may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
James A. Trapp,
Lowell L. Hancuh,
Filed November 10, 1998
Reversed and remanded; motion denied
Ramsey County District Court
File No. CX-95-6856
Kevin M. Busch, Moss & Barnett, P.A., 4800 Norwest Building, 90 South Seventh Street, Minneapolis, MN 55402-4129 (for appellant)
John A. Pecchia, Charles E. Keenan, Christoffel & Elliot, P.A., 805 Capital Centre, 386 North Wabasha Street, St. Paul, MN 55102 (for respondent)
Considered and decided by Toussaint, Chief Judge, Anderson, Judge, and Thoreen, Judge.
Appellant challenges a judgment enforcing respondent's guaranty claim, arguing that enforceability of the guaranty had not been established as law of the case. Respondent claims that this appeal is for delay and moves for sanctions, costs, and attorney fees. Because we find that law of the case had not established the enforceability of the guaranty, we reverse and remand for a determination of its enforceability. We also deny respondent's motion for sanctions, costs, and attorney fees.
Following trial, the district court held that Hancuh's interest rate was usurious and that Trapp was entitled to recover $8,000, but that Hancuh could not recover on the counterclaim because the statute of limitations on the underlying debt had run. In its memorandum, the court cited Borg-Warner Acceptance Corp. v. Shakopee Sports Ctr., Inc., 431 N.W.2d 539, 541 (Minn. 1988), for the proposition that if a guaranty does not contain any time limitation, its true termination after a reasonable time may be implied. The court noted that it would be unreasonable to extend the guaranty "beyond the time period of the debtor's obligation."
Hancuh appealed. Trapp v. Hancuh, No. C5-96-2406, 1997 WL 396234 (Minn. App. July 15, 1997), review denied (Minn. Oct. 31, 1997), reversed the award of $8,000, holding the statute of limitations had run on Trapp's claim. It also reversed the district court's conclusion that the action on the guaranty was barred because the statute of limitations had run on the debt. Id. at *3. Trapp held that the guaranty and the underlying debt were separate obligations with different limitations periods. Id. Trapp also held, citing Borg-Warner, that if a guaranty does not include an expiration date, its termination may be implied after a reasonable time. Id. However, Trapp did not address whether the guaranty had in fact terminated due to the passage of a reasonable time. In particular, it did not address whether the period from June 26, 1990, when Trapp signed the guaranty, to July 26, 1995, when Hancuh sought to enforce it by counterclaiming in Trapp's action, was a "reasonable time" implying the termination of the guaranty.
After the Minnesota Supreme Court denied review, Hancuh moved the district court for entry of judgment on his counterclaim based solely on law of the case. His memorandum stated that "the Court of Appeals affirmed the decision of the District Court with respect to the dollar amount of $47,861.79 proved up by [Hancuh] and owed by [Trapp]" and that "[b]ased on the Court of Appeals decision, it is clear * * * that judgment should now be entered in favor of [Hancuh] in the amount of $47,861.79 * * *." Trapp opposed the motion, also relying on law of the case. His memorandum asserted that the court of appeals had affirmed the district court's application of Borg-Warner and its finding that the guaranty terminated when the debt terminated. Following a hearing, the district court apparently agreed with Hancuh that law of the case entitled him to judgment on the guaranty and ordered judgment for Hancuh for $47,861.
Trapp challenges this judgment. Hancuh moves for double costs and damages, arguing that this appeal is solely for delay.
In Sigurdson, after this court reversed the district court's finding that the plaintiff did not suffer discrimination and remanded for a trial on damages, the district court dismissed plaintiff's discrimination claim on statute of limitations grounds not addressed in the two prior appeals. Sigurdson, 448 N.W. 2d at 64-65. This court then reversed the district court's dismissal. Sigurdson v. Isanti County, 433 N.W.2d 910 (Minn. App. 1988). On appeal, the supreme court was asked whether this court's finding of discrimination on prior appeal was law of the case precluding consideration of the statute of limitations issue. Sigurdson, 448 N.W.2d at 65. The supreme court held that there was no law of the case on the limitations issue because the issue had been argued but not ruled on at the first trial and could have been reached but was not reached in either of the two prior appeals. Id. at 66.
