Russell Grant Limited, Respondent, vs. Scott Equipment Company, Appellant.

Russell Grant Limited, Respondent, vs. Scott Equipment Company, Appellant. A05-1570, Court of Appeals Unpublished, May 30, 2006.

This opinion will be unpublished and

may not be cited except as provided by

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

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-1570

 

Russell Grant Limited,

Respondent,

 

vs.

 

Scott Equipment Company,

Appellant.

 

Filed May 30, 2006

Affirmed

Shumaker, Judge

 

Scott County District Court

File No. 70-2005-04032

 

 

Todd C. Pearson, Dorsey & Whitney, LLP, 50 South Sixth Street, Suite 1500, Minneapolis, MN 55402-1498 (for respondent)

 

Michael D. Schwartz, Michael D. Schwartz, P.A., 455 Pond Promenade, Suite 210, P.O. Box 219, Chanhassen, MN 55317 (for appellant)

 

            Considered and decided by Kalitowski, Presiding Judge; Willis, Judge; and Shumaker, Judge.

U N P U B L I S H E D   O P I N I O N

SHUMAKER, Judge

Appellant contends that the district court abused its discretion in denying appellant's motions to vacate a foreign judgment and to stay execution of that judgment.  Appellant argues that the judgment was obtained by fraud.  Because the court did not abuse its discretion in its rulings, we affirm.

FACTS

This appeal calls into question the legitimacy of a British judgment for damages against the appellant, who claims that the judgment was the product of the respondent's fraud on both the appellant and the British court.

Respondent Russell Grant Limited (RGL) is a London company that dries and grinds fish waste products into a powder that is then fed to livestock.  Appellant Scott Equipment Company (SEC), located in Scott County, designs, manufactures, and installs drying equipment for various uses.

RGL negotiated with SEC for the purchase and installation of fish-drying equipment to be used in RGL's business. The parties reached an oral agreement, subject to a written memoralization, and RGL made a down payment of 50,000 pounds sterling.  Shortly thereafter, the parties signed a written agreement, and SEC installed the equipment.  It was agreed that the fish waste that RGL would process "shall contain at least 80% water and . . . shall be of the species haddock melanogrammus aeglefinus or cod gadus morhua." 

RGL began to use the drying equipment but found that it frequently caught on fire and had other alleged defects.  The parties disputed the adequacy of the equipment and SEC's contention that the fish RGL was processing were too oily for the proper operation of the equipment.  Unable to resolve the dispute, RGL sued SEC for breach of contract and misrepresentation.

The case was tried for 15 days in Her Majesty's High Court of Justice, Queen's Bench Division, Leeds Mercantile Court.  As characterized by the court, a principal issue was "the composition of the contract."  There was evidence presented that SEC faxed a proposed contract to RGL.  It contained SEC's standard conditions of sale, as set forth on the first three pages, and terms particular to this sale.  Among the standard conditions were provisions limiting damages recoverable in a lawsuit against SEC to the value of the purchase price, excluding certain warranties, and limiting the time for bringing suit to one year.  RGL did not accept the proposed contract but rather made changes that entailed amendments to the second page, retention of the third page, and omission altogether of the first page.  RGL then sent to SEC for its approval photocopies of the amended second page and the third page, but not the first page.  RGL did not notify SEC that the first page, which contained the limitations and warranty exclusions, had been eliminated.  Ultimately, RGL sent to SEC for signing what it represented to be the full contract draft, as amended.  The draft did not include the conditions of sale on page one.  SEC's managing director signed the contract on behalf of SEC.

At trial, SEC contended that RGL had defrauded it through the omission of the conditions of sale on page one.  In its findings, the court noted that SEC invited it to infer that the parties had agreed that all three pages of the standard conditions of sale were to be incorporated into the contract, subject only to the amendments on page two, and that it was merely a clerical oversight that page one was not made a physical part of the contract.  RGL's countervailing evidence on this issue was that page one contained some conditions unacceptable to RGL and other terms in conflict with the second-page amendments.  From a drafting standpoint, RGL thought it best to eliminate the first page altogether.  SEC contended at trial that this explanation was against the probabilities and should be rejected.  Although the court found that RGL deliberately failed to call to SEC's attention the elimination of page one when it returned a revised draft of the contract to SEC, the court was persuaded as to the truth of RGL's drafting solution, stating:

A facile, rough and ready solution to the problem was to have page one omitted altogether.  Thus the need for sophisticated re-drafting was obviated, speedy progress towards their mutually desired early formation of a contract was maintainedand [RGL's] interests were served by the omission of certain potentially adverse terms.

 

At the conclusion of the trial, the Mercantile Court determined that there had been no fraud or misrepresentation in the formation of the contract and that SEC had breached its contract by failing to provide equipment fit for the purpose for which it was mutually intended and agreed.  The court then awarded damages for various losses, including a loss of business profits.  SEC appealed to Her Majesty's Court of Appeal.

During the pendency of the appeal, RGL docketed the judgment in LeSeur County.  SEC moved to vacate the judgment or, in the alternative, to stay its enforcement until the appeal was decided.  SEC's ground for this relief was that there had been fraud on the Mercantile Court.  While the district court had these motions under advisement, SEC sued Derek Grant, owner and managing director of RGL, individually, alleging Grant's "intentional and negligent misrepresentation arising out of the same situation that was litigated . . . in the Mercantile Court."

The British appellate court affirmed the Mercantile Court in part but reduced the damages award and reserved for later determination the issue of trial and appeal costs.  The Minnesota district court denied SEC's motion to vacate the judgment; granted a stay, subject to the posting of a bond; and changed venue to Scott County.

