may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2002).
IN COURT OF APPEALS
Johnson, et al.,
Jon T. Christenson,
Becker County District Court
File No. C5011373
Brant Beeson, Beeson Law Office, First Security Bank Building, 611 Summit Avenue, P.O. Box 70, Detroit Lakes, MN 56502-0070 (for respondents)
Paul F. Carlson, Kennedy & Nervig, LLP, 503 Jefferson Street South, P.O. Box 647, Wadena, MN 56482-0647 (for appellant)
Considered and decided by Peterson, Presiding Judge, Shumaker, Judge, and Forsberg, Judge.*
U N P U B L I S H E D O P I N I O N
In this dispute regarding whether appellant real-estate seller misrepresented the condition of the property, the district court granted a default judgment to respondent-buyers. On appeal from the district court’s denial of appellant’s motion to vacate the default judgment under Minn. R. Civ. P. 60.02, appellant argues that he satisfied all four elements for reopening a judgment and, therefore, the district court abused its discretion in denying his motion. We affirm.
On February 1, 2000, the parties executed a purchase agreement under which respondent-buyers Mark A. Johnson and Marilyn K. Johnson contracted to buy a house from appellant-seller Jon T. Christenson. In the purchase agreement, seller represented that the house had no roof, wall, or ceiling damage caused by water or ice build-up and that the air-conditioning, heating, plumbing, and wiring systems used and located on the property would be in working order on the closing date. In a disclosure statement completed by seller in December 1999 and provided to buyers, seller represented that the roofing material was three years old; the roof was new construction in 1996; the house had no interior damage from ice build-up and no leakage; and the air-conditioning and heating systems were in working condition.
At the June 26, 2000, closing, buyers withheld $5,000 of the purchase price because seller still had personal property in the house and in other buildings located on the property. By letters dated January 8, 2001, and January 19, 2001, buyers’ attorney informed seller that he was representing buyers and that there were problems with the house that had not been disclosed in the purchase agreement or the seller’s property disclosure statement. The letters also requested that seller remove his personal property from the property. Seller contacted buyers’ attorney on January 12, 2001, and buyers’ attorney advised seller to retain an attorney to represent him. The January 19 letter also suggested that seller retain an attorney.
On August 23, 2001, buyers began this action by serving a summons and complaint on seller. Buyers sought damages for a leaky roof and for the heating and air-conditioning systems not being in working order. Buyers also requested storage fees for seller’s personal property that remained on the property.
On August 24, 2001, seller contacted Marilyn Johnson and arranged to pick up his personal property the following day, which he did. On September 10 and 11, 2001, seller attempted to contact buyers’ attorney by telephone. On September 13, 2001, seller contacted Mark Johnson and offered to settle the matter for $7,500.
Seller did not serve an answer to the complaint. Seller did not appear at the default hearing conducted on December 3, 2001, and default judgment in the amount of $36,450.83, plus costs and attorney fees, was entered the next day. On December 18, 2001, seller received notice of entry of the default judgment. On February 27, 2002, seller filed a motion to vacate the default judgment.
In his proposed answer and affidavit filed with the motion to vacate, seller admits that he failed to disclose the damage to the house caused by leakage due to ice build-up on the roof. Seller asserts that he did not discover the damage until the spring of 2000, after the parties executed the purchase agreement, and that in April 2000, he filled out a revised seller’s property disclosure statement disclosing the problem. Seller states that he provided the revised disclosure statement to his real-estate agent and that he relied on the real-estate agent to provide the revised disclosure to buyers.
Regarding the heating and air-conditioning systems, in his proposed answer, seller admits that he represented “that the central air, heating, plumbing and wire systems in the premises would be in working order on the date of the closing.”
Regarding his personal property, seller asserts that buyers prevented him from removing it by changing the locks and otherwise failing to cooperate with his removal efforts.
As affirmative defenses, seller asserted estoppel; that upon information and belief, the revised seller’s property disclosure statement was transmitted to buyers’ real-estate agent; and that the damages claimed by buyers for repairing the heating system were excessive because buyers replaced the heat pump with a higher-capacity heat pump.
The district court may relieve a party from a final judgment based on “[m]istake, inadvertence, surprise, or excusable neglect” or “any other reason justifying relief from operation of the judgment.” Minn. R. Civ. P. 60.02. The district court has discretion in ruling on a motion to vacate a default judgment, and its decision will not be reversed absent an abuse of that discretion. Foerster v. Folland, 498 N.W.2d 459, 460 (Minn. 1993). The record is viewed in the light most favorable to the district court’s decision. Imperial Premium Finance, Inc. v. GK Cab Co., Inc., 603 N.W.2d 853, 857 (Minn. App. 2000).
A party seeking relief from a default judgment
must demonstrate (1) reasonable defense on the merits; (2) that there exists a reasonable excuse for failure or nelglect to act; (3) that the party acted with due diligence after notice of the entry of judgment; and (4) that no substantial prejudice will result if the action is reopened.
Foerster, 498 N.W.2d at 459 (citing Hinz v Northland Milk & Ice Cream Co., 237 Minn. 28, 30, 53 N.W.2d 454, 455-56 (1952)). The moving party bears the burden of proving all four of the elements, including lack of prejudice. Imperial Premium Fin., 603 N.W.2d at 857.
