A05-2256

Ran Mart Stucco, Texture & Drywall, Incorporated,

Appellant,

vs.

Danna Homes, Inc., et al.,

Defendants,

Danna, Inc., et al.,

Respondents,

QSSC, Inc., d/b/a Quality Scaffolding

Solutions, intervening defendant,

Respondent.

Filed September 19, 2006

Reversed and remanded

Hudson, Judge

Hennepin County District Court

File No. LN 05-9912

Kurt J. Erickson, McCollum, Crowley, Moschet & Miller, Ltd., 700 Wells Fargo Plaza, 7900 Xerxes Avenue South, Bloomington, Minnesota 55431 (for appellant)

David G. Hellmuth, Christopher P. Parrington, Hellmuth & Johnson, PLLC, 10400 Viking Drive, Suite 500, Eden Prairie, Minnesota 55344 (for respondents Danna Homes, Inc., et al.)

Martin D. Kappenman, Moore, Costello & Hart, PLLP, 55 East Fifth Street, Suite 1400, St. Paul, Minnesota 55101 (for respondent QSSC)

Considered and decided by Worke, Presiding Judge; Kalitowski, Judge; and Hudson, Judge.

U N P U B L I S H E D O P I N I O N

HUDSON, Judge

On appeal from the district court’s sua sponte dismissal of a mechanic’s lien action and the district court’s subsequent refusal to reopen the judgment, appellant argues that the district court (1) erred by dismissing its claim without first giving appellant notice; (2) violated its due process rights; and (3) erred by denying appellant’s motion to reopen the judgment. Because the district court abused its discretion when it denied appellant’s motion to reopen the judgment, we reverse and remand. Because we reverse on that basis, we do not reach appellant’s due process claim.

FACTS

In May 2005, appellant Ran Mart Stucco, a stucco-installation company, entered into a subcontract agreement with respondents, Danna, Inc., et al., to install stucco on a building. In July 2005, appellant filed a complaint alleging breach of contract, quantum meriut, and foreclosure of a mechanic’s lien, seeking $48,000 plus interest. On July 11, 2005, the district court issued a notice of judicial assignment, which included the language: “Pursuant to Rule 111.02 General Rules of Practice for the District Courts, within sixty days after an action has been filed, each party shall submit an Informational Statement.” On July 29, 2005, respondents filed a motion to stay litigation and compel arbitration. On September 12, 2005, the district court notified respondent’s counsel that it planned to dismiss appellant’s complaint without prejudice, apparently because appellant had not filed an informational statement. But the district court did not notify appellant’s counsel of the forthcoming dismissal. On September 13, 2005, the district court dismissed appellant’s complaint for failure to file an informational statement. On September 15, 2005, appellant filed a motion to reopen the order to dismiss and the judgment, which the district court denied. This appeal follows.

D E C I S I O N

A district court may “upon its own initiative, or upon motion of a party, and upon such notice as it may prescribe, dismiss an action or claim for failure to prosecute or to comply with these rules or any order of the court.” Minn. R. Civ. P. 41.02(a). Unless the district court indicates otherwise in its order, an involuntary dismissal under rule 41.02(a) acts as an adjudication upon the merits. Minn. R. Civ. P. 41.02(c); see also Fedie v. Mid-Century Ins. Co., 631 N.W.2d 815, 818 (Minn. App. 2001) (noting that the court “indicates otherwise” when it specifies that an involuntary dismissal pursuant to rule 41.02 is “without prejudice”). On appeal from an involuntary dismissal, this court reviews the district court record in “the light most favorable to the [district] court’s order.” State v. St. Paul Fire & Marine Ins. Co., 434 N.W.2d 6, 8 (Minn. App. 1989), review denied (Minn. Mar. 17, 1989). This court will not reverse an involuntary dismissal under rule 41.02(a) absent a clear abuse of discretion. Chahla v. City of St. Paul, 507 N.W.2d 29, 32 (Minn. App. 1993) (citing Bonhiver v. Fugelson, Porter, Simich & Whiteman, Inc., 355 N.W.2d 138, 144 (Minn. 1984)), review denied (Minn. Jan. 20, 1994).

On September 13, 2005, the district court dismissed appellant’s claim without prejudice because appellant failed to comply with the deadline to submit an informational statement. Therefore, the district court dismissed appellant’s claim for failure to comply with a court order or rule, rather than, as suggested by the parties, failure to prosecute.

Rule 41.02(a) grants the district court discretion to prescribe the amount of notice necessary for an involuntary dismissal, but this court has previously determined that rule 41.02(a) “does not provide that the court may dismiss a case without any notice to a party.” Chisholm v. Foley, 427 N.W.2d 278, 281 (Minn. App. 1988) (reversing the district court’s involuntary dismissal under rule 41.02 for failure to provide written notice to a party). Appellant argues its claim was dismissed without proper notice. We disagree.

