Pearlene Willis v. Larkins Construction, LLC ( 2015 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A14-1255
Pearlene Willis,
Respondent,
vs.
Larkins Construction, LLC,
Appellant.
Filed May 11, 2015
Affirmed
Reilly, Judge
Ramsey County District Court
File No. 62-CV-12-7615
Chad D. Lemmons, Kelly & Lemmons, P.A., Little Canada, Minnesota (for respondent)
Karen R. Cole, Law Office of Karen Cole, St. Paul, Minnesota (for appellant)
Considered and decided by Kirk, Presiding Judge; Ross, Judge; and Reilly, Judge.
UNPUBLISHED OPINION
REILLY, Judge
Appellant challenges the district court’s order denying its motion to vacate default
judgment under Minnesota Rule of Civil Procedure 60.02. Because the district court did
not abuse its discretion by determining that the legal factors did not support vacation of
the judgment, we affirm.
FACTS
Respondent is a homeowner living in St. Paul, Minnesota. Respondent was
experiencing a problem with rain water entering the interior of her home through leaks in
her roof and exterior siding. In October 2010, respondent entered into a contract with
appellant-construction company to repair her roof. The parties dispute the scope of this
agreement. Respondent claims that appellant agreed to make the exterior repairs needed
to prevent water from entering her home, and included roof sheathing, shingles, fascia,
and exterior siding. Appellant agrees that it entered into a contract to make repairs to the
property but contends that it only agreed to fix respondent’s shingles. Appellant claims
that it informed respondent that the work to the shingles would not fix any possible
structural damage to her roof but, despite these warnings, respondent chose only to fix the
shingles and make other minor repairs to the gutters and downspouts because those were
the only expenses for which she could seek reimbursement through her insurance
company.
Appellant made the initial repairs to respondent’s shingles and gutters.
Respondent did not pay appellant for this work. In July 2011, appellant filed a complaint
against respondent in conciliation court alleging, breach of contract and seeking money
damages. A contested hearing was held and both parties appeared. In August 2011, the
conciliation court determined that appellant was entitled to judgment against respondent
in the total amount of $2,575 for breach of contract for the outstanding amount due under
the contract. The judgment was stayed to allow time for removal or appeal, but
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respondent did not file a demand for removal to the district court or otherwise appeal the
decision.
In October 2012, respondent filed a complaint in district court asserting claims for
breach of contract and negligence and seeking damages in excess of $35,000.
Respondent alleged that appellant failed to complete the agreed upon repairs, leaving her
home exposed to the elements and ultimately leading to water damage to the interior of
her home and to the clothing in her closet. Respondent also noted that a building
inspection of her home found that corrections were needed to the roof deck, fascia,
gutters, and siding.
In October 2013, respondent moved for default judgment against appellant in the
amount of $52,000. The motion was unopposed. The district court granted default in
respondent’s favor and awarded damages in the total amount of $52,000, including
$37,000 for the cost of repairs and $15,000 for damage to her personal property inside the
home damaged as a result of the water leak. Judgment was subsequently entered on
October 30, 2013. On February 11, 2014, appellant moved to vacate the judgment under
Rule 60.02 of the Minnesota Rules of Civil Procedure. The district court issued an order
on May 20, 2014, denying the motion for relief. This appeal followed.
DECISION
Appellant challenges the district court’s denial of its motion to vacate default
judgment. The district court has discretion to grant relief from final judgment and that
decision will not be reversed on appeal absent a clear abuse of discretion. Foerster v.
Folland, 498 N.W.2d 459, 460 (Minn. 1993). We view the record in the light most
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favorable to the district court’s order. Bentonize, Inc. v. Green, 431 N.W.2d 579, 582
(Minn. App. 1988).
