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Pay Attention! You Are Being Sued.

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In the case of Chapman v. Burton, et al., the Minnesota Court of Appeals provided yet another harsh example of what can happen when you ignore a Complaint, and believe that someone else is “taking care of matters…”

 As part of a complex real estate transaction, defendant Kristopher C. Howard (“Howard”) convinced Renee C. Burton and her husband, Samuel (the “Burtons”) to invest in real property in Minnesota owned by Edward B. Chapman and his wife, Gail (the “Chapmans”).  The purchase agreement called for the Chapmans to convey their home to the Burtons for $571,500, while at the same time signing over $215,510 in built up equity in the home to the mortgage company.  The Chapmans then repurchased their home from the Burtons for $410,000 on a contract for deed.  Meanwhile, the Burtons were to obtain a $410,000 mortgage on home, and the Chapmans were to make monthly payments to the bank to pay off the mortgage.  (I told you it was complex).

 What the Chapmans did not know was that the loan and mortgage arranged by and between Howard, the bank and the Burtons was for $514,350, not $410,000.  Several months later, the Chapmans learned that the mortgage debt they were paying off was over $546,000, and not the $410,000 they agreed to previously.  Thereafter, the Chapmans sued the Burtons, Howard, the mortgage company and the bank.

 The Burtons were personally served with the Summons and Complaint in North Carolina (their state of residence).  While they sent letters to the Chapmans’ attorney, they did not answer the Complaint.  Howard was also personally served and wrote to the Chapmans’ attorney, but he failed to answer the Complaint, as well.  Accordingly, the Chapmans sought and obtained a judgment against Howard and the Burtons in the amount of $388,934.10.  A month later, the Chapmans served a garnishment summons on the Burtons and their bank.  TWO MONTHS AFTER THAT, the Burtons asked the court to vacate the judgment for, among other reasons, excusable neglect.”

 In support of their excusable neglect argument, the Burtons claimed that Howard told them he was “taking care of all matters and would go so far as to appear in court.”  The court of appeals held that the trial court did not abuse its discretion when it found that:

 This Court finds it unreasonable that the Burtons trusted or relied on Howard after receiving a complaint which alleged that he had committed illegal acts.  The Burtons were well aware that they were being sued for a transaction which Howard had suggested to them and orchestrated for them.  Their mistaken belief that Howard was taking care of the matter and their complete delegation to him of their own responsibilities was not a sensible excuse to justify their failure and neglect to answer.

 Ignoring a Complaint or trusting someone else to “take care of all matters” for you when it comes to litigation, is not a wise decision.  In addition to being unwise, it can be costly.  In this case, it cost $388,934.10.

 P.S.  In May 2010, the Minnesota Supreme Court ordered that the language in Minnesota Summons be changed to more clearly indicate what is happening.  The first four words of the Summons appear in boldface and all caps to read: YOU ARE BEING SUED.

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