This opinion will be
unpublished and
may not be cited except as
provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
IN COURT OF APPEALS
Appellant,
vs.
David Haugen,
Respondent.
Filed May 2, 2000
Huspeni, Judge*
Hennepin County District Court
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 respondent’s use of construction
equipment. Upon service by publication,
appellant was awarded default judgment for $65,153.26. Respondent’s 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.
In May 1994, respondent David Haugen and Mike
Erickson served in the same Air Force Reserve unit. Through their friendship, Haugen met Mike’s 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 employer’s 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 Haugen’s 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 Haugen’s late mother with Haugen as the beneficiary. E & M’s attorney and Haugen’s
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.
I. Default Judgment
We will not reverse a district court’s 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 court’s order. Bentonize, Inc. v. Green, 431 N.W.2d 579, 582 (Minn. App. 1988). Default judgments are to be “liberally” 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.
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. Haugen’s 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.
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.
On February 14, 1997, Haugen’s Montana attorney and E & M’s 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, Haugen’s 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 parties’ 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 parties’ 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.
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). “Because respondents cannot cite any prejudice other than increased costs associated with these proceedings,” Galatovich, 412 N.W.2d at 761, the district court did not abuse its discretion in finding that this factor was satisfied.
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 Haugen’s 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 court’s 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 “cloud of
impropriety” necessary to sustain an unjust enrichment claim. Id. Haugen
was a friend of Erickson’s 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 Haugen’s 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 & M’s
recovery to the value of a new trailer to replace the one stolen while in
Haugen’s 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, § 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 Haugen’s possession,
plus $269.29 incurred in transporting and repairing the bobcat after it was
reclaimed by appellant.