Shortly after appellant filed its claim, the district court issued a notice of judicial officer assignment, a document that contained a paragraph instructing the parties to file an informational statement within 60 days in accordance with rule 111.02 of the General Rules of Practice for the District Courts. The notice of judicial officer assignment constituted sufficient notice within the meaning of rule 41.02(a) and Chisholm. It clearly informed both parties that filing an informational statement was required and explicitly stated that “[f]ailure to timely file any required document or other failure to comply with the general rules of practice for the district courts may result in the imposition of sanctions, including possible dismissal of the case or striking of the answer.” (Emphasis added.) We conclude that the district court did not abuse its discretion by dismissing appellant’s claim pursuant to rule 41.02(a), and we decline to reverse on these grounds. Nonetheless, once the district court notified respondents of its sua sponte decision to dismiss, the proper course of action would have been to notify appellants as well.

Upon motion by a party, rule 60.02 permits a court to reopen a judgment for various reasons, including “mistake, inadvertence, surprise, or excusable neglect.” Minn. R. Civ. P. 60.02(a). “[I]n keeping with the spirit of Rule 60.02, in furtherance of justice, and pursuant to a liberal policy conducive to the trial of causes on their merits, the court should relieve a defendant from the consequences of his attorney’s neglect in those cases where defendant [satisfies the Finden test].” Finden v. Klaas, 268 Minn. 268, 271, 128 N.W.2d 748, 750 (1964); Charson v. Temple Israel, 405 N.W.2d 895, 897 (Minn. App. 1987), rev’d on other grounds, 419 N.W.2d 488 (Minn. 1988) (“Rule 60.02 relief is not limited to default judgments . . . and the same four-part test applies where a plaintiff seeks to vacate the dismissal of an action on the grounds of excusable neglect.”); McKay v. Boyer Ford Trucks, Inc., 411 N.W.2d 27, 28–29 (Minn. App. 1987) (applying rule 60.02 four-part analysis to denial of motion to vacate for failure to comply with a procedural scheduling order). The four-prong Finden test requires the party seeking to set aside an order or judgment under rule 60.02 to “(1) possess a reasonable defense on the merits, (2) have a reasonable excuse for the failure or neglect involved, (3) have acted with due diligence after notice of the entry of judgment, and (4) show that no substantial prejudice will result to the other party.” Carter v. Anderson, 554 N.W.2d 110, 115 (Minn. App. 1996), review denied (Minn. Dec. 23, 1996). This court will not disturb the district court’s application of rule 60.02 absent an abuse of discretion. Id. When, as here, the district court does not employ the Finden test when making a decision on a motion under 60.02, we apply this test de novo. Id.

To satisfy the first prong of the Finden test, a party must demonstrate the existence of “a debatably meritorious claim.” Charson, 419 N.W.2d at 492. The record shows that a subcontract agreement existed between the parties, and that the parties dispute whether that contract was properly terminated and whether appellant is owed compensation for work performed. Based on the record, we conclude appellant has satisfied this requirement.

With regard to the second prong, appellant argues that its failure to file the informational statement was excusable neglect. Appellant explains that it intentionally did not file an informational statement and did not intend to file one until after the hearing on respondent’s motion to stay litigation and compel arbitration, reasoning that if the case moved into arbitration the informational statement would become moot. We agree with the district court’s characterization of this argument as unpersuasive. Moreover, apart from the merits of appellant’s position, inexplicably, appellant did not notify the district court or respondent of its rationale for not filing the informational statement.

With regard to the third prong of the Finden test, we conclude that appellant acted with due diligence when it moved for reconsideration one day after it received notice of the dismissal and, therefore, satisfied the third prong of the Finden test.

With regard to the final prong of the Finden test, appellant argues that reopening the judgment would not have caused respondent to suffer substantial prejudice. Here, the district court dismissed appellant’s claim one day after the deadline to file an informational statement. Had the district court reopened the judgment upon appellant’s motion, the resulting delay would have been minimal. Prejudice results from every delay, Lund v. Pan Am. Machs. Sales, 405 N.W.2d 550, 554 (Minn. App. 1987), but in the context of rule 60.02, the delay and expense of additional litigation, without more, do not constitute substantial prejudice. Finden, 268 Minn. at 272, 128 N.W.2d at 751. Additionally, the district court could have conditioned reopening of the judgment on payment of costs to diminish any prejudice to respondents. See id. (noting that the district court could have conditioned relief from a default judgment upon payment of costs and disbursements).

This court has previously held that a weak showing on one factor of the Finden test can be balanced against a strong showing on the other three factors. Riemer v. Zahn, 420 N.W.2d 659, 661–62 (Minn. App. 1988); Guillaume & Assoc., Inc. v. Don-John Co., 371 N.W.2d 15, 19 (Minn. App. 1985). After reviewing the record, we conclude that appellants’ showing on the first, third and fourth Finden factors outweighs its weak showing on the second factor. Therefore, appellant satisfied the Finden test and accordingly we conclude that the district court abused its discretion when it denied appellant’s motion to reopen the judgment. Our decision is also influenced by our strong preference that claims are resolved on their merits, and not procedurally. Firoved v. Gen. Motors Corp., 277 Minn. 278, 283, 152 N.W.2d 364, 368 (1967) (“An order of dismissal on procedural grounds runs counter to the primary objective of the law to dispose of cases on the merits.”).

Reversed and remanded.