author: KONENKAMP, Justice.

text:
    2006 SD 56
    Doug O’BRYAN, Joni O’Bryan, individually and as Doug O’Bryan Contracting, Inc., Plaintiffs and Appellees, v. Bruce ASHLAND, Defendant and Appellant.
    Nos. 23596, 23609.
    Supreme Court of South Dakota.
    Argued Jan. 11, 2006.
    Decided June 21, 2006.

      Thomas H. Barnes, Stephen C. Hoffman of Costello, Porter, Hill, Heisterkamp, Bushnell & Carpenter, Rapid City, South Dakota, Attorneys for plaintiffs and appel-lees.
    John K. Nooney of Thomas, Nooney, Braun, Solay & Bernard, Rapid City, South Dakota, Attorneys for defendant and appellant.
   KONENKAMP, Justice.

[¶ 1.] In ordinary circumstances, when a tax advisor’s negligence leads to an underpayment of tax, the taxpayer cannot recover as damages the tax deficiency itself because the tax liability arose not from the negligent advice, but from the ongoing obligation to pay the tax. An issue never before decided in South Dakota, however, is whether the taxpayer can recover from the negligent advisor the accrued interest the IRS charged on the delinquent tax. Here, Bruce Ashland, an accountant, improperly completed federal income tax returns for Doug O’Bryan’s contracting business. When the mistakes were later uncovered, O’Bryan incurred a large delinquent tax liability, together with accrued interest on the unpaid tax. He sued Ashland for accountant malpractice. At trial, Ashland conceded negligence and left for the jury the question of damages. Through special interrogatories, the jury held Ashland liable for, among other things, the interest the IRS assessed against O’Bryan. On appeal, Ashland challenges only the interest award. He urges us to follow a line of authority generally holding that recovery of interest payable to the IRS is not allowed because taxpayers have the interim use of the taxes, and therefore they are not damaged by later having to pay interest for the period of that use. We conclude that the better reasoned authority allows for recovery of interest depending on the particular circumstances of each case. Under the facts here, interest was recoverable, and thus we affirm the jury’s verdict.

Background

[¶ 2.] Ashland is a certified public accountant. He began providing services for Doug O’Bryan Contracting in 1987-1988. From 1979 through the first quarter of 1995, O’Bryan operated as a sole proprietorship. O’Bryan’s well-drilling business prospered and grew in the early 1990s. On several occasions over the years, Ash-land recommended to O’Bryan that he incorporate. O’Bryan ultimately followed Ashland’s advice and incorporated effective April 1,1995.

[¶ 3.] For taxation purposes, incorporating in April meant that O’Bryan remained a cash basis taxpayer for the first quarter of the year, January 1, 1995 through March 31, 1995. Then, on incorporation, the business changed to accrual basis accounting for the last three quarters, April 1, 1995 through December 31, 1995. But, when Ashland prepared O’Bryan’s 1995 tax return in October 1996, he mistakenly calculated O’Bryan’s income for the first quarter using accrual based figures. As a result, Ashland understated, and consequently underreported, the income O’Bryan realized for the first quarter.

[¶ 4.] Ashland’s mistake was discovered by another accountant during O’Bryan’s divorce proceedings in 1997. After the accountant informed Ashland, he wrote a letter to O’Bryan disclosing the mistake and the need to correct the tax return. O’Bryan’s divorce attorney hired a different accountant to review and amend the mistaken return, and, as of June 28, 1998, O’Bryan had $239,933 in additional tax liability for 1995, together with approximately $50,000 in interest. O’Bryan brought suit against Ashland seeking recovery for the additional expenses he incurred in correcting the erroneous tax returns. He also sought the interest the IRS charged on his unpaid tax liability.

[¶ 5.] As a matter of settled law, the circuit court ruled that O’Bryan’s delinquent tax debt ($239,933) could not be included in his measure of damages because it was solely O’Bryan’s obligation, which he would have owed regardless of his accountant’s negligence. However, the court allowed the jury to consider whether O’Bryan could recover as damages the interest assessed by the IRS on his unpaid tax liability. Accordingly, the issue whether the interest charge actually damaged O’Bryan was extensively argued, and each side offered theories on whether and why the interest assessed by the IRS should or should not be recoverable.

[¶ 6.] While Ashland conceded that under certain situations a negligent accountant should pay interest assessed against the taxpayer, such requirement would apply only to situations where the client had “the money just sitting in their one percent savings account....” Here, Ashland argued, the situation was distinguishable because O’Bryan did not have the cash readily available when his 1995 tax return was originally filed in October 1996, and if it would have been correctly filed, O’Bryan would have had to borrow the money to pay the tax at a higher interest rate than the IRS charged. As a result, Ashland contended that the loss O’Bryan sustained should not include the interest assessed by the IRS.

[¶ 7.] O’Bryan, on the other hand, maintained that he would have been able to fully pay his 1995 tax obligation had it been properly calculated, and thus he would have incurred no interest. O’Bryan also asserted that Ashland committed additional negligence when he incorporated O’Bryan’s business in April rather than at the beginning of the year. To support his theory, O’Bryan offered expert testimony that had Ashland incorporated O’Bryan’s business at the beginning of the year, rather than in April, O’Bryan would have been able to use a transitional reporting method, termed the “Three Year Rule.” Use of the “Three Year Rule,” according to O’Bryan’s expert, would have softened the effect of changing from a cash based taxpayer to an accrual based taxpayer. Consequently, the damage O’Bryan claimed he suffered was that Ashland’s negligence prevented him from spreading out the effect of changing from a cash based taxpayer as a sole proprietor to an accrual based taxpayer through incorporation.

[¶ 8.] According to Ashland, however, O’Bryan’s “Three Year Rule” argument only confused the issues: use or non use of the “Three Year Rule” was in no way connected to the case and was “nothing more than a smoke screen.... ” In Ash-land’s view, the IRS interest charge related exclusively to O’Bryan’s unpaid tax liability for 1995. Thus, the “Three Year Rule” was immaterial, and Ashland claimed that the focus should be on the real issue: what damage did O’Bryan suffer from Ashland’s miscalculation of O’Bryan’s income realized for the first quarter of 1995?

[¶ 9.] O’Bryan and Ashland presented their conflicting theories on how damages should be calculated and what factors should be considered within that calculation. Ultimately, the jury concluded that O’Bryan had been damaged by Ashland’s negligence and found, among other things, that the interest O’Bryan incurred should be included in the measure of damages. The jury awarded O’Bryan interest charged from October 10, 1996, through June 23, 1998, which was later calculated to be $39,038.03.

[¶ 10.] Ashland appeals only the award of interest charged by the IRS, claiming that, as a matter of law, it is not includable as an element of recoverable damages in professional negligence actions. By notice of review, O’Bryan contends that interest should have been figured from April 15, 1995, the date the original return was due, instead of October 10, 1996, the date the mistaken return was filed.

Standard of Review

[¶ 11.] Whether a plaintiff may recover the interest due the IRS in an accounting malpractice action is a question of law. Questions of law are reviewed de novo. See Convenience Center, Inc. v. Cole, 2004 SD 42, ¶ 11, 678 N.W.2d 774, 777; Parks v. Cooper, 2004 SD 27, ¶20, 676 N.W.2d 823, 829; Truhe v. Turnac Group, LLC, 1999 SD 118, ¶ 11, 599 N.W.2d 378, 380.

Analysis and Decision

[¶ 12.] Ashland asks us to adopt a categorical rule that interest payable to the IRS is not recoverable as a measure of damages. O’Bryan, on the other hand, asserts that he was damaged by the interest charged against him, and he should be allowed to recover it. These conflicting arguments have divided the courts around the country. Some jurisdictions hold that interest is never recoverable because delinquent taxpayers will have had the interim use of the funds owed to the IRS, and thus they are not damaged by having to pay interest for the period of that use. Other jurisdictions conclude that taxpayers would not have had to pay interest if they had received competent advice, and therefore awarding interest allows them to be restored to the situation they would have been in had they not received the faulty advice. To discern the better approach, we must examine both positions.

[¶ 13.] We first consider the rationale used in those jurisdictions where recovery of interest is precluded as a matter of law. See Eckert Cold Storage, Inc. v. Behl, 943 F.Supp. 1230 (E.D.Cal.1996); Orsini v. Bratten, 713 P.2d 791, 794 (Alaska 1986); Alpert v. Shea Gould Climenko & Casey, 160 A.D.2d 67, 72, 559 N.Y.S.2d 312 (1990); Leendertsen v. Price Waterhouse, 81 Wash.App. 762, 916 P.2d 449, 451 (1996). In Leendertsen, 916 P.2d at 451, the taxpayer received an excessive refund from the IRS because of accounting negligence and incurred, among other charges, an IRS interest assessment. The taxpayer sought recovery from the accountant, but the court held that the taxpayer had the use of this money, and to obtain payment from another source for that use would unjustly enrich the taxpayer.

[¶ 14.] Likewise, in Eckert Cold Storage, Inc., 943 F.Supp. at 1234, a taxpayer argued that the accountant gave negligent advice on certain investments causing the taxpayer damage upon incurring back taxes and interest. The taxpayer attempted to prove damages, arguing that, but for the negligent advice, the taxpayer would not have had the back taxes or interest charges. The court examined whether interest payable to the IRS should be recoverable and held that the better rule would exclude it because “to the extent that the IRS charges the market rate,” it has not damaged the taxpayer. Id. at 1235.

[¶ 15.] Also prohibiting recovery, Alaska’s Supreme Court concluded that the taxpayer was in no worse position as a result of the interest. Orsini, 713 P.2d at 794. The same result can be seen in New York, where the court ruled that a windfall would result if recovery was allowed. Alpert, 160 A.D.2d at 72, 559 N.Y.S.2d 312. Essentially, the argument against allowing interest as a measure of damages hinges on the theory that the IRS does not charge interest to penalize the taxpayer. Rather, it is merely a charge for the use of money that the taxpayer should have earlier paid to the government. See Eckert Cold Storage, Inc., 943 F.Supp. at 1235; Orsini, 713 P.2d at 794; Alpert, 160 A.D.2d at 72, 559 N.Y.S.2d 312; Leendertsen, 916 P.2d at 451.

