Buck Blacktop, Inc. v. Gary Contracting and Trucking Company, LLC

929 N.W.2d 12

BUCK BLACKTOP, INC., Respondent,

v.GARY CONTRACTING AND TRUCKING COMPANY, LLC, et al., Appellants.

A18-1059

Court of Appeals of Minnesota.

Filed May 6, 2019

David S. Holman, The Law Office of David S. Holman, Ltd., Burnsville, Minnesota (for respondent)

Timothy R. Maher, Joseph D. Kantor, Guzior Armbrecht Maher, Minneapolis, Minnesota (for appellants)

Considered and decided by Johnson, Presiding Judge; Ross, Judge; and Jesson, Judge.

JOHNSON, Judge

This appeal arises from a judgment that was entered after the filing of a confession of judgment that was executed more than four years earlier. The two parties who had executed the confession of judgment moved to vacate the judgment on the ground that the confession of judgment was filed after the statute of limitations had expired. The district court denied the motion after applying the four-part test stated in Finden v. Klass , 268 Minn. 268, 128 N.W.2d 748 (1964). We conclude that the four-part Finden test does not apply to a motion based on paragraph (f) of rule 60.02 of the Minnesota Rules of Civil Procedure. Therefore, we reverse and remand.

FACTS

Gary Contracting and Trucking Company, LLC (hereinafter GCTC), which is owned by Gary Boryczka, is engaged in the construction business. Buck Blacktop, Inc., is in the paving business. In 2011, GCTC hired Buck Blacktop to perform paving on six construction projects. But GCTC did not pay Buck Blacktop for the work that it performed.

In 2013, Buck Blacktop retained an attorney to collect the debt owed by GCTC. On May 21, 2013, after negotiations between the parties, Boryczka executed a confession of judgment in the amount of $ 51,824.31 on behalf of GCTC and himself. The confession of judgment states that it was "made in conformity with Minn. Stat. § 548.22, for the purpose of settling and confessing judgment in this action." The confession of judgment also states that GCTC and Boryczka "consent to the immediate entry of judgment in the aforementioned amount and waive stay of execution thereon."

Buck Blacktop did not immediately file the confession of judgment. The parties engaged in further discussions and agreed that GCTC could "work off" the outstanding debt on future construction projects. But, according to Buck Blacktop’s president, "no such projects occurred." Neither GCTC nor Boryczka made any payments on the debt.

On November 10, 2017, more than four years after GCTC and Boryczka executed the confession of judgment, Buck Blacktop filed it with the Ramsey County District Court. In an accompanying affidavit, Buck Blacktop requested that interest be added to the principal. On November 14, 2017, the district court administrator entered a judgment in favor of Buck Blacktop and against GCTC and Boryczka in the amount of $ 60,871.02. The district court administrator sent notice of the judgment to GCTC, Boryczka, and Buck Blacktop. Boryczka actually became aware of the judgment in December 2017.

On February 27, 2018, Buck Blacktop served a garnishment summons on a bank at which GCTC had an account. Buck Blacktop was able to seize $ 15,612.81 in cash. The next day, GCTC and Boryczka served and filed a motion to vacate the November 14, 2017 judgment pursuant to rule 60.02 of the rules of civil procedure. In their memorandum of law, GCTC and Boryczka argued that they are entitled to relief under paragraphs (d) and (f) of rule 60.02 on the grounds that the confession of judgment was not timely filed within one year and that it does not comply with all statutory requirements. In response, Buck Blacktop argued that a one-year limitations period does not apply to the confession of judgment and that GCTC and Boryczka waived any argument that the confession of judgment does not comply with statutory requirements.

In May 2018, after a hearing, the district court filed a seven-page order and memorandum in which it denied GCTC and Boryczka’s motion to vacate the November 14, 2017 judgment. With respect to paragraph (f) of rule 60.02, the district court reasoned that GCTC and Boryczka satisfied the first requirement of the four-part Finden test because they have a reasonable statute-of-limitations defense and have reasonable defenses against the addition of interest and the form of the confession of judgment. But the district court reasoned that GCTC and Boryczka did not satisfy the second requirement of the Finden test because they knew that the confession of judgment could be filed at any time and did not establish a reasonable excuse for failing to pay their debt. The district court also reasoned that GCTC and Boryczka did not satisfy the third requirement because they did not act diligently in the three months following the entry of judgment. And the district court further reasoned that GCTC and Boryczka did not satisfy the fourth requirement because Buck Blacktop would be substantially prejudiced if the judgment were vacated. With respect to paragraph (d) of rule 60.02, the district court reasoned that, even if the judgment were erroneous, an erroneous judgment is not void. GCTC and Boryczka appeal.

