Minn. Stat. SS 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Kevin J. Lamson,
Filed November 18, 1997
Hennepin County District Court
File No. 9617710
Anthony R. Rossini, Raymond D. Rossini, Jonathan H. Adams, Rossini & Rossini, P.A., 5353 Gamble Drive, Suite 150, Minneapolis, MN 55416 (for appellant)
Timothy D. Kelly, Wendy A. Snyder, Kelly & Berens, P.A., 3720 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondent)
Considered and decided by Lansing, Presiding Judge, Davies, Judge, and Willis, Judge.
Proceeding under an alleged assignment of an execution-sale interest in corporate stock, Kevin Lamson challenges the district court's summary judgment dismissing his claim as barred by the statute of limitations. Because no action that would cancel the shareholder's legal title to the stock was brought within the statutory period, and because Lamson, in this action, has neither pleaded nor presented evidence to demonstrate that he is entitled to relief that would extend the six-year limitation period an additional four years, we affirm.
Kevin Lamson's business associate, Timothy Lippert, as assignee of Performance Tire Company, brought an action against Tire and Tube Supply, Co., Inc. in November 1995 for goods sold and delivered. In December 1995 Lippert obtained a judgment against Tire and Tube. With this judgment Lippert then sought a third-party judgment against International Rubber Supply, Inc. ("IRSI"), a long defunct business which did not respond to the complaint, and Lippert obtained a default judgment.
With his third-party default judgment Lippert obtained a writ of execution in Ramsey County, which he delivered to the Hennepin County Sheriff with instructions directing the sheriff to levy execution on whatever interest IRSI might have in 1,540,000 shares of Damark International, Inc. common stock legally titled to Mark Cohn.
The Hennepin County Sheriff issued Lippert a certificate of sale for whatever interest IRSI had in the Damark stock, and Lippert purportedly assigned this interest to Kevin Lamson. Lamson then brought this action, alleging that in 1986 Cohn fraudulently converted IRSI assets and used them to found Damark International. The district court ruled that the statute of limitations barred Lamson's claim and granted summary judgment in favor of Cohn. Lamson appeals the district court's judgment.
An action for replevin is barred if not brought within six years from the date the cause of action accrues. Minn. Stat. SS 541.05, subd. 1(4) (1996). An action for fraud is also barred if not commenced within six years. Minn. Stat. SS 541.05, subd. 1(6) (1996). But a cause of action grounded in fraud does not accrue until the facts constituting the fraud are deemed discovered by the aggrieved party. Id. See also Duxbury v. Boice, 70 Minn. 113, 119, 72 N.W. 838, 383 (1897). The facts constituting fraud are deemed to have been discovered when with reasonable diligence they could have been discovered. Buller v. A.O. Smith Harverstone Prods., Inc., 518 N.W.2d 537, 542 (Minn. 1994). The fact that the aggrieved party did not actually discover the fraud does not extend the time period. Id. (quoting First Nat'l Bank of Shakopee v. Strait, 71 Minn. 69, 72, 73 N.W. 645, 646 (1898)).
Lamson in this replevin action alleges Cohn fraudulently converted IRSI assets in 1986 and used them to form Damark International. Lamson seeks to satisfy the third-party judgment against IRSI by enforcing it against Cohn's stock in Damark International. Lamson contends that the district court erred in ruling that his replevin action was barred by the statute of limitations because the statute does not begin to run on a replevin action until after the sheriff's sale. Otherwise, Lamson argues, the sheriff's sale purchaser would not have an opportunity to obtain what he had purchased. This argument, however, has a major fallacy.
It is true that IRSI or its creditors may have had a cause of action against Cohn if in fact he fraudulently converted IRSI assets to form Damark (an allegation which Cohn denies). That cause of action, however, is barred by the statute of limitations if it was not brought within six years from the discovery of the fraud or from when the fraud reasonably should have been discovered. At the sheriff's sale Lippert bought whatever rights IRSI had--and no more; he did not acquire new rights. State of Wis. ex rel. Southwell v. Chamberland, 361 N.W.2d 814, 818 (Minn. 1985) (stating valid assignment generally operates to vest in the assignee the same right, title, or interest that the assignor had in the thing assigned). Lamson has not demonstrated that he has an enforceable right to the Damark stock or that the alleged cause of action for fraudulent transfer was brought within the statute of limitations. Lamson's replevin complaint, dated November 7, 1996, alleges that Cohn wrongfully issued the Damark stock to himself on June 13, 1986. But on its face the claim has been brought four years after the expiration of the six-year limitations period.
Lamson's argument that his claim is not time-barred relies almost exclusively on Brasie v. Minneapolis Brewing Co., 87 Minn. 456, 92 N.W. 340 (1902). Cohn maintains that this is an illogical reading of Brasie; our reading comports with Cohn's. Citing a syllabus point, Lamson contends that Brasie holds that the statute of limitations begins to run from the date of the sheriff's sale. The syllabus point is drawn from text stating that whatever title acquired in an execution sale is subject to the statute of limitations which runs from the date of the sale. Id. at 463, 92 N.W. at 342 (emphasis added). Lamson did not purchase a right to Cohn's stock--only whatever rights (unlitigated and undetermined) that IRSI had in the stock. The more relevant portion of Brasie reads, "the authorities are very uniform wherever the question has been presented, to the effect that the title of a fraudulent grantee is protected by the statute of limitations; and if creditors do not, by proper judicial proceedings, effect the cancellation of his title within the statutory period, it becomes final and conclusive." Id. at 462, 92 N.W. at 342.
IRSI and its creditors or successors had not previously brought an action within the statutory period to annul or cancel Cohn's legal title to the Damark stock. Consequently Lamson had to demonstrate in this replevin action why he would be entitled to bring his claim for fraudulent transfer ten years after it allegedly occurred. Lamson's replevin complaint does not allege that the creditor's were unable to discover the fraud or that the limitations period should be tolled. Cohn affirmatively pleaded the statute of limitations in his answer. Nothing in the complaint or the facts supporting the complaint suggests why the action could be brought four years after the limitations period expired. See Bartlett v. Miller & Schroeder Mun., Inc., 355 N.W.2d 435, 441 (Minn. App. 1984) (burden is on the party seeking relief from statute of limitation to show statute should be tolled). There is no indication that Cohn concealed his involvement with Damark or the issuance of the Damark stock. When a creditor becomes aware of or should have become aware of a fraudulent conveyance, the statute of limitations begins to run and it expires against that creditor in six years unless facts are alleged and presented that would toll the limitation period. Buller, 518 N.W.2d at 542.
Lamson also challenges the district court's award of $2,500.00 to Cohn for attorneys' fees. Cohn, arguing that this appeal was prosecuted in bad faith, particularly in light of the application of collateral estoppel, asks this Court to award sanctions under Minn. Stat. SS 549.21 (1996). That provision was recently repealed and replaced with Minn. Stat. SS 549.211. 1997 Minn. Laws ch. 213, arts. 1, 2, SS 6. We affirm the district court's award of attorneys' fees for the reasons stated in its opinion. But the district court's dismissal was based on the statute of limitations rather than collateral estoppel and we decline to award additional fees on appeal.