This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).







WJO5, Inc.,





Stan Holter, et al.,





The Peck Companies, LLC,





Richfield Bus Company, et al.,



Filed September 20, 2005

Reversed and remanded; motion denied

Hudson, Judge


Hennepin County District Court

File Nos. CT 03-1544, 99-12792


Joanne H. Turner, Patrick C. Summers, Mackall, Crounse & Moore, PLC, 1400 AT&T Tower, 901 Marquette Avenue, Minneapolis, Minnesota 55402 (for appellants)


Tony P. Trimble, Matthew W. Haapoja, Trimble & Associates, Ltd., 10201 Wayzata Boulevard, Suite 130, Minnetonka, Minnesota 55305 (for respondents)


            Considered and decided by Stoneburner, Presiding Judge; Minge, Judge; and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N


            On appeal from a district court judgment vacating an appellate court judgment awarding costs, appellants argue that (1) the district court erred by vacating the appellate court judgment under Minn. R. Civ. P. 60.02 and (2) the district court improperly awarded respondent attorney fees.  Appellants also move to strike portions of respondents’ brief as containing factual statements outside the record on appeal.  We reverse the judgment and award of attorney fees and remand for trial on the outstanding factual issues.  We deny appellants’ motion to strike.


            The Peck Companies, LLC performed contracting services for Richfield Bus Company, for which it was not paid.  Richfield Bus Company is owned by George and Marilyn Holter.  Peck Companies initiated a mechanic’s-lien-foreclosure action in 1999 against all three parties (collectively Richfield Bus Company).  On August 13, 2001, an order for judgment was entered that provided Peck Companies with a lien in the amount of $41,429.26 against the property where the Richfield Bus Company is located.  The sheriff conducted a foreclosure sale of the property on October 22, 2001.  At that sale, Dan Holter, Stan Holter, and Christian Holter purchased the property.

            Richfield Bus Company appealed the judgment, and Peck Companies cross-appealed for costs associated with the appeal.  In an unpublished opinion filed May 21, 2002, this court affirmed the judgment and determined that Peck Companies was entitled to interest on the unpaid balance.  This court remanded the matter to the district court for an award of interest.  This court subsequently awarded $837.91 in costs and disbursements to Peck Companies. 

On September 13, 2002, Peck Companies brought a motion before the district court for interest on the lien and attorney fees with respect to the interest claim.  Dan Holter represented Richfield Bus Company.  The parties dispute the scope of the settlement negotiations entered into at the hearing on September 13.  According to the affidavit submitted by Dan Holter, the purpose of the September 13, 2002 discussion was to resolve all outstanding debts, including the satisfaction of the $837.91 costs judgment arising from the previous appeal.  According to the affidavits submitted by Timothy Grande, counsel for Peck Companies, the purpose of the September 13, 2002 discussion was only to resolve the outstanding motion for interest and attorney fees; the court of appeals judgment for costs was not discussed or included in any settlement negotiations.  Following the negotiations, Dan Holter paid Peck Companies $3,500, noting on the check that payment was “for dismissing motion for interest and attorney fees.” 

            Peck dismissed its motion for interest and attorney fees, but, in October 2002, Timothy Grande wrote a letter to George and Marilyn Holter on behalf of Peck Companies demanding payment of the $837.91 costs judgment.  In response, Dan Holter sent a letter to the district court on October 14 explaining his belief that the settlement agreement included the cost and disbursements judgment.  The district court did not respond to either party’s letter, and Dan Holter took no further action.

            The district court docketed the costs judgment against Richfield Bus Company in the amount of $837.91 on November 12, 2002.  When the Holters refused to pay, Peck Companies became a lien creditor with an interest in the property and a statutory right under Minn. Stat. § 580.24 to redeem the property from the mechanic’s-lien-foreclosure sale, after the expiration of George and Marilyn Holter’s redemption rights.  Peck Companies assigned its interest in the judgment to appellant WJO5, Inc. (WJO5), and, on November 26, 2002, WJO5 filed notice of an intention to redeem the Richfield property with the Hennepin County recorder.  After George and Marilyn Holter failed to exercise their redemption rights, WJO5 redeemed the property on December 3, 2002 by paying the sum of $47,000.  WJO5 received a sheriff’s certificate of redemption.