[¶ 16.] But what if taxpayers can prove they were truly damaged? Acknowledging this possibility, several courts refuse to adopt an absolute rule barring recovery: whether a taxpayer has been damaged is left to the finder of fact, with the burden of proof on the taxpayer. See Jobe v. Int’l Ins. Co., 933 F.Supp. 844 (D.Ariz.1995); Ronson v. Talesnick, 33 F.Supp.2d 347, 353 (D.N.J.1999); Dail v. Adamson, 212 Ill.App.3d 66, 156 Ill.Dec. 445, 570 N.E.2d 1167 (1991); Wynn v. Estate of Holmes, 815 P.2d 1231 (Okla.App.1991); McCulloch v. Price Waterhouse, LLP, 157 Or.App. 237, 971 P.2d 414 (1998). The courts taking this approach recognize that, under traditional damage principles, if the taxpayer has been injured, recovery should be allowed. These decisions focus on the position the parties would have been in had they not received the negligent advice.

[¶ 17.] The Oregon Court of Appeals considered the two concerns identified in those decisions denying recovery: “(1) a windfall: i.e., the taxpayer could recover damages for interest and at the same time a return from the use of the monies that could have been applied to the tax liability; and (2) the speculative nature of the causation of the damages.” McCulloch, 971 P.2d at 419 (discussing Leendertsen, 916 P.2d at 451). Because the burden is on the taxpayer to prove “the causation and amount of each claim of damage[,]” the court held that “neither concern supports the absolute bar to recovery of damages arising from accrued interest....” Id. (emphasis added). Nonetheless, while the Oregon court refused to follow Leendert-sen, it acknowledged that in certain circumstances an award of interest may not be warranted when taxpayers fail to meet their burden of proof. But ultimately the issue should depend on the circumstances of each case. Id.

[¶ 18.] Similarly, a New Jersey court considered the split in authority on this question and concluded that the better reasoned process would allow the jury to determine whether the taxpayer was damaged by the interest assessed. Ronson, 33 F.Supp.2d at 354. The court found particularly compelling certain tort damage principles, such as the collateral source rule and the benefits rule. Along those lines, the court stated that “[a] blanket prohibition against the recovery of IRS interest under the circumstances presented is not reconcilable with one of the underlying policies of the collateral source rule that a tortfeasor should not benefit from the ingenuity of a harmed plaintiff.” Id. at 355. Thus, it held that “New Jersey would permit recovery of IRS interest as damages in accounting malpractice actions.” Id. at 354.

[¶ 19.] In sum, the Ronson court deduced that this was “the only reasonable interpretation that furthers the overriding tort damages principle of restoring the plaintiff to the position he or she would have been in but for the actions of the tortfeasor.” Id. Moreover, “[d]enying recovery of IRS interest from a negligent accountant permits the tortfeasor to benefit from the presumption that a harmed taxpayer should have been ingenious enough to (1) maintain a sum of money that he would have otherwise had to pay over to the IRS and (2) invest that money in a manner in which he earned interest in an amount comparable to the rate charged by the IRS.” Id. at 355.

[¶ 20.] Our own precedent supports the rule that “[i]n a professional negligence action, the appropriate measure of damages is the difference between what the taxpayer would have owed absent the negligence, and what [the taxpayer] paid because of [the] accountant’s negligence, plus incidental damages.” Lien, 509 N.W.2d at 426 (citing Thomas v. Cleary, 768 P.2d 1090, 1091-92 n. 5 (Alaska 1989)). While this standard does not expressly include interest payable to the IRS, it does lay the foundation for such an award. For instance, the court in Bail, 156 IlLDec. 445, 570 N.E.2d at 1169, used the Thomas measure and allowed recovery of the interest assessed by the IRS. The same occurred in Jobe, 933 F.Supp. at 860, where the court adopted the standard in Thomas and then concluded that interest was recoverable as an appropriate measure of damages.

[¶ 21.] Our case law has long emphasized that the “object of compensatory damages is to make the injured party whole.” Hulstein v. Meilman Food Industries, Inc., 293 N.W.2d 889, 891 (S.D.1980) (citing Ralston Purina Co. v. Jungers, 86 S.D. 583, 199 N.W.2d 600 (1972)). Accordingly, we conclude that the issue whether a plaintiff has actually been damaged from the interest charged by the IRS to the taxpayer on unpaid tax liability is a question of fact and align ourselves with those jurisdictions that refuse to adopt a blanket rule forbidding interest recovery in accounting malpractice actions.

[¶ 22.] Having concluded that interest charged by the IRS may be recoverable in the proper circumstance, we now examine the facts of this case. Here, negligence was conceded, thus the jury was only required to determine what, if any, damages O’Bryan suffered as a result. Both Ashland and O’Bryan offered evidence on damages. O’Bryan’s expert asserted that the interest charged by the IRS did in fact damage O’Bryan. Ash-land’s expert responded that the IRS charged a 4% to 9% interest rate and O’Bryan would have been required to pay a 10½% market interest rate when the obligation was due. As a result, Ashland suggested that O’Bryan was not damaged from the negligence because he had a more favorable interest rate from the IRS than he would have obtained elsewhere.

[¶23.] Confronted with O’Bryan’s and Ashland’s conflicting theories, the trial court allowed them to be evaluated by the jury, and, through special interrogatories, the jury found that O’Bryan was damaged by the interest assessed. We examine the evidence in a light most favorable to the verdict. Parker v. Casa Del Rey, 2002 SD 29, ¶ 5, 641 N.W.2d 112, 115. There was evidence to support this verdict. O’Bryan did not have the unpaid tax money deposited somewhere earning interest. But he said that had he been able to use the “Three Year Rule” to spread his tax liability, and had he known of the tax when it was due, he would have been able to pay it. He said that he would not have necessarily had to borrow the money from a bank; he may have been able to borrow money from his family as he had done before. Only a trier of fact could adequately assess these claims. We conclude that there was sufficient evidence in the record to support the jury’s determination that the interest charged by the IRS was directly related to Ashland’s negligence and that O’Bryan suffered a loss as a result. Therefore, the circuit court did not err when it allowed the issue to go to the jury.

[¶ 24.] Perhaps, under the appropriate facts, an equitable burdens and benefits analysis might be used to more finely ascertain the proper damages in this type of case. Our laws are not designed to allow plaintiffs to profit from their injuries. Big Rock Mountain Corp. v. Steams-Roger Corp., 388 F.2d 165, 169 (8thCir.1968); see also Reed v. Consol. Feldspar Corp., 71 S.D. 189, 23 N.W.2d 154. As the court in Ronson concluded, “defendants should be permitted to come forward with evidence of benefit from the malpractice that could be applied to reduce the plaintiffs recovery.” 33 F.Supp.2d at 355 (citing Lien, 509 N.W.2d at 426). This measure balances the policy of preventing plaintiffs from recovering a windfall against allowing tort-feasors to escape without making plaintiffs whole. Such a method may cut a pragmatic course between two rigid theories: plaintiffs had use of the money and therefore cannot recover interest, or interest must be recovered to put plaintiffs in the position they would have been in had it not been for the tax advisor’s negligence. See Caroline Rule, What and When Can a Taxpayer Recover From a Negligent Tax Advisor?, 92 J Tax’n 176 (March 2000). Whether this approach should be used in South Dakota must be decided in the appropriate future case. Here, neither party raised the specific question whether any benefits O’Bryan may have had from Ash-land’s negligence should be offset against any damages. Each side simply argued that interest was recoverable or not recoverable.

[¶ 25.] Lastly, on notice of review, O’Bryan contends that the interest award should have started on the date the 1995 taxes were originally due, April 15, 1995, instead of the date the jury settled on, October 10, 1996. In response, Ashland argues that this issue was not preserved for appeal. At the close of the case, O’Bryan moved for a directed verdict under SDCL 15-6-50(a). His motion was denied. At no time thereafter did O’Bryan move for judgment notwithstanding the verdict under SDCL 15-6-50(b). Therefore, whatever the merits of his interest date argument, the issue was not preserved for appeal by the failure to move for judgment notwithstanding the verdict. S.D. Bldg. Auth. v. Geiger-Berger Assocs., 414 N.W.2d 15, 25 (S.D.1987). The only exception available is under the plain error rule, but we find no support in the record for plain error. SDCL 19-9-6 (Rule 103(d)).

[¶ 26.] Affirmed.

[¶ 27.] GILBERTSON, Chief Justice, and SABERS, ZINTER, and MEIERHENRY, Justices, concur.

      . According to Ashland, ''[a]s a cash basis taxpayer, O'Bryan was obligated to pay tax on the actual receipts of cash he had realized in the first quarter, and for the last nine months of 1995, O’Bryan owed the IRS tax on the services billed and/or completed during that time period, even though the company may not have yet realized actual cash for such services and/or billings.”

      . In addition to understating O'Bryan’s income for 1995, Ashland also failed to use an Indian Employment Tax Credit for O'Bryan's 1994 return. Ashland conceded he was negligent in this regard.

      . According to Ashland, by "the time of trial, O'Bryan still owed the IRS $182,369 of the original $239,933, as well as the interest....”

      . Before O’Bryan incorporated he recognized income when it was actually received because he was a cash basis taxpayer. After the date O'Bryan incorporated, his business recognized income when the job or service was completed or billed. As a result, when O'Bryan changed reporting methods in the middle of 1995, he was required to recognize all his accounts receivable as income for the last three quarters of the year. Had he been allowed to use the "Three Year Rule”, he would have been able to spread out the adjustment over three years. For example, O'Bryan’s expert stated that if O'Bryan had $790,000 in accounts receivable for 1995 and would have been able to use the Three Year Rule, he would have spread out the tax obligation on the $790,000 over three years, rather than being required to pay it all in 1995.

      . O’Bryan argued that Ashland's failure to incorporate at the beginning of the year was in fact essential to the issue of damages and related to the interest assessed by the IRS. First, O’Bryan testified that use of the "Three Year Rule” would have spread out his 1995 tax obligation over three years, and thus the 1995 obligation would have been far less. Second, because it would have been less, O’Bryan maintained he could have paid the obligation, and thus avoided incurring any interest charges. Third, because of Ashland’s negligence in failing to incorporate in January, O’Bryan argued that these circumstances warranted including the interest assessed by the IRS as a measure of damages.

