Court Opinion

ID: 3162369
Source: CourtListenerOpinion
Date Created: 2015-12-14 22:06:37.834408+00
Date Added: 2024-06-11T11:47:17.073722
License: Public Domain

This opinion will be unpublished and
          may not be cited except as provided by
          Minn. Stat. § 480A.08, subd. 3 (2014).

               STATE OF MINNESOTA
               IN COURT OF APPEALS
                     A14-1916

                      Lynn D. Schwie,
                         Plaintiff,

                             vs.

               Armco Unlimited, Inc., et al.,
                      Defendants,

                             and

    Chicago Title Insurance Company as assignee of
Countrywide Home Loans, Inc., et al., third party plaintiffs,
                     Respondents,

                             vs.

   AmRes Mortgage, Inc., f/k/a Provident Mortgage
 Corporation of Minnesota, et al., third party defendants,
                     Appellants,

    Provinet Financial Services, Inc., judgment debtor,
                      Co-Appellant,

                  Access Title, Inc., et al.,
                  Third Party Defendants.

                 Filed December 14, 2015
                         Vacated
                     Bjorkman, Judge

              Hennepin County District Court
                 File No. 27-CV-08-8604
Joseph S. Lawder, Charles E. Nelson, Lindquist & Vennum LLP, Minneapolis,
Minnesota (for respondents)

Scott M. Flaherty, Kari S. Berman, Jordan L. Weber, Briggs and Morgan, P.A.,
Minneapolis, Minnesota (for appellants and co-appellant)

         Considered and decided by Worke, Presiding Judge; Larkin, Judge; and Bjorkman,

Judge.

                         UNPUBLISHED OPINION

BJORKMAN, Judge

         Appellants AmRes Mortgage, Inc., Provinet Financial Services, Inc., and Alan

Reid challenge an enforcement judgment that adds Reid and Provinet as judgment

debtors, arguing that the district court lacked personal jurisdiction over them. We agree

and therefore vacate the judgment.

                                        FACTS

         In 2008, Lynn Schwie initiated this quiet-title action against a number of

defendants, including Countrywide Home Loans, Inc. Countrywide served a third-party

complaint on AmRes on March 6, 2009. AmRes did not respond, and Countrywide

obtained a default judgment against AmRes on November 23, 2010.             Countrywide

subsequently assigned its interest as a judgment creditor to respondent Chicago Title

Insurance Company.

         Reid is a shareholder and the CEO of both AmRes and Provinet. At the end of

2009, Reid and Provinet owed $484,925.33 and $313,146.38, respectively, to AmRes.

As part of its efforts to collect on the default judgment, Chicago Title obtained revised

balance sheets from AmRes that reflected a release of the debts owed by Reid and

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Provinet.   AmRes did not produce any evidence that it received consideration for

discharging those debts.

       Because it was unable to recover from AmRes, Chicago Title filed a motion for

post-judgment relief, seeking to include Reid and Provinet as judgment debtors because

they received fraudulent transfers from AmRes. But Chicago Title did not seek to add

Reid and Provinet as parties and did not serve them with notice of the motion or the

hearing date. On September 24, 2014, the district court granted the motion and issued an

order stating, in relevant part:

              3.      The fraudulent and preferential transfers are hereby set
                      aside and Judgment Creditor Chicago Title is
                      permitted to collect the November 23, 2010 Judgment
                      against AmRes as follows:

                      a.     From Alan J. Reid to the extent of the
                             unsatisfied AmRes Judgment but not more than
                             $852,631.92;
                      b.     From Provinet Financial to the extent of the
                             unsatisfied AmRes Judgment but not more than
                             $313,146;
                      ....

              4.      The Judgment Creditor or Sheriff of Hennepin County
                      or any county in which the Judgment is docketed is
                      authorized to levy and execute upon assets of Alan
                      Reid and Provinet Financial to carry out the terms of
                      this Order.

Judgment was entered on September 26. That same day, Chicago Title requested writs of

execution in both Hennepin and Scott counties. On November 7, Chicago Title moved

the district court to add Reid and Provinet as parties and as judgment debtors. Before the

district court ruled on that motion, appellants commenced this appeal.

