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Peterson v. Wilson Township

December 24, 2003

CASEY CATHERINE PETERSON, APPELLANT,
v.
WILSON TOWNSHIP, RESPONDENT,
v.
MUTUAL SERVICE CASUALTY INSURANCE COMPANY, RESPONDENT.



SYLLABUS

Under the 1998 garnishment statute, discharge from a garnishment action relieves the garnishee of the duty to retain the debtor's property with respect to that specific garnishment summons, but does not release the garnishee from subsequent garnishment actions.

Reversed.

Heard, considered, and decided by the court en banc.

The opinion of the court was delivered by: Blatz, C.J.

OPINION

Casey Catherine Peterson, the appellant and judgment creditor, brought this garnishment action to force Mutual Service Casualty Insurance Company, the respondent and garnishee, to indemnify its insured, Wilson Township, the respondent and judgment debtor. The court of appeals held that subsequent garnishment actions against a garnishee are impermissible after the garnishee has been discharged under Minn. Stat. §á571.79(b) (1998). We reverse.

On June 23, 1996, Lance Henderson was sold and served a number of alcoholic beverages while attending Wilson Daze, an annual festival held by the Wilson Township Volunteer Fire Department. While intoxicated, Henderson left the festival in an automobile and collided with a vehicle driven by Peterson. Because Henderson was intoxicated and had purchased beer from Wilson Township, Peterson sued Wilson Township under the Minnesota Dram Shop Act, Minn. Stat. § 340A.801 (2002).

Peterson's action implicated two insurance policies. The first policy, obtained by Wilson Township, was a commercial policy issued by Mutual Casualty Service Insurance Company (MSI). The second policy, obtained by Wilson Township's fire department, was a liquor liability risk plan issued by Minnesota Joint Underwriting Association (MJUA). While MJUA accepted coverage and provided legal defense for Wilson Township, MSI disputed coverage under its policy's liquor liability exclusion clause. The clause excluded coverage for injuries caused while the insured was "in the business" of furnishing alcoholic beverages. To resolve the coverage issue, MSI initiated a declaratory judgment action. The district court denied MSI relief on the basis that the liquor liability exclusion in MSI's policy did not apply because Wilson Township was not in the business of furnishing alcoholic beverages when it sold beer to Henderson. Mut. Ser. Cas. Ins. Co. v. Wilson Township, 603 N.W.2d 151 (Minn. App. 1999), rev. denied (Minn. Mar. 14, 2000).

While the declaratory judgment action was pending, Peterson and Wilson Township entered into a Miller-Shugart settlement.*fn1 In the Miller-Shugart settlement, Peterson and Wilson Township stipulated that the reasonable value of Peterson's claims amounted to $265,000. MJUA provided legal defense and agreed to pay its entire bodily injury limit of $100,000 to settle the claims brought against Wilson Township. Of that, MJUA paid $72,500 to Peterson.*fn2 In terms which typify a Miller-Shugart settlement, Peterson and Wilson Township agreed that the remaining $192,500 would come solely from proceeds of the MSI insurance policy and from no other assets of Wilson Township. Although given notice of settlement negotiations, MSI refused to participate, defend, or provide funds to settle Peterson's claims against its insured, Wilson Township. Pursuant to the settlement, on April 20, 2000, the court entered judgment in favor of Peterson against Wilson Township in the sum of $192,500.

The next day, Peterson served a garnishment summons upon MSI. In MSI's response dated May 12, 2000, a garnishment nonearnings disclosure statement (disclosure statement), MSI admitted existence of coverage and agreed to pay $15,305.47 for attorney fees and expenses incurred by Wilson Township, but disputed the amount owed to Peterson under the settlement—$192,500. MSI claimed the settlement was invalid and unenforceable because MJUA had failed to drive a "hard bargain" and "colluded" with Peterson to deflect liability onto MSI.*fn3

To proceed against MSI directly, Peterson filed a motion for leave to file a supplemental complaint. Under Minn. Stat. § 571.80(a) (1998), Peterson had 20 days to file a motion for leave to file a supplemental complaint from the date that MSI served its disclosure statement. Instead, Peterson waited 48 days to file her motion. Despite finding probable cause that the garnishee would be liable for the judgment debt, the district court denied Peterson's motion for leave to file a supplemental complaint because the motion was untimely. The court further ruled that due to the untimely motion, the garnishee, MSI, was discharged from its duty to the judgment creditor, Peterson.

On November 22, 2000, Peterson served a second garnishment summons on MSI. In MSI's response, the second disclosure statement, MSI asserted it was discharged from all future garnishments by Peterson based on the district court's initial denial of Peterson's first motion for leave to file a supplemental complaint. Further, MSI went on to admit coverage, but again disputed the amount owed to Peterson under the Miller-Shugart settlement.*fn4

On December 12, 2000, Peterson served the third garnishment summons upon MSI. In its disclosure statement, MSI once again admitted coverage, noting the district court's discharge of MSI at the conclusion of the first garnishment proceeding. In response, Peterson filed a motion for leave to file a supplemental complaint seeking to enforce the Miller-Shugart settlement against MSI. Peterson also moved for relief under Minn. R. Civ. P. 60.02 on the grounds of excusable neglect and fraud.

The district court granted Peterson's third motion for leave to file a supplemental complaint, ruling that although MSI had been discharged from the first garnishment summons, nothing prevented Peterson from serving subsequent garnishment summonses. The court based its decision to grant the motion on amendments made to the garnishment statute that became effective in August 2000—before Peterson's third garnishment summons was served, but after the district court's previous ruling based on the 1998 version of the same statute. The 2000 amendments specifically limited the effect of a "discharge" under Minn. Stat. § 571.79 to "any further retention obligation" with respect to "a specific garnishment summons." Minn. Stat. ...


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