Dorso Trailer Sales, Inc. v. American Body and Trailer, Inc.

• Citation: 482 N.W.2d 771
• Decision Date: 13 March 1992
• Docket Number: No. C6-90-1381,C6-90-1381
• Parties: DORSO TRAILER SALES, INC., Respondent, v. AMERICAN BODY AND TRAILER, INC., et al., Petitioners, Appellants.
• Court: Supreme Court of Minnesota (US)

Page 771

482 N.W.2d 771

DORSO TRAILER SALES, INC., Respondent, v. AMERICAN BODY AND TRAILER, INC., et al., Petitioners Appellants.

No. C6-90-1381.

Supreme Court of Minnesota.

March 13, 1992.

As Amended March 26, 1992.

Syllabus by the Court

1. District court lacked jurisdiction to vacate a satisfied judgment.

2. Doctrine of res judicata bars the second action filed by respondent Dorso Trailer Sales, Inc.

Edward M. Laine, Nancy L. Cameron, Oppenheimer, Wolff & Donnelly, St. Paul, for appellants.

Christopher L. Dietzen, Andrew J. Mitchell, Sharon L. Brenna, Larkin, Hoffman, Daly & Lindgren, Bloomington, for respondent.

Heard, considered and decided by the court en banc.

TOMLJANOVICH, Justice.

This case arises out the termination of a distributorship contract between appellants Polar Manufacturing Company and Polar Tank Trailer, Inc. and respondent Dorso Trailer. We hold that the district court lacked jurisdiction to vacate a satisfied judgment. We agree with the court of appeals that res judicata bars Dorso's second cause of action.

Although the facts underlying the initial action are set out in Dorso Trailer Sales, Inc. v. American Body & Trailer, Inc., 372 N.W.2d 412 (Minn.App.1985) pet. for rev. denied (Minn., October 18, 1985) [Dorso I ], a brief review is appropriate. Since 1953, Dorso was a distributor of the American line of trailers manufactured by American Body & Trailer, Inc. Over the years, Dorso entered into various contracts with American and its successors in interest. The dispute in Dorso I centered around the interpretation of a distributor's contract between Dorso and American, dated April 29 1977, which provided for cancellation by either party after 90 days' written notice.

Polar succeeded to the interests of American and in May 1981, following a disagreement with Dorso, terminated the agreement after providing the requisite 90 days' notice. Dorso commenced an action asserting, essentially, that Polar breached the 1977 contract by terminating their relationship without cause. Polar counterclaimed for unpaid accounts.

The district court ruled, prior to trial, that as a matter of law the contract was terminable for cause only. On April 10, 1984, the jury returned a verdict finding Polar terminated the contract without cause and assessed damages. On November 15, 1984, judgment was entered in favor of Dorso in the amount of $248,889.45.

The court of appeals reversed the district court, finding that the 1977 contract was terminable at will. Dorso I, 372 N.W.2d at 415. Accordingly, the district court vacated the judgment in favor of Dorso and directed judgment be entered in favor of Polar on its counterclaim. On November 26, 1986, judgment was entered in favor of Polar in the amount of $110,946.24. Dorso satisfied the judgment and a Satisfaction of Judgment was filed on December 3, 1985.

Unknown to the three branches of the court or Dorso's counsel, there was a statute which, notwithstanding the constitutional challenge raised by Polar, actually governed the outcome in Dorso I. The statute, Minn.Stat. ch. 80E, which was enacted in 1981 and became effective on May 1, 1981, requires good cause to terminate a franchise relationship with a licensed new motor vehicle dealer. ¹ The statute, Minn.Stat. ch. 80E, provides in part:

Notwithstanding the terms of any franchise agreement or waiver to the contrary, no manufacturer shall cancel or terminate any franchise relationship with a licensed new motor vehicle dealer unless the manufacturer has:

* * * * * *

(c) Good cause for the cancellation or termination.

Minn.Stat. Sec. 80E.06, subd. 1(c) (1990). Under chapter 80E, Polar needed just cause to terminate its distributor relationship with Dorso.

It is not disputed that Polar's former counsel knew of the existence of this statute from the very beginning of this case but did not disclose it. In Dorso's original complaint, it asserted a claim under Minn.Stat. ch. 80C.01 et seq. In researching the applicability of this statute, Polar's former counsel discovered Minn.Stat. ch. 80E. Polar's former counsel, however, did not bring this statute to the attention of opposing counsel or the court. Instead, Polar's former counsel disregarded the statute for the balance of the litigation. Polar's former counsel justified this decision on the grounds that plaintiff had not pleaded or advanced chapter 80E as a theory of recovery and his belief that the statute was unconstitutional. In spite of being unaware of the existence of this statute, the district court ruled that Polar needed just cause to terminate the contract, basing its decision on the trend of the law.

Dorso's counsel did not discover the existence of Minn.Stat. ch. 80E until six months after Dorso had satisfied the judgment held by Polar. Based on this discovery, Dorso's counsel brought a motion to vacate the judgment pursuant to Minn.R.Civ.P. 60.02(a) and (f). At oral argument before the district court, Polar's former counsel admitted for the first time that he had known of the existence of Minn.Stat. ch. 80E but had determined he was under no duty to disclose it to the court or opposing counsel. Thereafter, Dorso expanded its motion to include Rule 60.02(c) which allows for relief from a judgment for "[f]raud * * *, misrepresentation or other misconduct of an adverse party." As a precautionary measure, Dorso filed a second action, claiming relief under chapter 80E.

On November 25, 1986, the district court issued an order vacating the November 26, 1985, judgment in favor of Polar, calling the failure to disclose a "grievous mistake," and consolidated Dorso's two actions. The district court based its decision on sections (a) and (f) of Rule 60.02. In declining to make a finding of fraud under section (c), the court wrote it "would rather find that counsel made a serious mistake in judgment rather than finding any intent to commit a fraud on the court." Polar's petition for discretionary review of this order was denied.

On March 30, 1990, the district court issued an order dismissing Dorso's consolidated actions on the grounds that Dorso I precluded the relitigation of this dispute. The court reasoned that "the violation of the Rule of Professional Conduct by [Polar's former] attorney cannot revive the action." Judgment of dismissal was entered on April 30, 1990. A divided court of appeals held that the district court did not abuse its discretion in vacating the first action based on former counsel's affirmative misrepresentations of law. The court also held that the district court erred in subsequently dismissing the first action. The dissent argued that the court lacked subject matter jurisdiction to vacate a satisfied judgment and that Dorso I should be accorded complete finality. 464 N.W.2d 551.

Whether a court has subject matter jurisdiction to vacate a satisfied judgment is an issue which this court has addressed infrequently. The court of appeals properly stated the general rule applicable to civil actions in Boulevard Del, Inc. v. Stillman, 343 N.W.2d 50 (Minn.App.1984). In Boulevard Del, after entry of summary...