      . Ashland asserted that the interest O'Bryan was charged was not a penalty, but a function of having the use of $239,933, money O'Bryan would otherwise not have had if the tax had been paid when originally due. Accordingly, Ashland argued that O’Bryan was not damaged by the interest charged because the rate assessed by the IRS was less than the rate O'Bryan would have obtained had the tax been properly calculated and O'Bryan had to pay the $239,339 when the 1995 tax return was originally filed. Ashland offered that the interest rate charged by the IRS was only 4% to 9%, and O’Bryan would have had to borrow funds to pay the 1995 tax obligation at 10⅛%.

      . The jury also awarded damages (1) from the failure to take the Indian Employment Credit on O’Bryan's 1994 taxes; and (2) the additional accounting fees incurred for the 1994, 1995, and 1996 amended tax returns. Ash-land does not appeal these awards.

      . In addition to the cases cited, the following authorities also allow for recovery of interest: Jamison, Money, Farmer & Co., PC v. Standeffer, 678 So.2d 1061 (Ala.1996); Jones v. Childers, 1992 WL 300845 (D.C.Fla.) (unreported), aff'd in part, and rev'd in part, 18 F.3d 899 (11thCir.1994); Jerry Clark Equip., Inc. v. Hibbits, 245 Ill.App.3d 230, 183 Ill.Dec. 931, 612 N.E.2d 858 (1993), appeal den., 152 Ill.2d 560, 190 Ill.Dec. 891, 622 N.E.2d 1208 (1993); Wannbrodt v. Blanchard, 100 Nev. 703, 692 P.2d 1282 (1984); Wyatt v. Smith, 1993 WL 518630 (Ohio Ct.App.) (unreported); Merriam v. Continental Casualty Co., 228 Wis.2d 510, 597 N.W.2d 774 (Ct.App.1999) ("unpublished limited precedent opinion”), review den., 230 Wis.2d 274, 604 N.W.2d 572 (1999); Adel v. Parkhurst, 681 P.2d 886 (Wyo.1984).

      . When the court listed the various decisions that have addressed the issue, it placed South Dakota among the jurisdictions that allow recovery of interest. Id. at 352. The court cited, Lien v. McGladrey & Pullen, 509 N.W.2d 421, 426 (S.D.1993), where we stated that the appropriate measure of damages in professional negligence actions in South Dakota is "the difference between what the taxpayer would have owed absent the negligence, and what [the taxpayer] paid because of [the] accountant’s negligence, plus incidental damages.” While this is an appropriate statement of our law, it does not stand for the proposition asserted in Ronson. Until today, we have never determined whether a taxpayer in South Dakota may recover interest payable to the IRS as a measure of damages in professional negligence actions.

      . There was testimony, albeit contested, that O'Bryan had $565,000 in profit from his business in 1996 available to pay taxes.

      . The court in Ronson cited our statement in Lien that "Q]ust as [the plaintiff's] expert was permitted to testify regarding the damages incurred as a result of the negligent advice, so must [defendant] be allowed to elicit testimony discrediting [plaintiff's] computations and demonstrating the benefits which [plaintiff] received.” 33 FSupp2d at 355 n14 (citing Lien, 509 N.W.2d at 426).


source: Caselaw Access Project

author: /s/ Helen M. Meyer Associate Justice

license: Public Domain

text:
    In re PETITION FOR REINSTATEMENT TO the PRACTICE OF LAW OF Steven Wayne VAN LIEW, a Minnesota Attorney, Registration No. 280793.
    No. A05-1772.
    Supreme Court of Minnesota.
    July 17, 2006.
   ORDER

On March 31, 2006, this Court suspended petitioner from the practice of law for a period of 90 days. Petitioner has filed an affidavit stating that he has fully complied with the terms of the suspension order and requests reinstatement. The Director of the Office of Lawyers Professional Responsibility does not oppose the request.

Based upon all the files, records, and proceedings herein,

IT IS HEREBY ORDERED that petitioner Steven Wayne Van Liew is reinstated to the practice of law in the State of Minnesota subject to his successful completion of the professional responsibility portion of the state bar examination by March 31, 2007.

BY THE COURT:

/s/ Helen M. Meyer Associate Justice


author: /s/Russell A. Anderson Chief Justice

text:
    Lori BENGSTON, Relator, v. PIONEER PACKAGING & PRINTING, and St. Paul Travelers, Respondents, and Medica Health Plus/Ingenix, Fairview Health Services, Novacare Rehabilitation, Noran Neurological Clinic, and Kari Clinic of Chiropractic, Interve-nors.
    No. A06-725.
    Supreme Court of Minnesota.
    July 19, 2006.
    Leslie A. Gelhar, Gelhar & Goldetsky, P.A., Bloomington, MN, for Relator Lori Bengston.
    Lisa Beth Pearson Wheeler, Thomas A. Atkinson, John G. Ness & Associates, St. Paul, MN, for Respondent Pioneer Packaging & Printing.
   ORDER

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that the decision of the Workers’ Compensation Court of Appeals filed March 14, 2006, be, and the same is, affirmed without opinion. See Hoff v. Kempton, 317 N.W.2d 361, 366 (Minn.1982) (summary affirmances have no precedential value because they do not commit the court to any particular point of view, doing no more than establishing the law of the case).

BY THE COURT:

/s/Russell A. Anderson Chief Justice


author: GILDEA, Justice.

text:
    Michael Gary LEE, petitioner, Appellant, v. STATE of Minnesota, Respondent.
    No. A05-1375.
    Supreme Court of Minnesota.
    July 20, 2006.
    Michael Gary Lee, Bayport MN, Pro Se Appellant.
    Mike Hatch, Attorney General, Susan Gaertner, Ramsey County Attorney, Mark Nathan Lystig, Assistant County Attorney, St. Paul, MN, for Respondent.
   OPINION

GILDEA, Justice.

Michael Gary Lee was convicted of one count of first-degree murder and two counts of attempted first-degree murder. Lee appealed his convictions to this court and this court affirmed. State v. Lee, 491 N.W.2d 895 (Minn.1992). Lee’s subsequent petition for posteonvietion relief was denied by the posteonvietion court. Lee now appeals the denial of posteonvietion relief to this court. We affirm the post-conviction court’s denial of Lee’s petition for postconviction relief.

On December 13, 1990, Michael Gary Lee was found guilty of first-degree murder by a Ramsey County jury for the stabbing death of 16-year-old Bethany Muller and the attempted first-degree murders of Laura Muller and Kristin Sal-yers. Lee was sentenced to consecutive sentences of life for the murder of Bethany Muller, 180 months (15 years) for the attempted murder of Laura Muller, and 240 months (20 years) for the attempted murder of Kristin Salyers. This court’s opinion issued in response to Lee’s direct appeal provides a full statement of the background facts in this case. Lee, 491 N.W.2d at 896-99.

On December 17, 2004, Lee filed his petition for postconviction relief, arguing that the district court erred “because the court ignored the mitigating factors that led to petitioner’s crime.” Lee requested that his sentence be reviewed because “mitigating circumstances were not considered in his sentencing.” In the petition, Lee alleged that “[t]he district court did not consider such factors as petitioner’s depression, addictions, lack of criminal history, or his prior unanswered request for medication prior to the offense.” The district court denied relief pursuant to Minn. Stat. § 590.04, subd. 3 (2004), because Lee’s petition raised “issues identical to those already determined on appeal[.]”

We review the summary denial of Lee’s posteonvietion petition under an abuse of discretion standard. Zenanko v. State, 688 N.W.2d 861, 864 (Minn.2004). Minnesota Statutes § 590.04, subd. 3 (2004), allows a postconviction court to “summarily deny a petition when the issues raised in it have previously been decided by the Court of Appeals or the Supreme Court in the same case.”

In his direct appeal, we rejected Lee’s nearly-identical argument that the district court erred in sentencing because it “should have taken into account that he had no prior criminal record.” See Lee, 491 N.W.2d at 902. We also rejected Lee’s argument that he “was suffering from mental impairment at the time of the crimes,” concluding that Lee “was depressed, angry and maybe impulsive, but he did not suffer from an extreme mental impairment that would warrant different treatment at sentencing.” Id. To the extent that Lee did not argue, in his direct appeal, that the district court erred by not considering his “addictions” or “his prior unanswered request for medication,” those arguments are foreclosed by our conclusion that Lee’s mental state did not “warrant different treatment at sentencing” and that the district “court acted within its discretion in sentencing [Lee].” Id. As such, the district court did not abuse its discretion in summarily denying Lee’s petition.

Even if we were to conclude that Lee’s petition for postconviction relief raises issues different from the issues already addressed in his direct appeal, the “Knaffla rule” bars Lee’s claim. State v. Knaffla, 309 Minn. 246, 252, 243 N.W.2d 737, 741 (1976) (When a direct appeal has once been taken by a convicted defendant, “all matters raised therein, and all claims known but not raised, will not be considered upon a subsequent petition for post-conviction relief.”). This court has determined that the Knaffla rule also bars claims that should have been known by the appellant at the time of appeal. Perry v. State, 705 N.W.2d 572, 574 (Minn.2005). As Lee’s claim is, at best, a variation of his direct appeal claim that the district court erred by imposing consecutive sentences and an upward departure, he certainly knew or should have known of the claim at the time of his direct appeal.

“ ‘There are two exceptions to the Knaffla rule: (1) if a novel legal issue is presented, or (2) if the interests of justice require review.’ ” Perry, 705 N.W.2d at 574. (quoting Taylor v. State, 691 N.W.2d 78, 79 (Minn.2005)). Lee has articulated no reason why either exception should apply, and we have previously declined to apply the exceptions in the absence of such reasons. See id. at 576. Our independent review of Lee’s claim and the record makes it clear that neither of the exceptions apply.

We hold that the district court did not abuse its discretion in summarily dismissing Lee’s postconviction petition.

