Kopperud v. Agers

• Decision Date: 25 November 1981
• Docket Number: No. 50806.,50806.
• Citation: 312 NW 2d 443
• Parties: Norman A. KOPPERUD, et al., Respondents, v. Joe S. AGERS, et al., defendants and third party plaintiffs, Appellants, Clyde DINNELL, Sr., et al., defendants and third-party plaintiffs, v. Gerald FLABY, third-party defendant, Respondent.
• Court: Minnesota Supreme Court

312 N.W.2d 443 (1981)

Norman A. KOPPERUD, et al., Respondents, v. Joe S. AGERS, et al., defendants and third party plaintiffs, Appellants, Clyde DINNELL, Sr., et al., defendants and third-party plaintiffs, v. Gerald FLABY, third-party defendant, Respondent.

No. 50806.

Supreme Court of Minnesota.

November 25, 1981.

Barnett, Ratelle, Hennessy, Vander Vort, Stasel & Herzog, Minneapolis, for appellants.

M. John Steward, Rochester, for Kopperud, et al.

O'Brien, Ehrick, Wolf, Deaner & Downing and Steve S. Fuller, Rochester, for respondents.

Considered and decided by the court en banc without oral argument.

SHERAN, Chief Justice.

This case comes before us on the appeal of defendant W. Shelley Richey from an order denying his motion to dismiss for lack of personal jurisdiction and on the following certified question: "Whether equity may operate to toll the running of the statutory bar established by Minn.Stat. § 80.26 (1971), of an action alleging a violation of Chapter 80 of the Minnesota Statutes, when the party bringing such an action has alleged the fraudulent concealment of the basis for such an action." We affirm the trial court's assertion of personal jurisdiction over defendant and answer the certified question in the negative, holding that fraudulent concealment of a claim under Minn.Stat. ch. 80 (1971) does not toll the statute of limitations contained in that chapter.

Plaintiffs are investors in defendant Thunderbird Valley, Inc. (Thunderbird), an Arizona land development corporation. In March 1978 they commenced this suit against Thunderbird and the individual members of its management team alleging violations of state and federal securities laws and fraud. The complaint states that during 1971 and 1972 plaintiffs and their assignors made loans to Thunderbird in the total amount of $116,685. It further alleges that the promissory notes given in return for the loans stated that they were secured by real estate mortgages when in fact they were not. Thunderbird is bankrupt and only defendants W. Shelley Richey and Joe S. Agers answered. They denied the allegations.

In July 1979 Richey and Agers moved for summary judgment on the state securities law claims on the ground that the statute of limitations had expired. They alternatively requested permission to serve a third-party complaint on Gerald Flaby, the broker who made the actual sales to plaintiffs and their assignors. Richey, in addition, moved for dismissal due to lack of personal jurisdiction. The trial court denied the motion for summary judgment, allowed the third-party complaint, and denied the motion to dismiss. Subsequently the trial court reconsidered its ruling on the statute of limitations and certified the question as important and doubtful. This appeal followed.

We first consider whether the district court erred by concluding that plaintiffs had made a prima facie showing that exercise of personal jurisdiction over defendant Richey was proper under our long-arm statute and the due-process clause. Minn.Stat. § 543.19, subd. 1(c) (1976) permits assertion of jurisdiction over a nonresident individual who commits any tort in Minnesota causing injury or property damage. Plaintiffs allege that Richey committed tortious fraud in Minnesota by failing to disclose that the mortgaged real estate was inadequate security for the notes when he had special knowledge of that fact. See Klein v. First Edina National Bank, 293 Minn. 418, 196 N.W.2d 619 (1972). Since corporate officers are personally liable to third persons for their fraudulent acts, the allegedly tortious conduct must be said to be Richey's for purposes of the statute. In our view, from a long-arm standpoint, this case is factually similar to Hunt v. Nevada State Bank, 285 Minn. 77, 172 N.W.2d 292 (1969), cert. denied, 397 U.S. 1010, 90 S.Ct. 1239, 25 L.Ed.2d 423 (1970), where corporate and individual defendants conspired to convert the assets of an insurance company whose policyholders were primarily Minnesotans. In construing our long-arm statute we stated: "Once participation in a tortious conspiracy — the effect of which is felt in this state — is sufficiently established, actual physical presence of each of the alleged conspirators is not essential to a valid assertion of jurisdiction." 285 Minn. at 109, 172 N.W.2d at 311.

Our long-arm statute, however, does not confer jurisdiction whenever a tort is committed by a nonresident. In Hunt we stated that the legislature intended the statute to reach only as far as constitutional limitations permit. 285 Minn. at 109, 172 N.W.2d at 311. The due-process clause requires that "minimum contacts" exist between the defendant and the forum state. We consider five factors in determining the fairness of asserting personal jurisdiction: (1) the quantity of contacts with the forum; (2) the nature and quality of the contacts; (3) the connection between the contacts and the cause of action; (4) the state's interest in providing a forum; and (5) convenience. Hardrives, Inc. v. City of LaCrosse, Wisconsin, 307 Minn. 290, 240 N.W.2d 814 (1976). Recent decisions of the United States Supreme Court emphasize the importance of the first three of these. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); Kulko v. California Superior Court, 436 U.S. 84, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978).

Richey had no contacts with Minnesota other than those giving rise to this lawsuit. He was a shareholder, director, and officer of Thunderbird and also served as its general counsel. Although his activities occurred in Arizona, they were directed toward attaining a commercial benefit in Minnesota. Richey met with Flaby, the individual who brokered the investments, and discussed with him how to transact sales of Thunderbird investments. Richey knew that Flaby was selling notes and mortgages in Minnesota, and he was personally involved in determining the amounts of the mortgages and in drafting the note and mortgage documents. Richey also corresponded with at least two Minnesota attorneys regarding treatment of Thunderbird notes and mortgages for probate purposes. At no time did he disclose that the real estate securing the mortgages was of little value, that some of the mortgagors were fictitious and others had defaulted, and that the Securities and Exchange Commission was claiming violations of federal law.

This is not a case of an isolated or unforseeable contact with Minnesota. Richey purposefully availed himself of this state to carry out a scheme to defraud investors. Although his direct contacts with this state were limited, he was instrumental in setting in motion the fraudulent scheme and in keeping it going. The cause of action arises directly out of the fraudulent transactions. Minnesota has an obvious interest in providing a forum since Minnesotans were defrauded. Moreover, convenience considerations are inconclusive because significant acts occurred both here and in...