ISSUE

Does the four-part test stated in Finden v. Klass , 268 Minn. 268, 128 N.W.2d 748 (1964), apply to a motion based on paragraph (f) of rule 60.02 of the Minnesota Rules of Civil Procedure ?

ANALYSIS

Appellants argue that the district court erred by denying their motion to vacate the November 2017 judgment. They challenge the district court’s ruling only with respect to their request for relief under paragraph (f) of rule 60.02 ; they do not challenge the district court’s ruling with respect to their request for relief under paragraph (d) of rule 60.02.

Appellants’ argument has two parts. They first contend that the district court erred by applying the four-part Finden test to their request for relief under paragraph (f) of rule 60.02. They contend in the alternative that, even if the Finden test applies, the district court erred by reasoning that they did not satisfy each of the four requirements of the test.

A.

The rule on which appellants’ motion is based provides as follows:

On motion and upon such terms as are just, the court may relieve a party ... from a final judgment ... and may order a new trial or grant such other relief as may be just for the following reasons:

(a) Mistake, inadvertence, surprise, or excusable neglect;

(b) Newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial pursuant to Rule 59.03;

(c) Fraud ..., misrepresentation, or other misconduct of an adverse party;

(d) The judgment is void;

(e) The judgment has been satisfied, released, or discharged or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (f) Any other reason justifying relief from the operation of the judgment.

Minn. R. Civ. P. 60.02. A motion under rule 60.02 "shall be made within a reasonable time, and for reasons (a), (b), and (c) not more than one year after the judgment, order, or proceeding was entered or taken." Id.

Rule 60.02 was adopted in 1951 when the supreme court promulgated the Minnesota Rules of Civil Procedure, which became effective in 1952. See Order of Promulgation of the Rules Governing the Regulation of Pleadings, Practice, Procedure, and the Forms Thereof in the District Courts of the State of Minnesota , No. 151882 (Minn. June 25, 1951). Before the existence of rule 60.02, a statute provided, among other things, that a district court, "in its discretion, may relieve a party from any judgment, order, or other proceeding taken against him through his mistake, inadvertence, surprise, or excusable neglect; or may, for good cause shown, modify or set aside its judgments, orders, or proceedings." Minn. Stat. § 544.32 (1949).

In Hinz v. Northland Milk & Ice Cream Co. , 237 Minn. 28, 53 N.W.2d 454 (1952), the supreme court applied section 544.32 to a claim of excusable neglect. Id. at 455-57. The defendant’s insurer failed to forward the summons and complaint to the defendant’s attorney until after the time for answering had expired, and the district court entered default judgment for the plaintiff. Id. at 455. The defendant moved to open the judgment pursuant to section 544.32, but the district court denied the motion. Id. On appeal, the supreme court synthesized its prior caselaw and stated that a district court has a "duty" to

grant a motion to open a default judgment ... if the party in default shows that he (a) is possessed of a reasonable defense on the merits, (b) has a reasonable excuse for his failure or neglect to answer, (c) has acted with due diligence after notice of the entry of judgment, and (d) that no substantial prejudice will result to the other party.

Id. at 455-56 (citing Rodgers v. U.S. & Dominion Life Ins. Co. , 127 Minn. 435, 149 N.W. 671, 671-72 (1914)).

In Johnson v. Nelson , 265 Minn. 71, 120 N.W.2d 333 (1963), the supreme court applied the four-part rule of Hinz to a motion filed under rule 60.02. The district court entered a default judgment after the defendant did not serve and file an answer. Id. at 334-35. The defendant moved to vacate the default judgment pursuant to rule 60.02, and the district court granted the motion. Id. at 335. On appeal, the supreme court stated that a district court has discretion under rule 60.02 to vacate a default judgment if the moving party makes a showing of the four requirements identified in Hinz , which the supreme court quoted. Id.

In Finden , the supreme court relied on both Hinz and Johnson and restated the four-part test. The district court entered a default judgment after the defendant’s attorney neglected to serve and file an answer. 128 N.W.2d at 749-50. The defendant moved to vacate the default judgment pursuant to rule 60.02, and the district court denied the defendant’s motion. Id. at 750. On appeal, the supreme court stated that a district court

should relieve a defendant from the

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