Affirmed.


author: /s/Helen M. Meyer Associate Justice

text:
    Ronald W. ODASH, Respondent, v. PEPSI, INC., and Kemper Insurance Cos., Relators, and Medicare/Noridian Administrative Serv., Northstar Neurological, and Millennium Neurology, Intervenors.
    No. A06-726.
    Supreme Court of Minnesota.
    July 20, 2006.
    Hon. William R. Pederson, Workers Compensation Court of Appeals.
    Shannon A. Nelson, Aafedt, Forde, Gray, Monson & Hager, PA, Minneapolis, MN, for relators.
    James A. Batchelor, Batchelor Law Firm, Minneapolis, MN, for respondent.
   ORDER

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that the decision of the Workers’ Compensation Court of Appeals filed March 14, 2006, be, and the same is, affirmed without opinion. See Hoff v. Kempton, 317 N.W.2d 361, 366 (Minn.1982) (summary affirmances have no precedential value because they do not commit the court to any particular point of view, doing no more than establishing the law of the case).

Employee is awarded $1,200 in attorney fees.

BY THE COURT:

/s/Helen M. Meyer Associate Justice


author: VANDE WALLE, Chief Justice.

text:
    2006 ND 157
    Terry L. JOHNSON, Plaintiff, Appellant and Cross-Appellee v. Thomas E. GEHRINGER, Defendant, Appellee and Cross-Appellant.
    No. 20050394.
    Supreme Court of North Dakota.
    July 18, 2006.

      Tom P. Slorby, Slorby Law Office, Minot, ND, for plaintiff, appellant and cross-appellee.
    James G. Wolff, Farhart Wolff, P.C., Mohall, ND, for defendant, appellee and cross-appellant.
   VANDE WALLE, Chief Justice.

[¶ 1] The parties’ partnership was dissolved by an amended judgment in 2001.

Thomas Gehringer made a motion to the district court asking the court to hold Terry Johnson in contempt of court and to impose remedial sanctions for violating the amended judgment. The district court found Johnson in contempt and imposed sanctions of damages, interest, and attorney’s fees against Johnson. Johnson appealed from the judgment of contempt. We affirm.

I

[¶ 2] Johnson and Gehringer were involved in a partnership known as Propane Services. The business primarily involved the sale and delivery of bulk propane and also included the installation and repair of heating and air conditioning equipment. The partnership was later dissolved by a judgment, order for sale, and amended judgment. Under the dissolution, Geh-ringer purchased Johnson’s partnership interest for $141,000. The amended judgment provided “[t]hat Terry L. Johnson is enjoined and restrained for a period of three (3) years from engaging in a business similar to Propane Services in the City of Mohall, North Dakota, and within a forty (40) mile radius immediately surrounding the City of Mohall, North Dakota.”

[¶ 3] In 2002, Johnson started a new business called A-OK Heating and Air Conditioning. It is undisputed that Johnson installed and repaired residential and commercial heating and air conditioning systems within forty miles of Mohall. Johnson maintains he did not engage in bulk propane sales or delivery. Johnson ultimately took a position as an employee of a civilian contractor conducting business on the Minot Air Force Base which included heating and refrigeration work.

[¶ 4] Gehringer moved the district court to find Johnson in contempt of the non-competition clause and asked the district court to impose sanctions. Gehringer argued Johnson violated the amended judgment by installing and repairing residential and commercial heating and air conditioning systems within forty miles of Mohall through his company A-OK Heating and Air Conditioning. Gehringer did not allege Johnson engaged in the sale and delivery of bulk propane.

[¶ 5] The district court determined Johnson engaged in business activities that the partnership had been engaged in. The district court found Johnson in contempt and ordered sanctions.

[¶ 6] The district court found that Johnson’s activities represented five percent of the total business activities of Propane Services. The court ordered Johnson to pay Gehringer five percent of the amount Gehringer paid Johnson to purchase Johnson’s share of the partnership. The court also ordered Johnson to pay interest at six percent per year from the date Johnson began the activities that violated the amended judgment. The court also ordered Johnson to pay Gehringer reasonable attorney’s fees and costs for bringing the contempt motion.

II

[¶ 7] Johnson argues the district court abused its discretion by finding him in contempt for violating the amended judgment. “The ultimate determination of whether or not a contempt has been committed is within the trial court’s sound discretion.” Giese v. Giese, 2004 ND 58, ¶ 8, 676 N.W.2d 794. “A trial court’s finding of contempt will not be overturned unless there is a clear abuse of discretion.” Id. “An abuse of discretion occurs when the trial court acts in an arbitrary, unreasonable, or unconscionable manner or when it misinterprets or misapplies the law.” Id.

[¶ 8] The amended judgment provided that Johnson was enjoined and restrained from “engaging in a business similar to Propane Services” for three years. The amended judgment capitalizes the words “Propane Services” and uses the proper name of this business partnership, not the words “propane services” in a general sense. The amended judgment thus unambiguously states that Johnson may not engage in business activities similar to those activities this particular business partnership engaged in. The record is clear that part of Propane Services’ business activities included the repair and installation of furnaces and air conditioning equipment.

[¶ 9] “The interpretation of an amended judgment is a question of law which is fully reviewable by this court.” Knoop v. Knoop, 542 N.W.2d 114, 117 (N.D.1996). “A judgment is construed to harmonize and give effect to all of its provisions.” Id. “If the language of a judgment is clear and unambiguous, it must be construed to give effect to that unambiguous language.” Id. “If the language of a judgment is ambiguous, we give great weight to a trial court’s construction of its own decree.” Id.

[¶ 10] In its contempt order, the district court found Johnson engaged in the repairing and installation of furnaces and air conditioning equipment, both business activities done by Propane Services. The district court also stated these activities may have helped Propane Services retain or attract customers.

[¶ 11] “We have consistently held that the district court must provide an adequate explanation for us to understand the basis for its decision.” In re Spicer, 2006 ND 79, ¶ 8, 712 N.W.2d 640. “However, we will not reverse a district court’s decision when ‘valid reasons are fairly dis-cernable, either by deduction or inference.’ ” Id.

[¶ 12] Based on the evidence in the record, it was not unreasonable for the district court to find that Johnson engaged in business activities that were done by Propane Services. The district court did not find Johnson’s employment as a civilian contractor at the Minot Air Force Base to be in violation of the amended judgment. The district court did not act in an arbitrary, unreasonable, or unconscionable manner and did not abuse its discretion by holding Johnson in contempt.

Ill

[¶ 13] Johnson also argues the district court erred by awarding damages. Specifically, Johnson argues Gehringer suffered no damages as a result of Johnson’s actions.

[¶ 14] The North Dakota Century Code authorizes courts of record to impose a remedial or punitive sanction for contempt of court. N.D.C.C. § 27-10-01.2. “A sanction requiring payment of a sum of money is remedial if the sanction is imposed to compensate a party or complainant, other than the court, for loss or injury suffered as a result of the contempt.” N.D.C.C. § 27-10-01.1(4). Section 27-10-01.4(l)(a), N.D.C.C., allows the district court to impose a sanction of “[p]ayment of a sum of money sufficient to compensate a party or complainant, other than the court, for a loss or injury suffered as a result of the contempt, including an amount to reimburse the party for costs and expenses incurred as a result of the contempt.”

[¶ 15] Based on the record before it, the district court determined the repair and installation of furnaces and air conditioning equipment accounted for five percent of Propane Services’ total business. The district court ordered Johnson to pay Gehringer five percent of the amount Geh-ringer paid Johnson for Propane Services when the partnership was dissolved, plus interest. When the partnership was dissolved Gehringer paid Johnson a sum of money so Gehringer could keep operating Propane Services. Johnson violated the amended judgment by engaging in business similar to the business services offered by Propane Services. Since repair and installation of furnaces and air conditioning equipment accounted for five percent of Propane Services’ total business, the district court determined it would be appropriate to require Johnson to pay Gehringer five percent of the purchase price Gehringer paid Johnson for Propane Services. Although other measures of compensation for the contempt may also have been appropriate, the amount of the compensation imposed by the district court relates to Gehringer’s injury which was caused by Johnson’s contempt. The district court did not abuse its discretion in its damage award.

[¶ 16] The district court also required Johnson to pay Gehringer’s reasonable attorney’s fees and costs for bringing the contempt action. The district court, “in its discretion, may award attorney fees as part of the compensation to the complainant in contempt proceedings as reimbursement for costs and expenses incurred as a result of the contempt.” Giese v. Giese, 2004 ND 58, ¶ 12, 676 N.W.2d 794; N.D.C.C. § 27-10-01.4(l)(a). On this record, we find no abuse of discretion by the district court in awarding reasonable attorney’s fees and costs to Gehringer.

rv

[¶ 17] The district court’s judgment finding Johnson in contempt and imposing sanctions against Johnson is affirmed.

[¶ 18] CAROL RONNING KAPSNER, MARY MUEHLEN MARING, DANIEL J. CROTHERS, and DALE V. SANDSTROM, JJ„ concur.


text:
    2006 ND 158
    CITY OF BISMARCK, Plaintiff and Appellee v. Kylie DePRIEST, Defendant and Appellant. City of Bismarck, Plaintiff and Appellee v. Jeffrey Kirby, Defendant and Appellant. City of Bismarck, Plaintiff and Appellee v. Deidre Handtmann, Defendant and Appellant.
    Nos. 20060070, 20060071, 20060072.
    Supreme Court of North Dakota.
    July 18, 2006.
    Rehearing Denied Aug. 16, 2006.
    Paul H. Fraase, Assistant City Attorney, Bismarck, ND, for plaintiff and appellee.
    Justin J. Vinje (argued), appearing under the rule on the limited practice of law by law students, and Ralph A. Vinje (appeared), Vinje Law Firm, Bismarck, ND, for defendants and appellants.
   VANDE WALLE, Chief Justice.

[¶ 1] Kylie DePriest, Jeffrey Kirby, and Deidre Handtmann (Appellants) appeal from judgments of conviction entered by the district court. The Appellants were charged with sale or delivery of alcoholic beverages to a person under 21 years of age in Bismarck Municipal Court. The Appellants moved to dismiss the charges and the municipal court denied their motions. The Appellants entered conditional guilty pleas contingent on their right to appeal the municipal court decision to the district court. The district court issued an order denying the Appellants’ motions to dismiss the charges. The Appellants each filed a Motion for Reconsideration with the district court and those motions were also denied. The Appellants entered conditional guilty pleas. We affirm.

