Charles F. Bond v. American Select Insurance Management Corporation, a Florida corporation, Timothy J. Pawlik ( 2014 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2012).
STATE OF MINNESOTA
IN COURT OF APPEALS
A13-2229
Charles F. Bond,
Respondent,
vs.
American Select Insurance Management Corporation,
a Florida corporation, et al.,
Defendants,
Timothy J. Pawlik, et al.,
Appellants.
Filed July 14, 2014
Vacated in part and appeal dismissed in part
Hooten, Judge
Hennepin County District Court
File No. 27-CV-06-15000
Gerald H. Fornwald, Michael A. Rosow, Jacob B. Sellers, Winthrop & Weinstine, P.A.,
Minneapolis, Minnesota (for respondent)
John G. Westrick, Westrick & McDowall-Nix, PLLP, St. Paul, Minnesota (for
appellants)
Considered and decided by Kirk, Presiding Judge; Hooten, Judge; and Willis,
Judge.

Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
UNPUBLISHED OPINION
HOOTEN, Judge
Appellants challenge the district court’s order clarifying and modifying a
judgment in aid of execution, arguing that the district court lacked authority to subject
non-parties to the judgment and to order non-parties to pay the judgment with money
owed to appellant judgment debtor. We vacate in part and dismiss the appeal in part.
FACTS
In July 2004, respondent Charles Bond and American Select Insurance
Management Corporation executed a loan agreement and an associated promissory note
for $1,200,000. Appellant Timothy Pawlik was one of the guarantors of the note. There
was a default on the loan agreement and a subsequent breach of a forbearance agreement.
As a result, in July 2007, the district court ordered the entry of a money judgment against
Timothy in the amount of $922,434.83. The judgment was entered and docketed.
More than six years later, after substantial litigation on issues unrelated to this
appeal, Bond moved the district court to “exercise its inherent authority to enter an order
modifying and/or clarifying the Judgment to make clear that the various ‘Ethix Re’
entities under which [Timothy] . . . has done business as are one . . . and that any money
paid to those entities on [Timothy’s] behalf are subject to the Judgment.” In support of
this motion, Bond submitted documentation supporting his allegation that Timothy has
been using various entities to avoid paying the judgment, including a Florida company
called Ethix Reinsurance Intermediaries, LLC (ERI), and that appellant Thomas Pawlik,
Timothy’s brother, is a managing member of ERI. The notice of hearing and motion
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were served on Timothy in only his personal capacity, with no mention of any other
entity. Timothy did not file a written objection to the motion.
On the same day of the uncontested motion hearing, the district court granted
Bond’s motion and signed Bond’s proposed order, which stated in part:
The Judgment is hereby amended, modified and
clarified as follows: The money judgment entered by the
Court against [Timothy] and in favor of [Bond] . . . of the
Judgment shall apply not only to [Timothy] individually, but
shall extend with equal force to any entity or d/b/a through
which [Timothy] conducts business, holds assets, or accepts
payments, including, but not limited to, any entity or d/b/a
owned or operated by [Timothy] that contains the name
“Ethix Re” as all or part of its name.
. . . It is further ordered that any entity or person owing
money to any entity or d/b/a under which [Timothy] is
conducting, or has conducted, businesses is hereby directed to
pay such amounts directly to Bond.
Timothy, Thomas, and ERI jointly appeal.
DECISION
I.
As a preliminary matter, Bond asserts that Thomas lacks standing to appeal the
district court’s order. He is correct.
“Because standing is a jurisdictional issue, we evaluate decisions on standing de
novo.” In re Custody of D.T.R., 796 N.W.2d 509, 512 (Minn. 2011). “Standing to bring
an action can be conferred in two ways: either the plaintiff has suffered some injury-in-
fact or the plaintiff is the beneficiary of some legislative enactment granting standing. To
demonstrate an injury-in-fact, the plaintiff must show a concrete and particularized
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invasion of a legally protected interest.” Id. at 512–13 (quotations and citation omitted).