            George and Marilyn Holter filed a motion on December 5, 2002, to vacate the appellate-costs judgment and declare the certificate of redemption null and void.  On January 28, 2003, while the Holters’ motion was still pending in the Peck Companies’ litigation, WJO5 initiated a separate action against Dan, Stan, and Christian Holter (collectively Stan Holter) for a declaratory judgment to clear title to the property.  Stan Holter moved to have the WJO5 litigation dismissed or, in the alternative, consolidated with the Peck Companies’ case.  Stan Holter also moved to vacate the appellate-costs judgment and nullify the certificate of redemption.

In a May 23, 2003 order, the district court vacated the appellate-costs judgment under Minn. R. Civ. P. 60.02(a), finding that “[Dan Holter’s] failure to take any other action in response to the demand letter to prevent entry of judgment was excusable neglect.”  The district court then nullified the certificate of redemption, reasoning that nullification was necessary to effectuate the district court’s vacation of the appellate-costs judgment.  The district court concluded, “The consolidated action may proceed to trial on the issue of whether the $3500 settlement in the ‘Peck’ case satisfied the $837.91 appellate costs judgment and to determine the rights and interests of the parties with respect to ownership of the Richfield Bus Property.”

WJO5 moved for reconsideration.  In its June 30, 2003 order, the district court found no compelling circumstances that would require reconsideration of its order vacating the judgment or nullifying the sheriff’s certificate of redemption.  The district court clarified that the order terminated WJO5’s interest in the property and that a future finding by the district court or a jury that the $837.91 appellate-costs judgment was not included in the $3,500 settlement would result in a new judgment against the Holter defendants and would not result in reinstating the sheriff’s certificate of redemption.

            In September 2003, the Holters moved for an order declaring that neither WJO5 nor Peck Companies had any legal or equitable right, title, or interest in the property.  In an order dated January 27, 2004, the district court granted the Holters’ motion, holding that neither WJO5 nor Peck Companies had any legal or equitable right, title, or interest in the property and that any previously existing claims or potential claims of WJO5 and/or Peck Companies to any legal or equitable interest of any nature in the property were extinguished and declared void.  The January 27, 2004 order also instructed WJO5 to pay to the Holters $20,000 in attorney fees, costs, and expenses they incurred.  The court administrator entered final judgment on November 10, 2004.  This appeal follows.



Appellants WJO5 and Peck Companies first challenge the district court’s decision to vacate the appellate-costs judgment.  Minn. R. Civ. P. 60.02 permits relief from final judgments or orders only in narrowly defined circumstances.  Carter v. Anderson, 554 N.W.2d 110, 113 (Minn. App. 1996), review denied (Minn. Dec. 23, 1996).  The district court’s decision to vacate a judgment is a discretionary act and will normally not be reversed on appeal absent a clear abuse of discretion.  Safeco Ins. Co. v. Dain Bosworth, Inc., 531 N.W.2d 867, 873 (Minn. App. 1995), review denied (Minn. July 20, 1995).

            A court may vacate a judgment if it finds “[m]istake, inadvertence, surprise, or excusable neglect.”  Minn. R. Civ. P. 60.02(a).  To obtain relief for excusable neglect, the moving party must show: (1) a reasonable claim on the merits; (2) a reasonable excuse for the failure or neglect to act; (3) action with due diligence after notice of entry of judgment; and (4) that no substantial prejudice will result to the other party.  Hinz v. Northland Milk & Ice Cream Co., 237 Minn. 28, 30, 53 N.W.2d 454, 456 (1952).  Reviewing courts examine the record in the light most favorable to the district court order.  Imperial Premium Fin., Inc. v. GK Cab Co., 603 N.W.2d 853, 857 (Minn. App. 2000). 

            Here, the district court vacated the costs judgment under rule 60.02(a), concluding that Dan Holter’s failure to prevent docketing of the appellate-costs judgment in the district court was excusable neglect.[1]  We conclude that the district court abused its discretion.

            Under Minn. R. Civ. App. P. 139.03, the party prevailing in an appeal may recover costs and disbursements upon five days’ written notice served and filed by the prevailing party.  The non-prevailing party must serve and file written objections to the taxation of costs and disbursements within five days after service of the notice of taxation.  If the non-prevailing party fails to file written objections, that party waives any objections to the taxation of costs and disbursements.  Minn. R. Civ. App. P. 139.04.  A judgment for costs and disbursements under rule 139 is entered by this court after the time to petition for review has lapsed and is final.  Id. 