Here, in awarding judgment to Hancuh, the district court implicitly, if not explicitly, agreed with Hancuh's argument that after Trapp, the law of the case stated both that the statute of limitations for bringing an action on the guaranty had not run and that the guaranty itself had not expired due to the elapse of a "reasonable time." We agree that the statute of limitations issue was indisputably resolved by Trapp's holding that the six-year statute of limitations for bringing an action on a guaranty began to run at the inception of the guaranty, June 26, 1990, not at the inception of the debt. However, we do not agree that there is law of the case that the guaranty itself has not expired and is collectible.
To produce such law, this court would have had to say, pursuant to Borg-Warner, that a "reasonable time" had or had not elapsed. Although it cites Borg-Warner, Trapp says nothing about whether a "reasonable time" had elapsed or whether the guaranty was collectible. We therefore conclude that Hancuh misstated Trapp when he told the district court that "the Court of Appeals affirmed the decision of the District Court with respect to the dollar amount of $47,861.79 proved up by [Trapp] and owing to [Hancuh]," and when he implied that law of the case mandated judgment in his favor. We further conclude that the district court erred as a matter of law in accepting Hancuh's misstatement.
In fact, while Trapp reversed the holding that the statute of limitations barred collection of the guaranty, it did not address the issue of whether, under Borg-Warner, the guaranty had expired due to a reasonable passage of time. Trapp could have reached this issue, but it did not; it listed the issues as "Statute of Limitations for Usury Claims," "Statute of Limitations for the Guaranty," and "Consideration of the Guaranty." There is no law of the case as to the expiration of the guaranty. Trapp, like the defendant in Sigurdson, is entitled to a "day in court" to litigate whether the expiration of a reasonable time terminated his guaranty.
Trapp argues that the district court determined that the guaranty had expired after a reasonable time in its initial findings, and that if we reverse the order, the determination that the guaranty had expired is reinstated. However, determining whether a reasonable time elapsed requires a finding of fact that the district court has not yet made.
[When a] guaranty is not self-limited as to time, and, in consequence, expired after the lapse of a reasonable time, * * * it would be a question of fact, at least, whether the lapse of time was reasonable or unreasonable. The answer to this question would depend upon circumstances not now in evidence.
Midland Nat'l Bank v. Security Elevator, 161 Minn. 30, 41, 200 N.W. 851, 856 (1924) (citation omitted).
We agree with Hancuh that the district court has never made a factual finding as to the reasonableness of the time that elapsed before Hancuh's attempt to collect on the guaranty. Absent a finding as to the reasonableness of the time lapse, this court could not possibly have reviewed such a finding.
We therefore reverse the judgment awarded to Hancuh and remand for a finding as to whether the guaranty had terminated after the lapse of a reasonable time. Hancuh's motion for sanctions, costs, and attorney fees is denied.
Reversed and remanded; motion denied.
[*]Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
There is no transcript of the hearing and the court issued no findings of fact, conclusions of law, or memorandum. Therefore, the parties' briefs are the only indication of what was argued to the district court and of what the court relied on in making its decision.
The district court's observation that it would be unreasonable to extend a guaranty beyond the period of the debt is not a finding of fact but a misstatement of law. As Trapp stated, a guaranty is a separate obligation from the debt. Trapp v. Hancuh, 1997 WL 396234, at *7; see, e.g,. Continental Can v. Lanesboro Canning, 180 Minn. 27, 28-29, 230 N.W. 121, 122 (1930) (holding that a guaranty made prior to a three-year contract for payment under the contract was still in force after the contract expired); Tri-County State Bank v. Golf Properties, 395 N.W. 2d 409, 412 (Minn. App. 1986) (same).