A04-1459

Lake County,

Appellant,

vs.

Russell Huseby,

Respondent.

Filed June 14, 2005

Reversed and remanded

Hudson, Judge

Lake County District Court

File No. C4-02-267

Russell H. Conrow, Lake County Attorney, Bruce L. Anderson, Assistant County Attorney, Lake County Courthouse, 601 Third Avenue, Two Harbors, Minnesota 55616 (for appellant)

Wayne G. Johnson, Johnson & Morris, LLP, Wells Fargo Bank Building, Suite 103, Silver Bay, Minnesota 55614 (for respondent)

Considered and decided by Stoneburner, Presiding Judge; Hudson, Judge; and Dietzen, Judge.

U N P U B L I S H E D O P I N I O N

HUDSON, Judge

Appellant Lake County sued respondent Russell Huseby for conversion relating to the sale of timber, and respondent counterclaimed. The jury awarded no damages but found that respondent should recover attorney fees. On appeal, appellant argues that the district court erred by (a) denying its motion for a new trial, and (b) awarding respondent attorney fees without contractual or statutory authorization. Because the district court’s jury instructions constituted fundamental error, we reverse the district court’s judgment and remand for a new trial.

FACTS

Keith Huseby, respondent’s brother, successfully bid at appellant’s timber sale in June 1994 and provided a downpayment. Huseby thus became the permit holder for that harvest. Huseby, however, failed to pay the balance of the bid—$12,364.35—when due. Huseby asked Tom Martinson, land commissioner for Lake County Forestry, to permit respondent to cut the timber. Martinson had concerns about respondent assuming responsibility for the cut, but he ultimately acquiesced to respondent’s participation as a favor to Huseby. Under Minnesota law, an assignment of a contractual right to timber must be in writing and approved by the land commissioner. Minn. Stat. § 90.171 (2004). Martinson did not transfer the permit to respondent’s name because there was no assignment and Martinson did not want respondent’s name on the timber sale.

Respondent paid the balance of the bid by check in August 1996 and cut the timber shortly thereafter. The cut resulted in a substantial overrun, i.e., cutting timber in excess of what was authorized. The overrun had a value of about $8,000. Neither respondent nor Huseby reimbursed appellant for the overrun. Martinson began billing Huseby monthly for the overrun because Huseby remained the permit holder. Martinson believed that respondent actually owed the money, however, because respondent paid the balance and cut the timber. But Martinson acknowledged in his testimony that there was nothing in appellant’s records—apart from respondent’s initial payment on the balance—that showed that respondent was delinquent.

In January 2001, respondent won the bid/permit at a state timber auction. Believing that Minnesota law prohibited a logger with a debt at one public agency from participating in a sale with another agency, Martinson contacted Jon Fogelberg at the Forestry Division of the Minnesota Department of National Resources (Minnesota DNR) and informed Fogelberg that respondent had a delinquent account with appellant. Fogelberg sent respondent a letter returning his down payment and canceling his permit. The Minnesota DNR subsequently refused respondent’s request to bid on an additional timber sale after contacting Martinson, who stated that respondent’s account remained delinquent.

Appellant filed a complaint against respondent in August 2002, alleging breach of contract, timber trespass, and conversion. Respondent filed a counterclaim in May 2003, alleging that appellant or its agents “wrongfully and unlawfully conspired to prevent [respondent] from engaging in any future timber sales in the State of Minnesota,” resulting in a loss to appellant in the amount of roughly $49,000 because respondent was “denied a timber sale” in Lake County. In September 2003, the court dismissed appellant’s breach-of-contract and timber-trespass claims.

The district court conducted a jury trial in April 2004. Throughout the proceedings, appellant repeatedly requested clarification of the theory of recovery alleged in respondent’s counterclaim, but appellant did not file a dispositive motion. At the close of evidence, appellant moved for a directed verdict under Rule 50, stating that, “[t]he [respondent] has failed to plead or prove any counterclaim that would support the cause of action in this case. Just by example, there’s no law that he can say that was violated here. So there’s no issue of fact for the jury to decide in this particular case.” The court denied appellant’s motion.

In its instructions to the jury regarding respondent’s counterclaim, the court stated,

The [respondent] in his counterclaim alleges that [appellant] through its agent or employee Martinson and/or others acted contrary to Minnesota Law in reporting to officers and agents of the State of Minnesota the nature of his relationship or status with respect to this matter.

You are instructed that there is no law or other legal requirement that required Martinson or any County Agent or employee to report any alleged delinquent account to the Minnesota DNR.

In determining whether or not [respondent] has established conduct by [appellant] contrary to law you should consider whether or not [respondent] was delinquent on any account with [appellant]. You are instructed that delinquency is a failure to pay an account when that account is due.

Appellant objected to the jury instructions, asking the court to identify the Minnesota law appellant’s conduct was alleged to have violated.

In answering the special-verdict form, the jury found that respondent’s actions did not result in a conversion of appellant’s personal property. The jury also found that appellant “wrongfully den[ied] [respondent] the right to bid on County and State timber contracts after 1996.” Finding that respondent suffered damage as a result of the wrongful denial, the jury awarded respondent “[l]awyers fees for having to come to this trial. His right to bid County auctions on timber be reinstated.” The jury did not identify a specific amount of damages that would adequately compensate respondent.