A district court may grant relief from final judgment for “[m]istake, inadvertence,
surprise, or excusable neglect” or for “[a]ny other reason justifying relief from the
operation of the judgment.” Minn. R. Civ. P. 60.02(a), (f). A party seeking to prevail
under rule 60.02 must establish the following four factors: “(1) a reasonable case on the
merits; (2) a reasonable excuse for the failure to act; (3) action with due diligence after
the entry of judgment; and (4) lack of prejudice to the opposing party.” Reid v.
Strodtman, 631 N.W.2d 414, 419 (Minn. App. 2001). All four elements must be proved,
although a “strong showing on the other factors may offset relative weakness on one
factor.” Imperial Premium Fin., Inc. v. GK Cab Co., 603 N.W.2d 853, 857 (Minn. App.
2000). The burden of proof rests on the party seeking relief. City of Barnum v. Sabri,
657 N.W.2d 201, 205 (Minn. App. 2003).
A. Reasonable Defense on the Merits
Appellant bears the burden of demonstrating a reasonable defense on the merits.
Reid, 631 N.W.2d at 419. This factor requires “[s]pecific information that clearly
demonstrates the existence of a debatably meritorious defense.” Northland Temporaries,
Inc. v. Turpin, 744 N.W.2d 398, 403 (Minn. App. 2008), review denied (Minn. Apr. 29,
2008). Thus, “conclusory allegations in [the] moving papers” are ordinarily insufficient
to demonstrate a meritorious claim or defense. Bentonize, Inc., 431 N.W.2d at 583. The
reasonable-defense factor may be satisfied by specific information in an affidavit. See
Valley View, Inc. v. Schutte, 399 N.W.2d 182, 186 (Minn. App. 1987) (stating a valid
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defense may be presented in affidavit, answer, or in the record), review denied (Minn.
Jan. 13, 1987).
The district court granted respondent’s motion for default judgment based in part
on appellant’s failure to respond to the motion or otherwise answer the complaint.
However, the district court also addressed the case on its merits and concluded that
respondent was entitled to judgment on its negligence claim as follows:
Based upon the contract between the parties, the fact
that the city building inspector found major flaws in the work,
the failure of [appellant] to meet with that inspector, and
finally, [appellant’s] failure to cure these material flaws, the
Court would be hard pressed to find that [appellant] has a
meritorious defense to this case.1
Appellant denies that it is responsible for respondent’s damages and argues that
“[d]amage due to any leaking of the roof was not due to the work [appellant] had
contracted to do and that it had done.” The parties each submitted affidavits in support of
their respective positions and the district court had the benefit of this evidence in making
its factual findings. The district court credited respondent’s affidavit over that of
appellant. We defer to the factual findings of the district court, unless they are clearly
erroneous. Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 101 (Minn. 1999).
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Respondent’s complaint asserted claims for breach of contract, negligence, breach of
express warranty, and breach of implied warranty of fitness for a particular purpose. The
district court chose to address only one of these claims in its analysis of whether
appellant had a reasonable defense on the merits. Because our function “is limited to
identifying errors and then correcting them,” we will not determine issues of fact bearing
on the remaining three causes of action. See Michaels v. First USA Title, LLC, 844
N.W.2d 528, 532 (Minn. App. 2014) (recognizing that this court will “only review legal
questions that the record demonstrates were actually raised in, and decided by, the district
court”).
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Moreover, “[t]he discretion of the district court in opening a default judgment is
particularly broad when the court’s decision is based upon an evaluation of conflicting
affidavits.” Roehrdanz v. Brill, 682 N.W.2d 626, 631-32 (Minn. 2004). We determine
that the district court acted within its discretion in denying the motion to vacate based on
its analysis of the evidence submitted. See id. at 632 (“Because the court made findings
of fact based upon conflicting evidence and applied the correct [four-factor] analysis to
those findings, we hold that the district court’s denial of [movant’s] motion did not
constitute an abuse of discretion.”).
B. Reasonable Excuse for Failure to Act
Appellant claims it had a reasonable excuse for not responding to the lawsuit
because it “reasonably believed” it had not been served with a summons and complaint.2
Generally, “[i]t is for the [district] court to determine whether the excuse offered by a
defaulting party is reasonable.” Howard v. Frondell, 387 N.W.2d 205, 208 (Minn. App.
