This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. ß 480A.08, subd. 3 (1998).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C2-99-1339

 

 

E & M Construction, Inc.,

Appellant,

 

vs.

 

David Haugen,

Respondent.

 

 

Filed May 2, 2000

Affirmed

Huspeni, Judge*

 

Hennepin County District Court

File No. 9614452

 

 

Jeffrey H. Olson, Hellmuth & Johnson, P.A., 10400 Viking Drive, Suite 560, Eden Prairie, MN 55344 (for appellant)

 

James P. Young, Lundquist Law Office, P.A., 1012 Grain Exchange Building, 400 South Fourth Street, Minneapolis, MN 55415 (for respondent)

 

 

††††††††††† Considered and decided by Peterson, Presiding Judge, Anderson, Judge, and Huspeni, Judge.

U N P U B L I S H E D†† O P I N I O N

HUSPENI, Judge

Appellant brought an action against respondent for money allegedly owed for respondentís use of construction equipment.Upon service by publication, appellant was awarded default judgment for $65,153.26.Respondentís subsequent motion seeking vacation of the default judgment was granted, and after trial, appellant was awarded $1,269.29.Appellant challenges both the vacation of the default judgment and the award.Because there was no abuse of discretion in either the vacation of the default judgment or the amount awarded to appellant, we affirm.

FACTS

In May 1994, respondent David Haugen and Mike Erickson served in the same Air Force Reserve unit.Through their friendship, Haugen met Mikeís father, Robert Erickson (Erickson), president of appellant E & M Construction.Haugen learned that Erickson needed a large piece of equipment repossessed, and offered to tow the equipment using a dump truck he had access to through his job.With his employerís permission, Haugen used the dump truck to help Erickson repossess the equipment.

At about the same time, Haugen was working on some projects on his home, and learned that Erickson had some construction equipment he was not currently using.Erickson agreed to let Haugen use a bobcat skid loader, a trailer, and a planer.Erickson contends that it was understood that the arrangement was a lease; Haugen claims he thought the equipment was being loaned to him as a favor.Erickson never discussed with Haugen any lease terms for the equipment, nor did Erickson ever send Haugen a bill or statement for use of the construction equipment.

Haugen took possession of the equipment on May 16, 1994.Shortly after that, the bobcat broke down.Sometime later, Erickson requested that Haugen return the bobcat, but Haugen explained that it had broken down, and he had disassembled it in an attempt to fix it.Instead of returning the broken and disassembled bobcat, Haugen rented another bobcat so that Erickson could complete the project for which he needed one.Haugen said that he would pay to have the bobcat fixed when he could afford to do so.At some time during the year, the trailer was stolen; Haugen also volunteered to pay to replace it.

During the period May 1994 to May 1995, Haugen worked with Erickson a day or two at a time on at least two other construction projects.In neither case was Haugen paid anything for his work.Haugen testified he thought he was simply returning favors; Erickson testified he thought Haugenís labor would be compensated as a credit against the money Haugen owed for the use of the equipment.

In May and June 1995, Erickson reclaimed the equipment, except the stolen trailer.According to Haugen, Erickson made no demand for payment when he picked up the equipment and did not object when Haugen again offered to pay for the repairs to the bobcat and the replacement of the trailer.Haugen continued to live in the Twin Cities until July 1996, and occasionally saw Erickson socially.

Erickson claims that in approximately February 1996, E & M began attempts to serve Haugen in an action seeking payment on an alleged lease agreement for the equipment.Unable to personally serve Haugen, and believing that he had left Minnesota, E & M served by publication beginning in September 1996, and was subsequently awarded a default judgment against Haugen in the amount of $65,153.26.

Haugen learned of the lawsuit and default judgment in February 1997, when E & M attempted to execute the judgment against a spendthrift trust established in Montana by Haugenís late mother with Haugen as the beneficiary.E & Mís attorney and Haugenís Montana attorney first communicated by telephone on February 14, 1997; a series of telephone calls and letters between the two attorneys followed.On February 25, 1997, E & M registered the default judgment in Montana.Settlement efforts having failed, Haugen brought a motion in Montana on April 9, 1997, to set aside the Montana judgment; the Montana court denied the motion on June 30, 1997.

On July 21, 1997, Haugen moved the Minnesota court to vacate the default judgment.The same judge who granted the default judgment granted the motion to vacate it.After a trial in which both Erickson and Haugen testified, the same judge awarded E & M $1,269.29,[1] plus costs.Appeal by E & M resulted.

D E C I S I O N

I.††††††††† Default Judgment

We will not reverse a district courtís decision to reopen a default judgment absent an abuse of discretion.Kosloski v. Jones, 295 Minn. 177, 180, 203 N.W.2d 401, 403 (1973).We view the record in the light most favorable to the district courtís order.Bentonize, Inc. v. Green, 431 N.W.2d 579, 582 (Minn. App. 1988).Default judgments are to be ďliberallyĒ reopened to promote resolution of cases on the merits.Galatovich v. Watson, 412 N.W.2d 758, 760 (Minn. App. 1987).

A party seeking relief under Minn. R. Civ. P. 60.02 must demonstrate (1) a reasonable case on the merits, (2) a reasonable excuse for the failure to act, (3) that it acted with due diligence after notice of the entry of judgment, and (4) that no substantial prejudice to the opposing party would result from granting the motion to vacate.Finden v. Klaas, 268 Minn. 268, 271, 128 N.W.2d 748, 750 (1964).The moving party bears the burden of proving all four elements.Nelson v. Siebert, 428 N.W.2d 394, 395 (Minn. 1988).Appellant contends that respondent failed to meet any of the four elements.We cannot agree.

