This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
IN COURT OF APPEALS
Hennepin County District Court
File No. 97010365
Jerome S. Rice, Jerome S. Rice & Associates, PA, 170 Community Bank of Plymouth Building, 3455 Plymouth Boulevard, Plymouth, MN 55447 (for appellant)
William R. Skolnick, Sean A. Shiff, Skolnick & Associates, PA, 2100 Rand Tower, 527 Marquette Avenue South, Minneapolis, MN 55402 (for respondent)
Considered and decided by Stoneburner, Presiding Judge, Schumacher, Judge, and Parker, Judge.*
On appeal from summary judgment granted to respondent, appellant argues that the district court erred by finding that a 1995 release of a prior claim of breach of fiduciary duty against respondent barred his current claim of breach of fiduciary duty, that the district court abused its discretion by applying the doctrine of unclean hands to deny his contribution claim. We affirm.
Appellant Mark O. Senn and respondent Larry Youngstedt were partners in several business enterprises, including Highway 7 Properties and Express-YES. TMG Life Insurance Company obtained a mortgage-deficiency judgment against Senn and Youngstedt, jointly and severally, in the principal amount of $581,751.19, plus approximately $20,000 in attorney fees. A few months later, TMG assigned the judgment to James Bartholomew. Two days before the assignment, Bartholomew entered into a forbearance agreement with Youngstedt, agreeing not to pursue collection against Youngstedt for 30 months in exchange for dismissal of Youngstedt’s pending appeal of the judgment, payment of $50,000 toward the judgment, and a grant of security in Youngstedt’s interest in the Highway 7 partnership. Senn would not negotiate with Bartholomew and opposed his collection efforts.
During Bartholomew’s extended collection efforts, $166,274.66 in attorney fees and costs were added to the judgment, and the district court found that Senn fraudulently transferred stock to his family members, misappropriated Express-YES funds, and violated discovery rules. Senn was ordered to sell stock and his interest in some partnerships to satisfy the judgment.
Senn brought four lawsuits against Youngstedt. The first suit, brought before Bartholomew acquired the judgment, alleged, in part, breach of contract and breach of fiduciary duty and requested dissolution of the Highway 7 partnership. That lawsuit was settled on the record after Bartholomew acquired the judgment. Pursuant to the settlement, purchase proposals for the purchase of Highway 7’s assets were submitted to the district court by Senn and by a partnership created by Bartholomew and Youngstedt (Phoenix). The district court approved sale of the assets to Phoenix. Sale proceeds were applied to the judgment.
In the second suit, Senn sought contribution from Youngstedt, alleging that Senn had paid more of the judgment than Youngstedt had paid. Youngstedt asserted the affirmative defense of unclean hands and requested indemnity for attorney fees added to the judgment due to Senn’s actions.
The third suit alleged that Youngstedt breached his fiduciary duty with respect to the Highway 7 and Express-YES partnerships. The district court consolidated the second and third actions. The district court granted Senn summary judgment against Youngstedt on his contribution claim and awarded Senn more than $71,000.  The district court also granted Youngstedt summary judgment against Senn on the claim of breach of fiduciary duty. The district court concluded that Senn’s release of the claim for breach of fiduciary duty in the first lawsuit precluded reassertion of the claim insofar as it concerned Youngstedt’s forbearance agreement with Bartholomew and that Senn had failed to establish the existence of any facts to support his claim as to Express-YES. The district court also held that the court’s approval of the sale of Highway 7’s assets to Phoenix collaterally estopped the claim. Youngstedt’s counterclaims for Senn’s alleged illegal withdrawal of funds from Express-YES survived the summary-judgment motions.
Senn finally settled with Bartholomew then started the fourth action against Youngstedt, a contribution action for the amount of the settlement. This lawsuit was consolidated with the others for trial. After trial, the district court denied Senn’s claim for contribution with respect to the additions to the judgment as barred by the doctrine of unclean hands and ordered Senn to disgorge funds illegally taken from Express-YES.
Senn appeals the summary judgment granted to Youngstedt on his claim of breach of fiduciary duty as to the forbearance agreement and dismissal of his contribution claims.
I. Summary judgment on the claim of breach of fiduciary duty.
On appeal from summary judgment, this court must determine whether genuine issues of material fact remain for trial and whether the district court erred in applying the law. Care Institute, Inc. – Roseville v. County of Ramsey, 612 N.W.2d 443, 445 (Minn. 2000). No genuine issues of material fact remain for trial when collateral estoppel conclusively precludes relitigation of an issue. State Farm Mut. Auto. Ins. Co. v. Spartz, 588 N.W.2d 173, 175 (Minn. App. 1999),review denied (Minn. March 30, 1999).
Senn argues that the district court erred by concluding that Senn’s release in the first lawsuit barred recovery for his subsequent claim of breach of fiduciary duty. A valid release is a defense to any action on a claim released. Sorensen v. Coast-to-Coast Stores (Central Org.), Inc., 353 N.W.2d 666, 669 (Minn. App. 1984), review denied (Minn. Nov. 7, 1984).