1986), review denied (Minn. July 31, 1986). Neglect of the party itself which leads to
entry of a default judgment is inexcusable and is a proper ground for refusing to reopen a
judgment. Id.
Here, appellant was served with the complaint on September 25, 2012. In October
2012, appellant received a notice of case filing and judicial assignment from the district
court. The next correspondence appellant received was a district court notice directing
the parties to file informational statements. Appellant also received a scheduling order
2
Appellant initially contested service of process but has since waived that challenge.
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from the district court in February 2013. Appellant did not respond to any of these
communications and does not dispute that it received the district court notices.
In October 2013, respondent moved for default judgment. The district court
determined that the record “does not evidence a reasonable excuse for failure to answer
or defend.” In reaching this conclusion, the district court stated that appellant had notice
of the action and acknowledged receipt of the district court’s scheduling order and other
court notices, but failed to make any response to the court itself or to respondent. Based
on this record, we hold that the district court did not abuse its discretion in determining
that appellant did not have a reasonable excuse for failing to act. See Hovelson v. U.S.
Swim & Fitness, Inc., 450 N.W.2d 137, 142 (Minn. App. 1990) (stating that when the
party “lost” the summons and complaint, the resulting negligence “was caused by [the
party’s] own acts and is therefore not to be excused”), review denied (Minn. Mar. 16,
1990).
C. Due Diligence after Notice
A party seeking relief must act with due diligence after notice of the entry of
judgment. Reid, 631 N.W.2d at 419. The district court issued an order granting default
judgment on October 17, 2013, and judgment was entered on October 30. Rule 60.02
requires that a motion to vacate be made “not more than 1 year after the judgment . . .
was entered.” Minn. R. Civ. P. 60.02. Appellant filed its motion to vacate on
February 11, 2014, three months after entry of judgment. We have previously held that
“acting within three months is due diligence.” Black v. Rimmer, 700 N.W.2d 521, 528
(Minn. App. 2005); Kemmerer v. State Farm Ins. Cos., 513 N.W.2d 838, 841 (Minn.
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Ohio App. 1994). On this record, we hold that appellant acted with due diligence after entry of
judgment and this prong of the test is satisfied.
D. Prejudice to Opposing Party
The party seeking relief from final judgment bears the burden of establishing that
no substantial prejudice will result to the other party. Nelson v. Siebert, 428 N.W.2d 394,
395 (Minn. 1988). The district court determined that “the prejudice to [appellant] is
substantial,” based on the fact that respondent’s roof continues to leak over four years
after appellant worked on it and vacating the judgment could result in a delay in her
ability to recover from the Minnesota Contractor’s Recovery Fund. See Minn. Stat.
§ 326B.89, subds. 2, 4, 6 (2012) (creating recovery fund to compensate owners of
residential real estate for fraudulent, deceptive, or dishonest practices). Appellant
challenges this finding.
In general, “substantial prejudice” does not exist when the only prejudicial effect
is additional expense and delay. Black, 700 N.W.2d at 528. However, we recognize an
exception to the general rule:
If it is perceived by the trial court that there is intentional ignoring of
process, the additional expense must be viewed in a different light.
To force a claimant to go to the expense of a hearing in court, to
gather evidence and expert testimony and the concomitant
preparation, all either by inexcusable neglect or by intent, colors the
prejudice with a deeper hue.
Hovelson, 450 N.W.2d at 142.
The district court determined that appellant “intentionally ignored the legal
process for a year, responding only when there was a judgment entered against [it],
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detract[ing] from any argument [it] might have regarding prejudice.” The record
provides support for the district court’s finding that appellant did not take action to
respond to the lawsuit, despite acknowledging that it received several communications
from the district court. Accordingly, we hold that the district court did not abuse its
discretion in determining that appellant failed to satisfy this prong of the test.
Affirmed.
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