A.††† ††† Reasonable Defense on the Merits

††††††††††† E & M obtained its default judgment by representing to the court that it had a lease contract with Haugen.Haugen, however, denied that there was any lease agreement and claimed the bobcat was being loaned to him as a favor.Haugenís denial that the lease agreement existed constitutes a reasonable defense on the merits for the purposes of the Finden test.See Johnson v. Nelson, 265 Minn. 71, 73-74, 120 N.W.2d 333, 336 (1963) (where plaintiff claimed contract was induced by false representation, denial that false representation was made was reasonable defense for purpose of reopening default judgment).The district court did not abuse its discretion by finding that this element of the Finden test was satisfied.

B.††† ††† Reasonable Excuse for Failure to Answer

E & M served Haugen by publication.Haugen first learned of the December 1996 default judgment in February 1997.His lack of actual knowledge of the lawsuit and resulting default judgment is a reasonable excuse for his failure to answer.The district court did not abuse its discretion by finding that this element of the Finden test was satisfied.

C.††† ††† Due Diligence After Discovering Default

On February 14, 1997, Haugenís Montana attorney and E & Mís attorney first spoke by telephone.Between February 17 and April 9, 1997, the attorneys exchanged correspondence and telephone calls in an unsuccessful attempt to resolve the matter.A motion in Montana to have the default judgment (filed in Montana as the judgment of a sister state) set aside was denied on June 20, 1997.On July 21, 1997, Haugen moved the Minnesota district court to vacate the default judgment.Thus, Haugenís motion to vacate the summary judgment was before the Minnesota court between five and six months after Haugen learned of it.In addition, settlement efforts of the partiesí attorneys had been ongoing, and commendably so, during most of that time.

Under circumstances similar to those here, this court has found the due diligence factor to be satisfied.In Galatovich, the appellant received notice of default judgment in late August 1986.412 N.W.2d at 760.Subsequent settlement efforts of the partiesí attorneys were unsuccessful, and on motion to vacate brought on January 7, 1997, the due diligence factor was deemed satisfied.Id.The delay here is not significantly greater than in Galatovich, especially in light of the fact that Haugen first sought relief in the Montana courts only two months after learning of the default.See Kemmerer v. State Farm Ins. Cos., 513 N.W.2d 838, 841 (Minn. App. 1994) (acting within three months is due diligence), review denied (Minn. June 2, 1994).The district court did not abuse its discretion in finding that this factor was satisfied.

††††††††††† D.††† ††† Absence of Prejudice to Non-Moving Party

The party seeking to vacate a judgment has the burden to establish that no substantial prejudice will result to the other party.Nelson, 428 N.W.2d at 395.The only prejudice that E & M has demonstrated is the cost it has incurred between the time of the default judgment and the time of the motion to vacate it.In the context of rule 60.02, the delay and expense of additional litigation, without more, do not create sufficient prejudice to defeat a motion to vacate.Charson v. Temple Israel, 419 N.W.2d 488, 491-92 (Minn. 1988).ďBecause respondents cannot cite any prejudice other than increased costs associated with these proceedings,Ē Galatovich, 412 N.W.2d at 761, the district court did not abuse its discretion in finding that this factor was satisfied.

††††††††††† E.††† ††† Conclusion Drawn From Finden Analysis

All four factors of the Finden test must be satisfied to justify vacating a default judgment.Nguyen v. State Farm Mut. Auto. Ins. Co., 558 N.W.2d 487, 490 (Minn. 1997).The district court found that each of the four factors was satisfied.E & M has not carried its burden of demonstrating that the district court abused its discretion on any of the four determinations.As a result, the district court properly granted Haugenís motion to vacate the default judgment.

II.††††††† Unjust Enrichment

E & M contends the trial court erred as a matter of law when it found that Haugen had not been unjustly enriched by his possession and use of the equipment.We will reverse a district courtís finding of fact only if it is clearly erroneous, that is, not reasonably supported by the evidence.Fletcher v. St. Paul Pioneer Press, 589 N.W.2d 96, 102 (Minn. 1999).

In order to prevail on a claim of unjust enrichment, the plaintiff must show that the defendant unlawfully or illegally obtained a benefit for which the defendant in all fairness should pay.Servicemaster v. GAB Business Servs., 544 N.W.2d 302, 306 (1996).The record demonstrates that Haugen did not receive any benefit under the ďcloud of improprietyĒ necessary to sustain an unjust enrichment claim.Id.Haugen was a friend of Ericksonís son and provided valuable labor to Erickson without requesting payment, both before and after Erickson gave him the construction equipment.Erickson admits that he never discussed either lease terms for the equipment or wage rates for the labor with Haugen, and does not dispute Haugenís claim that Erickson never demanded payment for the use of the equipment, either before or after it was reclaimed.Facts in the record provide substantial support for the conclusion that Haugen reasonably believed that Erickson had loaned him the equipment as a favor, not leased it to him for profit.Any benefit Haugen received from the possession and use of the equipment was not obtained unlawfully or illegally, and thus does not support a claim for unjust enrichment.

The district court did not err in determining that Haugen was not liable for unjust enrichment, and in limiting E & Mís recovery to the value of a new trailer to replace the one stolen while in Haugenís possession, plus costs incurred in transporting and repairing equipment after it was reclaimed.

Affirmed.

 



*Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, ß 10.

[1]This figure represents $1,000,which the court found to be the cost of a new trailer to replace the one stolen while in Haugenís possession, plus $269.29 incurred in transporting and repairing the bobcat after it was reclaimed by appellant.