Here, respondents failed to file any written objections to the notice of taxation of costs and disbursements and, therefore, waived their right to object to entry of the appellate-costs judgment.  The district court’s order of May 23, 2003, does not identify how appellants’ failure to object to the taxation of costs and disbursements constitutes excusable neglect sufficient to vacate the appellate-costs judgment but, rather, discusses appellants’ failure to delay or otherwise object to the docketing of the appellate-costs judgment in the district court.  Rule 60.02 does not contemplate relieving a party from operation of a court of appeals judgment for costs and disbursements because that party failed to challenge the docketing of that judgment in the district court. 

Moreover, the district court’s finding that respondents’ failure to object to docketing of the judgment constituted excusable neglect is not supported by the record.  The record reflects that respondents, as the non-prevailing party on appeal, would have no claim on the merits against the appellate-costs judgment and took no action to delay entry of the costs judgment.  Moreover, vacation of the costs judgment resulted in substantial prejudice to WJO5, as WJO5 was effectively stripped of its interest in the property.  Accordingly, the district court’s finding of excusable neglect is an abuse of discretion.

We acknowledge that this case presented a unique, complicated procedural history and are hesitant to dismantle the district court’s solution.  But we are an error-correcting court confined to the record on appeal.  Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988) (stating that the function of the court of appeals is limited to identifying and correcting errors).  Accordingly, we reverse the district court’s order vacating the costs judgment.  We reinstate the appellate-costs judgment and reinstate the sheriff’s certificate of redemption nunc pro tunc as of May 23, 2003.  We remand for trial on the disputed question of whether the parties included the appellate-costs judgment in their settlement on September 13, 2002. 


Appellants next challenge the district court’s award of $20,000 for respondents’ attorney fees.  This court will not reverse an award of attorney fees absent an abuse of the district court’s discretion.  Becker v. Alloy Hardfacing & Eng’g Co., 401 N.W.2d 655, 661 (Minn. 1987). 

“Recovery of attorney fees must be based on either a statute or a contract.”  Schwickert, Inc. v. Winnebago Seniors, LTD, 680 N.W.2d 79, 87 (Minn. 2004).  Minn. Stat. § 549.211 (2004) permits a district court to award attorney fees as a sanction when, after notice to the offending party and an opportunity to respond, the court determines that the offending party has acted in bad faith as defined by section 549.211, subdivision 2.  Minn. Stat. § 549.211, subds. 2, 3, 5 (2004).  Here, respondents did not provide notice to appellants that they intended to seek sanctions and did not file a motion for sanctions with the district court.  In its January 27, 2004 order, the district court awarded respondents $20,000 in “reasonable attorney fees, costs and expenses” on its own initiative, without identifying the statutory basis for its award or making any specific findings of bad faith conduct that would support an award under section 549.211. 

            Respondents argue that the district court is permitted to act sua sponte in awarding fees under section 549.211, subdivision 4(b), which states, “On its own initiative, the court may enter an order describing the specific conduct that appears to violate subdivision 2 and directing an attorney, law firm, or party to show cause why it has not violated subdivision 2 with respect to that conduct.”  Assuming that the district court intended to award fees under subdivision 4(b), the statute still requires (a) that the opposing party be given an opportunity to respond, and (b) that the district court describe the specific conduct warranting imposition of the sanctions.  Because the district court’s award of attorney fees does not conform to statutory requirements, the award is an abuse of discretion. 


            Appellants (WJO5 and Peck Companies) move to strike portions of respondents’ (the Holters’) brief as containing matters outside the record.  The record on appeal consists of the “papers filed in the trial court, the exhibits, and the transcript of the proceedings, if any.”  Minn. R. Civ. App. P. 110.01.  This court may not consider matters outside the record on appeal and must strike references to such matters from the parties’ briefs.  Fabio v. Bellomo, 489 N.W.2d 241, 246 (Minn. App. 1992), aff’d, 504 N.W.2d 758 (Minn. 1993). 

            Appellants move to strike three statements contained in respondents’ brief that respondents took from pleadings filed with the district court.  The statements are not taken from either affidavits or transcripts, but are taken from “papers filed in the trial court” under the plain meaning of the term “papers.”  There is no requirement that factual assertions in briefs be taken from sworn testimony.  We therefore deny appellants’ motion and request for costs associated with the motion.

            Reversed and remanded; motion denied.

[1] The district court mistakenly characterized the appellate-costs judgment as a default judgment in its order of May 23, 2003.  Despite its erroneous characterization, the district court applied the four-factor test for vacation of judgments generally under rule 60.02.  Accordingly, we disregard the characterization as harmless error.  See Minn. R. Civ. P. 61 (stating that no error in any order is grounds for disturbing a judgment, unless the refusal to take such action is inconsistent with substantial justice).