“That a party must be aggrieved in order to appeal [is] fundamental . . . .” Id. at 513
(quotation omitted). “Whether a party is aggrieved depends on whether that party’s
personal right [was] injuriously affected by the adjudication. A party with no interest in
the subject of the litigation cannot be aggrieved by the adjudication and consequently has
no right to appeal.” Id. (alteration in original) (quotations and citation omitted). “[T]he
general rule is that a person may appeal from a judgment that adversely affects his or her
rights, even if the person was not a party to the proceeding below.” Sammons v.
Sammons, 642 N.W.2d 450, 456 (Minn. App. 2002).
Here, Thomas was not a party to the proceeding below. In his brief to this court,
Thomas asserts that he has standing “because the order assisting in the execution of
judgment adversely affects” him. But Thomas fails to explain and point to evidence of
the judgment’s adverse effect on him. Moreover, he does not assert standing based on
statutory authority. Accordingly, we dismiss this appeal in part as it relates to Thomas.
We also dismiss the appeal in part as it relates to Timothy. See Annandale
Advocate v. City of Annandale, 435 N.W.2d 24, 27 (Minn. 1989) (stating that “[t]he
question of standing . . . can be raised by this court on its own motion”). Timothy has no
standing to appeal the particular issue of whether the district court erred by subjecting
non-parties to the judgment. Indeed, Timothy was already subject to the 2007 judgment,
and the district court’s subsequent order adding non-parties—the one appealed from—did
not change this. Accordingly, Timothy has not been aggrieved by this particular
determination by the district court. Timothy, however, is aggrieved by the district court’s
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other determination ordering non-parties to pay the judgment with money owed to him,
so he has standing to appeal that issue.
II.
Bond also asserts that Timothy and ERI failed to preserve any issues for appellate
review because they “did not submit any written objection nor did they object at the
hearing to the relief requested by” Bond. We are not persuaded by this argument.
“A reviewing court must generally consider only those issues that the record
shows were presented and considered by the [district] court in deciding the matter before
it.” Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (quotation omitted). Here,
Timothy was a party and was served with the motion and given an opportunity to object.
So we agree with Bond that Timothy failed to raise issues for the district court to
consider.
ERI, however, was not a party. The record shows that the notice of hearing and
motion were served on Timothy at his Brooklyn Park address. According to
documentation in support of Bond’s motion, Timothy’s Brooklyn Park address is also
ERI’s mailing address. But “[a] corporation is a distinct entity from its stockholders. All
corporate powers, franchises, and rights are vested in the corporation and not in the
stockholders. Among such powers is that of suing and defending in its own name.”
Singer v. Allied Factors, 216 Minn. 443, 445, 13 N.W.2d 378, 380 (1944). The notice
and motion were served on Timothy in only his personal capacity, with no mention of
ERI or any other entity. ERI, therefore, was not served with the notice of hearing and
motion and had no opportunity to preserve any issues for appeal.
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Even if ERI had been served with the notice and motion, absent a court order, a
non-party is not required to appear and contest a motion regarding a judgment of which it
is not a subject. See Minn. Stat. § 575.07 (2012) (providing that, “upon proof, by
affidavit or otherwise, to the satisfaction of the judge, that any person . . . is indebted to
the judgment debtor in an amount exceeding $10, the judge may require such person, or
any officer thereof if a corporation, upon such notice to any party as may seem proper, to
appear and answer concerning the same”). Accordingly, the issues on appeal are
properly before us based on ERI’s participation in this appeal, regardless of Timothy’s
failure to raise them.
III.
Turning to the merits, ERI argues that the district court violated its due-process
rights by subjecting it to Timothy’s judgment. It asserts that Bond could have obtained
leave to add ERI as a party under Minn. R. Civ. P. 15.01, but failed to do so.1 We agree.
“It is settled that a judgment may not be enforced against persons who are not
parties to an action.” Staab v. Diocese of St. Cloud, 813 N.W.2d 68, 75 n.5 (Minn. 2012).