1. Reasonable defense on the merits
Based on seller’s representations in the purchase agreement and in the seller’s property disclosure statement regarding the condition of the roof, the lack of damage due to ice build-up, and the soundness of the heating and plumbing systems, the district court found that seller failed to establish a reasonable defense on the merits. Seller asserts that fact issues exist regarding buyers’ conduct and their knowledge of the condition of the house, specifically, whether buyers received the revised disclosure statement and whether seller personally advised buyers that the heat pump was only a supplemental heat source.
But, as the district court noted, although seller asserts that he gave a revised disclosure statement to his real-estate agent, he makes no claim that he provided buyers with the revised disclosure statement. Seller cites no evidence in the record that his real-estate agent provided the revised disclosure statement to buyers or their real-estate agent. Absent any allegation or evidence that buyers actually received the revised disclosure statement, the fact that seller provided it to his real-estate agent is not a defense to buyers’ claim against seller.
Regarding the air-conditioning and heating systems, seller does not dispute that he represented that they would be in working order on the closing date. He argues that buyers did not replace the existing heat pump but rather upgraded it. Buyers, however, allege that the heating and air-conditioning systems were not in working order, and neither seller’s answer nor other evidence cited by seller demonstrates that they were in working order on the closing date. Seller specifically stated in his affidavit that he did not check the heat pump to determine that it was working but rather assumed that it would work because it worked when he last used it in 1996. Seller provided no specific information supporting his claim that buyers upgraded rather than replaced the existing heating and air-conditioning systems. “The existence of a reasonable defense on the merits must ordinarily be demonstrated by more than conclusory allegations in moving papers.” Imperial Premium Fin., 603 N.W.2d at 857 (citation omitted).
Regarding the storage of his personal property, seller argues that he has a complete defense to the claim for storage fees because the buyers admit that he removed his property before the buyers obtained the default judgment. But seller’s personal property was left on the property from June 26, 2000, the closing date, until August 25, 2001, two days after the summons and complaint were served.
The district court did not err in finding that seller failed to demonstrate a reasonable defense on the merits.
2. Reasonable excuse
Relying on Taylor v. Steinke, 295 Minn. 244, 203 N.W.2d 859 (1973), and Reardon Office Equip. v. Nelson, 409 N.W.2d 222 (Minn. App. 1987), seller argues that he had a reasonable excuse for failing to answer. In Taylor, defendant, acting pro se, contacted plaintiff’s attorney and explained why he disputed the complaint. In the conversation with plaintiff’s attorney, defendant obtained the impression that there was nothing further for him to do at that time. In Reardon, defendant, acting pro se, contacted plaintiff’s attorney to explain that the amount of the debt was disputed. Defendant stated that plaintiff’s attorney told him that if he disputed the amount of the debt, he should send a letter stating the amount he was willing to pay.
Seller contends that he believed he sufficiently responded to the complaint by attempting to contact buyers’ attorney, removing his personal property from the property, and making a settlement offer to Mark Johnson. In this case, as in Taylor and Reardon, seller was acting pro se. But this case is distinguishable because here seller does not claim that any representations by buyers or their attorney caused him to believe that an answer was unnecessary. Also, seller did not contact Mark Johnson until September 13, 2001, one day after the deadline for answering the complaint. Although the district court did not expressly find that seller’s excuse for failing to answer was unreasonable, its memorandum indicates that it did not accept seller’s excuse as reasonable. See Minn. R. Civ. P. 52.01 (stating that findings of fact may appear in district court’s memorandum).
3. Due diligence
Based on seller’s overall course of delay, the district court found that seller did not act with due diligence by filing a motion to vacate two months after receiving notice of the default judgment.
Whether a party acted with due diligence in moving to vacate a default judgment is a question of fact for the district court to determine. Roe v. Widme, 191 Minn. 251, 253, 254 N.W. 274, 275 (1934). What constitutes due diligence depends on all the facts and circumstances involved in the individual case. Simons v. Schiek’s, Inc., 275 Minn. 132, 138, 145 N.W.2d 548, 552 (1966); Hovelson v. U.S. Swim & Fitness, Inc., 450 N.W.2d 137, 142 (Minn. App. 1990) (district court did not abuse its discretion in considering defendant’s course of delay throughout dispute and finding that defendant did not act with due diligence by contacting plaintiff nine days after entry of default judgment), review denied (Minn. Mar. 16, 1990). The district court did not err in finding that seller failed to act with due diligence.
The district court noted buyers’ argument that “they are dependent on recovering from the judgment to make the necessary repairs to the property” and found that vacating the judgment “would considerably delay [buyers’] recovery and repairs.” But, “the delay and expense of additional litigation, without more, do not create sufficient prejudice to defeat a motion to vacate.” Imperial Premium Fin., 603 N.W.2d at 858. The delay cited by the district court does not support a finding of prejudice.
We are mindful that “courts favor a liberal application of the Hinz test to further the policy of resolving cases on their merits.” Kemmerer v. State Farm Ins. Cos., 513 N.W.2d 838, 841 (Minn. App. 1994), review denied (Minn. June 2, 1994). And a strong showing on three of the four factors can outweigh a weak showing on one. Valley View, Inc. v. Schutte, 399 N.W.2d 182, 185-86 (Minn. App. 1987), review denied (Minn. Mar. 18, 1987). But the district court found that seller did not demonstrate that he met the first three Hinz factors. Viewing the record in the light most favorable to the district court’s decision, we conclude that the district court did not abuse its discretion in denying seller’s motion to vacate the default judgment.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.