I

[¶ 2] The Bismarck Police Department initiated an alcohol compliance check program in an attempt to discourage the sale of alcoholic beverages to persons under 21 years of age. The plan provided that a volunteer under 21 years of age would enter a licensed liquor establishment under the supervision of a plain-clothed police officer and attempt to purchase an alcoholic beverage. The volunteers were instructed to show their real identification upon request, or, if asked their age, to state their real age, and to pay for the alcoholic beverage, if served. The volunteers were also instructed to leave the beverage unused in a bar or deliver it to a police officer upon leaving an off-sale liquor establishment.

[¶ 3] After compliance checks conducted in April of 2005, the Appellants were charged with class A misdemeanors for the sale or delivery of alcoholic beverages to a person less than 21 years of age. On appeal, the Appellants raise as an issue the denial of their motions to dismiss the charges and their motions for reconsideration.

II

[¶ 4] The Appellants rely heavily on one of our past cases wherein this Court held entrapment as a matter of law could be established by demonstrating that law enforcement officers used unlawful means to induce a crime. State v. Rummer, 481 N.W.2d 437, 442 (N.D.1992). The Court stated that where law enforcement officers themselves violate the law in order to induce a crime, they employ unlawful means. Id.

[¶ 5] In Rummer, the Court focused on the conduct of the law enforcement agents involved. Id. at 443. There, law enforcement officials planned a reverse sting operation, arranging for an informant to make a sale of drugs to a targeted individual. Id. at 438. The law enforcement officials conducting the sting operation obtained the drugs, without authorization from supervisory personnel, from the evidence room at the police department. Id. at 439. The illegally obtained drugs were given to the informant to make the sale to the targeted individual. Id. The Court stated “conduct by a public officer is not justified unless it is ‘required or authorized by law.’ ” Id. at 443. The Court found no statutory authority authorizing police officers to take controlled substances, which were confiscated in previous drug prosecutions, from evidence rooms to be used as bait in sting operations. Id. Since the police conduct at issue was not authorized by law, a majority of the Court found the defendant established entrapment as a matter of law. Id. at 443-44.

[¶ 6] Section 5-01-08, N.D.C.C., prohibits persons under 21 years of age from purchasing alcohol, attempting to purchase alcohol, and entering premises where alcoholic beverages are sold. The Appellants argue because the persons under 21 involved in the compliance checks do not fit under any of the exceptions allowing minors to enter bars and liquor stores, law enforcement officers used unlawful means to conduct these compliance checks by violating N.D.C.C. § 5-01-08. The Appellants argue that because law enforcement officers violated the law by conducting the compliance checks, the Appellants were entrapped as a matter of law and their convictions should be reversed.

[¶ 7] The district court held the provision in N.D.C.C. § 5-02-06(3), allowing persons under 21 years of age to enter and remain in licensed liquor establishments “if the person enters the licensed premises for training, education, or research purposes under the supervision of. a person twenty-one or more years of age with prior notification of the local licensing authority,” although not expressly providing law enforcement the authority for these compliance checks, does not categorize these compliance checks as outrageous police conduct. Therefore, the court concluded the police conduct in conducting these compliance checks did not constitute entrapment. N.D.C.C. § 5-02-06(3). The record provides no evidence law enforcement officials were conducting these compliance checks for “training, education, or research purposes” in the ordinary meaning of those terms and we believe N.D.C.C. § 5-02-06(3) does not apply to this factual situation nor control our resolution of this matter.

[¶ 8] Rather, we believe this matter is governed by N.D.C.C. § 12.1-05-02(4), which provides in part:

Conduct engaged in by an individual at the direction of a public servant, known by that individual to be a law enforcement officer, to assist in the investigation of a criminal offense is justified unless the individual knows or has a firm belief, unaccompanied by substantial doubt, that the conduct is not within the law enforcement officer’s official duties or authority.

[¶ 9] The Appellants argue the underage individuals used in these compliance checks were not assisting in the investigation of a criminal offense while the City argues this provision provides authority for law enforcement to use underage individuals in these compliance checks because they are assisting in the investigation of a criminal offense. The language of a statute is ambiguous if it is susceptible to differing, but rational, meanings. Security State Bank v. Orvik, 2001 ND 197, ¶ 9, 636 N.W.2d 664. Because the language of the statute does not make clear what the Legislature intended by assisting in the investigation of a criminal offense, we may consult extrinsic aids, such as legislative history, to ascertain the Legislature’s intent. N.D.C.C. § 1-02-02; N.D.C.C. § 1-02-39; see also State v. Stavig, 2006 ND 63, ¶ 12, 711 N.W.2d 183 (stating where the intent is ambiguous the Court may consult extrinsic aids, such as legislative history, to ascertain the Legislature’s intent).

[¶ 10] The legislative history of. this statutory provision contains ample testimony showing the intent of this provision was to allow persons under 21 years of age to be used in alcohol compliance checks. Hearings on H.B. 1453 Before the House Judiciary Committee and Senate Judiciary Committee, 57th Legis. Sess. (Jan. 31, 2001, and Mar. 7, 2001). The legislative history reveals the provision was intended to give law enforcement agencies the ability to legally use persons under 21 to conduct alcohol compliance checks without the need to deputize the individuals. Hearings on H.B. 14.58, swpra.

[¶ 11] During a hearing discussing House Bill 1453, Representative Disrud stated there was a need to use people under 21 to help “crack down” on liquor establishments who were serving minors. Hearing on H.B. 1453 Before the House Judiciary Committee and Senate Judiciary Committee, 57th Legis. Sess. (Senate Judiciary Committee Hearing on Mar. 7, 2001). An Assistant Attorney General testified “[effective law enforcement requires the assistance of the public” and this law would ensure “that citizens can help law enforcement officials without undergoing public attacks or allegations that they are criminals or felons.” Hearing on H.B. 1453 Before the House Judiciary Committee and Senate Judiciary Committee, 57th Legis. Sess. (Mar. 7, 2001) (testimony of Robert P. Bennett, Assistant Attorney General). A Fargo Police Officer testified in support of the bill stating in some circumstances, “like the sale of alcohol to minors, police need to utilize 18-20 year old adults to attempt to purchase alcohol from the liquor retailers.” Hearing on H.B. 14,53 Before the House Judiciary Committee and Senate Judiciary Committee, 57th Legis. Sess. (Mar. 7, 2001) (testimony of Ross Renner, Sergeant with the Fargo Police Department). Officer Ren-ner went on to say “[pjassage of this bill doesn’t require compliance checks be done, it just provides the protection necessary to do them in a lawful manner.” Hearing on H.B. 1453, supra (testimony of Ross Ren-ner, Sergeant with the Fargo Police Department). The statute was intended to provide the protection necessary to conduct these types of compliance checks in a lawful manner. Hearings on H.B. 1453, supra.

[¶ 12] Therefore, although N.D.C.C. § 5-01-08 prohibits persons under 21 years of age from purchasing alcohol, attempting to purchase alcohol, and entering premises where alcoholic beverages are sold, law enforcement officials did not violate the law when conducting these compliance checks because N.D.C.C. § 12.1-05-02(4) gives law enforcement officials the authority to use persons under 21 years of age for this purpose. Because N.D.C.C. § 12.1-05-02(4) authorizes the law enforcement conduct in conducting compliance checks, law enforcement officials did not use unlawful means to induce a crime and the defense of entrapment is unavailable to the Appellants.

[¶ 13] In reaching our decision, we have relied on the plan of action contained in the statutory scheme. It is the Legislature’s decision whether or not, as a matter of public policy, to allow law enforcement officials to conduct alcohol compliance checks in this manner. The Legislature has decided to allow this conduct by enacting N.D.C.C. § 12.1-05-02(4).

[¶ 14] Nevertheless, our decision is also in accord with decisions of several other jurisdictions which have rejected the entrapment defense where law enforcement officials have used underage individuals in conducting compliance checks. See Roberts v. Illinois Liquor Control Comm., 58 Ill.App.2d 171, 206 N.E.2d 799 (1965) (holding the entrapment defense is unavailable where underage decoys simply request to buy liquor); Provigo Carp. v. Alcoholic Beverage Control Appeals Bd., 7 Cal.4th 561, 28 Cal.Rptr.2d 638, 869 P.2d 1163 (1994) (using underage decoys to conduct compliance checks is not entrapment because sellers merely have to check a decoy’s identification to avoid illegal activity); Bartlett v. Ala. Alcoholic Beverage Control Bd., 654 So.2d 1139 (Ala.1993) (using minors to conduct compliance checks was not only proper and within the laws of Alabama but was probably the most effective manner of regulating and enforcing the laws prohibiting minors from purchasing alcohol). In criminal cases arising out of liquor sales to minors, “the doctrine of entrapment has frequently been held not to be established when the police did no more than to employ a minor as a decoy and to place him under surveillance while he requested the sale of an intoxicant.” Medley v. Maryville City Beer Bd., 726 S.W.2d 891, 893 (Tenn.1987); see also State v. Boylan, 158 Minn. 263, 197 N.W. 281 (1924); State v. Parr, 129 Mont. 175, 283 P.2d 1086 (1955).

III

[¶ 15] We affirm.

[¶ 16] CAROL RONNING KAPSNER, MARY MUEHLEN MARING, DANIEL J. CROTHERS, and DALE V. SANDSTROM, JJ., concur.


author: PER CURIAM.

text:
    2006 ND 146
    In the Matter of the APPLICATION FOR DISCIPLINARY ACTION AGAINST Steven K. AAKRE, a Member of the Bar of the State of North Dakota. Disciplinary Board of the Supreme Court of the State of North Dakota, Petitioner v. Steven K. Aakre, Respondent.
    No. 20050382.
    Supreme Court of North Dakota.
    June 29, 2006.
   INTERIM SUSPENSION ORDERED.

PER CURIAM.

