Opinion
No. C5-01-2096.
Filed August 13, 2002.
Appeal from the District Court, Washington County, File No. C6984584.
Mark A. Olson, (for respondent Paramore Enterprises)
Kevin K. Shoeberg, Kevin K. Shoeberg, P.A., (for appellant)
Considered and decided by Hanson, Presiding Judge, Anderson, Judge, and Halbrooks, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellant State of Minnesota challenges a judgment in an automobile-forfeiture proceeding that required appellant to pay respondent Paramore Enterprises, Inc. the proceeds of the sale of the vehicle and the balance due on the automobile loan. The state argues that the trial court lacked subject-matter jurisdiction because Paramore Enterprises, Inc. did not file a demand for judicial review within 30 days after the May 25, 1998 service of notice of forfeiture on Ryan Paramore, the driver of the vehicle. Paramore Enterprises, Inc. seeks review of the trial court's denial of its claim of innocent-owner status. Because the service of the notice of forfeiture on Ryan Paramore was valid service on Paramore Enterprises, Inc. and Paramore Enterprises, Inc. failed to file a demand for judicial review within 30 days of the service, the trial court lacked subject-matter jurisdiction. We reverse.
FACTS
On May 25, 1998, at about 1:00 p.m., Captain Jay Swanson and Trooper Ron Williams of the Minnesota State Patrol were on traffic-enforcement detail on Highway 36 in Washington County. An individual in a vehicle pulled up next to the officers, pointed to a pickup truck, and stated that the pickup had tried to force the individual's vehicle off the road. The troopers stopped the pickup, a 1995 Dodge Dakota driven by Ryan Paramore.
Ryan Paramore and a passenger were returning home from the Edge Fest in Somerset, Wisconsin. Swanson and Williams arrested Ryan Paramore for driving under the influence, his third drunk-driving offense in five years. Ryan Paramore identified himself as an officer of Paramore Enterprises, Inc. (Enterprises) and then wrote checks from the corporate checkbook in his possession that enabled his passenger to return home.
Minn. Stat. § 169.1217, subd. 1(c)(1)(i) (Supp. 1997), allows vehicle forfeiture for a third DWI conviction within five years. Pursuant to the statute, Swanson served Ryan Paramore with a forfeiture notice on the day of his arrest. On May 27, 1998, Officer Matthew Sokol called Richard Paramore, an officer of Enterprises and Ryan's brother. Officer Sokol advised Richard that the vehicle was going to be forfeited and that there was a procedure to reclaim it. When Ryan Paramore retrieved his personal belongings from the vehicle on June 2, 1998, he presented Officer Sokol with a business card identifying himself as the president of Enterprises.
At the time of the incident, the Dodge Dakota was registered to Enterprises and subject to a lien by American Bank of Burnsville for $3,520.93. In early August 1998, Charles Paramore, the father of Ryan and Richard, contacted the prosecuting attorney and complained that a notice of forfeiture had not been served on Enterprises, the vehicle's registered owner. In response, the state patrol served Enterprises with notice of forfeiture on August 5, 1998. On August 26, 1998, Enterprises, through Charles Paramore, filed a demand for judicial determination of the seized property and invoked the innocent-owner defense pursuant to Minn. Stat. § 169.1217, subd. 7(d) (Supp. 1997). The state responded by filing a forfeiture complaint on September 25, 1998, pursuant to Minn. Stat. § 169.1217, subd. 8(b) (Supp. 1997).
Between May 25, 1998, the date of the vehicle's forfeiture, and September 23, 1998, Enterprises paid American Bank the loan balance of $3,520.93. The vehicle was sent to auction on November 16, 1998, and sold for $400. Although Minn. Stat. § 169.1217, subd. 7a(b) (Supp. 1997), requires written notice to a secured party, Officer Sokol notified American Bank of the sale by telephone. On June 20, 2000, Enterprises filed an amended demand for judicial determination, asserting that neither it nor American Bank received sufficient notice of the sale.
Enterprises moved for judgment on the pleadings. The state asserted that the trial court lacked jurisdiction over the matter because Enterprises' demand for judicial determination was not filed within 30 days after the May 25, 1998 service on Ryan Paramore. In its order, the trial court found that the state was bound by its admission in a companion action against the vehicle that Enterprises had filed a timely demand. The court also made a factual finding that Ryan's father, Charles Paramore, was the president of Enterprises at the time of Ryan's arrest and the vehicle forfeiture. The court denied Enterprises' motion.
