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Knapp v. Commissioner of Minnesota Department of Revenue

Supreme Court of North Dakota

October 15, 2018

David Knapp, Petitioner and Appellant
v.
Commissioner of Minnesota Department of Revenue and Edward Jones, Respondents and Appellees

          Appeal from the District Court of Grand Forks County, Northeast Central Judicial District, the Honorable Lolita Hartl Romanick, Judge.

          DeWayne A. Johnston, Grand Forks, ND, for petitioner and appellant.

          Thomas S. Madison (argued), St. Paul, MN, and Jeffrey R. Strom (appeared), Hillsboro, ND, for respondent and appellee Commissioner of Minnesota Department of Revenue.

          Monte L. Rogneby (on brief), Bismarck, ND, for respondent and appellee Edward Jones.

          OPINION

          VANDEWALLE, CHIEF JUSTICE.

         [¶ 1] David Knapp appealed from a judgment dismissing his petition for a writ of prohibition against the Commissioner of the Minnesota Department of Revenue and Edward Jones and from an order denying his motion to vacate the judgment. We conclude the district court did not abuse its discretion in denying Knapp's petition for a writ of prohibition, and we affirm the judgment and the order.

         I

         [¶ 2] In August 2016, the Commissioner issued an order assessing personal liability against Knapp, a North Dakota resident, for $65, 843.80 in unpaid Minnesota sales and use taxes relating to his interest in a business in Bemidji, Minnesota. In December 2016, the Commissioner issued a third-party levy on securities held by Edward Jones for Knapp by sending a notice to Edward Jones at its Missouri office. The third-party levy said Edward Jones must sell Knapp's securities under Minn. Stat. Ann. 270C.7101(7) and send the Minnesota Department of Revenue payment up to the amount due. The levy instructed Edward Jones not to send money that was exempt or protected from the levy and cautioned that state law allowed the Commissioner to assess debt to businesses, officers, or other individuals responsible for honoring the levy, including assessing the total amount due plus a twenty-five percent penalty.

         [¶ 3] Knapp petitioned the district court to dissolve the levy and for a writ of prohibition against the Commissioner and Edward Jones to prohibit them from taking any further action to levy on his account. Knapp alleged that the Commissioner had no jurisdiction in North Dakota to levy on his North Dakota property and that his property was exempt from the levy. The district court issued a preliminary writ of prohibition to stay the levy pending the filing of an answer showing cause under N.D.C.C. § 32-34-05.

         [¶ 4] In an amended answer, the Commissioner asserted that the district court lacked personal jurisdiction over the Commissioner and the State of Minnesota and that the requirements for a writ of prohibition had not been met. Edward Jones answered, alleging that the petition failed to state a claim against it and that Knapp failed to exhaust his legal remedies in Minnesota.

         [¶ 5] The Commissioner moved for judgment on the pleadings, asserting that the district court lacked personal jurisdiction over the Commissioner and that the requirements for a writ of prohibition had not been met. After an April 28, 2017 hearing, the court dismissed Knapp's petition, ruling that it lacked personal jurisdiction over the Commissioner and that Knapp failed to satisfy the requirements for issuance of a writ of prohibition because he failed to exercise his legal remedies in Minnesota. A judgment was entered dismissing Knapp's petition.

         [¶ 6] Knapp moved for relief from the judgment under N.D.R.Civ.P. 52, 59 (b)(1) and (6), and 60 (b)(3) and (6). Knapp argued that North Dakota courts have in rem jurisdiction over his Edward Jones account. After an August 10, 2017 hearing, the district court denied Knapp's motion, ruling he failed to establish he had no adequate remedy in Minnesota to contest the Commissioner's imposition of the assessment and levy against him and he was not entitled to dissolution of the levy. The court also explained it did not have personal jurisdiction over the Commissioner and declined to address Knapp's argument about in rem jurisdiction over his Edward Jones account because he failed to raise that issue until his motion for relief from the judgment. The court concluded Knapp failed to establish he was entitled to relief under N.D.R.Civ.P. 52, 59(b)(1) and (6), and 60 (b)(3) and (6).

         II

         [¶ 7] A writ of prohibition is a special proceeding governed by the rules of practice for a civil action to the extent the rules are not inconsistent with the statutory provisions for the writ. N.D.C.C. §§ 32-32-01, 32-32-03, 32-32-05, 32-32-06. See also N.D.R.Civ.P.81(a) and Table A; Tormaschy v. Tormaschy, 1997 ND 2, ¶¶ 11-16, 559 N.W.2d 813 (applying North Dakota Rules of Civil Procedure to proceedings in N.D.R.Civ.P. 81 to fill in gaps for excepted statutes). A writ of prohibition is an extraordinary remedy to prevent an inferior tribunal, corporation, board, or person from acting without or in excess of jurisdiction when there is not a plain, speedy, and adequate remedy in the ordinary course of law. N.D.C.C. §§ 32-35-01, 32-35-02; Old Broadway Corp. v. Backes, 450 N.W.2d 734, 736 (N.D. 1990). The issuance of a writ of prohibition is discretionary, and the denial of the writ will not be overturned on appeal absent an abuse of discretion. Backes, at 736. A district court abuses its discretion when it acts in ...


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