may not be cited except as provided by
Minn. Stat.§ 480A.08, subd. 3 (1994).
STATE OF MINNESOTA
IN COURT OF APPEALS
Johnson Brothers Liquor Company,
Rodney Olson and Joyce Olson,
d/b/a 617 Liquor Lounge,
White Bear Bowl, Inc.,
d/b/a White Bear Bowl/Holiday House, Inc., et al.,
Valley Liquor, Inc., et al.,
The Home Indemnity Company,
Ramsey County District Court
File Nos. C3-926750, C5-926748, C2-924519
Felix M. Phillips, Phillips & Gross, P.A., 5420 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402 (for Appellant)
Richard W. Copeland, 4524 Highway 61, White Bear Lake, MN 55110 (for Respondents Olson and White Bear Bowl, Inc.)
Loren Gross, 8609 Lyndale Avenue South, Bloomington, MN 55420 (for Respondents Valley Liquor, Inc., et al.)
Thomas J. Vollbrecht, Faegre & Benson LLP, 2200 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402 (for Respondent The Home Indemnity Co.)
Considered and decided by Harten, Presiding Judge, Crippen, Judge, and Thoreen, Judge.
Appellant Johnson Brothers Liquor Company (Johnson) contends that the district court erred by granting respondent Home Indemnity Company's (Home) motion for summary judgment in an action arising from a claim Johnson alleged was covered by Johnson's employee dishonesty policy with Home. Because we conclude that there were no genuine issues of material fact and that the district court did not err in its interpretation of the law, we affirm.
Johnson, a wholesale liquor distributor, sold liquor to three liquor retailers, White Bear Bowl, Inc., d/b/a White Bear Bowl/Holiday House, Inc. (White Bear), Rodney Olson and Joyce Olson, d/b/a 617 Liquor Lounge (Olsons), and Valley Liquor, Inc. and John Bernstein (Valley) (collectively "the retailers"). Until November 1990, the retailers paid Johnson's salesman, Bryant Marquardt, for Johnson's liquor. Without Johnson's knowledge, Marquardt arranged to have the retailers pay him in advance. He received the payments and did not remit the funds to Johnson. When one of the retailers requested a useable quantity of goods, Marquardt paid for the merchandise from his funds and provided the merchandise to the retailer. Late in 1990, Marquardt stopped working for Johnson. Johnson continued selling liquor to the retailers without receiving payment from the retailers or Marquardt.
In 1992, Johnson sued the retailers demanding payment for the liquor Johnson delivered from November 1990 until 1992. The retailers answered, alleging they had paid Johnson, or its agent, all money due. White Bear and the Olsons also counterclaimed to recover money they had prepaid Marquardt for undelivered liquor. Johnson amended its complaint, naming Home as a defendant. Johnson alleged that it was entitled to recover from Home if unable to recover from the retailers. Additionally, Johnson contended that Home should indemnify Johnson. Home answered, denying Johnson's claim that it had suffered a covered loss and denying any ensuing responsibility to pay.
In April 1993, White Bear and Home filed a joint motion for summary judgment. The district court granted partial summary judgment "as to all credit in excess of thirty days," but stated that Johnson may have valid claims for the payment from the first thirty days in which the retailers were delinquent. The court reasoned that the transactions after November 1990 violated Minn. Stat. § 340A.318 (1990) and, thus, were unenforceable. Johnson appealed to this court. This court affirmed the district court's decision. Johnson Bros. Liquor Co. v. Olson, 511 N.W.2d 494 (Minn. App. 1994), review denied (Minn. Mar. 31, 1994).
In 1994, Home moved for summary judgment to dismiss Johnson's claims against it. The district court granted Home's motion for summary judgment, finding that (1) Home was not required to reimburse Johnson, because Johnson would not be required to pay the retailers, (2) Home had no responsibility to pay Johnson for losses it incurred, because Johnson engaged in actions in violation of Minnesota Liquor Control regulations, (3) Johnson suffered no loss due to Marquardt's dishonesty, (4) Johnson still has the right to recovery from the retailers for the sales not in violation of Minn. Stat. § 340A.318, (5) the indemnification action against Home cannot be "metamorphosed" into an action for direct recovery, and (6) an attempt to amend the complaint to add a claim for direct recovery was untimely and unsustainable. Johnson appeals.
D E C I S I O N
On an appeal from summary judgment, we ask two questions:
(1) whether there are any genuine issues of material fact and
(2) whether the lower courts erred in their application of the law.
State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).
1. Johnson contends that it suffered a loss due to employee dishonesty because it supplied merchandise for which it never received payment because Marquardt absconded with the prepayments. Home contends that Johnson lost the merchandise because Johnson engaged in transactions that violated Minn. Stat. § 340A.318, subd. 1 (1990), that prohibits credit extensions to liquor retailers for periods in excess of 30 days. Therefore, Home states that the loss did not result from Marquardt's dishonesty and was not covered by the policy.