The reasoning is rooted in due-process principles:
The foundation of the rule that judgments of a court of
competent jurisdiction are attended with a presumption of
absolute verity, is the fact that the parties have been properly
brought into court and given an opportunity to be heard upon
the matters determined. But the foundation falls and the rule
of verity ceases when it affirmatively appears from the record
1
ERI also asserts that Bond could have filed a supplemental complaint against it, citing
Minn. R. Civ. P. 69 and Minn. Stat. § 550.135, subd. 8 (2012). But section 550.135 is
inapplicable because it relates only to a sheriff’s levy on property held by a third party,
which is not at issue here.
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that the judgment adjudicated and determined matters upon
which the parties were not heard. Under this rule the decree
of the circuit court [subjecting certain individuals to a
judgment], they not being parties to the action and not being
given opportunity to be heard, is clearly void for want of
jurisdiction and open to attack by persons not parties to the
action.
Hurr v. Davis, 155 Minn. 456, 459, 193 N.W. 943, 944 (1923) (emphasis added). Here,
ERI and other non-parties were never properly brought into court or given an opportunity
to be heard on their involvement with Timothy. Accordingly, the district court’s order is
“clearly void for want of jurisdiction.” See id.
Bond argues that the district court possessed inherent authority to ensure
compliance with its own orders and may therefore subject non-parties to the judgment.
Bond refers to Timothy’s alleged “continued use of the ‘Ethix Re’ entities to subvert the
Judgment” and argues that the district court “was well within its authority to expand the
Judgment to ensure compliance and to put an end to the fraud that was being committed
upon it.”
But Bond misunderstands the district court’s inherent authority. Significantly, he
cites no authority standing for the proposition that a district court may subject a non-party
to a judgment under its inherent authority. “The judiciary’s inherent power governs that
which is essential to the existence, dignity, and function of a court because it is a court.”
State v. M.D.T., 831 N.W.2d 276, 280 (Minn. 2013) (quotation omitted). “In order to
determine whether inherent authority exists, we ask whether the relief requested by the
court or aggrieved party is necessary to the performance of the judicial function as
contemplated in our state constitution.” Id. (quotation omitted). Because, as we have
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stated, due process prohibits a judgment to be enforced against non-parties who have not
been properly served and given an opportunity to be heard, it follows that such a due-
process violation is not necessary to the performance of the judicial function as
contemplated by our constitution. The district court’s inherent authority, therefore, does
not encompass the authority to subject ERI to Timothy’s judgment, and the district court
erred as a matter of law by doing so.
Finally, Timothy and ERI argue that the district court erred by ordering
any person or entity owing Timothy money to direct payments to Bond to satisfy the
judgment. In making this determination, the district court cited no legal authority. On
appeal, Bond points to no authority allowing the district court to make this determination.
Similarly, we have found no authority supporting the district court’s determination.
Because ERI was not a party to the action, the district court did not have jurisdiction over
ERI. Cf. Hurr, 155 Minn. at 459, 193 N.W. at 944 (holding that a judgment against
persons not parties to the action was “clearly void for want of jurisdiction and open to
attack by persons not parties to the action”). To the extent that ERI is an entity owing
Timothy money, the district court erred as a matter of law by ordering ERI to pay Bond
in satisfaction of Timothy’s judgment.2
2
Although the district court did not have jurisdiction over ERI, nothing in this opinion
precludes the district court from continuing to exercise jurisdiction over Timothy and
directing that his property, including property in his hands or payment of amounts owed
to him by others over which the district court has jurisdiction, is to be applied toward
satisfaction of the judgment. See Minn. Stat. § 575.05 (2012) (providing that the district
court “may order any of the judgment debtor’s property in the hands of the judgment
debtor or . . . due to the judgment debtor . . . to be applied toward the satisfaction of the
judgment”).
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In sum, we dismiss the appeal in part because Thomas lacks standing to appeal all
issues and because Timothy lacks standing to appeal the district court’s determination
subjecting non-parties to the judgment. We vacate in part the district court’s order for
lack of jurisdiction over ERI.
Vacated in part and appeal dismissed in part.
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