Respondent’s counsel submitted an affidavit listing fees and expenses totaling roughly $24,000. The district court awarded respondent that sum, together with costs and disbursements by order for judgment dated May 10, 2004. The court administrator entered judgment on June 28, 2004. Appellant moved for a new trial under Minn. R. Civ. P. 59.01. The district court denied appellant’s motion for a new trial by order dated July 23, 2004. The district court noted appellant’s failure to file a dispositive motion and stated that the district court “is satisfied that [respondent’s] claim alleged, discovered and tried is consistent with the tortious interference of a business relationship.” This appeal follows.

D E C I S I O N

On appeal from an order denying a new trial, review is limited to issues raised in the new-trial motion. Sauter v. Wasemiller, 389 N.W.2d 200, 202 (Minn. 1986). A new trial may be granted on the grounds that (a) errors of law occurred at the trial, and objected to at the time, or (b) the verdict, decision, or report is not justified by the evidence. Minn. R. Civ. P. 59.01. Because the district court has the discretion to grant a new trial, we will not disturb the decision absent a clear abuse of that discretion. Halla Nursery, Inc. v. Baumann-Furrie & Co., 454 N.W.2d 905, 910 (Minn. 1990).

In its motion for a new trial, appellant argued that the district court erred as a matter of law by failing to instruct the jury on the principles of law applicable to respondent’s counterclaim. Although appellant did not specifically argue this issue on appeal, this court will address whether the district court’s jury instructions were contrary to law. See Minn. R. Civ. App. P. 103.04 (noting the appellate court’s discretion to address any issue as justice requires).

Trial courts are allowed considerable latitude in selecting the language in jury instructions. Alhom v. Wilt, 394 N.W.2d 488, 490 (Minn. 1986). “Errors are likely to be considered fundamental or controlling if they destroy the substantial correctness of the charge as a whole, cause a miscarriage of justice, or result in substantial prejudice.” Lindstrom v. Yellow Taxi Co., 298 Minn. 224, 229, 214 N.W.2d 672, 676 (1974) (citations and quotation omitted). This court views the instructions as a whole, from the standpoint of their impact on the jury. Id. If the instructions are misleading or conflicting on a material issue, a new trial should be granted. Id.; see also Apache Plaza, Ltd. v. Midwest Sav. Ass’n, 456 N.W.2d 729, 733 (Minn. App. 1990) (“If an instruction is erroneous and an appellate court is unable to determine whether the error affected the jury, a new trial should be granted.”), review denied (Minn. Aug. 23, 1990).

Minnesota courts recognize a claim for tortious interference with prospective economic relations, adopting the Restatement (Second) of Torts definition, which states,

One who intentionally and improperly interferes with another’s prospective contractual relation (except a contract to marry) is subject to liability to the other for the pecuniary harm resulting from loss of the benefits of the relation, whether the interference consists of

(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or

(b) preventing the other from acquiring or continuing the prospective relation.

United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 632–33 (Minn. 1982) (citing Restatement (Second) of Torts § 766B (1979)). The cause of action protects an interest in the reasonable expectation of an economic advantage. See Wild v. Rarig, 302 Minn. 419, 442 n.16, 234 N.W.2d 775, 791 n.16 (1975).

The Restatement provides several factors for consideration in determining whether the actor’s conduct was improper including: (a) the nature of the actor’s conduct, (b) the actor’s motive, (c) the interests of the other with which the actor’s conduct interferes, (d) the interests sought to be advanced by the actor, (e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other, (f) the proximity or remoteness of the actor’s conduct to the interference, and (g) the relations between the parties. Restatement (Second) of Torts § 767 (1979); see also R.A., Inc. v. Anheuser-Busch, Inc., 556 N.W.2d 567, 571 (Minn. App. 1996) (listing restatement factors), review denied (Minn. Jan. 29, 1997). The Jury Instructions Guide suggests an instruction incorporating these factors. See 4 Minnesota Practice, CIVJIG 40.35 (1999).

We conclude that the district court’s jury instructions were contrary to the law of tortious interference with prospective economic relations. The district court’s sole instruction to the jury was to consider whether respondent was delinquent on any account with appellant when determining if respondent established conduct by appellant contrary to law. The instruction did not identify what law appellant’s conduct should be compared to, inviting the jury to make a legal conclusion based on their own moral evaluation of appellant’s conduct. Moreover, the instruction did not outline the elements of respondent’s tort claim. The terms “wrongful interference” are found only on the verdict form and are undefined. This omission is particularly significant because the factual determination of whether appellant’s interference was improper requires a complex balancing of the above factors. The district court’s instruction conflicts with the elements of tortious interference with prospective economic relations and constitutes fundamental error. Accordingly, the district court abused its discretion by denying appellant’s motion for a new trial.

Appellant next challenges the district court’s denial of its motion for a new trial, arguing that the district court improperly awarded respondent attorney fees as damages. Recovery of attorney fees must be based on either a statute or a contract. Schwickert, Inc. v. Winnebago Seniors, Ltd., 680 N.W.2d 79, 87 (Minn. 2004); see also 22 Am. Jur. 2d Damages § 120 (2003) (“Except where the circumstances are such as to warrant the allowance of punitive or exemplary damages, the damages recoverable for a tort are those directly attributable to the tort and no more.”).

Respondent argues that the award was within the jury’s discretion, suggesting that the jury did not intend to award “attorney fees,” but rather awarded the amount he must spend on attorney fees as compensatory damages. Respondent cites no case law in support of this distinction. The district court improperly awarded respondent attorney fees as damages.

Reversed and remanded.