[¶ 1] On November 7, 2005, an Application for Interim Suspension of Steven K. Aakre, a member of the Bar of North Dakota, was filed under N.D.R. Lawyer Discipl. 8.4, resulting from a self-report that Aakre had improperly taken $75,506 from the Serkland Law Firm between June 2003 and May 2005. Aakre’s Response to Application for Order of Interim Suspension was filed on November 18, 2005, acknowledging his wrongdoing and requesting the Court to consider mitigating factors such as his remorse, repayment of all funds with interest, and the fact that no client funds were involved.

[¶ 2] On November 28, 2005, the Court entered an Order denying the Application for Interim Suspension and allowing Aakre to continue practicing law subject to the following conditions:

1) Aakre will be allowed to practice law as an employee of the Stefanson Plam-beck & Foss law firm, and Todd W. Foss, a member of the firm, will supervise Aakre;
2) Strict financial controls are in place at the firm to ensure the protection of the public and clients funds, which include:
a. Aakre will not have check signing or withdrawal authority on any business or trust account of the firm;
b. All of Aakre’s incoming mail will be opened by a third-person employed by the firm, who will deliver all checks or other funds to a person designated by the firm to deposit such monies into the appropriate account or accounts, or hold such items until they are sent to the person for whom they are intended; and
c. Any request for payment of monies by Aakre, whether on his own behalf, on behalf of a client, or to himself, must be made in writing to a partner of the firm, and no check or other instrument for the payment of money will be issued without the signature of a partner of the firm.
8) The firm must file quarterly reports with the Supreme Court and Disciplinary Counsel setting forth that the firm has followed the conditions imposed.
4) The Supreme Court and Disciplinary Counsel must be notified immediately if Aakre’s employment with Stefanson Plambeck & Foss is terminated for any reason, or if any new financial irregularity involving or connected with Aakre is discovered.

[¶ 3] Quarterly reports were filed by the firm on February 24, 2006, and June 1, 2006, reporting no financial irregularities. However, on June 28, 2006, the firm reported certain financial irregularities concerning Aakre’s handling of two clients.

[¶ 4] On June 28, 2006, Disciplinary Counsel filed a subsequent Application for Interim Suspension of Aakre for violation of the Court’s November 28, 2006, Order. By letter dated June 28, 2006, Aakre agreed to the immediate suspension of his license to practice law in North Dakota. Aakre was admitted to practice law in the State of North Dakota on October 5, 1981, and is currently licensed.

[¶ 5] ORDERED, Steven K. Aakre’s license to practice law is SUSPENDED effective immediately, and until further order of this Court, pending final disposition of the disciplinary proceeding upon which this matter is predicated.

[¶ 6] FURTHER ORDERED, Steven K. Aakre comply with N.D.R. Lawyer Dis-cipl. 6.3.

[¶ 7] GERALD W. VANDE WALLE, C.J., CAROL RONNING KAPSNER and DANIEL J. CROTHERS, JJ., concur.

[¶ 8] The Honorable DALE V. SANDSTROM and the Honorable MARY MUEHLEN MARING, deeming themselves disqualified, did not participate in this decision.


author: SANDSTROM, Justice.

text:
    2006 ND 144
    STATE of North Dakota ex rel. BOARD OF UNIVERSITY AND SCHOOL LANDS, Plaintiff and Appellee v. Donald J. ALEXANDER and Ethel A. Alexander, Defendants and Appellants.
    No. 20050409.
    Supreme Court of North Dakota.
    June 29, 2006.
    Rehearing Denied Sept. 13, 2006.

      Douglas Bruce Anderson, Assistant Attorney General, Office of Attorney General, Bismarck, N.D., for plaintiff and appel-lee.
    Donald James Alexander (argued), pro se, and Ethel A. Alexander (on brief), pro se, Harvey, N.D., defendants and appellants.
   SANDSTROM, Justice.

[¶ 1] Donald and Ethel Alexander appealed from an order denying their post-judgment motions after the district court entered a judgment evicting them from real property. We affirm, concluding the district court did not abuse its discretion in denying the Alexanders’ post-judgment motions.

I

[¶ 2] In a judgment entered in October 2004, the State of North Dakota, through the Board of University and School Lands, obtained quiet title to farmland in Sheridan County through foreclosure by advertisement of a farm mortgage executed by the Alexanders. The State leased ten acres of the land to the Alexanders for use as a single-family residence, subject to termination on 30 days notice if the State sold the land. In June 2005, the State sued the Alexanders to evict them from the leased property, alleging it notified the Alexanders the land had been sold and the Alexanders had been asked to surrender the property by April 18, 2005, but they refused. The State’s eviction action was scheduled for trial on June 20, 2005.

[¶ 3] In a June 16, 2005, letter to the clerk of the district court, Ethel Alexander notified the court the Alexanders would be unable to appear at the scheduled eviction trial because of a family emergency, but all of their personal belongings had been removed from the house and all that remained on the farm was property owned by Northern Trust, which, according to the Alexanders, is an “Inter vivos trust established by Donald James; Alexander as Trustor.” Ethel Alexander’s letter also indicated they would attempt to arrange for the removal of the Northern Trust property as soon as possible. In documents dated June 16, 2005, and filed with the court on June 17, 2005, Donald Alexander filed a “special appearance for limited purpose — answer to complaint — motion to dismiss.” Those documents included a default judgment in an action by the “Pembi-na Nation Little Shell Band of North America” and “Donald James; Alexander” against Joyce Dockter, the Sheridan County Recorder, in which Dockter allegedly exceeded her authority by refusing to record a quitclaim deed for the land from the Alexanders to the Pembina Nation Little Shell Band of North America. Donald Alexander asked to dismiss the eviction action, claiming the issues raised in that action were “moot in light of the Default Judgment entered before the court which becomes Res judicata.” Donald Alexander alternatively asked that “all parties will face contempt and held to show cause.”

[¶ 4] Although this record does not include a transcript of the June 20, 2005, eviction trial, the Alexanders do not dispute they did not attend the trial. The district court entered judgment evicting the Alexanders from the land. The court concluded the respective rights between the State and the Alexanders had been adjudicated in the 2004 foreclosure action, and the State was the owner of the land involved in the eviction action. The court also required the Alexanders to provide the State with information regarding the personal property claimed to belong to Northern Trust.

[¶ 5] Donald Alexander then moved for a new trial. He subsequently filed a “motion for rule to show cause” for a restraining order to allow Northern Trust to continue its removal of property from the premises. The district court denied the Alexanders’ post-judgment motions. The Alexanders appealed from the denial of their post-judgment motions.

[¶ 6] The district court had jurisdiction under N.D. Const, art. VI, § 8, and N.D.C.C. §§ 27-05-06 and 33-06-01. The Alexanders’ appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const, art. VI, §§ 2 and 6, and N.D.C.C. § 28-27-02.

II

[¶ 7] We review a district court’s denial of a motion for a new trial under the abuse-of-discretion standard. Johnson v. Nodak Mut. Ins. Co., 2005 ND 112, ¶ 18, 699 N.W.2d 45. A district court abuses its discretion if it acts in an arbitrary, unreasonable, or unconscionable manner, its decision is not the product of a rational mental process leading to a reasoned determination, or it misinterprets or misapplies the law. Id.

A

[¶ 8] The Alexanders argue the district court should have granted them a continuance so they could have attended the eviction trial and the court erred in denying their request for a new trial.

They argue they notified the court of a “family emergency,” and they claim “it was reasonable to expect the trial to be postponed, the same courtesy extended to attorneys.” The State responds the Alexanders did not ask the court for a continuance and argues Ethel Alexander’s letter included language from which a reasonable person would have understood the Alexanders were conceding and not contesting the action.

[¶ 9] Under N.D.C.C. ch. 33-06, an eviction action proceeds under an expedited time period for a defendant to appear and defend. Flex Credit, Inc. v. Winkowitsch, 428 N.W.2d 236, 239-40 (N.D.1988). Here, the Alexanders did not specifically request a continuance, and on this record, we conclude the district court did not act arbitrarily, unreasonably, or unconscionably in denying their motion for a new trial on this issue.

B

[¶ 10] The Alexanders argue they filed numerous documents with the district court that could have resulted in a different outcome and the court erred in denying their motion for a new trial. They claim the district court had no jurisdiction, and they attack the judgment in the foreclosure action and the sale of the land.

[¶ 11] Although the Alexanders attempt to raise issues in this eviction action about the mortgage foreclosure judgment, the Alexanders did not appeal the judgment in the foreclosure action, and those claims are res judicata. See Farm Credit Bank v. Brakke, 483 N.W.2d 167, 170 (N.D.1992) (parties to prior foreclosure action and their assigns were bound by judgment in prior action under principles of res judicata). We conclude the district court did not abuse its discretion in denying their motion for a new trial on those claims.

C

[¶ 12] The Alexanders also argue that a default judgment in the Little Shell Band Federal Tribal Circuit Court in an action by the “Pembina Nation Little Shell Band of North America” and “Donald James; Alexander” against the Sheridan County recorder, Joyce Dockter, created a lien against the real property involved in the eviction action. The Alexanders argue there are indispensable parties that were not made parties to the eviction action, including the Sunflower Properties Trust, Northern Trust, and the Pembina Nation Little Shell Band of North America. According to the Alexanders, Sunflower Properties Trust was created on April 12, 2004, under the jurisdiction of the Little Shell Pembina Nation. The Alexanders claim the Pembina Nation Little Shell Band of North America is the legal titleholder of the land and the Alexanders’ bid at the sheriffs sale consisted of the $247,000 default judgment against Joyce Dockter, plus at least $30,000 in interest, which was more than the actual bid for the land. They claim Indian tribes are “domestic independent nations” that exercise inherent sovereign authority over their members and territories and are immune from actions in state and federal courts absent a clear waiver of immunity.