Enterprises next moved for summary judgment. The trial court denied the motion on the ground that fact issues remained regarding whether Enterprises was entitled to an innocent-owner defense and as to the fair market value of the vehicle.
After a bench trial, the trial court found that, contrary to Charles Paramore's assertion that he had a 51% ownership interest in Enterprises in 1998, Ryan and Richard were the sole shareholders of record and controlled the company's day-to-day affairs. The court further found that the vehicle, although normally used for deliveries, was kept at Enterprises' place of business with the keys accessible to the company office and that Ryan could and did avail himself of the vehicle for personal use. Because the court found that Ryan and Richard's knowledge of the use of the vehicle must be imputed to Enterprises, the court concluded that Enterprises had not met its burden of proof that it was an innocent owner under Minn. Stat. § 169.1217, subd. 7(d).
The court further concluded that the state was entitled to forfeit the vehicle subject to the security interest of American Bank, but that the state had not given proper notice of the vehicle's sale to American Bank. Because Enterprises had paid off the note, the court concluded that Enterprises stood in the shoes of the bank and ordered the state to pay $3,500 to Enterprises. This appeal follows.
DECISION
The state claims that the trial court lacked subject-matter jurisdiction because Enterprises did not file a demand for judicial determination within 30 days after the May 25, 1998 service of the forfeiture notice on Ryan Paramore. A party may question subject-matter jurisdiction at any time. "Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." Minn.R.Civ.P. 12.08(c).
In its response to Enterprises' motion for judgment on the pleadings, the state asserted, for the first time, that Enterprises' demand for judicial determination was untimely. This assertion was contrary to the state's earlier admission in a pleading in a companion case that the demand for judicial determination was timely. In response, the trial court noted in paragraph 10 of the findings of fact:
The State is bound by its earlier admission that the Judicial Demand was timely. The Court views the State's recent attempts to prove otherwise with great disfavor. At the time of Ryan Paramore's arrest, the president of the company was his father, Charles Paramore, who claims he had no knowledge that his son was using the vehicle for personal reasons, or using it for an unlawful purpose.
The court further noted in findings of fact paragraph 13:
If the Plaintiff prevails on its innocent owner claim, the Court may order a return of the vehicle, or payment of the fair market value of the vehicle at the time of forfeiture if the vehicle no longer exists.
In its motion to dismiss based on the pleadings, Enterprises represented to the court that Charles Paramore was the president of Enterprises in 1998, when his son, Ryan, was arrested while driving a company vehicle. The factual finding made by the trial court based on that representation persisted until the matter was tried on July 11, 2001.
In its findings of fact, conclusions of law, and order for judgment following trial, the court made the following factual finding in paragraph 10:
At trial, Charles Paramore testified on behalf of Plaintiff that in May 1998, he was the owner of 51% of the corporation and that his two sons, Ryan and Richard, were the owners of a minority interest in the corporation. However, he also admitted that the corporate tax returns for tax years 1997 through 2000 contradicted his testimony and showed that his sons, Ryan and Richard, received all of the income from the corporation and were listed as the sole shareholders for that period. Charles Paramore was not able to produce any corporate documents to support his claim that he was [the] majority shareholder of Enterprises in mid-1998.
The court made this additional finding in paragraph 14:
Even if Charles Paramore did have an interest in the business at the time of the offense, he had retired and no longer was involved in its day-to-day affairs, frequently being absent for months at a time. The business was being run by, and control had been turned over to, Ryan and Richard Paramore. The brothers' knowledge regarding the use of the vehicle must be imputed to Enterprises.
The court further noted in factual finding paragraph 11:
At the time of the offense, Ryan Paramore was one of two shareholders of record of Enterprises, and with his brother, Richard, controlled its day-to-day affairs.
The court concluded that Enterprises had failed to meet its burden of proof that it was an innocent owner under Minn. Stat. § 169.1217, subd. 7(d) (Supp. 1997), and that the state was entitled to forfeit Enterprises' interest in the Dodge Dakota subject to the bona fide security interest of American Bank, but that the state had failed to give the bank proper notice of the vehicle's sale. As a result, the court concluded not only that the state was liable to American Bank for the proceeds of the sale ($400) and the difference between the proceeds and the balance due at the time of seizure ($3,100), but also that Enterprises stood in the shoes of American Bank because it had paid the $3,500 that the state owed to American Bank. The court cited no authority in support of its conclusion that Enterprises stood in the bank's shoes as a consequence of paying off the lien.
