a clear abuse of that discretion.  See Raspler v. Seng, 215 Minn. 596, 598-99, 11 N.W.2d 440, 441 (1943); Haase v. Haase, 369 N.W.2d 311, 316 (Minn. App. 1985), review denied (Minn. Aug. 29, 1985).  Amendment of a complaint to conform the pleadings to the facts should be allowed when the defendant will not be misled or prejudiced.  Anderson v. Minneapolis, St. Paul & Sault Ste. Marie Ry Co., 146 Minn. 430, 435-36, 179 N.W. 45, 47 (1920), rev'd on other grounds, Borsheim v. Great N. Ry. Co., 149 Minn. 210, 183 N.W. 519 (1921); see Minn. R. Civ. P. 15.02.  A district court, however, "is required to base relief on issues either raised by the pleadings or litigated by consent."  Folk v. Home Mut. Ins. Co., 336 N.W.2d 265, 267 (Minn. 1983).  Because the agency theory was not pleaded, for the amendment to have been proper, Barnabo must have consented to litigation of that issue.  See id.

Here, the district court stated that it was allowing the agency argument 

based upon the questions that were asked during the trial with respect to who had been empowered to do [Barnabo's] business, where he appeared with them, whether or not he knew what they were doing.  And the court believes that those questions were asked and answered during the course of trial and not objected to. 

 

But the questions asked during trial with respect to who had been empowered to do Barnabo's business, where he appeared with them, and whether he knew what they were doing, were asked because, in the pretrial proceedings, MAA moved to amend its pleadings to include the unpleaded question of ratification.  The district court ruled that (a) it would not forbid ratification-related evidence merely because ratification had not been pleaded; and (b) it would decide whether to let the ratification question go to the jury after the evidence in question had been entered, and the district court had the opportunity to decide whether sufficient admissible evidence existed to let the question go to the jury.  Thus, the questions that the district court used to allow the agency theory to go to the jury were questions related to the unpleaded ratification issue that the district court ultimately decided could not go to the jury.  We find no merit in the contention that evidence related to one unpleaded issue (ratification) can support litigation by consent of another unpleaded issue (agency).  Furthermore, the agency theory is a fundamentally different theory from ratification; requiring that different factual issues be litigated.  By allowing MAA to amend its complaint to include the agency theory, MAA's theory of the case became a "moving target," and Barnabo was seriously prejudiced in his ability to defend the agency theory, especially in terms of pre-trial discovery and witness examination during trial.

Finally, Barnabo's failure to seek a continuance in district court to address the agency claim is not fatal to his appellate objection to the district court's ruling.  Folk, 336 N.W.2d at 267 (stating that "[c]onsent is not implied by mere failure to claim surprise or request a continuance").  For these reasons we conclude that the district court abused its discretion by allowing MAA to amend its pleadings to include the agency theory and that it erred in allowing that theory to go to the jury. 

III

            The district court awarded MAA attorney fees from Barnabo based on its determination that the guarantee unambiguously made Barnabo liable for those fees.  For purposes of this appeal, we will assume that the attorney-fee question is independent of the agency question.

Whether a contract provision is ambiguous is a legal question reviewed de novo.  Untiedt v. Grand Labs., Inc., 552 N.W.2d 571, 574 (Minn. App. 1996), review denied (Minn. Oct. 15, 1996).  In addition, attorney fees cannot be recovered absent statutory or contractual authorization.  Ly v. Nystrom, 615 N.W.2d 302, 314 (Minn. 2000); Barr/Nelson, Inc. v. Tonto's, Inc., 336 N.W.2d 46, 53 (Minn. 1983).  The relevant part of the guarantee states:

In consideration of [MAA] allowing [dealership] to buy motor vehicles through [MAA], the undersigned . . . guarantees full payment of any debts of [dealership] to [MAA], including any checks or drafts issued by [dealership] or any [dealership] representative, together with any loss or expenses incurred by [MAA] in collecting or attempting to collect such debt including attorney fees.

 

(Emphasis added.)  Under a plain reading of the provision, the "such debt" on which the guarantor is liable for collection expenses is the "any debts of [dealership] to [MAA]."  While the guarantee unambiguously purports to make Barnabo liable for the costs associated with collecting the underlying debt of the dealership, it does not mention the costs of enforcing the guarantee.  Because the guarantee does not authorize the payment of attorney fees, the district court erred in awarding MAA the attorney fees generated in the attempt to enforce the guarantee.  The cases MAA cites to argue to the contrary do not further MAA's claim, because in each case the court determined that the agreement itself specifically entitled the party to recover attorney fees.  See Seifert v. Regents of Univ. of Minnesota, 505 N.W.2d 83, 86 (Minn. App. 1993) (stating party "may be entitled to attorney fees and costs for prosecuting their right to indemnification if the agreement explicitly states so"), review denied (Minn. Oct. 19, 1993); Bartley v. BTL Enters, Inc., 490 N.W.2d 664, 667 (Minn. App. 1992) (reversing district court's failure to award attorney fees where debtor expressly assumed all obligations under promissory note and "the guarantors agreed to guarantee ‘all indebtedness' of [the debtor] ‘howsoever and whensoever created.'").  By contrast, the guarantee here does not specifically provide for attorney fees in connection with the enforcement of the guarantee. 

            In summary, we hold that the district court abused its discretion by allowing MAA to amend its complaint to add the agency theory, and that it erred in allowing that theory to go to the jury.  In addition, we hold that Barnabo is not liable for attorney fees MAA incurred in enforcing the guarantee.

            Reversed; motion granted in part and denied in part.

 

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.