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                                       DECISION

I.     This court has appellate jurisdiction.

       Chicago Title argues that this court lacks jurisdiction because (1) the September

2014 judgment is not final because it was not docketed and (2) Reid and Provinet have no

standing to pursue this appeal. We address each argument in turn.

       First, finality turns on entry of a judgment rather than docketing. “An appeal may

be taken to the Court of Appeals . . . from a final judgment . . . [or] . . . from a final order

or judgment made or rendered in proceedings supplementary to execution.” Minn. R.

Civ. App. P. 103.03(a)-(f). A final judgment ends the litigation on the merits and leaves

nothing for the trial court to do but execute the judgment. T.A. Schifsky & Sons, Inc. v.

Bahr Constr. LLC, 773 N.W.2d 783, 788 (Minn. 2009). The entry of a judgment and the

docketing of a judgment are separate procedures. State by Humphrey v. Certified Servs.,

Inc., 432 N.W.2d 494, 495 (Minn. App. 1988). A final judgment is appealable upon

entry, regardless of whether the judgment is docketed. See id. (stating that the time for

appeal runs from the date of entry rather than docketing of the judgment).

       The September 2014 judgment permitted Chicago Title to collect on the default

judgment from Reid and Provinet, with amounts not to exceed the debt each owed to

AmRes. The judgment effectively ended the litigation on the merits of Chicago Title’s

claims. The plain language of the order on which judgment was entered allows for

execution of the judgment by Chicago Title, the Sheriff of Hennepin County, and the

Sheriff of any other county where the judgment is docketed.               And Chicago Title

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implicitly recognized the judgment was final by filing for writs of execution in both

Hennepin and Scott counties the day the judgment was entered.

       Second, the fact that Reid and Provinet were not parties to the district court

proceedings does not affect the issue of appealability. Although a judgment cannot

typically be enforced against non-parties, a non-party who is adversely affected by a

judgment has the right to appeal the judgment. Staab v. Diocese of St. Cloud, 813

N.W.2d 68, 75 n.5 (Minn. 2012) (“[A] judgment may not be enforced against persons

who are not parties to an action.”); In re Marriage of Sammons, 642 N.W.2d 450, 456

(Minn. App. 2002) (stating that a non-party may appeal a judgment that adversely affects

his or her rights). In Sammons, husband transferred legal title of the family home and his

business to his mother to shelter those assets during marriage-dissolution proceedings.

642 N.W.2d at 453-54. The district court found the transfer was fraudulent and gave wife

a mortgage interest in the home and business. Id. at 454. On appeal, wife argued that

mother lacked standing to challenge the district court’s judgment. Id. at 456. We

rejected this argument.      Although mother did not participate in the underlying

proceedings, she had standing to appeal the district court’s decision because it adversely

affected her. Id.

       Likewise, Reid and Provinet were adversely affected by the September 2014

judgment that made them responsible for debts AmRes had forgiven or otherwise

released. The district court’s order exposed them to liability that did not exist prior to the

judgment. As in Sammons, Reid and Provinet’s exposure to those liabilities adversely

affected their interests and give them standing to appeal. Id. The fact that they were not

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parties to the district court’s proceedings is not a controlling factor for purposes of this

issue. Because the district court’s judgment is final and adversely affects Reid and

Provinet’s interests, we have appellate jurisdiction.

II.    The district court lacked personal jurisdiction over Reid and Provinet.

       The determination of whether personal jurisdiction exists is a question of law,

which we review de novo. Juelich v. Yamazaki Mazak Optonics Corp., 682 N.W.2d 565,

569 (Minn. 2004); see also C.H. Robinson Worldwide, Inc. v. FLS Transp., Inc., 772

N.W.2d 528, 533 (Minn. App. 2009). A district court does not have jurisdiction over a

non-party. Sammons, 642 N.W.2d at 457 (citing In re Ferlitto, 565 N.W.2d 35, 37

(Minn. App. 1997)).      Due process requires notice and an opportunity to be heard.