[¶ 13] To the extent the Alexanders make claims about the status of the Pem-bina Nation Little Shell Band of North America, they have not cited any persuasive authority on that issue. In Rott v. Connecticut Gen. Life Ins. Co., 2004 ND 198, ¶4, 688 N.W.2d 378, this Court considered an appeal in which the appellants claimed they had issued a quitclaim deed for their interest in land to the “Pembina Nation Little Shell Band of North America.” This Court said the “Pembina Nation Little Shell Band of North America” had not been substituted as a party to the appeal under N.D.R.Civ.P. 43(b), and we dismissed the appeal for failure to substi-

tute the appropnate entity as a party to this appeal. Rott, at ¶¶ 4-5. See also Cass County Joint Water Res. Dist. v. 1.43 Acres of Land, 2002 ND 83, ¶ 33, 643 N.W.2d 685 (holding condemnation of land conveyed to Indian tribe did not violate federal statute). Contrary to the Alexanders’ claims, however, this Court’s decision in Rott did not recognize the Pembina Nation Little Shell Band of North America as an Indian tribe. Other courts have not recognized the Pembina Nation Little Shell Band of North America as an Indian tribe. See Mulder v. Lundberg, 154 Fed. Appx. 52, 2005 WL 2844834 (10th Cir.2005) (stating Bureau of Indian Affairs does not recognize Pembina Nation Little Shell Band of North America or its courts). See also Delorme v. United States, 354 F.3d 810, 814 n. 6 (8th Cir.2004) (Little Shell Pembina Band of North America is federally unrecognized band located in North Dakota). We also note that the Bureau of Indian Affairs does not recognize the Pem-bina Nation Little Shell Band of North America as an entity eligible to receive services. See Indian Entities Recognized and Eligible to Receive Services from the United States Bureau of Indian Affairs, 70 Fed.Reg. 71,194 (Nov. 25, 2005). We reject the Alexanders’ claims about the Pembina Nation Little Shell Band of North America.

Ill

[¶ 14] On this record, we conclude the district court did not abuse its discretion in denying the Alexanders’ post-judgment motions, and we affirm the court’s order.

[¶ 15] GERALD W. VANDE WALLE, C.J., DANIEL J. CROTHERS, MARY MUEHLEN MARING, and CAROL RONNING KAPSNER, JJ„ concur.


text:
    2006 ND 148
    In the Matter of the Application for DISCIPLINARY ACTION AGAINST John T. KORSMO, a Person Admitted to the Bar of the State of North Dakota. Disciplinary Board of the Supreme Court of the State of North Dakota, Petitioner v. John T. Korsmo, Respondent.
    No. 20060054.
    Supreme Court of North Dakota.
    June 30, 2006.
    Paul W. Jacobson (on brief), Disciplinary Counsel, Bismarck, ND, for petitioner.
    John T. Korsmo (on brief), pro se, Washington, DC, respondent.
   PER CURIAM.

[¶ 1] John Korsmo objects to the length of suspension recommended by a hearing panel of the Disciplinary Board. The hearing panel recommended that Korsmo be suspended from the practice of law for two years from the time he seeks relicensure. We adopt the hearing panel’s recommendations that Korsmo be suspended and that he pay the costs and expenses associated with the disciplinary proceeding. We reject the hearing panel’s recommendation on the time period for suspension. We order Korsmo be precluded from applying to practice law in this State until July 1, 2007, and we order him to pay costs and expenses for the disciplinary proceeding in the amount of $435.00.

I

[¶ 2] The facts of this case were stipulated to by the parties and accepted by the hearing panel. Korsmo was admitted to practice law in North Dakota on October 10, 1979. He has not been licensed to practice law in North Dakota since December 31, 2001. On August 3, 2005, an interim suspension was ordered under N.D.R. Lawyer Discipl. 4.1(C) and (D) after Kors-mo pled guilty and was convicted for the felony of making false and fictitious statements in violation of 18 U.S.C. § 1001(a)(2). Disciplinary Bd. v. Korsmo, 2005 ND 148, ¶ 1, 703 N.W.2d 305. The criminal case arose after Korsmo made a false statement in response to two letters he received from Senator Paul Sarbanes in October 2002. At the time, Korsmo was serving as chairman of the Federal Housing Finance Board (“FHFB”). Korsmo was asked by Senator Sarbanes whether Korsmo or any member of the FHFB staff knew or had reason to believe that “officials of any Home Loan Banks or its member institutions would be solicited using the invitations on which your name appeared as a ‘special guest’?” Korsmo was also asked: “Did you or FHFB staff provide any contact information for Home Loan Bank executives or its members to the Clayburgh campaign or any of its representatives?”

[¶ 3] Korsmo falsely responded: “I do not know how the (Clayburgh) campaign or the event’s hosts obtained contact information for the Home Loan Bank executives who were invited.” Korsmo was interviewed by an agent from the FHFB Office of the Inspector General and an agent with the Federal Bureau of Investigation on April 1, 2003. During the interview, Korsmo falsely stated that he had no knowledge until December 2002 that his spouse forwarded the lists to anyone. The actual organizing of the fundraiser and supplying of names for the invitation list, which the false statements related to, is allowed under the Hatch Act. The criminal conduct occurred from making the false statements. Korsmo pled guilty and was sentenced to eighteen months probation in the United States District Court, District of Columbia.

[¶ 4] The hearing panel concluded that Korsmo’s “lie was not done to cover underlying illegal conduct; however, it would appear that the lie was to protect the respondent and/or others from unwanted public criticism or publicity. The significant benefit to respondent and/or others was that attempted protection.” Due to mitigating factors, the hearing panel did not recommend disbarment, but recommended suspending Korsmo from the practice of law for two years from the time he seeks relicensure, and requiring him to pay $435.00 in costs for the proceeding.

[¶ 5] Korsmo filed a written objection to the hearing panel’s recommendation asking that the appropriate discipline in his case would be to limit his ability to apply to be licensed during the period of his unsupervised probation which runs until January 11, 2007. Korsmo stated he does not plan to seek reinstatement of his license in the future. He does not object to the hearing panel’s findings, nor does he contest that his conviction was for a criminal act that “reflects adversely on the lawyer’s honesty, trustworthiness, or fitness as a lawyer” under Rule 1.2(A)(2), N.D.R. Lawyer Discipl. The only issue in this appeal is the length of Korsmo’s suspension.

II

[¶ 6] The primary purpose of the disciplinary process is not to penalize the accused, but to protect the public and the integrity of the profession. Disciplinary Bd. v. Nassif, 547 N.W.2d 541, 544 (N.D.1996). This Court reviews disciplinary proceedings “de novo on the record.” Disciplinary Bd. v. Ward, 2005 ND 144, ¶ 6, 701 N.W.2d 873. Due weight is given to “the findings, conclusions, and recommendations of the hearing panel,” but this Court does not automatically accept the recommendations. Id. Disciplinary counsel must prove each alleged violation by clear and convincing evidence. Id. A disciplinary case is considered on its own facts to determine what discipline is needed. Id.

[¶ 7] Korsmo objects to the hearing panel’s reliance on Standards 5.21 and 5.11, N.D. Stds. Imposing Lawyer Sanctions. Standard 5.21 states:

Disbarment is generally appropriate when a lawyer in an official or governmental position knowingly misuses the position with the intent to obtain a significant benefit or advantage for himself or another, or with the intent to cause serious or potentially serious injury to a party or to the integrity of the legal process.

Standard 5.11 states:

Disbarment is generally appropriate when:
(a) a lawyer engages in serious conduct a necessary element of which includes intentional interference with the administration of justice, false swearing, misrepresentation, fraud, extortion, misappropriation, or theft; or the sale, distribution or importation of controlled substances; or the intentional killing of another; or an attempt or conspiracy or solicitation of another to commit any of these offenses; or
(b) a lawyer engages in any other intentional conduct involving dishonesty, fraud, deceit, or misrepresentation that seriously adversely reflects on the lawyer’s fitness to practice.

[¶ 8] While the hearing panel looked to Standards 5.11 and 5.21 for guidance, the hearing panel rejected the sanction of disbarment and instead recommended a two-year suspension based on the sanction this Court imposed in Disciplinary Bd. v. Kaiser, 484 N.W.2d 102, 109 (N.D.1992) (imposing two-year suspension for falsely testifying under oath twice). We agree with the hearing panel that disbarment is inappropriate in light of the significant mitigating factors in this case. Korsmo made a timely good faith effort to rectify the consequences of his misconduct. N.D. Stds. Imposing Lawyer Sanctions 9.32(d). Korsmo’s good character and reputation has been established based on the numerous letters of recommendation in this record. Id. at 9.32(g). Finally, Korsmo has no prior disciplinary record and was cooperative in the disciplinary process. Id.' at 9.32(a) and (e). Concluding disbarment is an inappropriate sanction, we look to the appropriate length of suspension in light of previous cases that have dealt with a similar factual scenario.

[¶ 9] The hearing panel, relying on Kaiser, 484 N.W.2d at 102, recommended a suspension for two years from the date he seeks relicensure. Korsmo argues Kaiser is factually distinguishable and that the suspension given by the hearing panel is excessive. Korsmo believes an appropriate discipline would be to suspend his ability to practice law in North Dakota until the period of his unsupervised probation in the underlying criminal conviction ends on January 11, 2007. We disagree with both approaches. We conclude Korsmo should be precluded from applying to be licensed to practice law until July 1, 2007.

[¶ 10] The facts in Kaiser are similar to the facts in this case. However, we believe Kaiser’s conduct was more egregious than Korsmo’s conduct in this case. Kaiser involved an attorney who lied under oath in open court on two separate instances. Kaiser, 484 N.W.2d at 103. The Special Master — Honorable Norman J. Backes — found Kaiser made a “false statement concerning material information with the intent to deceive the court.” Id. at 105. The false testimony directly related to issues decided by the trial court and subsequently appealed to this Court. Id. at 109 (citing cases involving Kaiser that “imposed greatly on judicial resources,” see, e.g., Hunt Trust Estate v. Kiker, 269 N.W.2d 377 (N.D.1978); Serhienko v. Kiker, 392 N.W.2d 808 (N.D.1986); Kaiser v. Kaiser, 474 N.W.2d 63 (N.D.1991); Kiker v. Walters, 482 N.W.2d 626 (N.D.1992)). A public reprimand was proposed as a sanction by the disciplinary board, but this Court rejected the sanction concluding a two-year suspension was a more fitting sanction. Id. at 109. This Court determined neither the disciplinary board nor Kaiser appreciated the magnitude of the offense because: “Truth and candor are synonymous with justice, and honesty is an implicit characteristic of the legal profession .... We believe that any intentionally false statement by an attorney while testifying under oath, whether material or not, is an extremely serious breach of professional ethics.” Id. at 108 (emphasis in original).

