Traverse County District Court File No. 78-CV-11-172
Ronald R. Frauenshuh, Jr., Ortonville, MN (for appellant)
Don R. Krassin, Wahpeton, North Dakota, (for respondents)
Considered and decided by Cleary, Presiding Judge; Hooten, Judge; and Klaphake, Judge. [*]
Appellant challenges the district court's denial of his request for an award of attorney fees in connection with his efforts to satisfy a prior judgment against respondent. Because the district court erred in applying the standard for an award of attorney fees, we reverse and remand for consideration of an appropriate amount of attorney fees to be awarded to appellant.
This appeal arises out of a loan from appellant Ronald Hurlbut to respondent Cory Hoffman in late 2009 or early 2010. Hoffman signed a promissory note for $20, 000 and agreed that Hurlbut was to receive a possessory lien in a trailer owned by Hoffman. As part of the agreement, Hoffman also gave appellant an original title certificate to the trailer. However, on May 24, 2010, Hoffman sent Hurlbut's attorney a letter stating that there was a bank lien on the trailer and that holding the title "would do him no good."The record also reflects that a duplicate title was issued to Hoffman on May 21, 2010.
After Hoffman defaulted on the note, Hurlbut initiated a civil action against Hoffman for repayment of the $20, 000. The parties eventually stipulated to judgment in favor of Hurlbut in the amount of $20, 868.81, and on December 8, 2010, the parties agreed that enforcement of the judgment would be stayed for six months to permit Hoffman to sell the trailer in order to satisfy the judgment. As part of the settlement, the parties agreed that Hurlbut would maintain possession of title to the trailer, which was to constitute a possessory lien pursuant to Minnesota law, and that "the sale of any of the inventory or equipment that was inside of the trailer or the sale of the trailer would be a fraudulent conveyance" and would be treated "as a fraudulent conveyance if the proceeds of that sale did not go directly to [appellant]." In August 2011, when Hoffman still had not paid the judgment, Hurlbut attempted to levy the trailer through the Traverse County Sheriff's Office. However, he was unable to do so because, as of April 2011, the trailer had been retitled in the name of Hoffman's mother.
After learning that Hoffman sold his trailer to his mother, Hurlbut served a complaint against Hoffman and his parents on August 30, 2011, alleging fraudulent conveyance, conversion, and fraudulent misrepresentation and seeking attorney fees and damages in excess of $20, 000. Hurlbut's complaint alleges that after the settlement agreement, Hoffman and his parents claimed that the title was lost, when in fact the trailer had been sold to a relative for much less than its fair market value. In an answer served on September 14, 2011, Hoffman and his parents denied the allegations set forth in Hurlbut's complaint, including a denial that the sale of the trailer had been fraudulently conveyed.
In a motion served on October 12, 2011, Hurlbut requested that the district court order defendants to turn over the trailer to him for a private sale, pay his attorney fees and costs; strike the answer of defendants due to their failure to show up for a deposition; and grant leave to amend the complaint to include the defendant's attorney. In conjunction with the motion, Hurlbut also filed a rule 11 notice for the failure of defendants to attend a scheduled deposition and the failure of Hoffman to disclose that he was not the owner of the trailer. In an amended complaint filed on October 13, 2011, Hurlbut alleged fraudulent conveyance, conversion, and misrepresentation against Hoffman and his parents, requested attorney fees and sanctions against Hoffman and his parents, and alleged that Hoffman's attorney assisted in the fraudulent conveyance. The amended complaint requested that Hoffman, his parents, and his attorney be declared "jointly and severally liable for the attorney's fees and damages in excess of $20, 000." In their amended answer, Hoffman, his parents, and his attorney entered a general denial, but admitted that Hoffman's attorney "believe[d] [that] the trailer was conveyed" in April 2011.
During discovery, Hoffman admitted that he obtained a duplicate title for the trailer and provided Hurlbut with the original title, informing him that "it was no good." He also admitted that he sold the trailer to his mother without a written contract for the initial sum of $100, and that he informed his attorney of the sale. Hoffman's mother admitted that she was aware that her son owed Hurlbut $20, 000, but she claimed that the $100 paid to her son was only intended as a down payment on the trailer. During his deposition, Hoffman admitted that the sale of the trailer delayed Hurlbut's collection of the judgment against him.
The parties do not dispute that by February 22, 2012, during the pendency of Hurlbut's fraudulent conveyance and fraud lawsuit against Hoffman and his parents, Hurlbut's judgment against Hoffman in the amount of $20, 868.81 was satisfied. Hurlbut eventually filed a second motion for rule 11 sanctions, as well as a motion for summary judgment seeking attorney fees against respondent and his parents arising out of the alleged fraud. The district court found that the parties "understood that they were at least attempting to create a lien" despite the failure to ...