Senn argues that in the settlement of the first lawsuit he only released claims for breach of fiduciary duty that were set forth in Count II of his complaint in that case, which were unrelated to the alleged breach of fiduciary duty involving Youngstedt’s forbearance agreement with Bartholomew. But Senn’s memorandum opposing summary judgment in the first lawsuit asserted:
Most recently, Youngstedt entered into a standstill agreement with Bartholomew for $50,000, [in] which Youngstedt’s Inc. withheld over $55,000 in rent. Without amending his complaint every day, Senn cannot keep up with Youngstedt’s breaches of fiduciary duty.
Senn also argued at length about the impact of Youngstedt’s forbearance agreement with Bartholomew on the dissolution of the Highway 7 partnership in his memorandum opposing Bartholomew’s motion to intervene in the first lawsuit.
On the record, Senn’s attorney stated: “the breach of contract and fiduciary duty claims have been settled.” The district court correctly concluded that the release was very broad, applying to all claims for breach of fiduciary duty that either party made in the litigation and that there was no intent expressed to except claims regarding the forbearance agreement. The district court correctly noted that “an issue that is litigated, even if by motion pleading or trial brief, is raised for purposes of barring the re-litigation of the same claim,” citing Spears v. Drake, 193 Minn. 162, 163-64, 258 N.W. 149, 150 (1935).
Senn claims that the release can be avoided on the basis of mistake, citing Schmidt v. Smith, 299 Minn. 103, 109, 216 N.W.2d 669, 672 (1974). Schmidt stands for the proposition that a party may avoid release on the ground that the injury was unknown and not within the contemplation of the parties at the time of the release, but a party may not avoid release on the ground that a consequence of the contemplated injury was unknown. Id.
Here, Senn’s argument is that he did not realize that the forbearance agreement would create a situation where “Bartholomew and Youngstedt would get together to strip Senn of assets in other partnerships.” But this allegation, if true, is an unknown consequence of the agreement, not a new injury.
Senn asserts that the “Thomson Affidavit raises a question of fact with regard to what was intended with regard to the Highway 7 Receivership Action release.” The Thomson affidavit, written on April 17, 2000, by Senn’s previous attorney, merely states that the attorney believes the release only applied to the claim of breach of fiduciary duty stated in the amended complaint and did not contemplate the forbearance agreement. But the issue is whether the claim of breach of fiduciary duty based on the forbearance agreement was litigated, not whether Senn’s attorney believes the claim was released.
Because summary judgment against Senn’s claim of breach of fiduciary duty with regard to the Highway 7 partnership based on the release in the first lawsuit was appropriate, we do not reach Senn’s additional arguments concerning this claim.
II. Bar of the contribution claim for unclean hands.
Senn argues that the district court abused its discretion by concluding that the doctrine of unclean hands bars his contribution claim for the additions to the original judgment. He asserts that finding he had unclean hands runs contrary to the manifest weight and sufficiency of the evidence and that in the alternative, any acts that might invoke the doctrine are “collateral” to his contribution claim.
The equitable defense of unclean hands is premised on withholding judicial assistance from a party guilty of illegal or unconscionable conduct. Watson Co. v. United States Life Ins. Co., 258 N.W.2d 776, 778 (Minn. 1977). The doctrine of unclean hands
will be invoked only against a party whose conduct has been unconscionable by reason of a bad motive, or where the result induced by his conduct will be unconscionable.
Creative Communications Consultants, Inc. v. Gaylord, 403 N.W.2d 654, 657-58 (Minn. App. 1987) (quotation omitted). The granting of equitable relief is within the sound discretion of the district court, and its decision will not be reversed absent a clear abuse of that discretion. Nadeau v. County of Ramsey, 277 N.W.2d 520, 524 (Minn. 1979).
Here, the district court concluded that:
By reason of Senn’s misconduct and his improper efforts to thwart Bartholomew’s collection of the Judgment, and specifically since that misconduct and those improper efforts led directly to the addition of more than $150,000 in attorneys’ fees to the judgment, Senn has unclean hands. Therefore, as a matter of law, Senn is barred from seeking the equitable relief of contribution from Youngstedt for the payment of the $150,000.00 plus in additional attorneys’ fees.
The district court made detailed findings regarding Senn’s misconduct that hindered Bartholomew’s collections and led to the addition of attorney fees on the judgment. The court found that the orders adding attorney fees to the judgment were caused by Senn’s outlandish tactics and attempts to relitigate already-decided issues. Senn has not disputed any of the court’s specific findings, and the findings support the district court’s conclusion that Senn’s misconduct directly led to the addition of attorney fees. Senn’s acts are not “collateral” to his collection claim, and the district court did not abuse its discretion by barring Senn’s contribution claim on the basis of unclean hands.