Our analysis of the subject-matter jurisdiction issue on appeal must focus on the trial court's factual findings following the trial, because it is clear from the sequence of orders that the trial court's original factual finding with respect to Charles Paramore's ownership interest in Enterprises changed. And while the court's initial ruling on the timeliness of Enterprises' demand for judicial determination was supported by the finding that Charles Paramore owned 51% of the company at the time of the vehicle forfeiture, that factual support was eliminated by the contrary evidence of ownership at trial. As a result, the trial court's ultimate factual findings with respect to company operation, ownership, and management govern an analysis of subject-matter jurisdiction.
Service of process is valid on a corporation if the individual served is "authorized `to exercise or make any independent judgments regarding the business of the Corporation'" and has
the power to exercise independent judgment and discretion in promoting the business of the corporation or that her position was of such character and rank as to make it reasonably certain that the corporation would be apprised of the service.
Duncan Elec. Co. v. Trans Data, Inc., 325 N.W.2d 811, 812 (Minn. 1982) (citation omitted).
Here, the record includes copies of Enterprises' 1996 tax returns that indicate that Richard and Ryan Paramore owned 20% and 80% of the corporation, respectively. The 1997 returns reflect that Richard and Ryan Paramore owned 25% and 75%, respectively. The 1998 returns show that Richard and Ryan Paramore owned 53% and 46.65%, respectively. The evidence at trial was that Ryan and Richard Paramore conducted day-to-day business activities and that Charles Paramore had retired from managing the business, based on a registration form filed with the secretary of state's office on August 5, 1998. At the time of the vehicle forfeiture in May 1998, Ryan Paramore was president of Enterprises and was involved in its day-to-day affairs. Because Ryan's involvement with Enterprises meets the Duncan Electric test, service on Ryan was valid service on Enterprises.
We reach this conclusion in spite of the state's admission in an earlier pleading that Enterprises had filed a timely demand for judicial determination. While we agree with the trial court that parties are generally bound by their legal admissions, there may be a valid basis for an exception.
In Senger v. Minn. Lawyers Mut. Ins. Co., 415 N.W.2d 364, 367 (Minn.App. 1987), review denied (Minn. Feb. 12, 1988), appellant attorneys were sued for malpractice and tortious interference with a business opportunity. Their liability insurance company refused coverage because the insurance contract excluded claims arising out of business enterprises. Id. In a letter to the insurer, appellants admitted that the claims against them stemmed from a business enterprise. Id. at 369. We held that the insurance company properly denied coverage because the attorneys were bound by their admission in the letter. Id. But we noted that nothing in the record casts doubt on the fact that the underlying claims arose out of a business-enterprise dispute. Id. at 370.
Here, in contrast to Senger, the state's admission that Enterprises' demand for judicial determination was timely and the trial court's initial factual finding regarding vehicle ownership and control, were based on a representation made by Charles Paramore that was later rejected by the court. The evidence at trial demonstrated that Ryan Paramore, not Charles, was the president of Enterprises. Therefore, service on Ryan Paramore was valid service on Enterprises. Enterprises did not file its demand for judicial determination within 30 days after the service on Ryan. Although the state did not renew its motion for dismissal for lack of subject-matter jurisdiction after the trial court determined that Ryan Paramore was the president of Enterprises in 1998, the court then had a proper basis to dismiss the matter for lack of subject-matter jurisdiction.
Enterprises also argues that service of the forfeiture notice on Ryan Paramore was invalid because May 25, 1998, was Memorial Day. The administrative-forfeiture statute requires that "the appropriate agency shall serve the driver * * * with a notice of the seizure and intent to forfeit the vehicle." Minn. Stat. § 169.1217, subd. 7a(b) (Supp. 1997). The statute includes no exceptions for holidays, and we decline to usurp the power of the legislature by inserting one.
Finally, Enterprises asserts, pursuant to Minn. Stat. § 169.1217, subd. 7(d), that the court erred in finding that it was not an innocent owner. Motor vehicles are not subject to forfeiture if their owners did not know and should not have known of their unlawful use. Id. Because we conclude that the trial court lacked subject-matter jurisdiction, we do not reach this issue.