After the British appellate court issued its final decision, SEC moved for a further stay of enforcement of the judgment, arguing that, if a further stay were not granted, there would be a conflict between the British judgment and the judgment SEC anticipated obtaining against Derek Grant.  The district court denied the motion for further stay, and RGL garnished certain funds of SEC on deposit at a bank.

SEC appeals the denials of the motions to vacate the judgment and to stay enforcement of the judgment.

D E C I S I O N

The essence of this appeal is SEC's contention that it established in the Mercantile Court RGL's fraud in the inducement and formation of the contract that the parties entered and that the Mercantile Court endorsed that fraud when it awarded judgment to RGL.  SEC also argues that it "was denied a fair hearing and any semblance of due process in the United Kingdom court when [RGL's] fraudulent conduct was endorsed by its local jurist, and rewarded with a judgment against the foreign [SEC]."  SEC's particular challenges to the denials of its motion to vacate the judgment and to stay enforcement of the judgment are premised on SEC's allegations of fraud.

If a money judgment is final, conclusive, and enforceable in a foreign country in which it is entered, it is recognized as conclusive and enforceable in the United States in the same manner that full faith and credit is accorded within the United States.  Minn. Stat. § 548.35, subds. 2, 3 (2004).  But a foreign judgment is not conclusive if it was rendered under a system that is not compatible with the requirements of due process or "was obtained by fraud."  Id., subd. 4(a)(1), (b)(2) (2004)

And Minn. R. Civ. P. 60.02 provides that a court may relieve a party from a final judgment if the judgment resulted from fraud.

SEC contends that the standard of review under rule 60.02 is that of abuse of discretion, but that a review of a foreign country's judgment is de novo because it involves a question of law.  For this latter proposition, SEC cites a single authority, Nicol v. Tanner, 310 Minn. 68, 256 N.W.2d 796 (1976).  That case is inapposite.  The dispositive issue was a legal one, namely, whether reciprocity is a prerequisite to the enforcement of a foreign country's judgment.  The district court refused to enforce a German default judgment of paternity and child support on the ground that there was no reciprocity between German and United States judgments.  The supreme court reversed.  But the case does not define the standard of review for issues such as that involved here.  A foreign judgment need not be recognized if it is obtained by fraud.  Minn. Stat. § 548.35, subd. 4(b)(2).  It is significant that the statute does not provide that such a judgment is invalid.  Thus, it appears that the likely standard of review to be applied is that applied generally to motions to vacate judgments: "The decision to vacate a judgment is within the district court's discretion and that decision will not be reversed on appeal absent a clear abuse of discretion."  Safeco Ins. Co. of Am. v. Dan Bosworth, Inc., 531 N.W.2d 867, 873 (Minn. App. 1995), review denied (Minn. July 20, 1995).

Due Process

            SEC claims it was denied due process by a "local jurist" who engaged in "egregious and flagrant conduct" and who "rewarded" RGL's fraudulent conduct with "a judgment against the foreign Appellant."  This sarcastic "hometown decision" argument is without merit.  It is readily apparent that during 15 days of litigation SEC was afforded a complete and unfettered opportunity to present and argue its case and an equal opportunity to oppose RGL's case.  And, in detailed findings, the Mercantile Court thoroughly reviewed the issues, the evidence, and the witnesses; noted the respective arguments on the issues; and explained why, on the evidence and the law, it accepted certain positions and rejected others.  We cannot imagine a clearer example of due process played out in the courts than what occurred here.  Furthermore, SEC's characterization of the judge as "an improperly sympathetic and apologetic court" is unwarranted in view of the record that reveals a respectful trial judge who manifested civility in attitude and tone throughout the lengthy proceedings.

            SEC directs invective toward the trial judge but fails to articulate any deficiency or irregularity whatsoever in notice, jurisdiction, or opportunity to present its case as fully and effectively as it was able.  Thus, the Mercantile Court accorded to SEC all aspects of due process.

Fraud Allegations

            The district court acknowledged its discretion to refuse to enforce a foreign judgment obtained through fraud but denied SEC's motion to vacate the British judgment because SEC did "not allege facts sufficient to support its allegation of fraud."

            SEC contends that it was induced to enter the contract with RGL because of RGL's misrepresentation of the type of fish it intended to process and its fraudulent omission of the conditions of sale on page one of the three pages of standard conditions.  These issues were fully litigated, and the Mercantile Court ruled against SEC.  The appellate court affirmed that ruling.  As to SEC's first contention, the Mercantile Court found that SEC had failed to present evidence sufficient to show that RGL had misused the equipment.  And we have noted above the court's ruling as to the second contention.  Both rulings were reasonable and plausible given the evidence before the Mercantile Court, despite SEC's vigorous disagreement with the outcome.

            Furthermore, we do not take the phrase that "the judgment was obtained by fraud" in Minn. Stat. § 548.35, subd. 4(b)(2), to refer to a fraud allegation that was clearly and consciously litigated on its merits by the parties.  Rather, that phrase refers to deceit or distortion or concealment as to some matter that caused a court to issue a judgment it would not have issued had it not been duped.  See Halloran v. Blue & White Liberty Cab Co., 253 Minn. 436, 442, 92 N.W.2d 794, 798 (1958) (stating that "[w]here a court is misled as to material circumstances, or its process is abused, resulting in the rendition of a judgment which would not have been given if the whole conduct of the case had been fair, the court has inherent power to vacate for fraud and that power includes as well the power to modify.").

            SEC has failed to show any type of fraud on the Mercantile Court and has instead rested its claim in this appeal on its steadfast belief that RGL defrauded SEC and that the Mercantile Court was simply wrong in not so holding.

            The district court did not abuse its discretion in denying SEC's motion to vacate the British judgment and in refusing to continue to stay the enforcement of that judgment.

            Affirmed.