Humenansky v. Minn. Bd. of Med. Exam’rs, 525 N.W.2d 559, 565 (Minn. App. 1994)

(citing Goldberg v. Kelly, 397 U.S. 254, 267-68, 90 S. Ct. 1011, 1020 (1970)), review

denied (Minn. Feb. 14, 1995). Actual notice of a lawsuit will not establish personal

jurisdiction unless the party seeking relief substantially complies with rule 4 of the

Minnesota Rules of Civil Procedure. Smith v. Flotterud, 716 N.W.2d 378, 382 (Minn.

App. 2006) (discussing notice in regard to service of process), review denied (Minn. Sept.

27, 2006).

       Chicago Title moved for post-judgment relief on the ground that AmRes’s release

or transfer of the debts owed by Reid and Provinet was fraudulent under Minn. Stat.

§§ 513.44, .45(a) (2014). Chicago Title did not bring Reid and Provinet into the action as

parties and did not serve them with notice of its motion or the hearing date. The district

court determined that it had personal jurisdiction over Reid and Provinet because the

                                              6
post-judgment motion was a proceeding in rem. We rejected this analysis in Sammons,

holding that exercising quasi in rem jurisdiction over property that had been fraudulently

transferred does not withstand due-process scrutiny. 642 N.W.2d at 457. Just as in

Sammons, Reid and Provinet were not afforded due process. Their due-process rights

included the right to notice, a timely opportunity for a hearing, representation by an

attorney, an opportunity to present evidence and argument, an impartial decision-maker,

and a reasonable decision based upon the record. Id. They were denied these rights.

       Chicago Title asserts that even if Reid and Provinet were not joined as parties,

they had notice and an opportunity to be heard because they are indistinguishable from

AmRes. But “[s]ervice of process must accord strictly with statutory requirements.”

Lundgren v. Green, 592 N.W.2d 888, 890 (Minn. App. 1999) (quotation omitted), review

denied (Minn. July 28, 1999). Although Reid is closely connected with both AmRes and

Provinet, they are separate and distinct entities. W. Bend Mut. Ins. Co. v. Allstate Ins.

Co., 776 N.W.2d 693, 706 (Minn. 2009) (“[A] corporation is a separate legal entity from

its owners and shareholders.”); Metro Bldg. Cos. v. Ram Bldgs., Inc., 783 N.W.2d 204,

207 (Minn. App. 2010) (“A corporation is considered an artificial person.”), review

denied (Minn. Aug. 10, 2010). While it is true that Reid was the CEO and a shareholder

of both AmRes and Provinet, any constructive notice of the district court proceedings is

insufficient to protect Reid’s and Provinet’s due-process rights. See O’Sell v. Peterson,

595 N.W.2d 870, 872 (Minn. App. 1999) (stating that “[s]ervice in a manner not

authorized by a rule or statute is ineffective.”).

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      Finally, Chicago Title argues that Reid and Provinet effectively waived the service

requirement because Reid and AmRes were represented by the same law firm, which had

told Chicago Title to direct all service items regarding Reid to the firm. Chicago Title

also asserts that Reid and Provinet made general appearances during the supplementary

post-judgment proceedings and therefore any argument they have based on personal

jurisdiction fails. We are not persuaded. Waiver of personal jurisdiction occurs “when

the party submits to the jurisdiction of the court by appearing or by otherwise invoking

the court’s jurisdiction.” Hanson v. Woolston, 701 N.W.2d 257, 265 (Minn. App. 2005),

review denied (Minn. Oct. 18, 2005). Reid and Provinet never submitted to the district

court’s jurisdiction or officially appeared before the court. The fact that Reid’s attorney

directed service items to go to the same firm that AmRes’s service items would go to did

not invoke the court’s jurisdiction or waive the service requirement. Nor did Reid’s

participation in post-judgment enforcement discovery on behalf of AmRes. In sum, Reid

and Provinet did not waive the service requirement. Because the district court lacked

jurisdiction over Reid and Provinet, the September 2014 judgment must be vacated.

      Vacated.

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