[¶ 11] Kaiser lied twice under oath in open court and received, in the short term, a substantial benefit to himself. Korsmo’s lie, while inappropriate and certainly worthy of discipline, was not given under oath, nor is it conclusively apparent that Korsmo received a substantial benefit to himself.

We believe under the circumstances of this case, Korsmo’s conduct was less egregious and a lesser suspension should be imposed.

[¶ 12] We would be remiss if we did not comment on the inappropriate plea to this Court’s knowledge of Korsmo’s character other than as contained in this record. Korsmo’s “Objection to Report of Hearing Panel” stated:

I respectfully ask whether any member of this Court can say, based on what he or she knows or has heard about me over the past twenty-five years, that he or she believes that, in response to a clearly-politically motivated, election-year “investigation”... I would lie to protect myself “from unwanted public criticism or publicity?”

Such an appeal is inappropriate and has not been considered in mitigation by this Court.

Ill

[¶ 13] We conclude Korsmo should be suspended. We order he be precluded from applying to practice law until July 1, 2007, and he pay $435.00 in costs for the disciplinary proceeding.

[¶ 14] GERALD W. VANDE WALLE, C.J., CAROL RONNING KAPSNER, J., and BENNY A. GRAFF and WILLIAM F. HODNY, Surrogate Judges, and THOMAS J. SCHNEIDER, D.J., concur.

[¶ 15] The Honorable BENNY A. GRAFF, Surrogate Judge, the Honorable WILLIAM F. HODNY, Surrogate Judge, and the Honorable THOMAS J. SCHNEIDER, D.J., sitting in place of MARING, CROTHERS, and SANDSTROM, JJ., disqualified.


author: CROTHERS, Justice.

text:
    2006 ND 147
    Amanda REKKEDAL, Plaintiff and Appellant v. Amber FEIST, Defendant and Appellee.
    No. 20050430.
    Supreme Court of North Dakota.
    June 30, 2006.

      Corey J. Quinton, Oppegard, Wolf & Quinton, Moorhead, MN, for plaintiff and appellant; on brief.
    Carlton J. Hunke and Robin A. Schmidt, Vogel Law Firm, Fargo, ND, for defendant and appellee; on brief.
   CROTHERS, Justice.

[¶ 1] Amanda Rekkedal appeals from a district court judgment dismissing, without prejudice, her personal injury suit against Amber Feist due to Rekkedal’s failure to timely file a complaint. Rekkedal argues her suit should not have been dismissed because the demand to file complaint was not served in accordance with Rule 4(c)(3), N.D.R.Civ.P. We reverse.

I

[¶ 2] Rekkedal and Feist were involved in an automobile accident on April 30, 1995. Rekkedal was injured in the accident and commenced litigation by service of a summons and complaint upon Feist by mail on October 24, 2000. The parties affirm that limited discovery took place at this time. No further activity occurred until January 11, 2005, when Feist demanded that Rekkedal file the complaint. The demand was mailed first class, but no return receipt was requested.

[¶ 3] On January 26, 2005, Rekkedal’s attorney wrote Feist’s attorney acknowledging receipt of the demand. Rekkedal’s attorney expressed difficulty contacting Rekkedal and requested an extension. On February 22, 2005, Rekkedal’s attorney again notified Feist’s attorney that he had been unable to contact Rekkedal.

[¶ 4] The complaint was ultimately filed with the district court on June 10, 2005. Feist moved for dismissal on September 2, 2005. A hearing was held on October 17, 2005, and the district court granted Feist’s motion. Rekkedal appeals, arguing dismissal was improper because the demand to file the complaint was not served in accordance with the rules of civil procedure.

II

[¶ 5] Before reaching the merits, two factors in this case require that we first determine whether this appeal is within this Court’s jurisdiction. First, Rekkedal appealed from an October 17, 2005, order for judgment of dismissal rather than from a final judgment. However, a consistent judgment was subsequently entered on February 9, 2006. We therefore treat this as an appeal from the judgment dismissing Rekkedal’s claims without prejudice. Koehler v. County of Grand Forks, 2003 ND 44, ¶ 6 n. 1, 658 N.W.2d 741.

[¶ 6] Second, dismissal without prejudice generally is not appealable because either party may commence another action. Runck v. Brakke, 421 N.W.2d 487, 488 (N.D.1988). However, we recently explained:

[A] dismissal without prejudice may be final and appealable where the dismissal has the practical effect of terminating the litigation in the plaintiffs chosen forum. We have consistently held that where a statute of limitations has run, a dismissal of the entire action effectively forecloses litigation in the courts of this state. Thus, a dismissal without prejudice is appealable where a statute of limitations has run.

Sanderson v. Walsh County, 2006 ND 83, ¶6, 712 N.W.2d 842 (citations and quotations omitted). Here, Rekkedal will be barred by the statute of limitations from further pursuing this claim. Therefore, although dismissal was without prejudice, the decision has the practical effect of terminating litigation and is appealable.

Ill

[¶ 7] If a complaint is not filed when the action is commenced, Rule 4(c)(3), N.D.R.Civ.P., allows a defendant to serve a demand to file the complaint on the plaintiff: “The defendant may serve a written demand on the plaintiff to file the complaint. Service of the demand must be made under subdivision (d) on the plaintiffs attorney or on the plaintiff if the plaintiff is not represented by an attorney.” (Emphasis added.) The relevant portion of subdivision (d) requires personal service be made:

by (i) delivering a copy of the summons to the individual personally; (ii) leaving a copy of the summons at the individual’s dwelling house or usual place of abode in the presence of a person of suitable age and discretion then residing therein; (iii) delivering, at the office of the process server, a copy of the summons to the individual’s spouse if the spouses reside together; (iv) delivering a copy of the summons to the individual’s agent authorized by appointment or by law to receive service of process; or (v) any form of mail or third-party commercial delivery addressed to the individual to be served and requiring a signed receipt and resulting in delivery to that individual.

N.D.R.Civ.P. 4(d)(2)(A).

[¶ 8] When a plaintiff is represented by counsel, Rule 4(c)(3), N.D.R.Civ.P., requires service “on the plaintiffs attorney.” Feist argues that because service was required upon Rekkedal’s attorney rather than Rekkedal, the service procedures under Rule 5(b), N.D.R.Civ.P., should have been available to her. Rule 5(b) requires service upon an attorney to be made “by delivering a copy to the attorney or party, or by facsimile transmission if available to the attorney or party, or by mailing or delivering via third-party commercial carrier a copy to the attorney or party.... Service by mail is complete upon mailing.” Rekkedal does not dispute that service upon her attorney was required; she simply argues the service options under N.D.R.CivJP. 4(c)(3) and 4(d)(2) create a strict procedure that must be followed. We agree.

[¶ 9] Rule 4(c)(3) establishes a specific procedure for serving a demand to file a complaint, stating, “Service of the demand must be made under subdivision (d).” (Emphasis added.) Rules of court are interpreted by applying principles of statutory construction. State v. Lamb, 541 N.W.2d 457, 459 (N.D.1996). Therefore, words are to be interpreted and understood in their ordinary sense. N.D.C.C. § 1-02-02. When the wording is unambiguous, the letter of it should not be disregarded “under the pretext of pursuing its spirit.” N.D.C.C. § 1-02-05. No interpretation of Rule 4(c)(3) other than the “strict procedure” urged by Rekkedal can reasonably be made from a reading of the rule. Any doubt is resolved by the Joint Procedure Committee explanatory notes, which indicate:

Rule 5 applies to service of papers other than “process.” In contrast, Rule 4 governs civil jurisdiction and service of process. When a statute or rule requiring service does not pertain to service of process, nor require personal service under Rule 4, nor specify how service is to be made, service may be made as provided in Rule 5(b).

Here, Feist’s demand to file complaint was served in accordance with N.D.R.Civ.P. 5(b). However, the only reasonable interpretation of Rule 4, N.D.R.Civ.P., which allows for service of such a demand, requires service be made personally or via mail with return receipt. .

[¶ 10] We recognize that Rekkedal’s attorney actually received the demand, and in other contexts, this Court has excused irregular procedures when a party has actual knowledge of an event. E.g., Thorson v. Thorson, 541 N.W.2d 692, 694-95 (N.D.1996). In Thorson, we concluded a party has “actual knowledge” when that party has taken timely action that is clearly evidenced in the record, such as filing a motion with the court. Id. at 694. Here, no timely action by Rekkedal is apparent from the record. Moreover, the only cognizable record action that Rekkedal could have performed was filing the complaint in accordance with Rule 4(c)(3), N.D.R.Civ.P., as demanded by Feist. Therefore, compliance with the strict service requirements of Rule 4(c)(3) cannot be excused on the basis this Court has recognized for other rules.

[¶ 11] Documents filed with this Court by Rekkedal included an appendix, which fails to conform with the rules of appellate procedure. Rule 30(a)(1), N.D.R.App.P., provides that “[o]nly items in the record may be included in the appendix.” Rekkedal’s appendix contains discovery that was exchanged between the parties in 2000 and 2001 but which was not filed with, or considered by, the district court. This Court will not consider evidence outside the record below. Schmidt v. Schmidt, 2003 ND 55, ¶22, 660 N.W.2d 196. Because such an inappropriate attempt to supplement the record on appeal was made, we deny costs on appeal as a sanction, consistent with Rule 13, N.D.R.App.P. Van Dyke v. Van Dyke, 538 N.W.2d 197, 203 (N.D.1995).

[¶ 12] We reverse the district court’s judgment dismissing Rekkedal’s action.

[¶ 13] GERALD W. VANDE WALLE, C.J., MARY MUEHLEN MARING, and DALE V. SANDSTROM, JJ., THOMAS J. SCHNEIDER, D.J., concur.

[¶ 14] The Honorable THOMAS J. SCHNEIDER, D.J., sitting in place of KAPSNER, J., disqualified.