On June 11, 1993, the district court filed two orders granting the retailers partial summary judgment for all claims resulting from merchandise sold on "credit in excess of thirty days," because the credit extensions violated Minn. Stat. § 340A.318. The district court held that the claims arising from the transactions from December 1990 until 1992 were not enforceable because they arose from illegal exchanges. Johnson appealed and this court affirmed the district court's decision.
Because this court has previously reviewed Johnson's claims that it should be able to recover the money from the merchandise sold on credit in excess of 30 days, we will not review this issue again. See Deli v. Hasselmo, 542 N.W.2d 649, 656 (Minn. App. 1996) (citing St. Paul Fire & Marine Ins. Co. v. Central Nat'l Ins. Co., 480 N.W.2d 681, 684 (Minn. App. 1992) ("The purpose of collateral estoppel is to prevent needless consideration of issues decided in earlier litigation."), review denied (Minn. Apr. 16, 1996).
2. Johnson also alleges that it should be able to recover from Home because it never received the money that the retailers prepaid to Marquardt before November 1990. Home counters that reimbursing Johnson for the advance payments that Marquardt received from the retailers would result in an unearned windfall for Johnson. Home asserts that Johnson did not give merchandise or render any other form of consideration in exchange for the advance payments and, thus, Johnson may not claim to have suffered any loss. Johnson replies that by not receiving funds "collected and intended" for it, it lost money. Further, Johnson states that because there is no definition of "loss" in the employee dishonesty policy, Home cannot now add the prerequisite that loss must involve giving of consideration by the party who alleges that it suffered the loss.
The district court held that the contracts Marquardt entered into with the retailers violated several Minnesota Liquor Control regulations and, thus, were unenforceable. If the contracts were unenforceable, the payments that Marquardt received were unlawful and Johnson may not collect upon them. See Brubaker v. Hi-Banks Resort Corp., 415 N.W.2d 680, 684 (Minn. App. 1987) (unlawful contractual transactions are unenforceable according to the doctrine of in pari delicto), review denied (Minn. Jan. 28, 1988). Because Johnson does not contest the illegality of the transactions from which Marquardt collected money, there is no genuine issue of material fact regarding whether Johnson may recover the money unlawfully obtained by Marquardt. The district court did not err in its application of the law.
3. Johnson asserts that Home is directly liable because Marquardt stole money from Johnson. Even if Johnson had suffered a loss, Home replies that Johnson never advanced a claim for direct recovery and, therefore, may not advance a direct claim against Home now. Johnson responds that it immediately submitted a claim for relief to Home and that Johnson did assert a direct claim against Home in its amended complaint. Additionally, Johnson alleges that a formal direct claim against Home is not a prerequisite to recovery. Rather, Johnson asserts that Home had an obligation to pay the loss claim as soon as it became aware of it.
The district court held that:
At the time of this motion, this derivative claim had metamorphosed into one for direct recovery of the monies allegedly received by Marquardt. Not only is this claim not timely (this case has been in litigation for over four years), but it is not supported by anything on file with the Court.
The district court, in effect, denied Johnson's de facto motion to amend to include a claim for direct recovery. Minn. R. Civ. P. 15.01 states that after responsive pleadings have been served,
a party may amend a pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.
It is within the district court's discretion to grant or deny an amendment. Utecht v. Shopko Dep't Store, 324 N.W.2d 652, 654 (Minn. 1982). A district court's decision to deny a motion to amend is not an abuse of discretion where the "additional alleged claim cannot be maintained." Hunt v. University of Minn., 465 N.W.2d 88, 95 (Minn. App. 1991). The district court did not abuse its discretion by denying the de facto motion to amend because it was untimely and not supported by the record.
4. Johnson also alleges that Home is liable for its legal fees. Home denies this claim, asserting that the policy clearly excludes recovery of costs or fees. Johnson states that the provision in the policy excluding payment of legal expenses only excluded legal fees "incurred in investigating or making claims under the policy," not those incurred by a customer of Home attempting to recover from Home's breach of contract. The exclusion states that Home will not pay for "[e]xpenses related to any legal action."
The district court held:
Pursuant to the plain and unambiguous terms of the policy, Johnson Brothers, as a matter of law, has no actionable claim for legal fees and costs incurred in this action against The Home.
Minnesota courts require that the insured establish that an exception to an exclusion restores coverage. SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 314 (Minn. App. 1995). The cases Johnson cites involve victims of bad faith dealings. There is no evidence of bad faith in the record. The district court was correct in ruling that the exclusion applied.
5. Johnson asserts that it is still exposed to counterclaims by White Bear and the Olsons. Home argues that it should not be required to pay Johnson money to reimburse the retailers, because the district court dismissed the retailers' counterclaims and White Bear and the Olsons have not appealed. We decline to consider whether a genuine issue of material fact exists regarding this claim because it is speculative and not yet ripe for review. Petition of D & A Truck Line, Inc., 524 N.W.2d 1, 10 (Minn. App. 1994).
[ ]* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.